Leveraging the Fintech Opportunities in India

January 2017

` ` ` Leveraging ` ` ` the FinTech Opportunities in India Financial Foresights Editorial Team Contents Jyoti Vij [email protected] 1. PREFACE ...... 2 Anshuman Khanna 2. INDUSTRY INSIGHTS ...... 3 [email protected] n Leveraging FinTech: Digital Payments Gaining Ground in India ...... 5 Bhaskar Som, Country Head, India Ratings & Research Advisory Services Supriya Bagrawat Soumyajit Niyogi, Associate Director - Credit and Market Research, [email protected] India Ratings & Research Advisory Services n FinTechs in India: Drivers of Digital Banking? ...... 8 Amit Kumar Tripathi Dr. A. S. Ramasastri, Director, IDBRT [email protected] n The FinTech Revolution - Transforming Financial Services ...... 11 Kumar Abhishek, Founder & CEO, ToneTag n The New Sector on the Block...... 13 About FICCI Mukesh Bubna, Founder & CEO, Monexo n Blockchain and FinTech: A Debate and a Promise...... 15 FICCI is the voice of India's Varun Dua, Co-founder & CEO, Coverfox.com Devendra Rane, CTO and Co-founder, Coverfox.com business and industry. n In 2017, Can FinTech Make Everything About Money Easy? ...... 18 Established in 1927, it is Rajat Gandhi, Founder & CEO, Faircent.com India's oldest and largest n Path to the Ultimate FinTech Offering ...... 20 apex business organization. Jitendra Gupta, MD/Founder, Citrus Payment FICCI is in the forefront in Anurag Pandey, AVP, Product & Strategy, PayU India articulating the views and n The Evolving FinTech Landscape in India ...... 23 Gaurav Hinduja, Co-Founder & Managing Director, Capital Float concerns of industry. It n Taking on the Indian Financial Goliath - The story of the FinTech David ...... 27 services its members from the Harsh Vardhan Lunia, Co-Founder & CEO, Lendingkart Technologies Pvt. Ltd. Indian private and public n Emerging New Trends/Technologies in the Online Lending Space...... 31 corporate sectors and Akshay Mehrotra, CEO, EarlySalary multinational companies, n Aadhaar Enabled Digital Process Transformation in Indian BFSI Sector...... 33 drawing its strength from Sanket Nayak, Co-founder, Digio diverse regional chambers of n India Stack – Moment in the Sun for Indian Capital Markets ...... 36 Karthik Rangappa, Vice President – Education & Research Services, Zerodha commerce and industry n Cryptography: The Vault for Today's Banks...... 38 across states, reaching out to Ankit Ratan, CEO, SIGNZY over 2,50,0000 companies. n FinTechs & Banks: Together Creating Value for Customer ...... 40 Amit Sachdev, Co-founder and CEO, CoinTribe n Leveraging the FinTech Opportunities in India ...... 42 Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank Ltd. Disclaimer n The Future of Personal Finance is Instant, Cashless, Paperless-and ...... 44 All rights reserved. The Presence-Less, The evolving FinTech Landscape of India. content of this publication Adhil Shetty, Founder & CEO, Bank Bazaar may not be reproduced in n Leveraging FinTech Opportunities in India ...... 47 whole or in part without the Bipin Preet Singh, Founder CEO & Director, Mobikwik consent of the publisher. The n FinTech-Making India a New Techno Banking Empire ...... 50 Manavjeet Singh, Founder and CEO, Rubique publication does not verify n Change is the New Normal ...... 52 any claim or other Ajay Srinivasan, Chief Executive - Financial Services, Aditya Birla Group information in any 3. FICCI'S DATA CENTRE...... 55 advertisement and is not n responsible for product claim Equity Capital Markets...... 57 & representation. n Mergers & Acquisitions ...... 60 n Debt Capital Markets ...... 62 Articles in the publication n represent personal views of Loan Markets ...... 64 the distinguished authors. n Project Finance ...... 66 FICCI does not accept any n Investment Banking Revenue ...... 68 claim for any view mentioned in the articles.

Financial Foresights 1 Financial Foresights Editorial Team Contents Jyoti Vij [email protected] 1. PREFACE ...... 2 Anshuman Khanna 2. INDUSTRY INSIGHTS ...... 3 [email protected] n Leveraging FinTech: Digital Payments Gaining Ground in India ...... 5 Bhaskar Som, Country Head, India Ratings & Research Advisory Services Supriya Bagrawat Soumyajit Niyogi, Associate Director - Credit and Market Research, [email protected] India Ratings & Research Advisory Services n FinTechs in India: Drivers of Digital Banking? ...... 8 Amit Kumar Tripathi Dr. A. S. Ramasastri, Director, IDBRT [email protected] n The FinTech Revolution - Transforming Financial Services ...... 11 Kumar Abhishek, Founder & CEO, ToneTag n The New Sector on the Block...... 13 About FICCI Mukesh Bubna, Founder & CEO, Monexo n Blockchain and FinTech: A Debate and a Promise...... 15 FICCI is the voice of India's Varun Dua, Co-founder & CEO, Coverfox.com Devendra Rane, CTO and Co-founder, Coverfox.com business and industry. n In 2017, Can FinTech Make Everything About Money Easy? ...... 18 Established in 1927, it is Rajat Gandhi, Founder & CEO, Faircent.com India's oldest and largest n Path to the Ultimate FinTech Offering ...... 20 apex business organization. Jitendra Gupta, MD/Founder, Citrus Payment FICCI is in the forefront in Anurag Pandey, AVP, Product & Strategy, PayU India articulating the views and n The Evolving FinTech Landscape in India ...... 23 Gaurav Hinduja, Co-Founder & Managing Director, Capital Float concerns of industry. It n Taking on the Indian Financial Goliath - The story of the FinTech David ...... 27 services its members from the Harsh Vardhan Lunia, Co-Founder & CEO, Lendingkart Technologies Pvt. Ltd. Indian private and public n Emerging New Trends/Technologies in the Online Lending Space...... 31 corporate sectors and Akshay Mehrotra, CEO, EarlySalary multinational companies, n Aadhaar Enabled Digital Process Transformation in Indian BFSI Sector...... 33 drawing its strength from Sanket Nayak, Co-founder, Digio diverse regional chambers of n India Stack – Moment in the Sun for Indian Capital Markets ...... 36 Karthik Rangappa, Vice President – Education & Research Services, Zerodha commerce and industry n Cryptography: The Vault for Today's Banks...... 38 across states, reaching out to Ankit Ratan, CEO, SIGNZY over 2,50,0000 companies. n FinTechs & Banks: Together Creating Value for Customer ...... 40 Amit Sachdev, Co-founder and CEO, CoinTribe n Leveraging the FinTech Opportunities in India ...... 42 Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank Ltd. Disclaimer n The Future of Personal Finance is Instant, Cashless, Paperless-and ...... 44 All rights reserved. The Presence-Less, The evolving FinTech Landscape of India. content of this publication Adhil Shetty, Founder & CEO, Bank Bazaar may not be reproduced in n Leveraging FinTech Opportunities in India ...... 47 whole or in part without the Bipin Preet Singh, Founder CEO & Director, Mobikwik consent of the publisher. The n FinTech-Making India a New Techno Banking Empire ...... 50 Manavjeet Singh, Founder and CEO, Rubique publication does not verify n Change is the New Normal ...... 52 any claim or other Ajay Srinivasan, Chief Executive - Financial Services, Aditya Birla Group information in any 3. FICCI'S DATA CENTRE...... 55 advertisement and is not n responsible for product claim Equity Capital Markets...... 57 & representation. n Mergers & Acquisitions ...... 60 n Debt Capital Markets ...... 62 Articles in the publication n represent personal views of Loan Markets ...... 64 the distinguished authors. n Project Finance ...... 66 FICCI does not accept any n Investment Banking Revenue ...... 68 claim for any view mentioned in the articles.

Financial Foresights 1 Preface

inancial Foresights, the flagship quarterly publication of FICCI's financial sector team, provides a platform to industry, policy makers and other stakeholders to exchange ideas and views on important financial Fsector developments in the country. The current issue of the publication focuses on the topic: 'Leveraging the FinTech Opportunities in India' and presents interesting propositions in the form of insightful write-ups contributed by both established and emerging players from the FinTech industry. Technology today is changing at a rapid pace. Its application is changing at an even faster pace. One sector where application of technology has disrupted the traditional industry is the financial sector. This application of technology to capture and process data in real time and offer solutions not seen before is transforming how financial business is done, how products and services are conceived and how consumers participate in the process. Financial technology — or FinTech — is ushering a transformation by reaching the unreached in a cost effective Industry Insights manner, with all time presence and least use of resources. This is forcing established financial sector players to evaluate their business models and think afresh on how to best serve the consumers who themselves are evolving at a fast pace. It is usually felt that FinTech is all about digitising money. Our contributors to this edition show that there is more to it and that FinTech is about monetising data. By reducing information asymmetry in the marketplace, FinTech is not only improving the ability to match investors, lenders and borrowers; but providing a more level playing field that allows retail investors to have greater participation in the market. Innovative financial services such as robo-advisory have the potential to extend financial advice beyond high net worth individuals and more sophisticated investors, to a wider cross-section of the investors. And the frictionless operation of FinTech innovations such as block-chain and digital currencies are generating new value streams not just in financial services but across the economy. As you go through the pages of our latest edition, you would agree that India is poised to become a potent FinTech force of the world. Some of the key enablers for FinTech in India are high adoption of technology, increasing internet penetration, enabling government policies, emphasis on financial inclusion and an evolving start-ups ecosystem. The catalytic power of FinTech and its potential to unleash a new era of competition, innovation and generation of jobs in our economy is enormous. This issue, with contributions from both established & emerging names in India's FinTech sector, has attempted to analyse the potential of FinTech in India & how India can leverage it. We look forward to your views and suggestions and hope you will find this an interesting read. With best wishes for 2017.

Dr. A. Didar Singh Secretary General FICCI

Financial Foresights 2 Preface

Dr. A. Didar Singh Secretary General FICCI

Financial Foresights 2 Industry Insights

Leveraging FinTech: Digital Payments Gaining Ground in India

Bhaskar Som Soumyajit Niyogi Country Head , India Ratings & Associate Director - Credit and Research Advisory Services Market Research, India Ratings & Research Advisory Services

lobally conventional the requirement of access to However, India now offers an banking has been seamless and lower cost alternative Aadhaar authentication framework, Gundergoing colossal financial channels. On the other which covers over one billion changes in its structure and hand, inequality, inadequate Indians. This offers an opportunity practices, thanks to the rise of infrastructure, improper regulation to the newly introduced payments technological innovation. The and most importantly lesser and small finance banks to reach conventional role of banks is that of employment opportunities are the out to unbanked sections - several linking the dots between borrowers major challenges for the policy small finance banks are already and savers being an intermediary. makers. developing strategies to leverage Commercial banks undertake a their regional strength and reach The Indian financial system has not wide variety of activities, the three out to select areas. Meanwhile, a 1 been able to completely serve the main interrelated functions of report by Nasscom in partnership unbanked population, since it does commercial banks are holding of with Akamai opines, that India's not fit the traditional business deposits; creating credit through internet users will grow over model of commercial institutions. lending and investment activities; twofold to 730 million by 2020, and Several reasons have been cited, and providing a mechanism for that 75% of the new internet users including lack of access to payments and transfers of funds for in India will come from rural areas. customers in far-flung places, low various productive activities. The This will provide a further impetus scale of operations, high transaction extension of credit or lending is, for FinTech players to expand their costs, and few customer walk-ins thus, the principal activity of a market presence. during working hours among commercial bank. However these others. Financial Institutions have Besides the positive socio- functions are being challenged by also raised issues in knowing the demographics and being the fastest- multiple innovations. Technological authenticity of the customer, as growing major economy in the innovation in finance is a blessing, typical KYC documents are often world, India is creating an while at the same time a challenge not available to rural consumers. architectural framework for newer for developing or underdeveloped While many commercial banks players. This includes an existing economies. Large population have stayed away from the eKYC (know your customer) (population of India and China is unbanked areas, non-banking system and the Aadhaar 36% of world population), high financial companies (NBFCs) have authentication framework, a mobile phone penetration and large managed to successfully serve signature and digilocker, the unbanked population, commands people in these regions profitably. Unified Payments Interface - which

1 Lending and Investment Operations of Banks, RBI 2008.

Financial Foresights 5 Industry Insights

Leveraging FinTech: Digital Payments Gaining Ground in India

Bhaskar Som Soumyajit Niyogi Country Head , India Ratings & Associate Director - Credit and Research Advisory Services Market Research, India Ratings & Research Advisory Services

1 Lending and Investment Operations of Banks, RBI 2008.

Financial Foresights 5 Industry Insights Industry Insights

allows for swift payment across In the small business lending space, identifying investment themes, forge partnerships in specific sensitive customer information and The role of the regulators is to banks - and finally, a consent there are many new entrants that assessing credit exposure, arenas. This is because both internet frauds. It is therefore correct market imperfections, at architecture system, where are willing to provide financing to managing counterparty risk, or FinTech firms and legacy financial important to see how information least economic cost. This is with the information is made freely available small businesses. Most of these new executing and settling financial organisations have strengths and technology systems and data aim of improving the income to anyone. Many individual pieces entrants are in the form of merchant transactions - and then tap into the weaknesses in their models. Hence, security risks are monitored and distribution and thus improving the of the architecture exist, but they advances, in that they generally FinTech pool for innovation that for example, the banking industry managed. The regulatory social efficiency of markets. For tend to be only in private hands. provide some time of cash advance can support or expand based on the will be dominated by banks that framework applicable on FinTechs example, economic regulation India is one of the few countries in that is generally paid back through institution's core market. A marry the benefits of a FinTech in India is at a nascent stage and would be used to limit the exercise the world which has put together a charge volume, percent of sales or company's service and brand start-up with the advantages of a their evolution would also be of market power; information public architecture to enable this card sales. The new entrants metrics should serve as the primary legacy bank. The biggest challenge important in charting the way regulation would be used to correct teleservices system. underwrite an advance based on guideline for selecting advanced will be for smaller institutions that forward for disruptive innovations information asymmetries. payment or sales history with a technologies. However, changing may lack the culture, funding and in the Indian financial space. Advancements in the fields of The above has seen the emergence particular network. The lenders use any business model is difficult - and innovation capability to respond to technology and innovation will of several alternate players in the Massive innovation in the financial proprietary softwares to aggregate it is equally applicable for a rapidly changing consumer and only make the task of regulator Indian financial sector. These new sector is necessitating a relook into data about a business' operations - transforming into a FinTech- competitor battlefield. The primary more complex, as lines get blurred players are leveraging digital role of regulators. Regulators including social media (e.g. likes, focused organisation. reason behind this may be the across geographical boundaries, technologies effectively and should adopt pragmatic approach views, shares) - to underwrite the power of digitalisation on business operations and nature of innovatively, appealing to a large In the event of mishanding, the to stay ahead of the curve while loans. A common theme that satisfaction scores, and the entities. Cyber security increasingly spectrum of the market segment. transformation can easily create dispensing their objective of attracts all new entrants is that the difficulty for smaller banks - which necessitates regulatory synergies - Mobile-based payment solutions frustration for customers and the consumer protection and fostering underwriting and processing time are not startups - to invest to the as smooth information flow is and proprietary payment networks overall experience will suffer, growth and innovation. In addition is very short (as fast as 24 hours) same degree as larger banks in critical for both preventive are driving merchant acquisitions, leading to brand erosion. The to other causes, there is other with the advantage of an these channels. Although it will not measures and early detection. by offering low-investment degree of threat from FinTech start- principal motive for financial automated process. be impossible for smaller firms to The current, silo model of solutions. Consequently, non-cash ups will be determined by how well innovation - regulatory arbitrage. compete, it will require strong regulation in India in such a case is payment transactions, which today Alongside using much faster financial institutions do in Regulatory arbitrage can create leadership skills and a vision for the likely to result in insufficient constitute 22% of all consumer internet speed, always-on Internet defending their traditional turf of a space and scope for less regulated needs of a rapidly changing economic outcomes - as the payments, are likely to overtake connections, big data computing, large, loyal consumer base that opportunities in the market, which consumer. There is no doubt that regulatory architecture will face cash transactions by 2023. A study mobile connectivity, fast internet values safety, trust and incentivises for generating higher FinTechs have provided an issues of purview and scalability. by Google and Boston Consulting bandwidth and the universal personalised services. That being profits. "When there are completely amazing customer experience, To that end, regulatory Group forecasts that the digital adoption of smartphones, said, the benefits of scale and a free markets, there is not only however, increased levels of cyber synchronization will bring forth payments industry in India will companies now have real-time somewhat lethargic customer base freedom to choose; there is also threats have the potential to cause larger benefits of economies of both reach USD500 billion by 2020. access to financial information and will not hold off competition freedom to phish" (Phishing the disruptions in the services of these scale and scope. n transactions. This has led to the forever. If financial institutions do Phools, G. Akerlof and R Shiller). But digital payments are still ventures, apart from risks related to monitoring of multichannel not respond to the call of improved gaining ground in India, which is payment processing, resulting in digital solutions, that mirror the primarily a cash economy and newer ways of evaluating credit experience received at non-financial suffers from intermittency in a applications. firms such as Amazon and Uber, digital infrastructure. Also, in a there will be significant disruption market like India, where Hence, given the various in the industry. regulations are still evolving, opportunities FinTech provides, it building trust in online payments may be futile for traditional Believing in the opportunity of Bhaskar Som, Country Head, India Ratings & Research Advisory Services: Bhaskar Som (PGDM - IIM, Calcutta, B.Tech (Mechanical) - remains a challenge. Thus, while organisations to spend resources on FinTech coupled with the solid IIT, Madras, FRM Holder), Country Head of IRR Advisory - a Fitch group company Bhaskar has over twenty years of cross-sector the traditional banks understand in-house product development or strength of conventional banking, it experience in strategy formulation, quantitative analytics and risk management. Bhaskar is a member of IMC's Export the need to imbibe a digital R&D investments on a prediction of is logical to expect that in the years Competitiveness Council and was a member of the Expert Panel Group set up by Ministry of Finance for boosting infrastructure infrastructure, they also know that the future contours of an industry ahead, both traditional and non- financing in India. Bhaskar has been a speaker at various FICCI, AIAA and ACMA forums on competitiveness, policy insights, innovative funding alternatives and banking trends. whoever owns the customer will in a state of flux. It will be wiser for traditional financial institutions will Soumyajit Niyogi, Associate Director - Credit and Market Research: Soumyajit Niyogi, Associate Director - India Ratings & Research, continue to drive pricing and a financial institutions to focus on benefit from a 'co-operative' form of a Fitch Group company Soumyajit has over a decade's experience in the financial markets. Prior to India Ratings, he has worked product acceptance. core competencies - for instance, engagement and will accordingly with SBI DFHI, renowned Hedge fund D E Shaw and Peerless General Finance in various capacities. He is a rate strategist with focus on Macro economic variables and market orientation. He has published thematic research on systemic liquidity, monetary policy, and other associated financial market developments. He is an MBA in Finance from ICFAI Business School.

