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Januar y 2017

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Leveraging
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the FinTech
Opportunities
in India
Financial Foresights
Editorial Team
Jyoti Vij
Contents
jyoti.vij@ficci.com
1. PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Anshuman Khanna 2. INDUSTRY INSIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
anshuman.khanna@ficci.com 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,
supriya.bagrawat@ficci.com India Ratings & Research Advisory Services
n FinTechs in India: Drivers of Digital Banking? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Amit Kumar Tripathi Dr. A. S. Ramasastri, Director, IDBRT
amit.tripathi@ficci.com n The FinTech Revolution - Transforming Financial Services . . . . . . . . . . . . . . . . . . . . . . 11
Kumar Abhishek, Founder & CEO, ToneTag
n The New Sector on the Block . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mukesh Bubna, Founder & CEO, Monexo
About FICCI
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 Harshvardhan 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


Bipin Preet Singh, Founder CEO & Director, Mobikwik
whole or in part without the
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 Equity Capital Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
responsible for product claim
& representation. n Mergers & Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
n Debt Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Articles in the publication
n Loan Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
represent personal views of
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

F
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
sector 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
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
Industry Insights
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

G
lobally conventional the requirement of access to However, India now offers an
banking has been seamless and lower cost alternative Aadhaar authentication framework,
undergoing 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
been able to completely serve the
main1 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

allows for swift payment across In the small business lending space, identifying investment themes,
banks - and finally, a consent there are many new entrants that assessing credit exposure,
architecture system, where are willing to provide financing to managing counterparty risk, or
information is made freely available small businesses. Most of these new executing and settling financial
to anyone. Many individual pieces entrants are in the form of merchant transactions - and then tap into the
of the architecture exist, but they advances, in that they generally FinTech pool for innovation that
tend to be only in private hands. provide some time of cash advance can support or expand based on the
India is one of the few countries in that is generally paid back through institution's core market. A
the world which has put together a charge volume, percent of sales or company's service and brand
public architecture to enable this card sales. The new entrants metrics should serve as the primary
teleservices system. underwrite an advance based on guideline for selecting advanced
payment or sales history with a technologies. However, changing
The above has seen the emergence
particular network. The lenders use any business model is difficult - and
of several alternate players in the
proprietary softwares to aggregate it is equally applicable for
Indian financial sector. These new
data about a business' operations - transforming into a FinTech-
players are leveraging digital
including social media (e.g. likes, focused organisation.
technologies effectively and
views, shares) - to underwrite the
innovatively, appealing to a large In the event of mishanding, the
loans. A common theme that
spectrum of the market segment. transformation can easily create
attracts all new entrants is that the
Mobile-based payment solutions frustration for customers and the
underwriting and processing time
and proprietary payment networks overall experience will suffer,
is very short (as fast as 24 hours)
are driving merchant acquisitions, leading to brand erosion. The
with the advantage of an
by offering low-investment degree of threat from FinTech start-
automated process.
solutions. Consequently, non-cash ups will be determined by how well
payment transactions, which today Alongside using much faster financial institutions do in
constitute 22% of all consumer internet speed, always-on Internet defending their traditional turf of a
payments, are likely to overtake connections, big data computing, large, loyal consumer base that
cash transactions by 2023. A study mobile connectivity, fast internet values safety, trust and
by Google and Boston Consulting bandwidth and the universal personalised services. That being
Group forecasts that the digital adoption of smartphones, said, the benefits of scale and a
payments industry in India will companies now have real-time somewhat lethargic customer base
reach USD500 billion by 2020. access to financial information and will not hold off competition
transactions. This has led to the forever. If financial institutions do
But digital payments are still
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
remains a challenge. Thus, while organisations to spend resources on FinTech coupled with the solid
the traditional banks understand in-house product development or strength of conventional banking, it
the need to imbibe a digital R&D investments on a prediction of is logical to expect that in the years
infrastructure, they also know that the future contours of an industry ahead, both traditional and non-
whoever owns the customer will in a state of flux. It will be wiser for traditional financial institutions will
continue to drive pricing and a financial institutions to focus on benefit from a 'co-operative' form of
product acceptance. core competencies - for instance, engagement and will accordingly

