A fintech transformation is under way in India. It began with the government working with tech evangelists to lay out the infrastructure: a biometrics-based Aadhaar ID for every citizen to enable authentication, and a unified payments interface (UPI) to simplify money transfer. Then, a withdrawal of cash from the economy gave a push to go digital.
The big players in this space, such as Alibaba-backed Paytm, were the first to see their traction take off in the wake of these developments. But now, we’re seeing new innovators emerge on the scene to ride the fintech wave. State governments and traditional institutions, too, seem eager to work with fintech startups. The path to scalable and sustainable businesses for these ventures is far from clear, but at least there appears to be broad consensus that fintech can bring efficiency, reduce costs, and have a multiplier effect on business and jobs.
Last week, Singapore’s Lattice80 – the world’s biggest fintech hub spanning 30,000 square feet – announced its first center abroad. This is coming up in Vizag on the east coast of India, where the state government has committed to support fintech adoption.
Earlier this month, entrepreneurs got together with banks, corporates, and government officials for the Fintegrate conclave in the Bombay Stock Exchange. It’s an initiative by Zone Startups India – a joint venture between the Bombay Stock Exchange and Canada’s Ryerson Futures, which has accelerators and a seed fund.
The highlight of the conclave was a demo by 10 emerging fintech startups chosen out of hundreds. They gave a glimpse into how innovators are using new technologies like artificial intelligence and building on the so-called India stack of Aadhaar and UPI. The panel of judges had senior executives from top banks like HDFC and ICICI, as well as corporates like IBM and Capgemini, and not just VCs and mentors. It shows a new interest in engaging with startups even if they are out to disrupt traditional systems.
Here are the ten potential disruptors:
Fingpay is a product of Indore-based Tapits. It uses Aadhaar ID and biometric authentication to let merchants accepts digital payments even from customers who don’t have a card or wallet.
Founder and CEO Pratyush Halen, who is from a business family in the tier-2 city of Indore in central India, points out that it took years for India’s leading digital wallet Paytm to get 100 million customers after burning cash on marketing and onboarding. “Here, within a year, we have equipped 780 million Aadhaar holders who can make payments with the swipe of a finger.”
The bank account linked with the Aadhaar ID is debited after the authentication. The merchant can buy the biometric reader from the Fingpay app for INR 2,000 (US$30).
The customer only shares a mobile number, which is mapped with their Aadhaar ID at the back end. For additional security, the fingerprint is also encrypted at the device-level itself, so that it can’t be misused in transit.
Hyderabad-based AnyTimeLoan provides short-term unsecured loans to needy people. Loans of INR 1,000 – 60,000 (US$15 – 900) are given for 1 to 90 days. “So it’s a niche product which doesn’t compete with personal loans of banks,” points out founder Keerthi Kumar Jain.
It also provides education loans for K-12 students, whereas banks target higher education. A third category is a business loan of US$450 – 45,000 for up to 180 days.
What differentiates AnyTimeLoan is an AI-powered loan robot that parses data from loan applications and correlates it with the applicant’s digital footprint to evaluate their capacity to repay. Additionally, a live selfie is analyzed to gauge intention to pay. “The way you think reflects the way you look,” says Keerthi, adding that the two-year-old #startup has disbursed loans worth US$7.5 million so far with a 0.83 percent default rate.
Onboarding of customers is a painful exercise in banks. Biometric authentication with Aadhaar ID has simplified it, but it is still in assisted mode because either the customer has to go the bank or a representative has to visit the customer’s home. FRS Labs solves this with a live selfie which can be matched with an Aadhaar photo, thanks to new-age face recognition tech.
The Bangalore-based startup has been providing fraud, risk, and security services since 2010. Its identity product is built on the India stack with the help of new tech.
Founder Shankar Palaniandy points out that banks are risk-averse to using cognitive services from a foreign tech company. FRS Labs filed for patents on processing images. It enables biometric authentication of a customer in 30 seconds, compared to the traditional process which takes days.
DSYH stands for “don’t scratch your head.” The Ahmedabad-based startup helps sellers on ecommerce sites reconcile their accounts to ensure they are not losing out on receipts for returns, wrong charges, promotions, and so on. DSYH says reconciliation reports shown to marketplaces can recover 3-5 percent of revenue losses. No other tool in the market can automatically reconcile every record to achieve this, claims co-founder Sumit Karanji.
Other startups in this space – Unicommerce, Sellerworx, and Browntape – have all got acquired or changed direction. DSYH has plans to monetize the data it collects on sellers to track their financial performance and generate a credit rating for unsecured loans. Apart from ecommerce, DSYH can be used for reconciliation between Uber and drivers, Zomato and restaurants, and several others. “Reconciliation is sector-agnostic,” says Sumit.