Financial Foresights 6 Financial Foresights 7 Industry Insights Industry Insights

Sophisticated CRM Crowdfunding / Sourcing business license, business owner- ship/incorporation/ dissolution Engaging customers through New funding options have FinTechs in India : records, regulatory records, tax gamification techniques in a emerged in mid-market, such as returns, building and other types of collaborative environment leads to P2P lending and marketplace permits, accounts and annual Drivers of Digital Banking? better customer experience and lending platforms. There are 20+ reports. reflects in retention. FinTechs P2P lenders operating in India. This collecting data from customers can is breaking the norm of traditional Private Records use the same for generating new loans that require substantial Dr. A. S. Ramasastri Contracts, IDs, signatures, wills, revenue streams and offer compel- documentation which are time Director, IDBRT trusts, escrows and personal data ling value propositions including taking. Increased levels of technol- like date of birth. Robo-Advisories. Traditional fund ogy enable increase in lending managers can consider developing without an intermediary. Semiprivate / Semipublic Records their own Robo-Advisory products Block Chain Technology High school/university degrees for lower fee paying consumers. and professional qualifications, (BCT) Cash and Treasury Management grades, certifications, human nprecedented growth in Indian FinTech software market is Potential areas resources records, medical records, the use of internet and forecasted to touch $2.4 billion by In addition to the above potential Cash and treasury management accounting records, business Services for Unbanked areas, there is a great scope for incredible penetration of 2020 from a current $1.2 billion, as includes the administration of U FinTechs to exploit the features of transaction records, locational data, mobile has been changing the way per NASSCOM study. As per Citi Lower cost of providing services to external and internal funds, cash delivery records, genome and we live. The Whatsapp has become research report, the investments in BCT and its implementation in underbanked and unbanked flow management, and corporate DNA, arbitration and genealogy the way of communication among FinTech companies are still less banking and financial applications. customers is a major opportunity finance policies and procedures. trees. large masses of the country, than 4% of the total IT spend in BCT is about distributed ledgers for FinTech companies. In the The digitalisation of cash and that could work in harsh environ- Physical Access irrespective of age, gender, banks / financial industry, an treasury management functions backdrop of diverse demographics ments with little, no or negative education background and social indication to untapped potential. utilises online platforms to disrupt Digital keys to home, hotel, office, in terms of literacy, age and region trust. Potential areas of applicability status. There is little doubt that the traditional models, creating new car, locker, deposit box, mail box The key advantage of FinTechs is in India, FinTechs with focus on of BCT are listed; while some of these developments are making revenue streams and value and Internet of Things. that most of them are startups by user experience can provide the them like trade finance are directly technology inclusion a reality. propositions. Cross-border innovative young minds. They are impetus for financial inclusion. relevant to banking and finance Technology inclusion can lead to payment transfers for businesses, Challenges not held back by existing systems With a target of banking services others like land records may have financial inclusion if technology is foreign exchanges and invoice and are willing to make risky reaching every person/household appropriately harnessed to reach indirect impact. FinTech innovations are not risk- in India by 2020, FinTechs have a management are a few of the choices. FinTechs have the chance free and their transformative the large segment of the population, functions that are enabled primarily Financial Instruments and Records to build the right systems from the great role in making government of currently unserviced or implications are to be examined in India initiative possible. through the advent of online start and share a culture of efficient Currency, private and public detail. Some of the challenges for underserviced. platforms. operational design that many Process Enhancements equities, certificates of deposit, FinTechs are - It is precisely in this area that the incumbents may not have. Streamlined Processes bonds, derivatives, insurance l FinTechs can play an important role Application program interface policies, voting rights associated Data Security - threat of hacking, According to a study, 46% of Indian in leading India to a digital nation (API) enable FinTechs to develop The consumer product application with financial instruments, confidentiality of data, distrib- FinTechs are focused on payment and us to a less cash society. They value-added applications. Using process (loan origination) can be commodities, derivatives, trading uted denial of service and and trade processing. The recently can ride on the wave of widespread Artificial Intelligence enables streamlined with the emergence of records, credit data, collateral related extortion attacks launched Unified Payment cloud-based lending solutions and mobile penetration and large scale companies to extract greater management, client money l Interface by NPCI is likely to High expenditure on marketing Aadhaar registrations. customer insights to improvise electronic bank account manage- segregation, mortgage or loan redefine the future of payment services. Also, the combination of ment systems which automate the records, crowdfunding, P2P l Interoperability and integration In fact, there has been globally a systems in India. FinTechs are automation and self-learning loan origination process and lending, microfinance, (micro) issues with banks and other perceivable growth in both the playing an active role in this regard, algorithms can lead to the user's increase overall transparency in the charity donations, account portabil- systems of the country number of FinTechs and their which can help in moving towards own data consumption in order to lending process. The move towards ity, air miles and corporate tokens. l Differences in management and contribution. Based on recent less cash society. In addition to the generate new products, services such solutions can improve Public Records culture - as most of the FinTechs estimates, investments in FinTech area of payments, there are other and processes. customer experience by possible are startups with young and companies increased from $1.8 potential areas in the Indian reduction in the amount of manual Land and property titles, vehicle ambitious talented workforce, billion in 2010 to $19 billion in 2015. context, where FinTechs can focus. work, down times and errors. registries, shipping registries,

Financial Foresights 8 Financial Foresights 9 Industry Insights Industry Insights

there can be situations for expertise of agencies involved in collaborative approach can lead to breakaways and thus leading to banking domain to reduce any 'win-win-win' situation for customer impacts. future uncertainties. customers, bank and FinTechs. The FinTech Revolution - l Compromises in regulatory Regulators may encourage banks Institutes like IDRBT have been processes - there could be and FinTechs through continuous working with academicians, banks Transforming Financial Services compromises in KYC leading to dialogue in a formal way. Regula- and FinTechs to ensure innovation money laundering, cross-border tors may also provide a broader is responsible and reaches the banks through workshops, money exchanges, etc. framework and sandbox environ- Kumar Abhishek seminars and contests. The Institute ment to encourage responsible is bringing out a white paper on Founder & CEO Responsible innovation innovation. Towards this objective, implementation of BCT in Indian ToneTag a Working Group was already set While FinTechs improve customer banking and financial sector. up by Reserve Bank of India. experience, provide banking to FinTechs should ensure that they unbanked / underbanked custom- Banks have been increasingly continue to retain CLASSIC ers and move the country to less adopting digital channels. New (Customer Centric, Legacy Free, cash society, it is important that payment banks and small finance Asset Light, Scalable, Secure, oday, financial services million. So it can be said that a large This is where FinTech comes in. they understand the importance of banks are likely to begin their Innovative, and Compliance Easy) around the world are being part of the population is still FinTech companies develop responsible innovation. They operations as digital banks. A principles. n Ttransformed which is akin to outside the banking net and not in a technology that could work should leverage experience and the adoption of computers in banks position to reduce its dependence towards decreasing costs of for bookkeeping and the launch of on cash. Even for people with financial services. Though initial payment cards which has replaced access to banking, the ability to use takers for services such as virtual cheques for payments. But instead their debit or credit card is limited banking are young urban of being led by banks, the second because there are only about 1.46 professionals, these services could wave of digitization is being million POS terminals which accept potentially trickle down to rural campaigned by financial payments through cards. India where it could be of great technology product companies. Even today, most living in remote value. The investment in India's While FinTech becomes and rural areas cannot boast of a FinTech industry has grown 282 synonymous with innovation, it is bank branch close to their percent between 2013 (US$ 38 also being perceived as something residence. ATMs and POS terminals million) & 2015 (US$ 450 million). that is going to disrupt or even are also few and far in-between Various FinTech firms are breaking replace traditional banks and these places. Residents must miss new ground in the finance sector banking processes. But it must be work and travel far distances to through innovative and dynamic realized that both banks and reach the nearest bank branch use of technology in the lending FinTech organizations have a lot to where they could deposit or and payment processes. FinTech gain from one another. The withdraw cash. Due to these ventures use machine learning financial services market in a hassles, many folks living in such algorithms and alternative data country like India is so vast that places don't feel the need for banks. points such as social media footprints, call records, shopping Dr. A. S. Ramasastri, Director, IDBRT: Dr. A. S. Ramasastri took over as the Director of the Institute on October 24, 2014. Since then he there is room for FinTech They earn and spend exclusively in companies and banks to co-exist cash, since they are forced to do so. histories, and payments to utility has actively led the development and growth of the Institute, especially in the areas of relevance to banking like cyber security, analytics, cloud service providers to increase computing and payment systems. He has been instrumental in introducing the PGDBT, IBAC and IDRBT Staff Papers Series, setting up of and gain from a larger ecosystem of Due to the unorganized cash CIO and CAO Forums, and in the Institute gaining the status of SIRO. He is the Chairman of IFTAS, the company promoted by IDRBT in services. economy, they cannot produce any efficiency and provide greater 2015 to provide technology services to banking and financial sectors. He is on the board of DSCI and SETS. records of their earnings and access to credit. The turnaround Most banks feel that the cost to set- time is also much faster for the Prior to joining the Institute, Dr. Ramasastri was the Chief General Manager-in-charge of Department of Information Technology at Reserve spending, which means that most up branches or ATMs across rural approval and disbursal of loans by Bank of India. In the RBI, he has spearheaded many important projects including the implementation of the Next Generation RTGS, adoption aren't eligible for loans from banks India wouldn't be worth the FinTech firms despite several banks of international standards like XBRL and ISO 20022, conceptualizing and guiding of banks on Automated Data, and preparation of IT Vision initiative. The banks also felt that either. About 90% of the workforce, of RBI for 2011-17. His initiatives of XBRL and ADF have been globally recognized and has received "Award of Excellence" from XBRL which produces nearly half of the digitizing and speeding up these International. there will be tremendous inertia processes markedly. against formal banking and digital output in the country, works in the Dr. Ramasastri authored two books titled 'Quantitative Methods for Valuation of Assets' and 'Quantitative Methods for Banking and payments in these sectors. Because unorganized sector. People often The Government of India along Finance'. The former has been published in Chinese too. He has to his credit several articles on Finance, Banking and IT in eminent journals of this, after the recent resort to the unorganized sector for with regulators such as SEBI and and newspapers. demonetisation announcement by loans where they are exploited RBI are aggressively supporting the He has guided the Bank of Mauritius, Bank of Malaysia and Bank of Uganda on implementation of Data Warehouse, XBRL, etc., and delivered our Prime Minister, it was these through higher interest rates. It will ambition of the Indian economy to talks on standards and technology for data reporting at the International Monetary Fund and Bank of International Settlements. unbanked who were affected the not be easy for the informal sector become a cashless digital economy Dr. Ramasastri holds a Ph.D in Finance from the Indian Institute of Technology, Madras and was the top ranker in M.Sc (Statistics) from most. According to a 2015 report by to become cashless, and this part of and emerge as a strong FinTech Madras University and B.Sc (Statistics) from Loyola College, Madras. He has also attended Advanced Management Programmes at the Pricewaterhouse Coopers, India's the economy is likely to be affected ecosystem via both funding and University of Oxford and Kellogg School of Management. unbanked population was at 233 the most because of the ongoing promotional initiatives. With such currency swap.

Financial Foresights 10 Financial Foresights 11 Industry Insights Industry Insights

incentives and mandates, this the Reserve Bank of India (RBI), in usage of their wallets and the robust business environment will formal institutions possess an money loaded into them post be the most impactful levers in established infrastructure and November 8. Now, the habit of getting the Indian FinTech market legacy that is not easily replaceable. evading taxes will not change up to speed and enable it to better FinTech startups need to instil overnight, but other major hurdles The New Sector on the Block address these roadblocks like the greater confidence among Indian such as awareness, internet lack of authentic consumer consumers, already known for connectivity and infrastructure in information on digital media and being conservative in their financial terms of digital payments can be low technological and digital preferences. Figuring out how to dealt with now. While urban infrastructure. market to the needs of the centres mostly enjoy high speed Mukesh Bubna As start-ups emerge as enablers for organization and influencing internet connectivity, suburban the business of large financial financial behaviour could be some areas are deprived of a stable Founder & CEO institutions and seem to be in the of the biggest challenges, as will be internet connection. One good thing Monexo spotlight, government bodies and setting up a strong and responsive is that people from the rural parts other market players have been regulatory infrastructure to keep up can seamlessly transact through stoutly serving their part to with the speed of technological mobile phones with the help of the establish an environment for the innovation. On the other hand, recently launched UPI (Unified growth of innovation and traditional banking and financial Payments Interface) by NPCI institutions can leverage their (National Payments Corporation of technological advancement in the hey came, they saw and they lenders who operated outside the But by far the most important financial sector. Continued strong existing customer base and adopt India) making digital transactions have already conquered the commitment from the government, digital products that nurture strong as simple as sending a text message. system and were untracked by the beneficiary of the entire the industry and the FinTech firms financial relationships while While the Indian market is large marketplace much faster than government. demonetization exercise seems to improving service efficiency and T is critical to allow the FinTech and warmed up for financial one would have thought. P2P lending be the Peer-to-Peer (P2P) lending broadening access to meet changing Demonetization in India has also revolution dig its roots deep in any innovations, startups do face a has found itself in the middle of action companies. A relatively new financial system. needs. The disruptive potential of unique set of challenges. While the led to the rise of blockchain FinTech firms can provoke the following the demonetization exercise phenomenon, P2P lending is yet to government is trying to facilitate technology which works with In most emerging markets such as much needed modernization of the of the government. Mukesh Bubna take off in a major way in the India strategies focused on the emergence of new financial almost any kind of transaction that traditional sector, reducing costs in technologies, the market lists out the reasons for development Indian context. However, this collaboration, offering a sustainable the process and increasing the size involves value; this includes regulations are still tough. Also, and the future of P2P lending in India. whole exercise of demonetization change in the market are easier to of the banking population. property, money and consumer implement. With the ability to access to consumer data is scarce as has suddenly put this new segment Reacting to these opportunities and India is still a case-centric country, There has been a lot said and goods. Since every transaction in collaborate, start-ups cross the in the FinTech space under the challenges, banks like Federal Bank leading to a high risk for fraud and written about how demonetization the blockchain technology is chasm from being a small, spotlight. successful business to potentially announced a partnership with loops in security and there is lack of will impact and reduce the demon approved, it helps to reduce fraud. scaling their solution for a very Startup Village to develop consumer education which of black money. However, that is innovative banking products, the prevents people from getting on Secondly, the concept of Bitcoin has Banking functions have taken a big large customer base. With something that India will see in the U.K. giant Barclays is set to board easily. The digital revolution also managed to trickle into the hit. Various functions in the improvements in mobility, distant future. As per the RBI, the availability and quality of such operationalize its fifth global is transforming operations across system. While Bitcoin is relatively banking industry have been parallel economy funded by black products and services, functionality FinTech innovation center that will the financial and banking sector. new to the Indian economy and impacted due to the constant be located in India, and Goldman What looks heartening is that the and online experience becomes money is around 26% of India's business system, the volume of requirement of attention towards Sachs Principal Strategic Indian government and regulatory better, which in turn will lead to GDP. The scrapping of Rs. 500 and Bitcoins being traded in India has the cash disbursal, exchange and greater level of trust in traditional Investments Group (GSPSI) is institutions have promoted an Rs. 1000 currency notes have shot up substantially in the post- depositing that has happened in the institutions. looking to invest in Bengaluru's entrepreneurial climate for FinTech FinTech startup scene. in India. However, policies and shattered the foundations of the demonetization era. Bitcoin prices past one and a half month or so. While digital finance firms have governance will need to match the black market and the so-called benefited from the government's Mobile wallet firms like such as in India range from $866 to $896 per This opened up a flood gate of speed of innovation in this sector, parallel economy, but the business pro-start up policies and flexible FreeCharge, MobiKwik, Oxigen, Bitcoin and the increasing demand opportunity for a sector that was Paytm, etc have witnessed a surge particularly to ensure secure and sector has also been reeling from its regulatory conditions imposed by transparent growth. n is driving the price higher. Bitcoin just about trying to figure out the aftermath. start-ups like ZebPay, Coinsecure best way to set itself up in the In the current scenario, the cash- and Unocoin are mushrooming and Indian context. Kumar Abhishek, Founder & CEO- ToneTag: Kumar brings extensive experience on large scale, multi country, core banking taking advantage of the current strapped economy is trying to India's inclination towards informal implementations both on mobile and internet banking arenas. He aspires to enable financial inclusion to the grass root level. Thus cash crisis in the country. Thirdly, making proximity payments reach the last mile and to the critical masses irrespective of geographies, internet connectivity and return to normalcy and businesses lending channels had anyways e-wallet companies like Paytm and hardware dependency. are looking for ways to boost their offered them with a handle to set Freecharge have capitalized on the Prior to starting ToneTag, he was with Finacle core banking at Infosys and as a Senior Engineer with MindTree. In 2013, Kumar income. The informal sector which themselves up here. As per the conceptualized the idea of ToneTag and developed a unique concept of making offline payments and eliminating hardware is almost one-fourth of the Indian demonetization scenario with some dependency. This was not only the launch of a completely new product; in fact it was the birth of a totally new product category. recent Ministry of Statistics and economy has been ferociously aggressive advertisement He strongly believes that Collaborations and Partnerships enrich and drive abundance than competition. Programme Implementation based attacked by the government. It has campaigns to bring more users In addition to his business activities in the entrepreneurs space, he likes playing Golf and the Saxophone. on the 70th round of National in a way wiped out a large chunk of under its fold.

Financial Foresights 12 Financial Foresights 13 Industry Insights Industry Insights

Sample Survey non-institutional instrumental in pushing India lending firms offer process and fee credit accounts for nearly 19% in towards formal channels and move transparency attracting more the rural sector and 10% in the away from being primarily a cash- borrowers. In the wake of Blockchain and FinTech: urban regions. dependent economy. In 2016, India demonetization, P2P lending firms crossed the 1-billion mobile will dominate the market space as Traditionally, informal lending subscriber milestone which clearly cash will no longer remain the king A Debate and a Promise players charge interest rates of indicates how quickly India is and informal lenders will vanish more than 2% to 3% per month adopting new emerging mobile from the market. which are higher than the interest technologies. Finance companies Mr. Varun Dua Mr. Devendra Rane rates formal lending players charge. With better transparency in rates are actively making use of various Co-founder & CEO CTO and Co-founder Transaction transparency is a major and online payments, P2P lending internet and mobile technologies Coverfox.com Coverfox.com problem with informal lenders as firms are well to capitalize on the that would allow them to cut they deal in hard cash and there are digital business space where every operational cost and offer low- no bank transfers. The concept of transaction is done online. These interest loans to borrowers. no-compliance definitely works in firms are also ideal for the under- their favour, but now with a chunk P2P lending firms offer a platform banked population that has zero of black money being wiped out it for borrowers to get loans without credit score and history. In the he Indian of the twenty-first savings, while few inquired if it will It's without a doubt that the central has become increasingly difficult transacting with financial distant future, RBI's regulatory century is at the cusp of an be possible to fire and replace their aspect of our FinTech ecosystem is for cash hoarders to keep a large institutions. P2P lending firms, on guidelines will provide more clarity Timportant revolution, and compliance department with the user or the customer. It is the amount of cash and disburse it at the other hand, are 100% online on how these firms can ensure we must acknowledge it in its Blockchain. With the initial stage customers' behavior, requirements their will. firms and therefore they offer low- smooth functioning and finance the entirety. Financial services are no being set by Bitcoin, the world and preferences that define the interest rates to the borrowers. needy. n more what they used to be two wants to embrace Blockchain, but extent to which a technology will The November 8 shock therapy by Unlike, informal lenders, P2P decades ago. This has been made the hype makes it difficult to find prove to be disruptive in the real the Government has been possible by not just all the the right problems to solve amidst sense of the word. innovation and technology at our the clutter of ideas. Being a late entrant into the global disposal but also the entire economy, India is known to skip ecosystem shifting gears and A note on the Ecosystem trends and jump to latest gaining momentum. We are Before we understand the role of technologies; cases in point being witnessing a revamp in financial any new technology in FinTech, it's pagers and answering machines. To services through an ever evolving important to acknowledge that a great extent, this is also true about FinTech space. Indian FinTech industry is well the service sector in India. Indians, We could quote ample financial emerging from its nascent form especially in the rural areas, haven't reports and site data that have because of the ecosystem in which still got used to quality services and suggested FinTech's success and it has been placed. A healthy have not formed technology habits. indicated its limitless potential. relationship between the different This eases entry for new entrants to However, for the sake of brevity, elements of this ecosystem have acquire and create new habits. we'd like to restrain ourselves and allowed the overall industry to It is true that India has the third get to the heart of the matter. We'd grow. highest number of internet users in like to discuss the potential and These elements include the young the world. It is also true that, in promise of the often debated minds who are 'starting up' March 2016, 97.62 percent of the technology, Blockchain. ventures with the objective of total 1,058 million telephone Blockchain happens to be much disrupting the service sector with subscribers were actually wireless misunderstood, mainly because of innovative technology, the phone users. However, this is just Mukesh Bubna, Founder & CEO, Monexo: Mukesh brings 20 years of consumer banking experience from Citibank. He has worked the buzz surrounding it and unclear investors who are coming to believe the tip of the iceberg. Thus, at one across geographies and lived in India, Singapore and Hong Kong. He has led diverse regional teams in his role as Regional Director for Product & Marketing of Citibank. Prior to that he was CFO for Cards and Unsecured Lending for the Citibank APAC representations from the media. In this disruption thanks to the level is the Indian that hadn't been region. In his last role he was a Business Head for Western Union - Financial Inclusion Program for Asia. Mukesh enjoys outdoor a gathering of top industry government and regulatory bodies previously exposed to efficient activities, traveling and photography. He can be either seen dragon boating on the weekends or hiking trails. In Jan' 2014 - he ran honchos, quite a few wanted to recognizing the potential of the financial service standards, and at the Hong Kong Trail of 50 Km from Peak to Big Wave beach - he climbed his Mount Everest and has since been an avid runner know if it can provide any IT cost 'disruptors' another level is the Indian that is sporting a Polar watch on his wrist.