Financial Foresights 6
Industry Insights

forge partnerships in specific sensitive customer information and The role of the regulators is to
arenas. This is because both internet frauds. It is therefore correct market imperfections, at
FinTech firms and legacy financial important to see how information least economic cost. This is with the
organisations have strengths and technology systems and data aim of improving the income
weaknesses in their models. Hence, security risks are monitored and distribution and thus improving the
for example, the banking industry managed. The regulatory social efficiency of markets. For
will be dominated by banks that framework applicable on FinTechs example, economic regulation
marry the benefits of a FinTech in India is at a nascent stage and would be used to limit the exercise
start-up with the advantages of a their evolution would also be of market power; information
legacy bank. The biggest challenge important in charting the way regulation would be used to correct
will be for smaller institutions that forward for disruptive innovations information asymmetries.
may lack the culture, funding and in the Indian financial space. Advancements in the fields of
innovation capability to respond to technology and innovation will
Massive innovation in the financial
a rapidly changing consumer and only make the task of regulator
sector is necessitating a relook into
competitor battlefield. The primary more complex, as lines get blurred
role of regulators. Regulators
reason behind this may be the across geographical boundaries,
should adopt pragmatic approach
power of digitalisation on business operations and nature of
to stay ahead of the curve while
satisfaction scores, and the entities. Cyber security increasingly
dispensing their objective of
difficulty for smaller banks - which necessitates regulatory synergies -
consumer protection and fostering
are not startups - to invest to the as smooth information flow is
growth and innovation. In addition
same degree as larger banks in critical for both preventive
to other causes, there is other
these channels. Although it will not measures and early detection.
principal motive for financial
be impossible for smaller firms to The current, silo model of
innovation - regulatory arbitrage.
compete, it will require strong regulation in India in such a case is
Regulatory arbitrage can create
leadership skills and a vision for the likely to result in insufficient
space and scope for less regulated
needs of a rapidly changing economic outcomes - as the
opportunities in the market, which
consumer. There is no doubt that regulatory architecture will face
incentivises for generating higher
FinTechs have provided an issues of purview and scalability.
profits. "When there are completely
amazing customer experience, To that end, regulatory
free markets, there is not only
however, increased levels of cyber synchronization will bring forth
freedom to choose; there is also
threats have the potential to cause larger benefits of economies of both
freedom to phish" (Phishing the
disruptions in the services of these scale and scope. n
Phools, G. Akerlof and R Shiller).
ventures, apart from risks related to

Bhaskar Som, Country Head, India Ratings & Research Advisory Services: Bhaskar Som (PGDM - IIM, Calcutta, B.Tech (Mechanical) -
IIT, Madras, FRM Holder), Country Head of IRR Advisory - a Fitch group company Bhaskar has over twenty years of cross-sector
experience in strategy formulation, quantitative analytics and risk management. Bhaskar is a member of IMC's Export
Competitiveness Council and was a member of the Expert Panel Group set up by Ministry of Finance for boosting infrastructure
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.
Soumyajit Niyogi, Associate Director - Credit and Market Research: Soumyajit Niyogi, Associate Director - India Ratings & Research,
a Fitch Group company Soumyajit has over a decade's experience in the financial markets. Prior to India Ratings, he has worked
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 7
Industry Insights

inTechs in India :
F
Drivers of Digital Banking?
Dr. A. S. Ramasastri
Director, IDBRT