“I just met a CEO who told me to see his CTO as soon as he heard I’m from a cybersecurity firm,” quips Pankit Desai, co-founder of Sequretech, who is an IT industry veteran with over two decades of experience at IBM, Wipro, and NTT Data. “A CEO understands business risks, but the security industry has made things too complicated,” says Pankit.
Sequretech tries to simplify it by building a risk profile based on metrics that change as an organization evolves. It takes into account the biggest risk which is “the stupidity of the user.” Device security is a third big area of concern in the mobile age. The three-year-old startup claims “last mover advantage” of using new AI-powered tools and counts HDFC Bank among 20 major clients.
One of the biggest pain-points for offline retailers are the checkout queues, which ruin the customer experience and cause abandoned carts, especially on weekends. Bangalore-based Perpule provides a GPS-enabled app to identify a store and enable self-checkout. Customers scan the barcodes of items they pick off the shelves, get prices and offers, and use a payment gateway to complete the transaction.
Co-founder Abhinav Pathak points out that the app brings to offline retailers some of the online world’s cool features, such as customer profiling and product recommendations to drive more sales. Apart from being a standalone app, it also piggybacks on bank and wallets apps by providing an SDK (software development kit).
Competition from Amazon Go which is testing self checkout in a Seattle store? Nah, says Abhinav. “Amazon Go is too elaborate and would require stores to invest heavily in the required infrastructure, but it does validate our concept.” Perpule is currently live in the Hypercity retail chain in India, and the Landmark Group in Dubai.
S2Pay is another startup trying to solve the problem of hundreds of millions in India who don’t have the requisite internet connectivity or data plans to make digital payments, even as the government is on a drive to go cashless. Here, a user enters a four-digit pin in a bank app that has integrated S2Pay. This generates a 24-digit number and QR code which a merchant can scan to receive the payment.
The customer’s phone number and the bank pin complete the two-factor authentication required by the Reserve Bank of India. Co-founders Aditya Agarwal and Nirmal Juthani point out that merchants need no additional hardware, apart from a phone, for this solution. It also has the advantage of not requiring any sensitive information to be passed to the merchant. The 24-digit number and QR code generated are valid only for 10 minutes.
Aditya and Nirmal, who have long experience with banks, were working on fraud detection when this idea was born.
There are any number of tech tools that convert information and data into charts and tables. Mumbai-based vPhrase reverses that. Its AI-powered tool Phrazor converts complicated charts and tables into an easy narrative for a quick read. And it does it in multiple languages.
Founder and CEO Neerav Parekh points out that few people have the skill to scan a chart and table and derive insights. Phrazor does the work for them by parsing the data and constructive a narrative on what can be derived from the charts and tables.
Neuron provides a platform for developers to build AI-powered apps that use natural language processing. More than two-thirds of internet content is text which can be analyzed for comparisons, sentiments, and many other use cases, points out founder Veer Mishra. From a chatbot for travel recommendations to ticket classification, over 1,000 apps have been built on Neuron, he says.
Monetization varies from charges per API call to on-premise installation for enterprises. The startup is currently clocking a revenue of nearly US$100,000 a month and is cash positive.
Beewise began as an app to help users track expenses and make savings. Now it helps ecommerce and fintech players, such as lenders, to get user profiles based on purchase and financial data.
Founder Varun Deshpande became an entrepreneur straight after graduating from premier engineering college BITS Goa. His first startup failed and he joined edtech startup Toppr before launching the expense manager which he saw was a pain-point for young folks.
Beewise parsed SMS notifications received by users from banks and other online transactions. This data could be used to provide expense management, but Varun soon realized it was hard to make money off such an app even though it quickly notched up over 100,000 users after its August 2015 launch. Then he converted it into an SDK which is today integrated in 15 other apps which use the Beewise financial data.
Rockmetric helps its clients integrate user engagement data across web, mobile, email, telephony, and CRM. It provides analytics and tools to re-engage with users from dead leads, abandoned carts, and unfilled forms. The Mumbai-based startup has been a part of Barclays’ accelerator.
And the winner is AnyTimeLoan. It’s not surprising to see an unsecured loans provider emerge victorious. This is an area which has been relatively easier to monetize.
Fintech has great potential to make a huge difference in improving efficiency and cutting costs in several other areas, as we have seen above. But for all the interest shown by corporates and banks, the path to profitability and sustainability for fintech startups targeting the Indian market remains narrow.