Financial Foresights 14 Financial Foresights 15 Industry Insights Industry Insights

adapting to newer forms of Blockchain and use cases Blockchain-based smart contract technology every day and demands can get executed without manual Varun Dua, Co-founder & CEO, Coverfox.com: Varun Dua is the Co-Founder of Coverfox Insurance Broking Pvt. Ltd. that runs the website www.coverfox.com.Varun has extensive and diverse experience in the insurance industry spanning over 10 years. He's more. The key to using Blockchain is first intervention as soon as a flight gets worked on Sales, ROI based marketing, built tech solutions for insurance companies amongst other things. understanding that there is no real cancelled. Similarly, if someone had The Government and regulators Varun started his career as an advertising and marketing professional and worked with leading insurance and financial services firms use case for a private Blockchain. Its insured their property against including Tata AIG and Franklin Templeton. He led marketing analytics efforts for direct business acquisition and led technology have also recognized the need for impactful only when applied to earthquake, the contacts could efforts for efficient servicing of customers. financial services to catch up with business problems where multiple executed in case of an earthquake Prior to Coverfox, he has co-founded 2 firms Enser Communications and Glitterbug Technologies which have brought in good the technologically advanced partners are writing and reading and the claims settled as per the technology and practices to the Insurance Industry in India. Enser was set up in 2008 and was the fastest growing customer support Indian of the twenty-first century. from a common ledger, without and contact center for financial services firms and grew to 500 people in two years of its inception. Glitterbug is a technology services magnitude of the quake. firm and has serviced top insurance brands including ICICI Prudential, HDFC Life and Aviva to integrate their online business with Schemes like Jan Dhan Yojna are a having to trust each other. If the A technology like Blockchain can core applications and cloud based voice record storage, management and retrieval. step not just towards financial problem statement doesn't match also be used to minimize the Varun is passionate about technology, consumer internet and financial services. He is a graduate of MICA (Mudra Institute of inclusion but also towards bringing this definition, Blockchain is an Communications, Ahmedabad) where he pursued the flagship course in communication management with a specialisation in Brand perennial problem of frauds in India closer to adopting newer overkill or probably useless. Management. forms of technology. insurance. Everything from a user's For example, Bitcoin has been one medical history to claim history and Devendra Rane, CTO and Co-founder, Coverfox.com: He graduated from IIT Mumbai in 2005 with a Bachelors and Masters degree in In this dynamic space, it is worth of the direct consequences of profile can be put into a Blockchain Aerospace engg. He started his entrepreneurial career as the co-founder of 'Innovations Unified' which was the winner of "Eureka", Asia's biggest Business plan competition. The business was centered around a proprietary nanotechnology which he developed as a opening the conversation around Blockchain. It used Blockchain as a and shared across as a part of KYC. part of his thesis. Blockchain now. currency ledger. Needless to say, Quite a few disputes in insurance claims happen when the insurer Prior to Coverfox, he has co-founded two companies, one specializing in User experience design and the other providing technology Bitcoin has reaped huge benefits services to Financial and Insurance domain. Blockchain for the CEO and insured give conflicting from Blockchain, when it comes to He has worked with many tech. startups at various stages. He is experienced in conceptualizing appropriate Minimum Viable versions of the KYC, medical problems like taxation, accounting Product (MVP) for startups as well as enterprises. He has managed globally distributed projects and teams, and has a pragmatic Without getting too technical, history and other details. If all such and restricting black money. understanding of developing products in such environments. With his valuable experience in large scale consumer and enterprise Blockchain is simply a ledger which documents are a part of a platforms, he understands scalability of an evolving product as it goes from being an MVP to a successful product. is distributed across multiple Speaking of trust and our own centralized document management Some of the key projects developed by him in the consumer domain are: parties guaranteeing 100 percent experience in the domain, let us put system supported by Blockchain, l hoonur.com : A talent hunt portal by Balaji Telefilms, acquired by StarPlus. Scaled to 100,000 profiles in 6 months. Role : Technol- consistent data with all of them. All the Insurance sector to test the which can be accessed by the ogy consultant for scalability and high availability. l parties can write to this ledger at principle that governs Blockchain. insured and insurer, then all such duboo.com : Flash based Audio Manipulation and Dubbing Tool. Role : Lead developer l any time and still be consistent with Insurance is largely based on trust conflicts can get resolved without chaupaati.in : A web and mobile based market place for second hand products, acquired by Future Bazaar. Role: Backend any intervention and need of a trust Developer each other. Now data consistency and set policies. Here, the insurance based system. l homestaysdos.com : now Tripvillas.com, Asia's largest vacation home stays portal. Role : Sole Developer and Designer across multiple parties has existed company and the insured l gototest.com : An online education portal for schools and colleges, currently operating in 10,000 schools. Role : Sole Developer since ages, what makes Blockchain individual need to trust each other The promise l qilpmedia.com : Browser and Desktop based rich media application. Funded by Norvest ventures. Roles: Senior Developer different is that you cannot change that either party will stick to the previous entries once they are a policies. So, if a complex insurance Blockchain in itself is ineffective. part of the ledger 'ever'. Blockchain policy was to become a part of the For that matter, any single is therefore 'distributed truth' Blockchain, settlement could technology is ineffective in isolation. Blockchain will need imposed by technology such that it happen without disputes based on other new age technologies as can operate without the need of the policy blocks. trust between a set of parties who inputs to be practically used. At the agree to adopt it as their common With the help of Blockchain-based same time, the insurance industry ledger. Blockchain as a technology smart contracts, one can code the needs to collaborate a lot more to be can bring in good governance and terms of an insurance policy into able to manage frauds and customer profiling since they are self-regulation without the need of the contract itself. This means that the most common and amongst the a governmental body. However, in case of a claim, settlement would biggest problem areas for everyone. this is just one technology that can happen automatically. Let us Blockchain provides a great way to be a potential game changer, and explain this to you with an example be able to do so without a regulator not one of the easy wins either, of flight cancellation insurance. If or an intermediary, all the while because it requires the industry to someone had insured a flight which relying on technology which has was later cancelled for some collaborate and adopt. other benefits to being fast, unforeseen circumstances, the distributed and democratic. n

Financial Foresights 16 Financial Foresights 17 Industry Insights Industry Insights

the next best alternative to functioning for ages, by $512M (83 rounds), total funding at currency. However, the technology democratizing lending. With P2P, the seed stage rose to $27M, while In 2017, Can FinTech Make that powered it, Blockchain, was anyone with a disposable income the average investment ticket size at soon considered as the real game can technically become a lender. the Series B saw a 24% increase at Everything About Money Easy? changer. Today, banks, financial P2P is a relatively new $15.4M. As per Tracxn, there are 19 institutions and regulators are phenomenon, but has caught the startups in the P2P marketplace closely looking at where a fancy of the people. On the lender segment and five have been technology like Blockchain goes. In side, it is primarily driven by the funded. Rajat Gandhi fact the SEBI Chairman UK Sinha fact that returns are better than P2P as a model also works Founder & CEO recently added that the market what stocks, mutual funds or any beautifully on top of a digital Faircent.com regulator was also trying to figure other financial products can offer. economy, which Prime Minister out how the pieces play out. From Lending as an asset class has Narendra Modi and the how we access credit history, to traditionally been the one to deliver Government is trying to propagate. how we undertake credit ratings, the most attractive returns and with As India starts with a drive to from how we disburse money to P2P lending it gets thrown open to increase digital transactions, a how we collect it, the financial a large spectrum of people. For system that covers every aspect of ecently I got talking with a 2010 days, to the slump that Complex world is undergoing a sea of borrowers, interest rates are much lending through the digital medium journalist and the followed, micro-finance was a change and technology is lower compared to what banks is a big step in that direction. FinTech is probably one of the most conversation veered to how casualty of a sector growing at continuously evolving. It is difficult charge and the ease with which one R complex sectors around primarily to figure out where technology is The FinTech space opened strong in fast technology companies were breakneck speed. can raise credit. P2P also enables a because it needs experience in two 2016 and ended with a flurry of growing in India. With four digit headed, which makes it difficult to wider group of people to access For the FinTech industry, especially of the most varied disciplines - activities. The demonetization growth, some tech companies are determine what works best. formal channels of credit compared peer-to -peer lending, it is finance and technology. The exercise has meant everyone is scorching the landscape with their to what banks or other financial important to find the sweet spot financial world is one of the slowest Role of P2P and relevance looking at the sector to provide phenomenal business. However, where growth does not come at the institutions cater to. adopter of technology and tech on answers. In the P2P space, Faircent barring a major digital wallet cost of the business itself. One way in India: the other hand has tried to stay The growing interest in the sector along with other players in the company, the journalist said of growing is to grow at any cost Within the FinTech bucket, one of away from addressing the hardcore and its popularity has meant space have taken the responsibility FinTech startups were conspicuous and the other is to get it right. the most exciting models is P2P concepts around money. As a investors are keen to put their to ensure that we have the right set with their absence. After all, When you are dealing with money lending where an online platform result, there is a dearth of talented money in genetic startups. of guidelines and the sector grows FinTech is supposed to be one of from the public at large, you have connects an individual lender to an entrepreneurs and teams that can According to Tracxn, Mobile in a way that adds value. P2P the hottest sectors in India. the added responsibility to ensure individual borrower. Like the rest target large, complex pieces in the payments ($212M) and Lending lending has the potential to be a there are no undue risks associated. of the world, lending has largely While the spotlight has been on financial domain. Also, large banks ($199M) accounted for nearly 80% game changer in terms of getting been limited to banks and other FinTech, more so after November 8, Nascent and financial institutions have been of the total funding that went into credit to individuals outside the it is important to understand where financial institutions, but India also FinTech in India is only about half a wary of technology and disruptive the Indian FinTech space, in the formal network of credit. Along we stand today and where we need has a large presence in the informal decade old and is at a very nascent ideas that can change the status year to date. Although, in terms of with the potential, however, comes to go. For that we have to look at sector in lending, which mostly stage. For any sector to grow and quo. As a result, most financial overall funding, there was an the responsibility that we do not history, analyze what others have comprises of money lenders. P2P n mature it takes far longer and instruments and products have almost 64% year-on- year decline at squander what we can achieve. changes the mix, which has been done and ensure we do not commit FinTech is no exception. In the been relatively the same for mistakes. absence of regulations, the sector decades altogether. As a result, Growth has done well to self-regulate and FinTech in India and across the Rajat Gandhi, Founder & CEO, Faircent.com: Rajat has over 20 years of experience in marketing, strategy and brand building ensure fly-by-night operators and world face the challenge of talent. It especially in online and digital space. One of the earliest professionals of Internet in India, he gathered extensive hands on While every sector wants to grow at unscrupulous elements are kept in is not easy to build a team that can experience in launching and building Portals, online Classifieds, Communities, E-Commerce and Digital Advertising businesses. impressive levels, it is always check. What is helping is that the imagine solutions which can impact In the past, he has headed multiple initiatives at The Times Group including member of the founding team that launched brands important to find that optimal level regulators are making the right millions by combining the power of like Timesjobs.com, Magicbricks.com and Simplymarry.com and India Head at Performics, a digital marketing agency of where your growth is not at the cost noise and have come up with a technology with the impact of Chicago-based Publicis Group. of everything else. We do not have draft set of guidelines that seem to innovative financial solutions. Faircent.com is India's largest peer to peer lending website which caters to retail and business loans. Faircent helps in eliminating to go far to look at what skewed point in the correct direction. The the high margins, which intermediaries like banks and other financial institutions make on loan transactions thereby helping growth can do. Once considered the guidelines are very important for Evolving borrowers get faster and cheaper access to credit and lenders make greater returns. sectors like P2P and crowdfunding answer to financial inclusion and The entire technology piece in Faircent.com has in its nascent history garnered recognition from the Industry. It was showcased as one of the top start-ups at where public money is involved getting credit to the poor, micro- FinTech is also not stagnant. For Start Up India, selected for the first batch of NASSCOM 10,000, part of the Microsoft Accelerator program and one of the top 10 and barriers to entry are relatively finance in India has seen its share of example, when Bitcoin burst into companies from India to be selected for Web Summit in 2013. Faircent is acclaimed as the 'Interbrand Breakthrough Brand in low. Finance' by Interbrand, NYSE and Facebook in its Breakthrough Brands report 2016. Recently, it was selected as part of highs and lows. From heady pre- the scene, it was largely touted as NASSCOM Emerge50 2016 awarded to India's most innovative Top 50 emerging IT product companies.

Financial Foresights 18 Financial Foresights 19 Industry Insights Industry Insights

where mobile page loads are faster pay later product can be the first also the time to unify all federated than broadband and take on step into lending. Pay later offerings for the consumer on a Path To The Ultimate average 2.1 seconds). On top of this, products solve two problems - they single platform. signing up to accept payments as a further help to improve the Most consumers want their money business is always a nightmare performance of the payments FinTech Offering to be managed for them for both because of the KYC and compliance platform as complex card or net short term liquidity as well as long requirements. banking flows are not required and term investments. On top of this also help to build a relationship By innovating to solve these basic Jitendra Gupta Anurag Pandey with the consumer, where they start they have insurance needs so that but difficult problems, acceptance is MD/Founder AVP, Product & Strategy to come on your platform to pay they aren't burdened with built on the merchant side. As Citrus Payment PayU India their dues. unexpected expenditure in an acceptance grows, so do the emergency. Enough trust has been multitude of consumers transacting As the pay later product matures built with the consumer as you are on these merchants. Solutions that and is distributed across the ever now their favourite source of credit help consumers transact easily such increasing merchant base, big ticket on all the merchants where they as custom browsers, saved cards lending needs can start to be transact. ith the announcement KYC and servicing a consumer our daily exercise. The deepest and wallet balance help drive covered, where credit decisioning on 8th November 2016 (IndusInd Mobile Fingerprint darkest troubles caused by repeat transactions on such can be done in milliseconds based To start with the consumer can be Wby the Prime Minister, Banking, Aadhaar Payment Bridge), demonetization during the last few merchants. As transactions on the predictive ability of the engaged to get a financial health the industry is now in the midst of there exist solutions to tackle every weeks have been our inability to continue to grow, data begins to get complex and intelligent scoring check up of their existing portfolio. heady excitement, an arms race of problem. transact due to non availability of rich. Information on who is modelled both on payment and From here the consumer can be sort is on to capture and serve the small denominations of cash. We transacting where, and for how lending behaviour of consumers. guided to create a goal based While each of these solutions has rapidly digitising consumer in run our lives transacting - buying much and how often, what time of Collaborations with merchants on portfolio for both short term and targeted a specific problem, no India for electronic payments as milk and groceries, getting to work the day. use of their data as well as data FinTech player (apart from Alipay long term needs. This portfolio will well as other financial services. by cab, auto, bus or train, paying from financial institutions can help be rebalanced automatically for in China) has yet been able to build While this information will lay the "FinTech" is the buzzword du jour! for electricity, water, rent, parking, improve the efficacy of the models. a complete solution that satisfies all groundwork for the next step of the both tax and returns. All insurance It is however unfair to treat this entertaining ourselves by eating out consumer needs in one place. We journey, it is also helpful in further Further foray can also be made into needs can also be managed from industry as a flavour of the season. or watching movies or going for a are still to see the Apple or Google optimising the payment platform. credit solutions for small merchants the platform. Tax filing services can For many years now, across the holiday. of the FinTech world, a product so Continuous investment on - this again helps to drive the also be automated for the globe startups and financial refined, easy to use and understand The first step is to build a best in automation, settlements, ecosystem by creating more and consumer. All of these can be easily services institutions have been and backed by latest technology class digital payments system that operations, platform scaling still more merchants that keep the achieved by partnering with fin- creating compelling solutions to incorporating behavioural and solves not only problems for needs to be made to ensure that payments and lending platforms techs who are already operating in benefit consumers and businesses. transactional analytics, machine consumer experience but also for more merchants are getting more growing and servicing more each specific area such as robo From alternate lending solutions learning, blockchain, biometrics businesses both big and small. Even success for lesser effort on their consumers. At this stage, the advisory, insurance aggregators, smartly underwritten on non and mobile. Here we present, the In 2016, almost 10-15% of part. As the payments flywheel lending flywheel is also rotating at and tax planners. traditional data sources that let you journey to build the ultimate transactions are lost between starts to spin at a relentless pace, it speed and that along with Not only will such a system be a pay later (Klarna, OnEMI, Ola FinTech offering. The journey that payment gateways and issuing is time to take the next step. payments acts as a propeller into simple automation of investment, Credit, LazyPay), to providing will ensure that the FinTech banks due to infrastructure issues. the third and final phase of the insurance, liquidity and tax working capital for your business revolution sweeping this country is Such high incidents of failures With rich data come rich journey. compliance needs but will be (Capital Float, LendingKart). From not just a flash in the pan but a (resulting in direct loss of revenue) possibilities intelligent enough to anticipate simplifying acceptance of payments bonafide success positively damage the credibility of banks and Time to take-off! change in goals as the person ages on online or mobile (Stripe, PayU, impacting the population in easing payment processors and inhibit the Data from the payment platform With engines of payments and CitrusPay) to making offline how we transact and manage our use of digital payments. Add to and other available sources are built and suggest changes in investment lending running on full throttle, the payments ubiquitous (Square, finances. this, the problems created by the together to predict the thesis. Such a system will create next step is to incentivise the mSwipe, ApplePay, ItzCash). From poor quality of internet on mobile creditworthiness of a consumer. great opportunities to earn consumer to use your platform for banking solutions that don't ever First comes payments devices (A page load takes on an These involve both the ability and revenues as the regulators (RBI, not only payment and lending need a visit to a branch (Simple, average 5.9 seconds on mobile and willingness of a consumer to pay. SEBI, IRDA) are already Payments are our basic daily needs but also as their gateway to BankMobile, DigiBank DBS) to 4.1 seconds on broadband in India. Armed with this, a convenience and incentivising providers to charge on necessity, it is akin to drinking all other financial services. This is using biometrics to reduce cost of This is in stark contrast to China, small ticket (less than $30) based advisory and not from commissions water, eating our food & getting