U
nprecedented growth in Indian FinTech software market is Potential areas
the use of internet and forecasted to touch $2.4 billion by
incredible penetration of 2020 from a current $1.2 billion, as Services for Unbanked
mobile has been changing the way per NASSCOM study. As per Citi
Lower cost of providing services to
we live. The Whatsapp has become research report, the investments in
underbanked and unbanked
the way of communication among FinTech companies are still less
customers is a major opportunity
large masses of the country, than 4% of the total IT spend in
for FinTech companies. In the
irrespective of age, gender, banks / financial industry, an
backdrop of diverse demographics
education background and social indication to untapped potential.
in terms of literacy, age and region
status. There is little doubt that
The key advantage of FinTechs is in India, FinTechs with focus on
these developments are making
that most of them are startups by user experience can provide the
technology inclusion a reality.
innovative young minds. They are impetus for financial inclusion.
Technology inclusion can lead to
not held back by existing systems With a target of banking services
financial inclusion if technology is
and are willing to make risky reaching every person/household
appropriately harnessed to reach
choices. FinTechs have the chance in India by 2020, FinTechs have a
the large segment of the population,
to build the right systems from the great role in making government of
currently unserviced or
start and share a culture of efficient India initiative possible.
underserviced.
operational design that many Process Enhancements
It is precisely in this area that the incumbents may not have.
FinTechs can play an important role Application program interface
According to a study, 46% of Indian (API) enable FinTechs to develop
in leading India to a digital nation
FinTechs are focused on payment value-added applications. Using
and us to a less cash society. They
and trade processing. The recently Artificial Intelligence enables
can ride on the wave of widespread
launched Unified Payment companies to extract greater
mobile penetration and large scale
Interface by NPCI is likely to customer insights to improvise
Aadhaar registrations.
redefine the future of payment services. Also, the combination of
In fact, there has been globally a systems in India. FinTechs are automation and self-learning
perceivable growth in both the playing an active role in this regard, algorithms can lead to the user's
number of FinTechs and their which can help in moving towards own data consumption in order to
contribution. Based on recent less cash society. In addition to the generate new products, services
estimates, investments in FinTech area of payments, there are other and processes.
companies increased from $1.8 potential areas in the Indian
billion in 2010 to $19 billion in 2015. context, where FinTechs can focus.

Financial Foresights 8
Industry Insights

Sophisticated CRM Crowdfunding / Sourcing business license, business owner-


ship/incorporation/ dissolution
Engaging customers through New funding options have
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
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
Contracts, IDs, signatures, wills,
revenue streams and offer compel- documentation which are time
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 High school/university degrees
for lower fee paying consumers. Block Chain Technology
and professional qualifications,
(BCT) grades, certifications, human
Cash and Treasury Management
In addition to the above potential resources records, medical records,
Cash and treasury management accounting records, business
areas, there is a great scope for
includes the administration of transaction records, locational data,
FinTechs to exploit the features of
external and internal funds, cash delivery records, genome and
BCT and its implementation in
flow management, and corporate DNA, arbitration and genealogy
banking and financial applications.
finance policies and procedures. trees.
BCT is about distributed ledgers
The digitalisation of cash and
that could work in harsh environ- Physical Access
treasury management functions
ments with little, no or negative
utilises online platforms to disrupt Digital keys to home, hotel, office,
trust. Potential areas of applicability
the traditional models, creating new car, locker, deposit box, mail box
of BCT are listed; while some of
revenue streams and value and Internet of Things.
them like trade finance are directly
propositions. Cross-border
relevant to banking and finance
payment transfers for businesses, Challenges
others like land records may have
foreign exchanges and invoice
indirect impact. FinTech innovations are not risk-
management are a few of the
Financial Instruments and Records free and their transformative
functions that are enabled primarily
implications are to be examined in
through the advent of online
Currency, private and public detail. Some of the challenges for
platforms.
equities, certificates of deposit, FinTechs are -
Streamlined Processes bonds, derivatives, insurance
policies, voting rights associated l Data Security - threat of hacking,
The consumer product application with financial instruments, confidentiality of data, distrib-
process (loan origination) can be commodities, derivatives, trading uted denial of service and
streamlined with the emergence of records, credit data, collateral related extortion attacks
cloud-based lending solutions and management, client money l High expenditure on marketing
electronic bank account manage- segregation, mortgage or loan
ment systems which automate the records, crowdfunding, P2P l Interoperability and integration
loan origination process and lending, microfinance, (micro) issues with banks and other
increase overall transparency in the charity donations, account portabil- systems of the country
lending process. The move towards ity, air miles and corporate tokens.
such solutions can improve l Differences in management and
customer experience by possible Public Records culture - as most of the FinTechs
reduction in the amount of manual are startups with young and
Land and property titles, vehicle
work, down times and errors. ambitious talented workforce,
registries, shipping registries,

