January 20, 2017 • Volume 9 • Issue 1 • D100 How MobiKwik is realising its vision of digitising India & embracing a cashless economy The story of Sequoia-backed Pine Presented by Labs Fino Paytech’s alternate banking revolution How Prime Venture Partners-backed Happay is fixing expense management Fintech In conversation with Kalaari Capital’s Bala Srinivasa on the opportunities in India’s fintech sector Stories from India’s most exciting fintech entrepreneurs CONTENTS The Smart CEO // Jan 20, 2017 • Volume 9, Issue 1 16 COVER STORY Fintechntte Every one of the 35 fintech entrepreneurs we spoke to, is bridging a gap in two segments; for MSMEs, the glaring gap in availability of finance, and for consumers, improving penetration of basic financial products. But, how conducive is the Indian ecosystem to support this growth? 4 • The Smart CEO | January 2017 TRULY A DIVERS PARADISE! 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PREM KUMAR 6 • The Smart CEO | January 2017 Editor’s Note This Suffix Called ‘Tech’ Recently, I had a very interesting conversation with a veteran Government, the unexpected catalyst: “There is no other banker and former CEO of a bank, on India’s startup ecosystem. country that has 24/7 real time, instant and low cost payment The topic of conversation was the ‘tech’ suffix – foodtech, infrastructure this sophisticated. UK is years behind and the US mediatech, insurancetech, fintech, healthtech, etc. – that is decades behind,” says, Lizzie Chapman, co-founder and CEO, entrepreneurs, investors and, of course, the media, seem to add Zest Money, one of the founders we interviewed. to various sectors. Everyone can win; It is not a ‘winner takes it all’ The banker, who views and analyses the entire ecosystem with sector: Kalaari Capital’s Bala Srinivasa, who recently authored a shaker of salt, was convinced that a majority of entrepreneurs a research report on the sector, says, “In the Western markets, in the ecosystem are pursuing loss-making ideas which will turn there is a near 100 per cent penetration of financial services. In profitable only at massive scale, which is often not possible for India, however, financial products are underpenetrated in almost everyone to build. any category. And, the opportunity lies in using technology and innovation to deliver financial services that can increase Further, our conversation revolved around what really was the adoption and expand the market itself.” end game going to be for a large proportion of these startups. Can some of these companies deliver stellar IPOs? Are we going The presence of experienced professionals: While there to have a Valley-style M&A ecosystem in India? And, many such are mixed opinions on the value of prior banking experience questions that we’ve now grown accustomed to. Typically, a to succeed as a fintech entrepreneur (For example, PayTM’s critic’s favorite scapegoat is often the foodtech sector, and I was Vijay Shekar Sharma is picking up his banking knowhow on the tired of hearing the same from several people I meet. job), there is no doubt that India has the advantage of having a large pool of professionals with deep understanding of financial But, this individual surprised me with a positive view on services. This, along with the technology talent pool, is critical ‘fintech’. His view was very unique, one that got me thinking for the sector. for days. He said, “I think fin-tech is probably the only tech- suffix sector where it is not a ‘winner takes it all’ market.” He backed it up with some rough data, all essentially pointing to the Investor Interest: Of course, probably the most important fact that financial services in India is largely unpenetrated and booster for the sector comes from the venture capital ecosystem over 400 million people could use the services of digital credit, which has invested USD 734 million into the fintech sector peer-to-peer lending, access to MSME finance, mobile money in 2016, compared to USD 552 million in 2015 (this, without transfers, wallets, and so on. He believed, unlike in foodtech or including Alibaba’s strategic investment in PayTM) (Source: even e-commerce, where two or three players would dominate, Venture Intelligence). fintech could potentially have multiple market leaders in various verticals and horizontals. In short, at Smart CEO, we’re certainly looking forward to a fintech revolution of sorts, maybe like the telecom revolution we This conversation gave us the impetus to pursue an elaborate witnessed last decade. The mobile phone certainly empowered cover story on the fintech sector. We simply said we’ll go out the whole Indian population, and if our fintech entrepreneurs and and talk to 35 entrepreneurs across the many sub-sectors. These investors move right, we may be in for something special. include companies building mobile wallets, platforms for MSME lending, technology-driven financial inclusion firms, insurance- Read on. We hope you enjoy reading this edition. Here’s wishing tech firms, payment infrastructure companies, data-driven you a wonderful, healthy, exciting 2017. companies aiding with credit score calculations, peer-to-peer lending, EMI payment enablers, and many such startups. Sincerely, Going by the conversations we had with these entrepreneurs, Prem Sivakumaran one aspect is very clear – there is indeed a fintech wave in the (Editor) country and predominantly there are four factors driving it. January 2017 | The Smart CEO • 7 COVER STORY - FINTECH 35 The Fintech Wav e 8 • The Smart CEO | January 2017 Every one of the 35 fintech entrepreneurs we spoke to, is bridging a gap in two segments; for MSMEs, the glaring gap in availability of finance, and for consumers, improving penetration of basic financial products. But, how conducive is the Indian ecosystem to support this growth? What is the one thing in common among and MobiKwik – are among the key Razorpay, Ezetap, Capital Float and innovations disrupting India’s financial Paytm, aside from the fact that they all services sector. So, what did the Indian fall under the ‘fintech’ category? If you startups do right (in India) that its Western observe their business models closely, you counterparts couldn’t? What makes India would notice that each of these ventures and Indian fintech businesses unique from find resonance and similarity with their the rest of the world? How different is Western and Asian counterparts. our addressable market? To understand this, let’s dig deeper into how the sector Let’s take the all too familiar Paytm, has evolved in the past decade and the for example. Founded initially as an regulations that govern it. internet venture under the banner One97 Communications, the company operated Understanding Fintech in India as a mobile recharge website, until the While the definition of fintech still mobile revolution post 2010 amped its remains a blur, it can be broadly defined growth with a foray into mobile VAS, as the evolving convergence of finance mobile commerce and primarily, mobile and technology, especially of 21st century payments & wallets, thus making it an businesses which create newer and more Indian counterpart to China’s Alipay. So innovative technologies to compete with is the case with Bengaluru-based Ezetap, and/or work alongside traditional banking which is capitalising on India’s one billion institutions and intermediaries, to deliver mobile users to build universal, electronic plug and play devices, creating what Square has built in the U.S.