Financial Foresights 20 Financial Foresights 21 Industry Insights Industry Insights

selling financial products. There Ensuring that the merchants where Managing these consumers through will be a multitude of cross selling these consumers transact are able to their consumption life goals and opportunities available on such a provide a reliable (99.9% ensuring healthy returns on The Evolving FinTech platform, creating a FinTech successful), ubiquitous (online, investments will attract the next set behemoth that is able to unify all offline), safe (Aadhaar & of 390 million Indians, who will be biometrics) and simple experience digital natives and are below the Landscape in India financial needs for consumers on a (mobile/IoT/wearable) will ensure age of 18 today. Payment needs and single platform. that these consumers keep coming experiences will be very different So why will this succeed? back. With the right investments in for them and different types of Gaurav Hinduja data and intelligence algorithms, businesses and models will emerge Co-Founder & Managing Director With the push by the Prime real time credit decisions can be to serve them. Innovating to stay Minister towards adoption of made for payments letting these ahead of this demand and fulfilling Capital Float digital transactions, most of the 440 consumers to focus on creating the needs of these businesses will million Indians between the ages of wealth through their investments keep the flywheels spinning into 18 and 35 in the next 3 years will and automating their tax and the next decade, creating definitely try to pay digitally to insurance needs. unprecedented value for the transact for their basic needs. n FinTech taking this opportunity. ver the past couple of FinTech any different and why is it Firms are now specializing in years, the term FinTech positioned as a unique sector? Over certain banking functions, instead Ohas evolved from being a the past 50 years, technology has of taking an aggregator approach. buzzword among tech-savvy "assisted" traditional financial business executives to an organized institutions. However, there has not The FinTech landscape sector characterized by hyper been any dramatic change in the includes companies in the growth. Digital technology, and its products being offered or their following segments: avatar in the financial segment, is target market. completely reinventing the way l Digital Lending: These compa- FinTech is not a replacement for business has traditionally been nies provide flexible options for traditional banking services; rather done. financing to SMEs and consum- it is a result of the inevitable ers. Technology is being used to FinTech is basically the amalgam- evolution of the banking space. create better financial products, ation of finance and technology. It Banking services are now being improve customer experience refers to a new generation of provided with the added conve- and increase the speed of loan companies that leverage cutting- nience of technology. The sector approvals. Some prominent edge technology to offer financial does this with the help of technol- companies in this space include solutions that are significantly more ogy intelligence, intricate algo- Jitendra Gupta, MD/Founder, Citrus Payment: Jitendra was Founder and MD of Citrus Pay, a leading digital payments company in Capital Float, Lendingkart, efficient and effective than those rithms, machine learning and big India. Post acquisition of Citrus Pay by Naspers, he leads the consumer businesses at the combined entity, PayU India, as their Indifi, NeoGrowth, etc. Managing Director. provided by traditional financial data, which are swiftly replacing He has more than 12 years of work experience in banking and financial services industry and considered an expert in payments institutions. traditional financial practices. l Payment Services: These industry. Prior to Citrus, he was working with ICICI bank for 7 years, wherein he was part of founding team of Retail cross sell Backed by such powerful armory, companies allow individuals and Investment banking division in the bank. During his last stint with the bank, he led the whole initiative of stitching a joint Merely a technological FinTech is completely changing the and businesses to accept venture between ICICI bank and First Data in Indian market. This was a unique JV ever done between a bank and an independent payments company. advancement? corporate landscape in multiple payments without even swiping During his tenure at Citrus, he grew the company to a 300 member+ strong team. Citrus counted its investors base from Sequoia industries and reinventing the way a card. Payments are made Technology has been used by Capital and E-context Japan to Ascent Capital in Series C round. He also led Citrus to the largest all-cash deal in the FinTech space companies gain access to finance. online and the payer just needs a in India, with the acquisition of Citrus by Naspers Group in September 2016. financial institutions for more than smartphone, without the He graduated from Sydenham College, Mumbai and is a qualified Chartered Accountant half a century. With the turn of the What does the FinTech requirement of a merchant millennium, technology started landscape look like? account. PayTM, Freecharge and Anurag Pandey, AVP, Product & Strategy, PayU India: Anurag is a Product & Strategy professional, currently working in the playing a more critical role in the MobiKwik are among the top CEO's office in driving the integration between PayU India and Citrus Pay. Over the last 3 years at Citrus Pay, he was leading financial sector. Modern banking or Traditional banking functions are players in this space. product on wallet, mobile, proximity and identity management central to experiments in consumer payments. financial services would struggle to being taken up individually by l He has worked for 10+ years across payments, voice telephony, broadband, mobile commerce companies or verticals. Prior to his stay relevant in the absence of various companies that are creating Savings & Wealth Management: MBA from HKUST Business School, Hong Kong he worked in India and Europe for leading technology players such as Infosys technology. So, the question is: is separate constructs of the services. These companies help individu- and Tech Mahindra in their solution consulting practice. He holds a degree in Computer Science Engineering from the Manipal Institute of Technology, Manipal.

Financial Foresights 22 Financial Foresights 23 Industry Insights Industry Insights

als save money as well as make increase in global investments. In ogy, as it helps reach a wider low, with as many as 145 million are generating digital footprints of critical sector faces several hurdles and manage their own invest- fact, FinTech became Investopedia's audience when compared to a feet- households not having access to customers. This data helps FinTech in raising funds the traditional way ments. Software helps to quickly "Top 10 Terms of 2015". on-street approach. Additionally, banking services. However, the companies to understand and due to stringent eligibility criteria, compare different options and the extent of technological aware- RBI's target is for the penetration to underwrite customers better, long processing times, high interest The global FinTech sector received allows for people to make ness also spreads across the masses, reach 90% by 2021. The push for contributing to the development of rates and rigid lending terms and an investment of a whopping $5.4 decisions based on their facilitating a higher acceptance rate financial inclusion from the customized financial solutions. conditions of traditional lending billion in the first quarter of 2016, individual needs. Scripbox and for new-age lending. Government helps FinTech lenders, solutions. Mostly, traditional according to figures published by Huge working population: India Funds India are among the as digital lending platforms can financial institutions were reluctant Accenture. This represented a 67% Internet penetration: The US might has a population of more than 1.3 popular firms operating in this target customer segments that were to sanction loans to smaller jump over the figures of the same have a higher internet penetration billion and a third of this popula- segment. previously underserved. companies or lowering interest quarter in 2015. While the FinTech at 89%, but due to the relatively tion is urban. The median age in rates as these enterprises are l Remittances: Inward and emerged in the Western world, the smaller size of the population, the Investors getting more interested: India is around 27 years, which perceived as being high risk entities outward remittances can be growth in the first quarter of 2016 reach is limited to a little less than Venture capitalists, angel investors, means that most of the population from a credit perspective. Banks complex, time-consuming and was driven by investments in the 300 million users. India, on the high net worth individuals and is working and generating income. typically charge 10-20% interest on expensive. FinTech companies Asia-Pacific region. other hand, might have a lower private equity houses consider Working adults typically adopt loans. If SMEs don't the meet the have made these transactions internet penetration at just 35%, but FinTech an attractive investment technology much faster than the criteria set by banks for availing a simple and affordable. Oxigen India is playing catchup because of the vast population, the option. According to a report retired elderly. These working loan, they turn to informal money and Payworld are among the reach is significantly higher, published by KPMG, FinTech adults would have greater enthusi- India is not very far behind the lenders for finance. These lenders notable remittance platforms. towering at almost 500 million investment in India surged from asm to avail the services offered by world in terms of the state of the charge exorbitant rates of interest, individuals with access to the $245 million in 2014 to over $1.5 the FinTech sector. Availing credit l POS: Several new players have FinTech sector, although there's ranging between 36-70% internet. The figure surged from billion in 2015. Although India has will become significantly easier for emerged in this space, which has room for massive growth. The 18% in 2014 to 35% in 2016. This only about 1,800 angel investors (as young adults due to their familiar- This led to a huge mismatch become prominent post country has recorded $1.77 billion highlights the fact that internet compared to roughly 300,000 in the ity with technology and data rich between the demand and supply of demonetization. Companies in FinTech investments between penetration is not just growing US), there has been a surge in their eco-systems that they frequently funding, often resulting in the operating in this segment 2014 and 2015 through a total of 158 rapidly, but has ample room to interest in the FinTech Sector, as engage with. SMEs having to shelve expansion provide card swipe machines deals, according to Inc42's FinTech grow over the next few years. reflected in the increase in deals plans or even shut shop. that enable customers to make Market Report 2014-2016. The FinTech lenders can capitalize on from 370 in 2014 to 691 in 2015. Necessity: The mother of cashless payments. Mswipe, average deal size was $9.82 million. FinTech emerged as an innovative this surge in internet penetration, as invention PineLabs, ICICI Merchant Movement from 'data poor' to 'data way of securing funds quickly and While these figures highlight the it inherently increases the segment's Services, etc are some of the rich': India now ranks third among While all the above factors support easily. SMEs are now able to apply growth of FinTech in India, there reach to geographical locations that larger POS machine providers in global startup ecosystems, and is the growth of FinTech, the primary online by uploading all the are several factors in play that were previously hard to serve due this space. expected to end 2016 with 4,750 driving force has been necessity. necessary documents. The algo- support phenomenal growth in the to logistical barriers. l startups. Taking into account the rithms being used by FinTech Insurance: FinTech has helped near future. The need for such solutions was the insurance sector transform Government policies: The latest current momentum, India is most strongly felt by the Small and companies are capable of executing from being document-heavy to Factors supporting surprise demonetization move has expected to have more than 10,500 Medium Enterprises (SME) sector, the initial screening in minutes. becoming paperless. Several new FinTech growth in India given a massive fillip to the FinTech startups by 2020, providing which were being stifled by the lack Moreover, cutting-edge technology companies are increasing the sector. Government policies in employment to almost 2.1 lakh of credit support offered by allows FinTech companies to offer a ease of decisioning at the High adoption of technology: India are evolving quickly, people, according to a report by traditional financial institutions. lot of flexibility to SMEs. They can consumer end by aggregating India has already proved itself as providing a favorable backdrop for NASSCOM. The startup wave and FinTech promises solutions to the now raise smaller loans for shorter insurance provider data and being pro-technology. Its high rate FinTech. By encouraging the huge investment (in excess of $5 bottlenecks that are inherent in the timeframes and pay lower interest simplifying the application of technology adoption can be seen digitization, by promoting uniform billion in 2015) supports FinTech traditional financial systems. rates. experience. Coverfox and in the penetration of smartphones. and widespread identification because this sector needs entrepre- Over the past decade, the Small and Policybazaar are chief among the India has already overtaken the US (Aadhaar Card) and through bank neurs who are open to innovation, The future of FinTech in Medium Enterprises (SME) sector companies that have risen to to become the world's second- account schemes, the government are willing to experiment and are India has emerged as an important part prominence in the last few years. largest smartphone market, with has taken several initiatives to boost not tied to traditional ways of of the Indian economy, with 36 The global FinTech sector is more than 220 million active unique the FinTech ecosystem. getting things done. The evolving million units, providing employ- expected to become $45 billion in Growth of FinTech in the smartphone users, according to a ecosystem of India, including Increasing financial inclusion: ment to over 80 million people and value by 2020, growing at a CAGR global economy report by Counterpoint Research. government policies, digital Currently, Indian's financial contributing about 8% to the of 7.1%. India would play a critical Lending is made significantly easier services like e-commerce and Funding in this segment has grown inclusion penetration is extremely country's GDP. However, this role, given that the backdrop is through high adoption of technol- growing prevalence of social media, rapidly, and 2015 recorded a 75%

Financial Foresights 24 Financial Foresights 25 Industry Insights Industry Insights

highly supportive. The Indian and offer unique products to a credit products and advanced data FinTech market is expected to reach larger number of people in India. analytics to the table. $2.4 billion by 2020. Recent partnerships between Taking on the Indian Financial Goliath - The FinTech sector has young FinTech companies and traditional FinTech has bright growth pros- businesses that need help in banks clearly suggest that two pects. One of the factors that could reaching their true potential. The Story of the FinTech David entities needn't necessarily propel the growth further would be Incubators and accelerators can compete, but can co-opt. While partnerships between this dynamic mentor these businesses and assist banks can offer voluminous sector and the experienced them in competing against the big amounts of money for lending Harsh Vardhan Lunia traditional banking sector. Collabo- players in an extremely challeng- purposes, FinTech companies bring Co-Founder & CEO rations between the two can bring ing, cost-conscious Indian technological expertise, customized Lendingkart Technologies Pvt. Ltd. together the best of both worlds market. n

ne might be curious about that while growth of the global and the growth of mobile internet how FinTech will fare in economy has been seeing a users is staggering as per the OIndia, where the literacy particularly lacklustre figure for a statistics presented by IAMAI rate is at around 74%, mobile couple of years now, India’s reports of 2016. Added to that, with internet penetration is iffy and economy still boasts of a GDP a population of 1.3 billion people, adoption of technology in Tier 2 growth of more than 7% as per mobile subscriptions in India had and Tier 3 cities is comparatively various sources, cited below. The already reached 1 billion users by low. In retrospect, we also know fiscal situation is not undermining February 2016.

Economist Intelligence Unit (EIU) Forecast World Bank (WB) Forecast

8 12 7.3 7.4 7.3 7.3 7.2 7.2 7.2 10.3 6.7 7 10 6 5.6 5.7 8.5 7.6 7.6 7.7 7.7 8 7.2 5 6.6 4 6 5.5 5.6

3 4 2 2 1

0 0 2011 2013 2015 2018 2016 2020 2014 2019 2011 2012 2017 2013 2015 2018 2016 2010 2009 2014 2012 2017

International Monetary Fund (IMF) Forecast 12 United Nations (UN) Forecast

10.1 10 10

7.8 8.0 8.1 8 7.5 7.6 8 7.5 7.6 7.6 7.7 7.4 7.3 7.2 7.2 7.1 6.6 6.4 6 Gaurav Hinduja, Co-Founder & Managing Director, Capital Float: Gaurav Hinduja co-founded Capital Float, an online lending 6 5.6 5.1 platform, in 2013. Under his direction, the company has grown to become the largest digital lender to SMEs in India. As the Managing Director of Capital Float, he continues to drive leadership in the FinTech space through numerous strategic 4 4 partnerships with industry leaders in the e-commerce, travel, hospitality and trade segments. Gaurav has played a key part in Capital Float's evolution of becoming the leading digital marketplace for SME lending. He was the COO of Gokuldas Exports and 2 2 possesses immense experience in operations and complex supply chain management. Gaurav holds an MBA from Stanford University and graduated from Christ University in Bangalore with a distinction in commerce. 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011 2013 2015 2016 2010 2009 2014 2012 2017

Financial Foresights 26 Financial Foresights 27 Industry Insights Industry Insights

Economist Intelligence Unit (EIU) Forecast World Bank (WB) Forecast

8 12 7.3 7.4 7.3 7.3 7.2 7.2 7.2 10.3 6.7 7 10 6 5.6 5.7 8.5 7.6 7.6 7.7 7.7 8 7.2 5 6.6 4 6 5.5 5.6

3 4 2 2 1

0 0 2011 2013 2015 2018 2016 2020 2014 2019 2011 2012 2017 2013 2015 2018 2016 2010 2009 2014 2012 2017

International Monetary Fund (IMF) Forecast 12 United Nations (UN) Forecast

10.1 10 10

Financial Foresights 26 Financial Foresights 27 Industry Insights Industry Insights

Mobile Internet Users In India Urban vs Rural 2. Non-trusting populace when it Post the demonetization move, the to this due to their model of FinTech as an industry is expected comes to their financial informa- association of banks with FinTech ‘paperless and presence less model. to perform better and outlast the 371 tion players can be considered a boom that ecommerce experienced. With a push towards a ‘less cash’ From the above, it is evidently clear symbiotic relationship that can That is not solely due to the fact Urban economy being unavoidable, the what can be banked upon when benefit both parties. Considering that it deals with the lifeblood of Rural concerning the growth of FinTech trend of banks partnering with 239 that the top categories in Indian every transaction, but also because in India. Non-transparent processes FinTech companies has already it allows multiple benefits to the 262 and lower reach of traditional FinTech are alternative lending, 185 picked up. From the FinTech point end-user. financial services give smart and consumer finance, investment tech 155 of view, apart from having access to digital FinTech companies a 130 171 and mobile wallets, the reach of While funding and regulatory 110 153 definite winning edge. The FinTech a larger consumer base, startups 91 banks can be geometrically support are still in the nascent 126 industry should bear in mind that it will become more organized owing expanded across the nation by 48 103 stages in India for the FinTech 85 is operating in a former predomi- to the established norms provided 70 nantly cash-based economy that has partnering with these customer- industry, entrepreneurial and 44 by banks. That in turn, will allow a been goaded into a ‘less-cash’ friendly options. In the cases of innovative mindset is gaining steady growth rate to aspects of the Jun-12 Jun-13 Oct-13 Dec-13 Mar-14 Jun-14 Jun-15 Jun-16 model. While businesses and NBFCs, alternative lenders can help steadily, boosted by technological FinTech business that are not Source: IAMAI people will be trying their best to provide more customers to banks readiness and congruent business overtly disruptive or innovative. go digital, there will be gaps that using digital means and evaluate environment. Government Taking all these figures into 4. Low penetration of technology in would require impeccable customer thin file customer using alternative incentives are an area that is still in consideration, the in-situ conditions Tier-2, Tier-3 cities service to bridge the provider and With online transactions in banks for startups and in specific, data sources to access credit the grey but that will be changing Opportunities the customer. on the rise, banks continually need FinTechs organisations are great. worthiness. In the same spirit, for the better to aid in the develop- The expected internet user base in to improve on their technological All the segments of FinTechs space 1. Under-penetrated financial ment of digital India. India is supposed to outweigh its mobile wallets allow merchants to architecture to cater to a population be it, e-wallets, crowdfunding, services counterpart in the United States send/receive payments from a remittances, asset management, that takes time to adopt new 2. High TAT for approvals and/or soon. As of 2014, India stood at the How the Indian FinTech insurance, share trading, credit variety of banks and the same also practices but is quick on the uptake rejections third position as far as number of cards, consumer lending, payments happens through payment once the learning curve is met. To playing field looks like internet users mattered. In the same or business lending, are witnessing 3. Non-transparency in processes processing firms. Banks can, of study, it has been found that state the obvious, here are some There are several themes that traction from entrepreneurs and course, develop applications of 4. Traditional financial institutions majority of these users have been statistics from NPCI showing how FinTech can adapt to, and thus venture capitalists alike. India, with not very tech-savvy within the ages of 15 and 44 years. their own, the Unified Payment IMPS transactions have increased its gamut of under-penetrated revolutionize the financial services This customer cohort has huge Interface being one of them. But the categories of financial services is Threats over the past year. The trend is sphere in India. Payments, P2P potential when it comes to using base principle that banks operate on ripe for a FinTech revolution. 1. Low financial inclusion headed upstream going by the lending, bank in a box, financial and adopting new technology. requires a physical location. Fintech Let’s take a comprehensive look at a recent changes announced by the inclusion, robo-advisory, security companies are more or less immune and biometrics are ways in which SWOT analysis for FinTechs in Growth of Internet Users vs Mobile Internet in government. India. India 2012 - 2016 FinTech companies can leverage Strengths their technological capabilities. 462 Number of IMPS Transactions in India 1. Rapid adoption of Payments comprise the most smartphones/portable comput- Mobile Internet 402 35 popular startups in India due to the ing devices due to declining 31 Total Internet Users 375 29.5 capability to empower customers to average selling price 354 30 28.5 26.2 330 371 carry out their business in a hassle- 2. Good growth of economy at 7% 25 24.2 24.4 302 free manner as far as sending and plus GDP 20.9 20.4 278 18.9 306 20 17.8 receiving money is concerned. UPI 3. Recent move of demonetization 243 16.5 276 14.8 introduced in many banks now is a 15 4. Government’s push towards 205 190 238 precursor to how digital payments digitization of payments 10 will be defined in the future. 192 Weaknesses 137 173 FinTech firms specializing in 159 5 1. Invasive red tape policies 137 payments and trade processing 0 2. Low ratio of business registra- 110 account for nearly 46 percent of the 91 Jan-16 Jun-15 Jun-15 Oct-15 Feb-16 Sep-15 Dec-15 Apr-16 Mar-16 Aug-15 Nov-15 tion to business operation May-16 Indian FinTech industry. After 48 payments, come P2P lending 3. Poor internet connectivity across Source: NPCI the nation, especially in rural Jun-12 Jun-13 Oct-13 Jul-14 Oct-14 Dec-14 Mar-15 Jun-15 Oct-15 Dec-15 Jun-16* and semi-urban areas Source: IAMAI