Financial Foresights 9
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.

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
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
money exchanges, etc. framework and sandbox environ- banks through workshops,
seminars and contests. The Institute
ment to encourage responsible
Responsible innovation is bringing out a white paper on
innovation. Towards this objective,
implementation of BCT in Indian
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,
they understand the importance of banks are likely to begin their Innovative, and Compliance Easy)
responsible innovation. They operations as digital banks. A principles. n
should leverage experience and

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
has actively led the development and growth of the Institute, especially in the areas of relevance to banking like cyber security, analytics, cloud
computing and payment systems. He has been instrumental in introducing the PGDBT, IBAC and IDRBT Staff Papers Series, setting up of
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
2015 to provide technology services to banking and financial sectors. He is on the board of DSCI and SETS.
Prior to joining the Institute, Dr. Ramasastri was the Chief General Manager-in-charge of Department of Information Technology at Reserve
Bank of India. In the RBI, he has spearheaded many important projects including the implementation of the Next Generation RTGS, adoption
of international standards like XBRL and ISO 20022, conceptualizing and guiding of banks on Automated Data, and preparation of IT Vision
of RBI for 2011-17. His initiatives of XBRL and ADF have been globally recognized and has received "Award of Excellence" from XBRL
International.
Dr. Ramasastri authored two books titled 'Quantitative Methods for Valuation of Assets' and 'Quantitative Methods for Banking and
Finance'. The former has been published in Chinese too. He has to his credit several articles on Finance, Banking and IT in eminent journals
and newspapers.
He has guided the Bank of Mauritius, Bank of Malaysia and Bank of Uganda on implementation of Data Warehouse, XBRL, etc., and delivered
talks on standards and technology for data reporting at the International Monetary Fund and Bank of International Settlements.
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
Madras University and B.Sc (Statistics) from Loyola College, Madras. He has also attended Advanced Management Programmes at the
University of Oxford and Kellogg School of Management.

Financial Foresights 10
Industry Insights

The FinTech Revolution -


Transforming Financial Services
Kumar Abhishek
Founder & CEO
ToneTag

T oday, financial services


around the world are being
transformed which is akin to
the adoption of computers in banks
for bookkeeping and the launch of
million. So it can be said that a large
part of the population is still
outside the banking net and not in a
position to reduce its dependence
on cash. Even for people with
This is where FinTech comes in.
FinTech companies develop
technology that could work
towards decreasing costs of
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
there is room for FinTech They earn and spend exclusively in footprints, call records, shopping
companies and banks to co-exist cash, since they are forced to do so. histories, and payments to utility
and gain from a larger ecosystem of Due to the unorganized cash service providers to increase
services. economy, they cannot produce any efficiency and provide greater
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
up branches or ATMs across rural spending, which means that most
aren't eligible for loans from banks approval and disbursal of loans by
India wouldn't be worth the FinTech firms despite several banks
initiative. The banks also felt that either. About 90% of the workforce,
which produces nearly half of the digitizing and speeding up these
there will be tremendous inertia processes markedly.
against formal banking and digital output in the country, works in the
payments in these sectors. Because unorganized sector. People often The Government of India along
of this, after the recent resort to the unorganized sector for with regulators such as SEBI and
demonetisation announcement by loans where they are exploited RBI are aggressively supporting the
our Prime Minister, it was these through higher interest rates. It will ambition of the Indian economy to
unbanked who were affected the not be easy for the informal sector become a cashless digital economy
most. According to a 2015 report by to become cashless, and this part of and emerge as a strong FinTech
Pricewaterhouse Coopers, India's the economy is likely to be affected ecosystem via both funding and
unbanked population was at 233 the most because of the ongoing promotional initiatives. With such
currency swap.