Financial Foresights 28 Financial Foresights 29 Industry Insights Industry Insights

companies that allow customers to a single digit. As clearly as it can be States, Hong Kong, the United engage on a community level with observed, the rate of adoption and Kingdom and Israel. Based on lenders. While next-gen payments maturity of this theme is at an all- entrepreneurial & innovative Emerging New Trends/Technologies allow easier business transactions, time high. mindset, government incentives P2P lending along with alternative offered, technological readiness, Block chain methodology can aid in the Online Lending Space lending allows easy access to compliance with regulatory the FinTech industry in becoming personal and business finance. A support, business environment and better at leveraging existing community spirit fosters account- funding options, the mentioned technology and making innovations ability, transparency and knowl- regions are a haven for FinTech Akshay Mehrotra on a more rapid scale. Making edge sharing among peers. 20 new companies. India, by the same CEO smaller transactions simpler, robo- P2P lenders have come up in India standards, still is an emerging EarlySalary advisory is a nifty feature that is in 2015. market, with none of the factors at a still in its growth phase. Portals like mature stage. Efficient push from But what about new players that Bankbazaar and Policybazaar are the government and growing are trying to get a foothold in the providing crucial financial manage- popularity of cashless transactions FinTech sector? Bank-in-a-box ment features to customers by will pave a better path for the solutions allow new entrants like implementing robo-advisors. FinTech industry to tread on. A 017 will mark the year of Check-Out etc basis credit check disrupting this market by offering payment banks and amalgamated Aadhaar-linked biometrics are the value-add to financial service FinTech and online lending and small unsecured loans which instant cash loans on a mobile app regional rural banks to quickly first step towards a secure FinTech providers and customers can be 2ecosystem innovation. For offer similar services like to salaried individuals for tenures adopt standard banking regulations space. Banks are already exploring provided only through a smart the past 6 years most online BillMeLater from PayPal and less than one month. and scale up their business voice-recognition systems to help in congruency of FinTech, banks and disruption has taken space in the e- PayLater by Wonga from the West. efficiently. Thus, financial inclusion authorizing transactions. Technol- non-finance technology firms. The commerce & e-classified space. This Disrupting the credit is being jet-propelled forward, also ogy plays a vital role here and increasing acceptance of e-wallets, is will see the largest see tech start- EMI on consumer score driven by Credit owing to various government-led FinTech players are not going to be electronic transactions and mobile ups disrupting the traditional durables and Bureau's initiatives. FinTech companies are left behind in this race. banking are the harbingers of a banking ecosystem. The ecosystem on the same ride, being accelerated truly mobile and unhinged consumerism on monthly The current markets where the is aiming to improve both Traditionally, CIBIL score is what towards growth. Plans developed financial experience for the instalment FinTech hub is at its best opera- consumer credit side and SME you need to get any form of credit. in line with India Vision 2020 aim nation. n tional frequency are the United credit pain points where traditional Bajaj Finance & Capital First have But this is very age bias and relies to bring financial exclusion down to banks and financial institutions dominated the consumer durable on banks and other institutions have left many pockets unattended finance category for nearly 7 years submitting their portfolio data to for the FinTech players to disrupt now and FinTech players are financial bureaus. Today many new and provide technology layered entering this space to disrupt this FinTech start-ups are either lending products. market. From offering EMI options focusing on building a new credit to students to credit without a score using multiple data sourcing Harsh Vardhan Lunia, Co-Founder & CEO, Lendingkart Technologies Pvt. Ltd.: Harshvardhan Lunia is the co-founder and CEO at Taking of the C out of the combing credit bureau reports to Lendingkart Technologies Private Limited. He drives the primary aspect of business in the company: Designing innovative credit credit card, building complex social media profile of the user to solutions and delivering them in the simplest and most efficient manner to SMBs. Harshvardhan had about a decade of COD machine learning credit scoring and experience in corporate banking before he embarked on an entrepreneurial route. social profiling systems to lend make their decision faster and more One of the biggest factor to the He started his career with large private sector and multinational banks in their small loan divisions. He has worked with top faster, the new age FinTech players accurate. companies like ICICI Bank, Standard Chartered Bank and HDFC Bank. Early in his career, he was intrigued by the passion of e-commerce growth story in India will disrupt the current consumer small business owners who despite being creditworthy were not served by existing lenders. Additionally, he understood the has been Cash-On-Delivery with Financier disruption with durable credit market considerably. anxiety one went through waiting for credit decisions to come through, which, in banks can take months. This is what spurred nearly 60% of all transactions today him to do something of his own in this sector, replete with opportunities. In December 2010, he launched Domestic Finance & Peer to Peer (P2P) model being COD. From this 60% around Investment Private Limited. Lendingkart was incorporated in April 2014 with a vision to provide financing solutions to those who Instant cash are creditworthy but would be overlooked by traditional financial institutions. 60% result in return/cancellation P2P model is changing the advance/loans His vision is to implement Big Data credit scoring with analytics and artificial intelligence. He wants to make Lendingkart on delivery causing the biggest landscape of capital provider for synonymous with an online credit provider that has the simplest and most efficient loan delivery system, the easiest access and pain point in the e-commerce Traditionally banks offers over lending. Traditionally banks and the most flexible terms. He plans to helm the expansion of Lendingkart by leveraging cutting-edge technology and data analytics growth story today. To solve this NBFCs borrowed to lend to others, for credit appraisal and cash management. draft facilities and a few companies problem, many FinTech players are and customer had to approach Harshvardhan is a Chartered Accountant and has completed his Post Graduation from the prestigious ISB (Indian School of offers salaried loans to employees. Business, Hyderabad). In his free time, he loves walking and exploring the world with his wife. entering into this place to build players like EarlySalary are these institutions to borrow. Peer to concepts like Pay Later, Credit on

Financial Foresights 30 Financial Foresights 31 Industry Insights Industry Insights

Peer platforms act as catalyst for players are operating in this market EarlySalary looks at combining anyone to become a lender and already. social media profile of a applicant offering his cash as credit to anyone to the Credit Bureau data and Aadhaar Enabled Digital Process Author of this article, is the Co- in need of credit. These platforms decides on a loan request within Founder and CEO of act as big catalyst for growing the 10 minutes. EarlySalary, India's 1st EarlySalary.com. EarlySalary is a Transformation in Indian BFSI Sector lending space. SME finance and mobile app based FinTech player short term lending platform which working capital funding has got started in Feb, 2016 and has already gives cash loans to working mass acceptance in a very early received 250000 app downloads individuals via a mobile app. Sanket Nayak stage already and many FinTech and loan requests. n Co-founder Digio

inTech has emerged as a One of the key enablers common l Paperless processes can bring dominating theme globally across the spectrum is "Identity down the cost of operations by Fin the last couple of years. linked Digital Customer approximately 70% While the disruption in payments Onboarding & Service Delivery". The facility to prove your identity started long back with Paypal & This is essential for frictionless, cost using biometrics and authenticate a Alipay emerging as prominent efficient and fast service delivery. transaction and digitally signing players, other themes have Thats where Aadhaar as a singular documents remotely using emerged only in the last few years. identity and authentication OTP/Biometrics, opens a whole platform comes to play. The story in India is no different. new realm of opportunities. There are 80+ startups in the Various applications can be built on Think of it, you could open a bank FinTech space in India and can top of this to provide paperless, account, get a credit card, or open a primarily be classified into hassle-free customer on-boarding demat account from the comfort of following segments: Lending, experience which is legally your home/workplace without: Investments and Payments. Even compliant, secure, consent driven large financial institutions are now and non-repudiable. l Having to fill lengthy forms either developing their own With 1.09 Billion people having l Physical signature applications to cater to these themes Aadhaar (more than 93% adults in or actively collaborating with these l Visiting a branch or someone India have Aadhaar), businesses startups. coming to your doorstep to get should be looking at working with your signatures and documents. Akshay Mehrotra, CEO, EarlySalary: Armed with a Master's Degree in Business Administration from Symbiosis Pune, Askhay However, one of the core companies building products Mehrotra is now spearheading his own Start-up venture EarlySalary along with two other partners. components responsible for and leveraging Aadhaar. Coming to its All this can now happen in a EarlySalary is a Fintech Start-Up which uses new age technology for lending funds. The company aims to deliver a revolutionary powering the growing adoption impact; completely paperless & presence new business model set to change the lending market in India by introducing ultra short term loans. and success of these companies less manner. l The cost of service delivery can Prior to this, Akshay was associated with brands like Future Retail Ltd, PolicyBazaar.com, Big Bazaar and Bajaj Allianz Life remains the "Enablers" which work Insurance Co. Ltd. An exemplary leader, Akshay brings with him a rich experience of 12 years in strategic planning and come down from Rs. 1200-2300 Think of it, the aforementioned "under-the-hood". marketing. He has been conferred as one of the Most Talented CMO of the year award in 2013 – 2014 in the retail space, by CMO to Rs. 75 per customer and; FinTech startups primarily cater to Asia. While these businesses continue to the top 37-40 million of the As the Chief Executive Officer at EarlySalary, Akshay oversees the implementation of the company's product strategy and is l Time taken for service fulfilment innovate, if conventional businesses population (with the exception of focused towards building the business and building EarlySalary as a Financial Institution. Akshay has a sharp business mind-set could be reduce from 7-10 like Banks, NBFCs, Mutual Funds, wallets). Investments, credit & with attention to details. An unwavering passion for customer service, he believes that one of the biggest features and the most working days to few minutes, significant competitive edge of any company is giving personalized attention to the customers and this is what he and his team Brokerages etc need to catch up, insurance for the bottom-of-the and all this disruption can at strive to achieve. they too need to leverage such pyramid, which is fundamental to scale In his leisure time he likes to go for short trips, exploring new places and spend time with his family. enablers.

Financial Foresights 32 Financial Foresights 33 Industry Insights Industry Insights

financial inclusion and social PMJDY as a case study for debit mandates etc, which today (passcode) and authenticate using credit decisioning etc. l Large businesses: To serve as security is still primarily dominated work on wet-ink signatures. Also, your Fingerprint/Iris. There could the adopters & benefactors of digital service delivery To sum it up, it is imperative that by large financial institutions. Last the only way to establish the also be biometric verification hubs this disruption by partnering for financial inclusion to happen, mile banking currently not being a The Pradhan Mantri Jan Dhan authenticity of a wet-ink signature which can be leveraged by with technology companies and digital inclusion needs to happen profitable operation, this could Yojana (PMJDY) is a classic case for possible fraud is using forensics. businesses rather than investing in bring in the "pull-factor" and first and everyone has a role to play fundamentally change things. study wherein 26 crore bank It is time, that the industries adopt capex. This will significantly bring "trust" into the equation for the here: accounts have been opened in legally accepted, non-repudiable down the cost of KYC and consumer Next steps record time. It is important to note Aadhaar based digital signatures operations. l Consumers: Adopt digital l Technology companies: To that of these accounts only a across the board, so that its fraud practices for secure, hassle-free Identity is fundamental to any Single View build applications to enable this meagre 23-24% accounts are zero proof, tamper proof, secure and and faster service delivery business and a consumer's identity digital infrastructure balance accounts. This augmented cost efficient Similarly, other data intelligence is singular, while his/her service l Government: Continue with Banking Mitra/ Business models will emerge with time. With If this is achieved, it will be a provider relationships could be 1-Click Service Delivery providing conducive policy Correspondent model for cash a unique identifier like Aadhaar if leapfrog moment for India's multiple. How do we efficiently environment for digital collection for deposits, mass roll- As a consumer, all your documents seeded and available across data banking and financial industry and manage the consumer's identity inclusion out of Rupay Cards, conversion of could be stored on your records (deposits, credit, insurance, could translate to a minimum of and documents (which do not Kisaan Credit Cards to Rupay mobile/cloud, and whenever you investments), a comprehensive l Central regulators: To come up 10,000 crores of operational cost change with industry/use case) Cards, Micro ATM infrastructure apply for a service (eg: bank "single view" of the consumer's with unambiguous and savings over next 5 years. n across his/her multiple service would further reduce the number account, credit card, loan etc), the financial health could be arrived at harmonised KYC guidelines relationships ? That is the key of zero balance accounts. business could fetch this for investment advisory, prudent question that needs to be information with your consent and addressed. This calls for a "digital Now basis this, aside to pre-fill the forms by extracting infrastructure" connecting the government subsidies, financial information from these documents, consumer, businesses and institutions like banks now have a obtain your digital signature on the government authorities. Few key medium for distribution of credit documents online. points therein would be: products, Insurance companies can provide micro-insurance products, Anywhere banking l Consent driven architecture to the erstwhile unbanked There could be mobile devices with l Paperless, presence less flow of population. biometric sensors at the nearest information Emerging case studies Kirana store, taxi or even your l Harmonisation in KYC policies workplace that you could use to DBS and IDFC Bank have recently and guidelines by Central prove your identity remotely. In emerged as pioneers in digital Regulators Banking, this could abstract out the practices. Taking a leaf out of the documentation and in-person Global firms like Boston Consulting telecommunications industry, verification part from the Group, Credit Suisse and Reliance Jio is a classic example for conventional not so profitable top- MicroSave have also emphasized digital service delivery. down business the need to go digital in banking correspondent/facilitator model. operations in multiple study The Future reports. One of the excellent reports Death of plastic cards Death of wet-ink signatures Sanket Nayak, Co-founder, Digio: Sanket is the Co-Founder of Digio (www.digio.in), a Bangalore based company, building to study is "The Digital Banking products for bringing paperless, presence less, hassle free service delivery to business processes for Digital India. Within 5 months Someday we could see plastic cards Report - 2014" by BCG which covers As the demography shifts from of launching its first product, Digio is currently integrating with more than 50 businesses across Banking, Brokerage, Insurance, becoming obsolete for cash Consumer Lending, SME Lending, P2P Lending, Taxation etc. all these aspects and calls out for writing with pen-paper to typing withdrawal at ATMs or for Prior to Digio, he was responsible for Twitter's product portfolio for emerging markets, early member at ZipDial through its the need of a truly digital banking on computers, our physical transactions at point-of-sale. All acquisition by Twitter Inc. serving as its Director of Global Operations, responsible for scaling India operations and setting up its industry. signatures are prone to mismatch you need is to know your PIN international operations in 4 geographies. Prior to ZipDial, he was part of the early core team member of High Mark Credit resulting in declining of cheques, Bureau through its acquisition by CRIF S.p.A. and has worked with Banks, NBFCs and MFIs closely. He has also been part of multiple other organizations in his career spanning a decade. Sanket holds a Masters in Astronautical Engineering from University of Southern California (USC), Los Angeles, Masters in Space Studies from International Space University (ISU), Strasbourg, France

Financial Foresights 34 Financial Foresights 35 Industry Insights Industry Insights

the financial intermediary (a stock to a cumbersome process, which Add to this, the ease with which broker for example) will authenti- currently takes many days. payments can be processed real India Stack – Moment in the Sun for cate these details with the UIDAI's time with the UPI layer, we are In fact, digital signing platforms, central data repository and get a basically looking at a completely which are again built on top of the 'yes/no' response. As an additional digital, transparent, and user Indian Capital Markets Aadhaar layer, further enable the layer of check, UIDAI sends out a friendly eco system. digital on boarding process. onetime password (OTP) to the India stack, with its set of open mobile number registered with the Clearly, the new digital on- Karthik Rangappa APIs, is poised to revolutionize the Aadhaar number. Needless to say, boarding process is user friendly, as Vice President – Education & Research Services way business is conducted. This is the OTP should match before the it requires no paper, no ink, no perhaps one of those rare moments, Zerodha submission of the application. photocopying, no messy glue, or where the government has taken a couriering of forms. Things happen So essentially, we are talking about huge step forward, and asking the at the click of a few buttons, at the opening a 'Trading and Demat' corporations to catch up. This, comfort of the customer's house, account (or even a bank account) in perhaps, is a very good problem to and the results are instantaneous. n alk about the Indian packs in different technological 2% of its population participating in a matter of few minutes as opposed deal with. 'FinTech' industry, and you layers. Each of these layers enables the capital markets. One of the Twill soon be diverted to a wide range of possibilities. For major reasons for such a low advancements in technology and example, the Unified Payment number is the manner in which a user experience in the digital Interface (UPI) layer allows the potential market participant is on payments space. Predominantly, all exchange of payments (across boarded. For instance, a person discussions on FinTech revolve banks/wallet accounts) in a real- willing to open a 'Trading and around this one particular industry time environment, much like the Demat account' has to deal with the sub domain. This is understand- traditional, physical form of cash. ordeal of printing forms, pasting able, as nearly 50% of the new The payments facilitated via UPI photographs, 30 signatures, and FinTech startups are focused on this are not just real time, but also have couriering these forms. Further- particular theme. However, the the added advantage of being more, one also has to sit through 'FinTech revolution' extends digitally accounted. the 'in person verification' process beyond the digital payments space which requires a verifying officer to On the other hand, the 'Unique and spreads to every possible physically verify the identity of the Identification Authority of India's' traditional financial service you can potential the account holder. (UIDAI) 'Aadhaar' layer can think of; be it lending, investment digitally authenticate the identity of Naturally, this very first step of management, financial advisory a person. So far, there have been 'account opening' itself acts a huge services, banking, or even stock nearly 3 billion Aadhaar based barrier for anyone willing to broking. These advancements are authentications and over 340 participate in the capital markets. expected to introduce financial million Aadhaar linked bank services to millions of Indians, who However, the Aadhaar based eKYC accounts. As a natural progression, are otherwise not financially process is set to change this Aadhaar based authentications included. If you breakdown the cumbersome process of on would lead to digitization of FinTech architecture to its elements boarding. The entire 'Know Your records a.k.a. paperless documenta- to investigate how this mass Client' (KYC) process has been tion. These developments have a inclusion is even possible, at its greatly simplified with the Aadhaar significant effect on capital markets, core, you will find 'India stack'. based eKYC. One can now fill up particularly the way new partici- Karthik Rangappa, Vice President – Education & Research Services, Zerodha: Karthik Rangappa is a senior equity research and the online application from the investment professional with over 15 years of experience. He specializes in financial modeling, equity valuation, equity derivative India stack, with its set of open pants can be on boarded. comfort of his home, upload the strategies, portfolio creation, and portfolio analytics. He has a passion for teaching and education. Besides handling the education Application program interface services – VARSITY at Zerodha, he also handles full credit courses related to markets and finance at leading Business schools in It is quite unfortunate that a necessary documents, and request (API) and digital infrastructure, Bengaluru. He holds a post graduate degree in Risk and Asset Management from EDHEC Business School, France and a Bachelors country like India has lesser than for a verification. At the back end, Degree in Engineering from Bangalore University.

Financial Foresights 36 Financial Foresights 37 Industry Insights Industry Insights

has become the norm. With volume The Indian eco-system though has result create distinct advantages for of mobile banking transactions largely neglected this area. The themselves. But success in Cryptography: The Vault for going up from INR 1819 crore in Indian government also has not Blockchain technology will also 2012 to INR 1,01,851 crore in 2015, been proactive, unlike its western need a good understanding of Today's Banks the shift towards digital banking counterparts, in creating standards. cryptography. Hence the need for seems obvious. Indian banking's rapid digitization investment and focus in this area should be parallely supported with cannot be overstressed. Cryptography advancement in security practices. Lock and vault makers were strong Ankit Ratan Building skill and knowledge base As the world moves to digital there partners for banking in the 19th and CEO in cryptography might be a good is a corresponding need of this 20th century. Startups today can fill SIGNZY starting point. "impenetrable" safety and security that space when it comes to the in the digital world. Cryptography Cryptography also powers one of digital world. There are an is the answer. the most rapidly rising finance increasing number of startups technology - Blockchain. offering services in security, digital Cryptography has four key identity and Blockchain. Introduction This small instance reveals a very of currency present. And hence the attributes: It has driven businesses to re- imagine how their networks important aspect of banking. Safety entire banking system 1. Confidentiality: The protection of Conclusion Cryptography is a sub-field of operate and has become is paramount. Banks have fundamentally relies on this information and prevention of theoretical computer science. It synonymous with alternative Banks in India have started constantly been the biggest buyers consumer trust in banking. unauthorized access; leverages advanced number theory of safe and vaults. Thus companies business models. At its core, realizing that consumer experience and hence needs a strong creating locks and vaults have been Need for security 2. Privacy: Protecting the personal however, Blockchain leverages hash and ease of banking are very background in mathematics. Inspite strong partners in banking growth. information of individuals; and public key encryption important. This has led to several of its abstract background, it is When the infamous thief Willie algorithms. These two form the collaborations between the FinTech 3. Non-repudiation: The inability to already widely used in everyday Even today, banks pay tremendous Sutton was asked why he robbed major pillars of cryptography, as start-ups and banks. What would deny an action took place; and applications. All digital attention to detail as regards safety banks, he answered, "Because that's well. The benefits of Blockchain are probably be the next wave is tie-ups and security. The vault of the where the money is." While the communications today leverage 4. Integrity: Assurance that well known today. It enables with startups focussing on digital Federal Reserve Bank of New York witty comeback still "holds up" some form of public key information cannot be confidentiality, privacy and security. This will help banks bring is safeguarded by a comprehensive today, the weapon of choice now is cryptography. Emails are a prime manipulated. security of data and user identities. the "offline" trust to the online example. As banking goes digital, multi-layered security system, the more likely to be a pen/computer Apart from its security benefits, world. Banks which focus on digital cryptography would play a major highlight of which is a 90-ton steel than a gun. The business of a As banking moves digital, Blockchain also increases the speed security and safety are more likely role in ensuring security and cylinder protecting the main vault. bank/financial institution is cryptography will become as of different transactions. Thus, it is to build consumer trust in the establishing trust. The only entry into the vault creates constantly under threat from important as the steel vaults were being seen as the modern coming future. Thus it is safe to say an airtight and watertight seal menaces of robbery, or even fraud. in the yesteryears. It will play a equivalent of the internet. that cryptography may hold the Recently, when the Edgartown which is impenetrable. Banks have always placed crucial role in preventing electronic 'key' to winning this digital Companies that can effectively Bank in Massachusetts, USA tremendous value on ensuring high fraud thereby ensuring the validity world. n This security is important as banks needed more space, they made a standards of safety and security. of financial transactions. leverage Blockchain would as a decision to do away with their steel have always thrived on the notion enforced vault built in 1850. What of trust that customers place in The advent of technology has made seemed to be a simple re-furnishing them. Direct evidence of this fraud-inducing practices more task turned into a mammoth principle is in the fact that banks act prevalent and sophisticated. A demolition exercise! Its only when as guardians of the currency of survey on financial trends made by they started digging deep, did they their customers. Customers deposit PwC found that financial frauds led realise that it wasn't that the vault large sums of their savings in to approximately $20 billion (Rs was put in the Bank. But the bank banks. They do believe that they 1.26 lakh crore) in direct losses was built, around the vault. Thus would be able to withdraw the annually. Ankit Ratan, CEO, SIGNZY: Over 6 years of experience working with financial institutions. Worked for boutique Analytics firm entire amount when need be. But in US deploying AML/CFT solutions at Citi Bank and Metlife. Started own company in Analytics in India in 2013, worked with removing the vault meant The same report states that as 75% banks deal with monetary values Axis Bank, Maersk and Benetton helping them with Analytics needs specializing in fraud analytics. Was silver medallist at IIT destabilizing the complete of the population of India has a Delhi where he also published 3 research papers and a patent. and transaction amounts which are infrastructure. mobile phone, 'banking on the go' Currently building Signzy, where we use cryptography, Artificial Intelligence and India Stack to build trust APIs for digital far greater than the actual amount banking.

Financial Foresights 38 Financial Foresights 39 Industry Insights Industry Insights

processes involved for Small for all - customers, banks and technology platform can be defined business loans that was okay till a FinTech players through rapid and more sharply thus, significantly FinTechs & Banks: few years back suddenly seems breakthrough innovations at scale. improving the chances of success as arcane to customers who have Banks have deep capabilities to this model is rolled out and scaled become used to simpler processes contribute to such innovation in the up. More importantly, the Together Creating Value for Customer offered by likes of Amazon, Uber, form of significant experience and partnership model should focus on Paytm etc. knowledge of customer needs and a regular feedback loop so that Much like the transactions space, preferences, banking products, business model and tech platform this leaves significant room for credit modelling, operations. Banks can be tweaked on an ongoing basis Amit Sachdev have brands and large distribution FinTech companies to emerge in to keep pace with changes in footprints. They also have rich data Co-founder and CEO each part of the loan value chain – customer needs and evolution of on each of these areas to aid CoinTribe customer sourcing, onboarding, the ecosystem around. credit risk assessment, pre- analytics and decision making for disbursement operations, various aspects of business model There are multiple partnership collections, customer servicing. innovation – something out of structures – Joint Ventures, Equity While several FinTech models have which FinTech players with stake, Acquisition, Start-up emerged in online customer advanced analytics can create very Incubation arms, FinTech focused acquisition, little has been seen on profitable models. Two speed world – entrant with slightest of innovation innovations have emerged with VC funds, transactional use of technology in the complex partnerships - that can be Innovation friendly Vs to cause disruption. focus on easier transaction FinTech companies offer the enablement such as mobile wallet, area of risk assessment or in nimbleness and agility required for potentially used for this purpose. digitizing the complete application BAU industries Banking - Innovation POS aggregators & payment quick pilots and experimentation in As mentioned in a recent report1, to disbursement process – which is friendly or BAU industry? gateways. The exponential growth the form of flexible technology large majority of banks prefer to We are fast witnessing the increasing being enabled by the of some of these models is systems and new development in engage through equity emergence of a two-speed world. This question doesn’t have an India Stack. One end of this world is witnessing testimony to how small ticket high an agile manner. They also offer participation with FinTech overarching answer but needs to be Banking ecosystem is structurally technology driven disruption in volume segments can be made outside-in perspective and first companies. This enables both looked at in the context of three not conducive to technology led innovation friendly industries such profitable using technology principle thinking on how to solve partners to work in an open different aspects of Banking – innovation. Multiple elements in as e-commerce, telecom, travel and effectively. Banks have now begun some of the complex issues simply environment of trust and brings out liabilities, transactions and assets. banking ecosystem such as limited tourism, logistics etc, while at the to collaborate with these FinTechs and with good user experience. the best form both partners. Opening up of Banking industry to competition given licensing other end there is Business As to offer state-of-the-art solutions to However, it is important for banks private competition in four requirements, philosophy of (over) Usual (BAU) in industries that are their customers and leverage the An ideal partnership model to be very careful in selection of different phases between 1994 and compliance, large and complex insulated from significant tremendous potential this part of between banks and FinTechs would FinTech partners. It is important for 2016 has led to liability customers organizations with multiple competition due to regulations, business offers. involve co-innovating the business Banks to partner with FinTech benefiting from several technology- decision contributors (not makers) government control, capital Asset side of banking has, however, model by leveraging the strengths having complementary capabilities driven innovations. With Internet that slow down decision making intensive nature or involving seen the least amount of tech of both partners. While this and focus on constant innovation. Banking, Mobile Banking, tab based etc. make it difficult to incentivize technical complexities such as innovation so far. With less than business model design would offer banking, ATMs, Cash Deposit and breed innovation in Banking Trust is the hallmark of bank's infrastructure, utilities etc. The 70% of bank’s asset base to be some clear answers, there would be Machines and now Bots based DNA. relationship with customers and constant focus on building customer services, liability side of deployed in loans and over 50% quite a few hypotheses to be tested. banks have strong brands and competitive advantage through banking has been one of the early share of corporate segment in the Partnership between The tech platforms of FinTech reputation to protect. Hence, it is enhancing user experience, adopters of technology. Given loan market compounded by vast Banks and FintTechs: partner can be used for rapid important for banks to work with simplicity, convenience in unmet need in MSME lending, the larger amount of bank’s focus on prototyping and multiple pilots partners who are credible, have innovation friendly industries, as competition in retail and MSME Potential Solution? retail liabilities and the increasing across segments and geographies to strong management and promoters experienced in Uber, Airbnb, loan segments has been relatively competition, these innovations Partnerships between banks and validate these hypotheses. Basis backing. n Paytm, etc is taking customer helped private banks garner large less compared to liabilities thus, FinTechs offers a win-win solution learning from pilots, the model and expectations to a new high every share of liabilities from public reducing the urgency of technology day. With customers using the lens sector banks. led innovation. Additionally, unlike of innovation friendly industries to liabilities, the banks here control the 1 PwC Global Fintech survey 2016 also judge the quality of products On the other hand with respect to supply and have therefore had less and services offered by BAU transactions, while some banks of a ‘woo’ing role. Consequently, industries, the gap between could build profitable models the processes and associated Amit Sachdev, Co-founder and CEO, CoinTribe: Amit Sachdev is the Co-founder and Chief Executive Officer of CoinTribe, the customer expectations and what around small ticket retail efficiencies involved in Retail and leading online loan disbursement platform. Amit aims to revolutionize the lending processes in India, make it completely BAU focused industries offer is transactions, most banks found this MSME loans and have largely technology-driven and enable CoinTribe to emerge as the largest online lending marketplace of our country. His alma maters widening. The end-result on as economically unattractive. Since remained the same over the years include IIT Varanasi as well as IIM Lucknow and has served prestigious Boston Consulting Group as a Principal. customer satisfaction levels in BAU this area was opened-up to non- with plenty of manual intervention He has worked closely with several prominent financial institutions and has assisted them with new business build, strategic focused industries is anybody’s banking players, multiple FinTech at each stage. Turn-around-times planning, design and execution of transformation agenda, digital agenda, product-growth strategy, risk management, and many guess leaving room for a new models with technology led (TAT) of 15-20 days and complex more key business problems. Amit’s expertise in the field has also been tapped by upcoming banks and he has played a pivotal role in framing their banking application, competitive strategy, bank set-up plan.

Financial Foresights 40 Financial Foresights 41 Industry Insights Industry Insights

products, solutions and experiences their APIs available for integration This data enables creation of new to consumers and the industry to FinTechs. Banks are also working products that can be tailored for The Emergence of alike. The advent of customer with FinTechs in areas like alternate individual consumers. centred design and experience will and flow based lending, insurance, redefine experience for end user. robo-advisory, customer experience Regulators FinTech in India With close to 90% of smartphone solution and interactive solutions While regulators are supportive of users on android, building a mobile like chatbots. innovation as long as customer first android experience is fast, cost This provides revenue opportunity privacy and risk is not effective & easy for many start-ups. Deepak Sharma and scale to FinTechs, and at the compromised, majority of FinTechs Access to capital and readiness of same time banks are able to roll out operate in unregulated space. As Chief Digital Officer banks & financial institutions to solutions at a faster pace. Various they become customer facing, either Kotak Mahindra Bank Ltd. work with FinTechs is helping them banks & FIs are also looking in terms of products or transaction validate their business model and beyond partnership and are open to for e.g. Account aggregation, raise capital at a faster pace. This is making strategic investments in insurance, investment, lending, also helping FinTech companies to such FinTech companies. This payments or deposits they will go beyond Indian shores. augurs well for the growth of both come under regulatory purview. industries and brings Thus, it is important for FinTechs to n the last couple of years, we Payment System (AEPS), Bharat Bill processing, analytics, transaction Banks & Financial complimentary value. understand regulatory landscape of have witnessed the making of Pay (BBPS) & USSD creates one of authentication and security Institutions (BFSI) India better. Some models that may FinTech in India with several the largest interoperable payment solution, or customer facing like Consumer work in other parts of the world I There has been a long debate about cannot be blindly adopted here. successful companies, marking ecosystems in the world. lending, wallets, investments etc. FinTechs vs. banks & how the As everyone fights for consumers’ their presence at Asian/Global Depending on space, business Regular interaction, ideation and As India leap frogs towards growth of FinTech will impact BFSI. wallets and mind share, it is level. As FinTech reaches the model and underlying technology, discussion with regulators can help adoption of data and device, i.e. FinTechs with unique strength of becoming pertinent that no one adolescence phase, it is showing FinTechs can sharpen their play. build better understanding on both smart phone, which crossed 325 focussed product, solution & owns the consumer. Consumers are confidence and seeking recognition sides, thus reducing speed bumps. million mark, it will be fair to say Today, richness of data across segment depth have been good in increasingly becoming demanding from peers and others alike. that India is mobile first country, if credit, social media, merchant solving identified problems. as they are presented with several Overall, it is a great time for FinTechs are looking at not mobile only. Demographic transaction, spends and financial FinTechs are agile, have high choices. Be it aggregators offering FinTech players in India, provided incorporating global best practises dividend, social media adoption aggregator is making us data rich adaptability & ability to pivot or range of financial products on a the companies choose customer in the Indian context keeping and mass urbanisation have created country, and companies focussed persevere with solution and single platform or chatbots segments, problem that they are consumer insights & broader large segment of ‘digital native’ on data science and analytics can experience. At the same time, the executing errand, there are several trying to solve, business model and ecosystem in mind. The FinTech which will continue to support leverage this across business FinTech industry lacks access to options in every category. Due to unit economics well. It is important opportunity in India has five broad growth of new business models. models. Such data can be initial customers, trust, distribution this, consumers have come to to note that technology can be a dimensions - Ecosystem, FinTech capital to build business models in footprint and regulatory oversight. expect convenience, user experience great leveller and is also easy to companies / start-ups, Banks & As Government continues the push areas like lending, insurance, This provides a perfect synergy for and offers/ deals while interacting copy. Those who combine Financial institutions, Consumers towards cashless economy with payments and investment Banks & FI to work with FinTechs with digital interface on web, technology with consumer insights, and Regulators. measures like government payment solutions. As motor vehicle, health, mobile or social media. It is, ecosystem partnership and speed to and taxes moving online, incentives & vice-versa. Many banks including land and property records get therefore, a great time to be a market will succeed. Ecosystem for digital transaction etc., we are Kotak have set up an innovation digitised, we will witness more new consumer. Consumer engagement likely to see growth in consumer lab, and is partnering with various Disclaimer: The views expressed in the In the last 5 years, India has built innovative solutions from FinTech. on digital platforms also helps adoption of digital mediums. This FinTechs to jointly develop Proof of article are personal and do not reflect one of the unique and robust FinTech and other ecosystem along with growth in e-commerce Technology is playing another Concept (POC) & roll out products. the views of Kotak Mahindra infrastructures for incubation and players become data rich, which in n transaction has resulted in changing pivotal role in the growth of As banks moves towards API Bank Ltd. growth of FinTech. India Stack, banking, many banks are making undeniably the new currency. which comprises JAM (Jan Dhan, consumer habits. Governments and FinTech as cost of starting a Aadhar & Mobile) Trinity start-up incubators are also business has dropped dramatically combined with E-sign & digital promoting FinTech through with cloud based storage, plug n financial & infra support means. play offices and access to Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank Ltd.: global first products like Jifi, Hashtag banking, Bharat Banking, M- locker, is major boost for FinTechs Store & Kaypay. Deepak believes in constant innovation and focuses on building business models which are customer centric and technology at low cost. Areas to build their business. This disruptive. FinTech around identity & fraud combined with Payment Stack Deepak has worked across various international markets and brings global perspective to his business. Prior to this, he was (including recent initiatives) viz. FinTechs have various management, artificial intelligence responsible for setting up the Bank’s highly successful Non Resident Indian (NRI) & International Remittance business. Deepak Immediate Payment Service (IMPS), opportunities, and can choose the and natural language processing also played a key role in launching the Bank’s affluent banking programme - Privy League. National Automated Clearing space they want to get into. It can (NLP), advance analytics, With over 22 years of experience, Deepak’s professional tenure spans across the banking, telecom and service verticals. Prior to House (NACH), India Quick be B2B, where one is blockchain, Internet of Things (IoT), joining Kotak, he was part of the leadership team of Consumer Banking at Standard Chartered bank from 2003 to 2008. As Response (QR), Unified Payment partnering/offering services to augmented & virtual reality National Head for Corporate Business, he was responsible for building the corporate payroll and Wealth Management business. Interface (UPI), Aadhar Enabled institutional clients like payment provides unimaginable range of Deepak has completed an advanced programme in Strategy from IIM Calcutta & Lead Certified in Corporate Innovation from Stanford GSB. He is also part of various trade and business committees and writes on subjects related to business.

Financial Foresights 42 Financial Foresights 43 Industry Insights Industry Insights

two enablers, India's unbanked can figure for Indians practicing a form that is capable of servicing now hope to access the benefits of of regulated banking through potentially millions of customers at The Future of Personal Finance is Instant, the formal financial system. banks, financial institutions and the same time. A customer can log mobile payment systems comes to in to this engine, input his product Let's take a recent development as around 700 million out of a total requirements, authenticate himself Cashless, Paperless-and Presence-Less example and understand the large- population of 1230 million. With through a cellphone OTP, and buy scale implications of FinTech. The Evolving FinTech Landscape of India. the number of Aadhaar and a product instantly. This whole To alleviate public suffering cellphone owners now standing at process would be over in minutes. Adhil Shetty following the demonetisation, the 1000 million, there's potentially a In the offline world, the same Founder & CEO Union Government and the RBI gap of 300 million people that process would require a visit to the Bank Bazaar have taken several steps. One of the needs bridging. lender along with a set of several most important of these steps was documents. The application, Beyond this set, there are taken on December 8 2016 when the approval and disbursal may take potentially 230 million more RBI amended the master direction several days. Indians who will acquire an on the KYC process of regulated Aadhaar number or a cellphone in Because the technological platform financial entities. The RBI now the future. All these people - is handling the application, it n June 2016, KPMG reported consumer and institutional finance. FinTech company that attracts 100 allows regulated entities to on- perhaps approximately 530 million allows the financial service that the FinTech software and More recently, the word has come million users every year, board new customers by strong - can thus eventually hope to provider to reduce costs on human services industry is expected to to encompass "technological BankBazaar is a technological and authenticating them through OTP- I benefit from an OTP or Aadhaar- resources and paperwork. This become worth $45 billion in 2020, innovation in the financial sector, marketing platform. It connects based eKYC instead of the normal linked eKYC-based account reduction in costs can be as high as growing at approximately 7.1% including innovations in financial banks and customers in a KYC process which requires opening processes. They can then 20-30% in case of insurance annually. In India, as per the same literacy and education, retail frictionless environment. It helps papers, presence and considerable come under the ambit of the formal products and 2-3% for banking report, the FinTech software market banking, investment and even banks acquire more customers, time. stood at $1.2 billion in 2016, and is crypto-currencies like bitcoin," while customers are helped in financial system and have easy, products. In the long run, paperless expected to double by 2020. according to Investopedia. making informed decisions about By authenticating themselves instant, presence-less and paperless products allow the financial their purchase by letting them through an OTP received on their access to savings accounts, loan services industry to cut costs and Goldman Sachs reported earlier this FinTech in India has multiple ways compare products on various cellphone, customers can open products, insurance products and reduce non-performing assets. year that with 440 million forward. It can compete with parameters such as price and deposit and loan accounts investment options. Since the products are paperless, millennials and 390 million Gen Z- established financial institutions. Or paperlessly, presence-lessly, and there are also savings in terms of features. The financial inclusion of half a ers (those born after 2000), and with it can enable those very institutions, instantly. costs to the environment. a per capita GDP of $1650 that partnering them into creating an Technology has a large role to play billion more people can then lead to compares with China in 2005, India integrated, easily accessible, in taking more Indians towards This being a pilot run for the RBI in a better standard of living, higher Customers stand to benefit from the is expected to fast-forward in terms democratised financial system that economic prosperity. Rather than terms of eKYC implementation, tax collection, and greater reduced costs of these products. of internet connectivity and e- could bring hundreds of millions of be threatened by it, more customers caps have been imposed on the prosperity and development all Considering that the service tax on commerce. Naturally, the growth of more Indians under the ambit of and banks can prepare to embrace current process. There's a cap of Rs. round. Without technology and the insurance products has been FinTech in India is expected to pair formal banking. this shift from offline to online, 60,000 per loan account per year, reach of cellphones, creating this trending upwards in the last with the growth of internet users from paper to paperless, from cash and an aggregate of Rs. 200,000 level of financial inclusion would decade, paperless products would Infosys co-founder and former and e-commerce in India. to cashless. (and no more than Rs. 100,000 per have been much more difficult. allow them the possibility of buying UIDAI chairman Nandan Nilekani deposit) per deposit account per the same products at significantly So what is FinTech? And how has it described this phase as the Indian Democratising finance in year. The caps can be lifted as soon Paperless finance: A new reduced prices. become so important? According to financial services sector's as the usual KYC processes have India wave Then, there's the matter of reach. Investopedia, the internet-based 'Whatsapp moment'. "Banking as been completed within a 12 month Cellphone and internet connectivity financial encyclopaedia, "FinTech is we know it will stand on its head in Technology is now allowing period. When we're trying to reach and sell may reach where the brick and a portmanteau of financial the next 10 years," Nilekani recently financial services providers to to people on their cellphones, the This may seem like a small step by mortar financial institutions will technology that describes an said while talking of disruptions in increase financial inclusion in India. financial products need to be the RBI. But it has the potential to not. By buying financial products emerging financial services sector the marketplace, comparing recent The cellphone has become a instant and paperless. These bank India's several hundred with their cellphones, customers in the 21st century." trends to how Whatsapp had differentiator, as is having an products are the way forward. Let's million unbanked people. Former may avoid the hardship and costs disrupted instant messaging. Aadhaar number. The number of understand this first through costs. The meaning of the word has RBI governor Raghuram Rajan said associated with having to travel to Indians having either a cellphone or evolved. Around the turn of the Where does a company like India is home to 21% of the world's A paperless product can be their nearest banks. Our belief in an Aadhaar card is now one billion. century, the word was used to BankBazaar fit into this fast- unbanked population, the largest processed and disbursed by an being online is vindicated each time Armed with one or both of these describe the technology powering evolving financial landscape? As a share for any country. The ballpark internet-linked technological engine