Financial Foresights 11
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
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
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
institutions and seem to be in the of the biggest challenges, as will be internet connection. One good thing
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
technological advancement in the institutions can leverage their (National Payments Corporation of
financial sector. Continued strong existing customer base and adopt India) making digital transactions
commitment from the government, digital products that nurture strong as simple as sending a text message.
the industry and the FinTech firms financial relationships while While the Indian market is large
is critical to allow the FinTech improving service efficiency and and warmed up for financial
revolution dig its roots deep in any broadening access to meet changing innovations, startups do face a
financial system. needs. The disruptive potential of unique set of challenges. While the
FinTech firms can provoke the government is trying to facilitate
In most emerging markets such as much needed modernization of the
India strategies focused on the emergence of new financial
traditional sector, reducing costs in technologies, the market
collaboration, offering a sustainable the process and increasing the size
change in the market are easier to regulations are still tough. Also,
of the banking population. access to consumer data is scarce as
implement. With the ability to
collaborate, start-ups cross the Reacting to these opportunities and India is still a case-centric country,
chasm from being a small, challenges, banks like Federal Bank leading to a high risk for fraud and
successful business to potentially announced a partnership with loops in security and there is lack of
scaling their solution for a very Startup Village to develop consumer education which
large customer base. With innovative banking products, the prevents people from getting on
improvements in mobility, U.K. giant Barclays is set to board easily. The digital revolution
availability and quality of such operationalize its fifth global is transforming operations across
products and services, functionality FinTech innovation center that will the financial and banking sector.
and online experience becomes be located in India, and Goldman What looks heartening is that the
better, which in turn will lead to Sachs Principal Strategic Indian government and regulatory
greater level of trust in traditional Investments Group (GSPSI) is institutions have promoted an
institutions. looking to invest in Bengaluru's entrepreneurial climate for FinTech
FinTech startup scene. in India. However, policies and
While digital finance firms have governance will need to match the
benefited from the government's Mobile wallet firms like such as
FreeCharge, MobiKwik, Oxigen, speed of innovation in this sector,
pro-start up policies and flexible particularly to ensure secure and
regulatory conditions imposed by Paytm, etc have witnessed a surge
transparent growth. n

Kumar Abhishek, Founder & CEO- ToneTag: Kumar brings extensive experience on large scale, multi country, core banking
implementations both on mobile and internet banking arenas. He aspires to enable financial inclusion to the grass root level. Thus
making proximity payments reach the last mile and to the critical masses irrespective of geographies, internet connectivity and
hardware dependency.
Prior to starting ToneTag, he was with Finacle core banking at Infosys and as a Senior Engineer with MindTree. In 2013, Kumar
conceptualized the idea of ToneTag and developed a unique concept of making offline payments and eliminating hardware
dependency. This was not only the launch of a completely new product; in fact it was the birth of a totally new product category.
He strongly believes that Collaborations and Partnerships enrich and drive abundance than competition.
In addition to his business activities in the entrepreneurs space, he likes playing Golf and the Saxophone.