Financial Foresights 44 Financial Foresights 45 Industry Insights Industry Insights

we get applications from customers of deposit and loan accounts. After Revolutionising finance based in hard-to-reach places like the success of the pilot project, we in Asia Ladakh or Pithoragarh. This is yet can expect eKYC to be adopted at a Leveraging FinTech another example of technology larger scale. The FinTech learnings and aiding and hastening financial successes in India can be exported This brings us to e-signatures. inclusion. to more Asian countries that opportunities in India Currently, wet signatures are continue to provide the largest Any time we discuss digitisation needed to complete the application chunks of the world's unbanked and paperless, we also need to process for all financial products. population. Bipin Preet Singh consider threats to information This is detrimental to the very idea Founder CEO & Director security. FinTech entrepreneurs of paperless and instant products. As per another KPMG report, only have a responsibility to constantly Going through the offline process 27% of Southeast Asia's population Mobikwik assess threats. We at BankBazaar of collecting a wet signature can of 600 million is banked. That gives hold ourselves to the highest take hours or days. This process the FinTech industry the standards in information security needs to be gradually replaced by opportunity to work towards the and are certified by TrustE, and e-signatures which already have financial inclusion of nearly half a regularly keep upgrading our been accorded legal status. In 2008, billion people more, or 438 million e live in uncertain yet like still immature start-up connect, engage and share ideas certifications pertaining to info the IT Act of 2000 was amended to quote the report precisely. exciting times. It is no environment and labyrinth-like across vibrant communities and security. providing legal sanctity to e- Financial inclusion in SEA can be less than a challenge - laws and regulations. networks. It also identifies and signatures based on asymmetric W more so a necessity - for converts opportunities into improved much the same way it is Why eKYC and eSign are cryptosystems. In addition, Sections corporations worldwide to manage Growth drivers business. In the current age of being done in India. Increasing the necessary 47A, 67A, 73A, and 85B were added internal and external risks, and Innovation and technology are technology-driven financial scope of basic, mobile-based to the Indian Evidence Act of 1872, stand resilient to evolving economic bringing radical changes in services, no market participant can transacting, using OTP-based Instant and paperless products, as I thus making e-signatures valid and and political circumstances. traditional financial services. A new afford to operate in silos. argued above, can also lead to authenticating, increasing the use of admissible evidence in the court of India - the world's fastest growing generation of start-ups is utilising greater financial inclusion. There paperless and presence-less Booming businesses law and for all legal purposes. major economy - is meanwhile tech tools and forging disruptive are two keys to achieving paperless. products, providing frictionless shining under a spotlight with business models to bring in India is transitioning into a This is the large-scale adoption of Once the RBI decides to approve experiences and benefits to young entrepreneurs, innovators seamless and innovative financial dynamic ecosystem offering eKYC and e-signature. As the use of e-signatures along with customers, and using the internet and visionaries reshaping how services for the banked and FinTech start-ups a platform to mentioned above, eKYC is now its current sanction to eKYC, for increased reach and instant business is done. While disruptions unbanked population - from potentially grow into billion-dollar already a reality, with the RBI paperless and instant products can delivery of financial services - these and unexpected events are a fact of payments to wealth management to unicorns. From tapping new become a reality. are broadly the way forward for agreeing to adopt it in the opening life, the country continues to show peer-to-peer lending to crowd segments to exploring foreign FinTech. n signs of gaining a steady funding. markets, FinTech start-ups are momentum and transitioning to a FinTech is generally defined as pursuing multiple aspirations. The global digital economy. technology-based businesses that traditionally cash-driven economy compete against, enable and / or has responded well to the FinTech With favourable demographics and opportunity, primarily triggered by supportive government policies, collaborate with financial institutions. These start-up firms a surge in e-commerce and smart India's 2.3 trillion dollar economy is phone penetration. witnessing a phase characterised by engage in external partnerships Adhil Shetty, Founder & CEO, Bank Bazaar: Adhil Shetty serves as the CEO of BankBazaar.com. Also the co-founder of the innovation-led entrepreneurship. with financial institutions, The transaction value for the Indian company, he has set for himself an incisive vision – that of making BankBazaar.com the go-to brand for investors and loan Young people are deploying new universities and research FinTech sector is estimated to be 33 aspirants – which is shifting the contours of how loans, cards and insurance products are consumed in India today. digital tools and communication institutions, technology experts, billion dollars and forecast to reach BankBazaar.com was born in 2008 as the result of a frustrating personal search for a loan. Adhil, along with other co-founders, technologies to disrupt the old government agencies, industry 73 billion dollars by 2020, growing conceptualized India's first and leading world-class digital marketplace that provides a platform where users not only could order. consultants and associations. at a CAGR of 22 per cent - over search and compare personal finance products but also purchase it on the platform – be it credit cards, secured or unsecured Through these partnerships, they three times the GDP growth rate. loans, insurance, or savings and investments – from all the leading financial institution in India. The core idea has been to digitize The 1.3 billion people, economy create a highly integrated The wave continues due to a strong the process as much as possible so that it delivers financial products to users instantly in a customized, presence-less, paperless growing at 7.4 per cent annually, ecosystem that brings together their talent pipeline of cost-effective tech manner. Today, this vision is becoming the face of Fintech in India, and consuming financial products is becoming as easy as English-speaking workforce, robust expertise, experience, technology workforce. shopping for any other consumer durable. information technology sector and and facilities. An engineering graduate from Anna University and holder of a Master's degree in International Relations from Columbia booming IT-related services are From e-wallets to lending to University, Adhil held decisive positions at Deloitte Touche Tomahatsu's US East Alliance and Cisco Systems before he dived attracting investments in billions of A successful FinTech ecosystem is insurance, the services of FinTech headlong into scripting the BankBazaar story. dollars, undaunted by challenges where all market participants have redefined the way businesses

Financial Foresights 46 Financial Foresights 47 Industry Insights Industry Insights

and consumers carry out routine travelling to and from a bank. Can more than 50 per cent of their FinTech focused accelerator technology is receiving encouraging financial firms operating in these transactions. Channels like e- digital payments address this? The transactions digitally, 80 per cent programmes. Partnerships by reviews from market players in the inaccessible areas. At present, the commerce and m-commerce are scope is huge. The report says rebates on patent costs for start-ups, FinTech product firms (in point-of- country. The RBI has set up a financial inclusion penetration is opening up new ways for digital payments services in India income tax exemption for start-ups sale hardware, credit deals and committee to understand the low where 145 million households consumers to make purchases - like can add 700 billion dollars to GDP for first three years, and exemption social lending) with banks with a possibility of using block-chain do not have access to banking tapping their mobile phone, or by 2025 and create 21 million new on capital gains tax for investments synchronised go-to-market strategy technology and to determine services. reading a quick response code, or a jobs. in unlisted companies for longer are addressing the immediate suitable regulatory policies. Rapidly growing penetration of wearable watch onto a contactless than two years. demand of digital-age consumers. Key enablers There have been initial concerns smart phones and internet has led payment terminal. Adoption of The RBI has been trying to create an To counter a steady challenge by over the emergence of virtual to the emergence of multiple these new innovations can help The government along with environment for unhindered venture backed FinTech firms, currency schemes. But the technologies for replacing cash, create new revenue channels and regulators such as the Securities innovations by FinTech companies, many incumbents are augmenting government recognises the need for providing credit information for reduce overheads, positively and Exchange Board of India (SEBI) expanding the reach of banking their value chain with competing regulators and authorities to keep screening, enabling online lending impacting financial bottom lines of and the Reserve Bank of India (RBI) services for unbanked population, offerings and leveraging their own pace with developments. Crypto- and purchasing of financial companies. are aggressively supporting the regulating an efficient electronic distribution and client base. Setting currencies have garnered products through digital means. ambition of becoming a cashless Going cashless payment system and providing up, managing or investing in worldwide attention with the Going forward, the recent provision digital economy with a strong alternative options to consumers. centres of excellence and FinTech World Economic Forum, the of payment bank licenses by the In the world's most sweeping FinTech ecosystem via both FinTech enablement has been hubs is an excellent strategy to take Pentagon, Central Banks and the RBI is likely to aid in monetising currency policy change in decades, funding and promotional primarily across payments, lending, an inside view of the emerging Government of Dubai announcing this digital trend and making Prime Minister Narendra Modi initiatives. security / biometrics and wealth FinTech firms' working, and to massive projects to rewrite the technology as the core offering. announced on November 8, 2016 The Jan Dhan Yojana added over management. nurture talent for a future history of money. The RBI has also given licenses to that all Rs 500 and 1,000 notes will 200 million unbanked individuals competitive advantage. be taken out of circulation. Aimed Investors' role Many of the world's largest banks 10 entities for setting up small into the banking sector. The are said to be supporting a joint finance banks. Through this at eliminating widespread FinTech investment increased Block-chain technology Aadhaar card programme started effort for setting up of private initiative, the central bank aims to corruption and widening the tax manifold from 247 million dollars as a 12-digit individual Built on the block-chain block-chain and building an extend credit facilities to micro and base, the move had sent hundreds in 2014 to more than 1.5 billion identification number enabling infrastructure, virtual currency is industry-wide platform for unorganised sectors. It has also of thousands of people queuing up dollars in 2015. India has a far lesser online and cost-effective enabling better speed and efficiency standardising the use of this come up with a report on medium- at banks across the country to number of angel investors (about identification for every resident of transaction. With more than 90 technology. This could transform term path for financial inclusion deposit idle cash or replace them 1,800 in 2016) as compared to Indian. It has already been per cent share globally, Bitcoin is functioning in back offices of banks, which aims to achieve 90 per cent with new notes. 300,000 in the United States. extended for pension, provident the leading virtual currency in a increase the speed and cost coverage by 2021. However, India is witnessing Since the move invalidated 86 per fund and the Jan Dhan Yojana. seven billion dollar market. Block- efficiency in payment systems and increasing interest levels in start-up While the FinTech sector offers cent of the total currency in Innovations leveraging the Aadhaar chain is being perceived in India as trade finance. circulation, an unprecedented cash card are expected to assist the funding, which is evident by a game changer. If used to its full innovation and disruptive crunch ensued, prompting more financially excluded segments and increasing number of angel deals potential, it can offer an innocuous, New normals technologies, banks can drive and more Indians to seek succour in remove financial untouchability. from 370 in 2014 to 691 in 2015. quick and economical way for customer demand. It is thus for In India, financial inclusion is banks to leverage these concepts e-wallets. This proves that the Bengaluru has the highest number transactions, simplify international The opportunity for FinTech is projected to be driven largely by and disruptive ideas and adopt market is huge and mostly of start-ups and accelerators in the remittances and reduce transaction enormous in the areas of creation of an ecosystem where them into their mode. Banks will untapped. With cash constituting country, while Delhi NCR region is times by more than half. government-to-person cash people get the opportunities to use likely consume and integrate about 98 per cent of all consumer home to big-ticket players. transfers too. The Direct Benefit Though it is at a very nascent stage financial instruments in their daily FinTech ideas into their normal transactions by volume and about Investors are coming to terms that Transfer (DBT) scheme will enable and is yet to mature into a lives and banks make best use of course of business in coming 68 per cent by value, 12 per cent of FinTech is more than just payments deeper penetration of financial mainstream application, the the spread of FinTech and non- times. n the economy depends solely on services and help in achieving technology and the interest is cash, according to consulting major financial inclusion goals. On the beginning to manifest itself in a PwC. Cashless transactions, on the other hand, Digital India and Smart variety of sub-segments such as Bipin Preet Singh, Founder CEO & Director, Mobikwik: Bipin founded MobiKwik with the vision of making mobile payments easier contrary, constitute a mere two per Cities initiatives have been investing, lending, wealth for the average Indian. He has worn several hats at MobiKwik, from engineering to leading the business development, marketing, cent of the GDP. launched to promote digital management, credit reporting and advertising teams. Bipin's current focus is on taking the wallet to a billion Indians by driving product innovation and brand marketing. A report by McKinsey Global infrastructure development in the among others. Prior to his entrepreneurial journey, Bipin spent 7 years as a Platform Architect at companies such as Intel, Nvidia, and Freescale. Institute titled 'Digital Finance for country as well as attract foreign The BFSI sector is gearing for both He also dabbled in advertising as a Partner with Star Auto and in civic advocacy with Janaagraha, a non-profit organization based All: Powering Inclusive Growth in investments. acquisitions and funding-based in Bengaluru. Emerging Economies' says Indians Among the notable initiatives on routes to increase its presence in the Bipin did his B.Tech in Electrical Engineering from IIT-Delhi. At the age of 29, when faced with a choice to spend his savings on lose more than two billion dollar a tax and surcharge relief are: tax emerging FinTech space. For an expensive B-school degree from a top university in the US or use the money to startup, Bipin chose the latter. It was a decision year in forgone income simply example Citi Bank, Barclays and that saw him making a difficult shift from hardware to software, learn programming from scratch and bootstrap his way to rebates for merchants accepting success. Given his success as a seasoned entrepreneur Fortune featured him under the prestigious "40 under 40" list for 2016. because of the time it takes Goldman Sachs have launched

Financial Foresights 48 Financial Foresights 49 Industry Insights Industry Insights

service providers to increase have struggled to remain afloat due Today, India's financial services efficiency and provide greater to their inability to access finance sector is at an inflection point with FinTech-Making India a New access to credit. The turnaround for their survival and growth. The the digital and technological time for the approval and disbursal huge lending gap can be attributed revolution transforming its of loans by FinTech firms is also to the information irregularity business operations. With the Techno Banking Empire swift as compared to several banks which exists in the sector relating to maturity of the ecosystem, Fintech who are digitizing and speeding up the funding options and choices to start-ups will lead the way to their processes markedly. these units. India's financial inclusion. This means consumers will be able to Manavjeet Singh Digital access to loans has mas- Considering this pain point, access financial services such as sively impacted the MSME sector FinTech platforms offers unique Founder and CEO digital remittance, credit, insurance that has been playing a vital role in technology solutions with match- Rubique etc. even without accounts in the Indian economy for the past making algorithm and direct commercial banks. With almost a five decades. Being the incubators integration with financial institu- billion mobile subscriptions and a of entrepreneurship development, tions' lending systems. With such billion Aadhar IDs creation, innovation, and risk-taking integrated technology solution, the financial services through mobile behavior, MSMEs have been focus is on disbursement rather phones are being foreseen to instrumental in the country's than mere lead generation allowing ndia is transitioning into a The absence of a broad-based combined platform for quick dominate all other channels. The industrial output, exports and in the customer to get the best deal in vibrant ecosystem offering financial transaction infrastructure sanction of loans. Such neutral success factors for Fintech players creation of employment opportuni- the quickest possible time while FinTech start-ups a platform to has been a major bottleneck in India platforms offering a wide range of in India will be the usability, I ties for millions of people in the lowering the cost of customer potentially grow into billion dollar and is largely responsible for the loan products and end-to-end loan affordability, reliability, and country. But when it comes to acquisition for the financial unicorns. Although relatively lack of penetration. For instance, fulfillment allows individuals to ubiquity of their services. To raising adequate finances, they are institution. young at present, the FinTech the application for a loan in India focus on building their businesses ultimately benefit consumers at the left under-served by banks and sector is escalating rapidly, fueled once required several physical instead of worrying about getting The emergence of P2P lending grassroots level, presence of financial lenders which would by the large innovation-driven documents - identification proof, the funding to fulfill the gap in their where lenders are connected to the financial literacy, awareness and rather reach out for the top of the start-up landscape, and responsive salary slips and attested copies of cash flows or fund their expansion borrowers directly through online trust factor are necessary to pyramid. government policies and regula- all documents, signatures, in- and growth plans. applications and websites is also mobilize rural and semi-urban tions. As per NASSCOM, the person verification, physical consumers in transitioning into Technology today is transforming Hunting for credit has always been enabling a social impact and industry is forecasted to touch USD inspections of property, and half a digital channels. The confluence of the financial services industry the biggest challenge for millions of providing easier access to credit to 2.4 billion by 2020 from the current dozen other items that almost stock finance, technology, and innovation bringing it at the forefront of small businesses in a country like small and medium entrepreneurs. USD 1.2 billion. The year 2016 up a fat binder. Similarly, without are not only making the possibili- providing efficiencies, but digital India which has more than 50 Their lower rates of interest witnessed major technology meaningful financial data, the risk ties endless but also making the presents a whole new prototype. By million MSMEs operating at compared with other money changes in the country's financial of lending to hundreds of millions journey to a formal financial system evaluating, implementing, and present. They run from pillar to lenders and with the unorganized services industry. The traditionally of undocumented and unverifiable for millions of Indians easier than combining the right digital uses for post to get finance for working sector make them user-friendly and cash-driven Indian economy has Indians became high even if the ever imagined. n their needs, emerging FinTech capital or any other financing approachable for SME borrowers. responded well to the FinTech income sufficiency tests were met startups are accelerating the speed requirements. Many MSME units opportunity, primarily generated by some. The digital storm has of change in the way customers by an upwelling in e-commerce, finally created an inflection point access financial products and and smartphone penetration. It is where technology, invention, and services. They are also remodeling becoming more open to preference favorable government policy are Manavjeet Singh, Founder and CEO, Rubique: First generation entrepreneur Mr. Manavjeet Singh is the Founder & CEO of the financial services industry for convenience with cashless helping overcome barriers that Rubique (earlier known as bestdealdinance), one of the largest financial portals offering a comprehensive range of financial drastically by creating disruption products and services from multiple Banks and Financial Institutions, through a cutting-edge technology platform. A veteran transactions fast gaining momen- have stood as a growth hurdle for through innovative and dynamic banker with more than 23 years of rich experience in the field of banking & financial services, he is a well-recognized name in the tum on one hand and promising decades in this area. use of technology in the lending industry. categories like lending, Personal The new age fin-tech lending process. For instance, while Manavjeet started his professional career with Xerox followed by several strategic leadership positions in prestigious corporate Finance Management (PFM), marketplaces foresee revolutioniz- traditional banks in India use organizations like Citibank India, SBI Mutual Fund, HDFC Bank, Reliance Consumer Finance, Reliance Broadcast Network Ltd Insurance, investment platforms, and YES Bank. In his career, he has handled various types of products ranging from retail & MSME loans, mutual funds, ing the country's financial lending technology to simply calculate banking technology, security, microfinance, to unsecured business lending. Manavjeet has also played an instrumental role in setting up businesses before business by changing the way it credit scores, FinTech ventures use loyalty management, e-tax filing launching his first entrepreneurial venture, bestdealfinance.com (now Rubique) along with his partner Mr. Sandeep Nambiar on works, through giving loans machine learning algorithms and October 2014. He conceptualized the online financial platform with a vision to bring transparency and to make finance simple & and Saas-based subscription billing, without collateral or by connecting alternate data points like social accessible through technology and create disruption in the online lending domain. etc. all set to transform the way of the consumers or small business media trails, call records, shopping A professional with a distinguished reputation of being the driving force, Manavjeet has a proven strategic track record in life for both urban and rural owners to financial institutions on a histories, and payments to utility operational efficiencies, business development, sales productivity, managing large teams & financial management. With his consumers. expertise, he has taken the company from being just a competitor to web aggregators getting instant approval to going beyond web aggregation and emerging as one of the very few players in the FinTech disrupting lending space, in just one year of its existence.

Financial Foresights 50 Financial Foresights 51 Industry Insights Industry Insights

scanning, GPS geocoding, and billion through 2018, or about six analyse lending proposals. The NFC-based technologies, they now times the growth rate of the overall whole process is completed within are potent commerce-enablers. information technology market. a fraction of the time it would usually take anyone to do this Change is the New Normal The evolution of smartphones is The disruption of FinTech, however manually. enabling new payment capabilities. is not limited to a spectacular range This has transformed digital of start-ups prevalent in this space. This brings me to our Payments payments. Coupled with innova- Traditional financial institutions Bank. This is an initiative that we Ajay Srinivasan tions in payment access and have also taken cognizance of the propose to roll out in the first half Chief Executive - Financial Services security technologies for reducing impact that this disruptive revolu- of 2017. Through the Payments fraud, multi-factor authentication tion could have to its existent Bank initiative, we will leverage the Aditya Birla Group etc., the growth for FinTech in India service offerings. We have increas- unique reach of our telecom cannot be emphasized enough. ingly heard of banks investing in company Idea to provide a wide FinTech within strategic areas of range of products and services. Perhaps the most exciting area of operations. FinTech innovation is the use of The adoption of mobile wallets, data. Big data and advanced At Aditya Birla Financial Services, cashless transactions and online s 2016 came to an end, I services industry. Over the past According to industry reports, the analytics offer transformative we have witnessed the power of payment gateways has paved the can't but reflect on how decade, FinTech has been growing Indian FinTech market is forecasted potential to predict "next best incorporating financial technologies way for FinTech disruption. For much disruption the year with a focus on customer-centric to touch $2.4 Bn by 2020, a two-fold A actions," understand customer into traditional services first-hand. those who can move fast to emerge had witnessed. Interestingly innovation. While 2015 saw increase from the market size needs, and utilize a host of data to For instance we have just launched with a customer centric engage- enough, the most common words in FinTech companies transforming today. Lending and payments, in determine profiles and clusters. Active Account - an app which ment strategy, the potential to business today too resonate the customer experiences by focusing particular are expected to pave the IDC estimated that the digital quite simply helps make your develop a winning model is same sentiment of disruption, on convenience, efficiency and user path for this unprecedented universe is doubling its size yearly money work harder than it does in enormous. For the rest, 2017 will be innovation and transformation. interface, 2016 has brought about growth. The increase in smartphone and would reach 44 ZB in 2020 a typical bank account. about collaborations with the right Given the sheer amount of conver- an increased collaboration between adoption, growth of rural telephony from 4.4 ZB of data generated in partners to provide enriched sations on disruption and innova- traditional financial institutions and penetration, the larger play of On the lending side, we have 2013. It also forecasted that the big customer experiences. tion, I think it's fair to say this is an FinTech start-ups. FinTech Indian digitization and the recent launched a complete end-to-end data technology and services issue that seems to be a discussion companies are benefiting from scale demonetisation will be other factors digital lending proposition wherein In any case, watch this space, as the market will grow at 26.4% com- point in every business today. by integrating with banks and driving the growth in this vibrant we have back-end algorithms to action is heating up! n pound annual growth rate to $41.5 building models that combine their sector. The concept of disruptive innova- innovative strengths with larger tion was defined by a Harvard India as such, provides a huge institutions, instead of competing. professor, Clayton Christensen, in untapped opportunity for the the late 1990s, when he talked about As Bill Gates once said, "Banking is growth of FinTech. The use of a principle wherein entrenched, necessary, banks are not." FinTech mobile internet is growing sharply. dominant product or service start-ups utilise this mindset to According to BCG, the number of Ajay Srinivasan, Chief Executive - Financial Services, Aditya Birla Group: Ajay Srinivasan has been the Chief Executive of the providers could be unseated in the think of better solutions to cus- users accessing internet services on Financial Services business at the Aditya Birla Group since July 2007. market by smaller rivals, who tomer problems or needs. We have mobile is expected to reach 3 billion In his role as Chief Executive, Financial Services, he sets the strategic direction and leadership for the Group's Financial Services offered solutions more simply or at seen FinTech companies increase by 2020, covering 65% of the business which covers several verticals such as life insurance, fund management, private equity, wealth management, retail broking, capital markets based lending, corporate financing, infrastructure finance, housing finance, general insurance broking, a much lower cost. While a lot of their focus to meet the needs of world's adult population as health insurance, pension fund management and online personal finance management. the hype on disruption is probably millennials, look at increased compared to approximately 1.9 Under his leadership, the financial services business has diversified into a large conglomerate with 13 new verticals. Aditya Birla exaggerated, the truth is that it has traction and in online advice and billion in 2015. It predicts that about Financial Services Group (ABFSG) ranks among the top 5 fund managers in India (excluding LIC) with an AUM of INR 217, 840 already changed a few sectors while discretionary wealth management 80% of all internet users will be Crore as on 30th September 2016 and has a lending book of Rs 31, 823 Crore. The business has been one of the fastest growing many others face challenges that tools, focus on Big Data and accessing the Internet through non-banks in the country. With a proven track record for building successful businesses, his experience in the financial services industry spans over two and a half decades. may be waiting in the wings today, analytics, explore alternative mobile handsets and 58% of such but could move from the fringes to finance options like peer-to-peer users will be using smartphones. Ajay has been engaged with several bodies including the Financial Planning Standards Board, the FICCI Committee on Insurance and as a member of the Advisory Board of the City of London. He is also actively engaged with some non profit organisations take centre-stage tomorrow. (P2P) lending and of course Given that smartphone devices are including Pride India and the Ashoka Fellowships. continue to focus on payments and equipped with powerful proces- Let us consider the disruption that Ajay is an Alumnus from St Stephens College, University of Delhi and the Indian Institute of Management, Ahmedabad. remittances. sors, substantial memory, high- is happening in the financial resolution cameras. barcode

Financial Foresights 52 Financial Foresights 53 Industry Insights Industry Insights

Financial Foresights 52 Financial Foresights 53 FICCI Data Centre FICCI Data Centre FICCI – Data Centre

Equity Capital Markets l Indian ECM volume stood at $10.1bn (via 150 deals) for 2016, down 47% on the $19.2bn (via 132 deals) raised in 2015 l IPO volume increased considerably to $4.1bn (via 90 deals) for 2016, compared to $2.1bn (via 60 deals) for 2015. There were two convertibles issued ($310m) for 2016 compared to none for 2015 l Follow-on volume for 2016 decreased 67% to $5.6bn (via 58 deals) from the $17.0bn (via 72 deals) for 2015 l ICICI Prudential Life Insurance Ltd.'s $903m IPO via book runners BAML, ICICI, DB, HSBC, CITIC, IIFL Holdings, JM Financial, SBI and UBS is the largest ECM transaction for 2016

Financial Foresights 57 FICCI – Data Centre

Financial Foresights 57 FICCI – Data Centre FICCI – Data Centre

Top 10 ECM Deals-FY 2016 India IPO Volume FY 2016 Date Issuer Sector Deal Type Deal Value Bookrunners Pos. Bookrunner Parent Deal Value ($m) No. % Share ($m) 1 ICICI Bank 467 12 11.3 22-Sep ICICI Prudential Life Insurance IPO 903 BAML, ICICI, DB, HSBC, CITIC, IIFL, JM Financial, SBI, UBS 2 Kotak Mahindra Bank Ltd 450 10 10.9 24-Feb NTPC Ltd Utility & Energy FO 734 SBI, ICICI, EDEL, DB 3 Axis Bank 342 8 8.3 29-Sep Kotak Mahindra Bank Finance FO 549 Kotak, CITI, DB, JPM 4 JM Financial Ltd 308 6 7.4 2-Nov PNB Housing Finance Finance IPO 450 Kotak, BAML, JM Financial, JPM, MS 5 Citi 295 5 7.1 28-Apr NHPC Ltd Utility & Energy FO 411 EDEL, HSBC, IDFC 6 State Bank of India 277 7 6.7 National Buildings 7 IIFL Holdings Ltd 238 7 5.7 21-Oct Construction Co- Construction/Building FO 333 AXIS, CITI, NOM 8 Bank of America Merrill Lynch 224 3 5.4 NBCC 9 HSBC 182 2 4.4 11-Apr Equitas Holdings Ltd Finance IPO 327 AXIS, EDEL, HSBC, 10 Edelweiss Financial Services Ltd 160 4 3.9 3-Nov Larsen & Toubro Ltd Construction/Building FO 315 ICICI, CITI, MS 13-May Eicher Motors Ltd Auto/Truck FO 314 CITI 19-May Castrol India Ltd Oil & Gas FO 311 CITI, ICICI India FO and Conv. Volume FY 2016 Pos. Bookrunner Parent Deal Value ($m) No. % Share Asia Pacific ECM Volume by Nation FY 2016 1 Citi 1,472 10 24.8 Pos. Nationality Deal Value ($m) No. % Share 2 ICICI Bank 755 9 12.7 1 China 214,886 908 68.8 3 Edelweiss Financial Services Ltd 476 6 8.0 2 Japan 26,378 190 8.4 4 Morgan Stanley 413 3 7.0 3 Australia 20,656 792 6.6 5 Deutsche Bank 359 4 6.1 4 South Korea 14,145 180 4.5 6 JP Morgan 337 2 5.7 5 India 10,073 150 3.2 7 Kotak Mahindra Bank Ltd 251 3 4.2 6 Hong Kong 6,959 270 2.2 8 State Bank of India 242 5 4.1 7 Singapore 4,265 52 1.4 9 UBS 199 3 3.4 8 Malaysia 3,484 76 1.1 10 Credit Suisse 194 2 3.3 9 Indonesia 2,697 31 0.9 10 Taiwan 2,597 123 0.8

India ECM Volume FY 2016 Pos. Bookrunner Parent Deal Value ($m) No. % Share 1 Citi 1,767 15 17.5 2 ICICI Bank 1,222 21 12.1 3 Kotak Mahindra Bank Ltd 701 13 7.0 4 Edelweiss Financial Services Ltd 635 10 6.3 5 Morgan Stanley 523 5 5.2 6 State Bank of India 519 12 5.2 7 Deutsche Bank 460 5 4.6 8 Axis Bank 453 9 4.5 9 JPMorgan 451 4 4.5 10 JM Financial Ltd 404 8 4.0

Financial Foresights 58 Financial Foresights 59 FICCI – Data Centre FICCI – Data Centre

India Announced M&A Attorney Ranking FY 2016 Mergers & Acquisitions Pos. Attorney Value $m # Deals % Share 1 Cyril Amarchand Mangaldas 19,614 48 31.6 l India ranked as the fourth targeted nation in Asia Pacific region for 2016 with $62.3bn, up 24% on the $50.4bn 2 AZB & Partners 15,873 104 25.6 announced for 2015 3 Freshfields 15,156 6 24.4 l India Outbound M&A volume increased 81% to $8.9bn for 2016 compared to $4.9bn for 2015 4 Khaitan & Co 11,693 48 18.8 l India Inbound M&A volume increased considerably to $33.2bn for 2016 from the $16.2bn for 2015 5 J Sagar Associates 8,716 40 14.0 l Domestic M&A volume dropped 15% to $29.0bn for 2016, compared to $34.0bn for 2015 6 Shardul Amarchand Mangaldas & Co 7,035 35 11.3 l Rosneftegaz OAO, the Russian state-owned oil and gas company, and a consortium led by Trafigura Beheer BV 7 Kirkland & Ellis LLP 6,422 2 10.3 and United Capital Partners Advisory OOO’s acquisition of Essar Oil and Vadinar Oil Terminal Ltd - VOTL from 8 Slaughter & May 5,896 2 9.5 Essar Group for $12.9bn, is the largest announced Indian M&A transaction for 2016 9 Simpson Thacher & Bartlett 3,417 4 5.5 10 Herbert Smith Freehills 2,700 5 4.4

India Announced M&A Advisory Ranking FY 2016 Pos. Advisor Value $m # Deals % Share 1 Citi 7,207 11 14.4 2 JM Financial Ltd 5,077 4 10.1 3 Rothschild & Co 5,011 5 10.0 4 Kotak Mahindra Bank Ltd 3,916 15 7.8 5 Axis Bank 3,857 12 7.7 6 Credit Suisse 3,701 6 7.4 7 Morgan Stanley 3,097 6 6.2 8 JP Morgan 3,045 7 6.1 9 Bank of America Merrill Lynch 2,959 4 5.9 10 PwC 2,844 14 5.7

Financial Foresights 60 Financial Foresights 61 FICCI – Data Centre FICCI – Data Centre

Debt Capital Markets l India DCM issuance for 2016 reached $40.8bn (via 467 deals), up 3% on the $39.7bn (via 423 deals) raised in 2015 l Corporate IG and Agency bonds accounted for 67% and 17% of the total DCM volume with $27.5bn and $7.1bn, respectively for 2016 l Export Import Bank of India led the offshore issuer table for 2016 with a 15.2% share, while HDFC Ltd. topped the domestic issuer ranking with a 8.5% share l India Domestic DCM volume reached INR2.07tr for 2016, up 5% on the INR1.97tr raised in 2015. Activity increased to 431 deals during 2016 from the 389 recorded for 2015 l International issuance for 2016 reached $9.9bn, up 12% on the 2015 volume of $8.9bn. Activity increased to 36 deals compared to 34 deals for 2015

Financial Foresights 62 Financial Foresights 63 FICCI – Data Centre FICCI – Data Centre

Loan Markets l India loan volume reached $46.7bn (via 240 deals) for 2016, down 16% on the $55.5bn (via 265 deals) for 2015 l Leveraged loan volume decreased 25% to $36.9bn via 220 deals, compared to $49.3bn (via 243 deals) for 2015 l Investment grade loan volume increased 59% to $9.8bn (via 20 deals) versus $6.2bn (via 22 deals) for 2015 l Among the corporate borrowers, Utility & Energy sector topped the industry ranking for 2016 ($12.2bn) with a 28.4% share l ONGC Ltd.'s $1.8bn investment grade deal in March arranged by Bank of Tokyo‐Mitsubishi, Citi, Mizuho and Sumitomo Mitsui Banking Corp is the largest loan transaction for 2016

Financial Foresights 64 Financial Foresights 65 FICCI – Data Centre FICCI – Data Centre

Top 10 Indian Project Finance Deals FY 2016 Project Finance Financial Borrower Project Name Sector Value $m Close Date 23‐Aug Sasan Power Ltd Sasan Coal Based Power Plant Refinancing Power 2,873 India Project Finance Loans Ranking FY 2016 Pos. Mandated Lead Arranger Value $m # Deals % Share 27‐Jun KSK Mahanadi Power Co Ltd KSK Mahanadi Power Project Power 1,220 1 State Bank of India 8,055 34 53.3 Additional Financing 2 Axis Bank Ltd 1,787 16 11.8 25‐Nov Rattan India Nasik Power Ltd Nasik Thermal Power Project Phase Power 1,073 3 ICICI Bank Ltd 1,167 17 7.7 Additional Financing 4 IDFC Bank Ltd 566 8 3.7 5 Yes Bank Ltd 523 6 3.5 25‐Nov KSK Mahanadi Power Co Ltd KSK Mahanadi Power Project Cost Power 841 6 Rural Electrification Corp Ltd 478 4 3.2 Overrun Financing 7 IDBI Bank Ltd 379 3 2.5 26‐Sep Ramagundam Fertilizers & Ramagundam Fertiliser Plant Expansion Plant 787 8 Oriental Bank of Commerce 378 3 2.5 Chemicals Ltd Project Petrochemical/Chemical 9 Punjab National Bank 369 3 2.4 24‐Oct Thermal Powertech Corp India 1320MW Andhra Pradesh Thermal Power Plant Refinancing 761 10 Power Finance Corp Ltd 249 1 1.6 Ltd Power 5‐Mar Chambal Fertilisers & Chambal Fertilizer Plant Expansion Plant 708 India Sponsor Ranking for Project Finance FY 2016 Chemicals Ltd Project Petrochemical/Chemical Pos. Sponsor Value $m # Deals % Share 22‐Mar HPCL‐Mittal Energy Ltd HPCL Mittal Refinery Expansion Oil Refinery/LNG 706 1 Reliance Anil Dhirubhai Ambani Group 2,873 1 9.3 Refinancing 2016 and LPG Plants 2 KSK Power Ventur plc 2,511 4 8.1 3 Adani Group 1,311 17 4.2 20‐Oct Delhi International Airport Delhi Airport PPP Bond Refinancing 2 Airport 523 4 Jindal Steel & Power Ltd 1,136 6 3.7 Pvt Ltd 5 GMR Infrastructure Ltd 925 7 3.0 9‐Sep Meenakshi Energy Pvt Ltd Meenakshi Energy Thermal Power Plant Power 502 6 Chambal Fertilisers & Chemicals Ltd 708 1 2.3 Phase I‐II Financing 7 RattanIndia Infrastructure Ltd 641 2 2.1 8 Essel Group 609 3 2.0 9 Sadbhav Engineering Ltd 600 5 1.9 10 Mytrah Energy Ltd 600 2 1.9

Financial Foresights 66 Financial Foresights 67 FICCI – Data Centre FICCI – Data Centre

Financial Foresights 66 Financial Foresights 67 FICCI – Data Centre

Investment Banking Revenue l India IB revenue reached $477m for 2016, down 11% on 2015 ($534m). However, revenue second half was up by 13% compared with 2H 2015 ($251m) l Syndicated Loan fees accounted for 29% of total India IB revenue for 2016 with $139m which is down by 24% on the $182m for 2015 l DCM revenue accounted for 20% of total India IB revenue for 2016 with $94m which is down by 8% on the $102m for 2015 l M&A fees accounted for 31% of the total India IB revenue for 2016 with $147m which is down by 1% on $148m for 2015 l ECM fees accounting for 20% of the total India IB revenue, decreased 6% to $97m in 2016 from the $103m for 2015

Financial Foresights 68 FICCI – Data Centre

Financial Foresights 68 FEDERATION OF INDIAN CHAMBERS OF COMMERCE AND INDUSTRY

Financial Sector Division Federation House, 1 Tansen Marg, New Delhi - 110 001 Ph: 011-23487424, 524; Fax: 011-23320714; Email: [email protected] (CIN): U99999DL1956NPL002635 www.ficci.com