Financial Foresights 12
Industry Insights

The New Sector on the Block

Mukesh Bubna
Founder & CEO
Monexo

T
hey came, they saw and they lenders who operated outside the But by far the most important
have already conquered the system and were untracked by the beneficiary of the entire
marketplace much faster than government. demonetization exercise seems to
one would have thought. P2P lending be the Peer-to-Peer (P2P) lending
has found itself in the middle of action Demonetization in India has also
companies. A relatively new
following the demonetization exercise led to the rise of blockchain
phenomenon, P2P lending is yet to
of the government. Mukesh Bubna technology which works with
take off in a major way in the
lists out the reasons for development almost any kind of transaction that
Indian context. However, this
and the future of P2P lending in India. involves value; this includes
whole exercise of demonetization
property, money and consumer
There has been a lot said and has suddenly put this new segment
goods. Since every transaction in
written about how demonetization in the FinTech space under the
the blockchain technology is
will impact and reduce the demon spotlight.
approved, it helps to reduce fraud.
of black money. However, that is Secondly, the concept of Bitcoin has Banking functions have taken a big
something that India will see in the also managed to trickle into the hit. Various functions in the
distant future. As per the RBI, the system. While Bitcoin is relatively banking industry have been
parallel economy funded by black new to the Indian economy and impacted due to the constant
money is around 26% of India's business system, the volume of requirement of attention towards
GDP. The scrapping of Rs. 500 and Bitcoins being traded in India has the cash disbursal, exchange and
Rs. 1000 currency notes have shot up substantially in the post- depositing that has happened in the
shattered the foundations of the demonetization era. Bitcoin prices past one and a half month or so.
black market and the so-called in India range from $866 to $896 per This opened up a flood gate of
parallel economy, but the business Bitcoin and the increasing demand opportunity for a sector that was
sector has also been reeling from its 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.
strapped economy is trying to taking advantage of the current
India's inclination towards informal
return to normalcy and businesses cash crisis in the country. Thirdly,
lending channels had anyways
are looking for ways to boost their e-wallet companies like Paytm and
offered them with a handle to set
income. The informal sector which Freecharge have capitalized on the
themselves up here. As per the
is almost one-fourth of the Indian demonetization scenario with some
recent Ministry of Statistics and
economy has been ferociously aggressive advertisement
Programme Implementation based
attacked by the government. It has campaigns to bring more users
on the 70th round of National
in a way wiped out a large chunk of under its fold.

Financial Foresights 13
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
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
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
rates formal lending players charge. With better transparency in rates
are actively making use of various
Transaction transparency is a major and online payments, P2P lending
internet and mobile technologies
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
has become increasingly difficult transacting with financial distant future, RBI's regulatory
for cash hoarders to keep a large institutions. P2P lending firms, on guidelines will provide more clarity
amount of cash and disburse it at the other hand, are 100% online on how these firms can ensure
their will. firms and therefore they offer low- smooth functioning and finance the
interest rates to the borrowers. needy. n
The November 8 shock therapy by
Unlike, informal lenders, P2P
the Government has been

Mukesh Bubna, Founder & CEO, Monexo: Mukesh brings 20 years of consumer banking experience from Citibank. He has worked
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
region. In his last role he was a Business Head for Western Union - Financial Inclusion Program for Asia. Mukesh enjoys outdoor
activities, traveling and photography. He can be either seen dragon boating on the weekends or hiking trails. In Jan' 2014 - he ran
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
sporting a Polar watch on his wrist.

Financial Foresights 14
Industry Insights

Blockchain and FinTech:


A Debate and a Promise
Mr. Varun Dua Mr. Devendra Rane
Co-founder & CEO CTO and Co-founder
Coverfox.com Coverfox.com

T
he Indian of the twenty-first savings, while few inquired if it will It's without a doubt that the central
century is at the cusp of an be possible to fire and replace their aspect of our FinTech ecosystem is
important revolution, and compliance department with the user or the customer. It is the
we must acknowledge it in its Blockchain. With the initial stage customers' behavior, requirements
entirety. Financial services are no being set by Bitcoin, the world and preferences that define the
more what they used to be two wants to embrace Blockchain, but extent to which a technology will
decades ago. This has been made the hype makes it difficult to find prove to be disruptive in the real
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
A note on the Ecosystem economy, India is known to skip
ecosystem shifting gears and
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
the buzz surrounding it and unclear investors who are coming to believe the tip of the iceberg. Thus, at one
representations from the media. In this disruption thanks to the level is the Indian that hadn't been
a gathering of top industry government and regulatory bodies previously exposed to efficient
honchos, quite a few wanted to recognizing the potential of the financial service standards, and at
know if it can provide any IT cost 'disruptors' another level is the Indian that is

Financial Foresights 15
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
more. The key to using Blockchain is first intervention as soon as a flight gets
understanding that there is no real cancelled. Similarly, if someone had
The Government and regulators use case for a private Blockchain. Its insured their property against
have also recognized the need for impactful only when applied to earthquake, the contacts could
financial services to catch up with business problems where multiple executed in case of an earthquake
the technologically advanced partners are writing and reading and the claims settled as per the
Indian of the twenty-first century. from a common ledger, without magnitude of the quake.
Schemes like Jan Dhan Yojna are a having to trust each other. If the
step not just towards financial A technology like Blockchain can
problem statement doesn't match
inclusion but also towards bringing also be used to minimize the
this definition, Blockchain is an
India closer to adopting newer perennial problem of frauds in
overkill or probably useless.
forms of technology. insurance. Everything from a user's
For example, Bitcoin has been one medical history to claim history and
In this dynamic space, it is worth of the direct consequences of profile can be put into a Blockchain
opening the conversation around Blockchain. It used Blockchain as a and shared across as a part of KYC.
Blockchain now. currency ledger. Needless to say, Quite a few disputes in insurance
claims happen when the insurer
Bitcoin has reaped huge benefits
Blockchain for the CEO from Blockchain, when it comes to
and insured give conflicting
versions of the KYC, medical
Without getting too technical, problems like taxation, accounting
history and other details. If all such
Blockchain is simply a ledger which and restricting black money.
documents are a part of a
is distributed across multiple Speaking of trust and our own centralized document management
parties guaranteeing 100 percent experience in the domain, let us put system supported by Blockchain,
consistent data with all of them. All the Insurance sector to test the which can be accessed by the
parties can write to this ledger at principle that governs Blockchain. insured and insurer, then all such
any time and still be consistent with Insurance is largely based on trust conflicts can get resolved without
each other. Now data consistency any intervention and need of a trust
and set policies. Here, the insurance
across multiple parties has existed based system.
company and the insured
since ages, what makes Blockchain individual need to trust each other
different is that you cannot change
The promise
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
imposed by technology such that it isolation. Blockchain will need
happen without disputes based on
can operate without the need of other new age technologies as
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
the contract itself. This means that customer profiling since they are
self-regulation without the need of
in case of a claim, settlement would the most common and amongst the
a governmental body. However,
happen automatically. Let us biggest problem areas for everyone.
this is just one technology that can
explain this to you with an example Blockchain provides a great way to
be a potential game changer, and
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
collaborate and adopt. was later cancelled for some
other benefits to being fast,
unforeseen circumstances, the
distributed and democratic. n

Financial Foresights 16
Industry Insights

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
worked on Sales, ROI based marketing, built tech solutions for insurance companies amongst other things.
Varun started his career as an advertising and marketing professional and worked with leading insurance and financial services firms
including Tata AIG and Franklin Templeton. He led marketing analytics efforts for direct business acquisition and led technology
efforts for efficient servicing of customers.
Prior to Coverfox, he has co-founded 2 firms Enser Communications and Glitterbug Technologies which have brought in good
technology and practices to the Insurance Industry in India. Enser was set up in 2008 and was the fastest growing customer support
and contact center for financial services firms and grew to 500 people in two years of its inception. Glitterbug is a technology services
firm and has serviced top insurance brands including ICICI Prudential, HDFC Life and Aviva to integrate their online business with
core applications and cloud based voice record storage, management and retrieval.
Varun is passionate about technology, consumer internet and financial services. He is a graduate of MICA (Mudra Institute of
Communications, Ahmedabad) where he pursued the flagship course in communication management with a specialisation in Brand
Management.

Devendra Rane, CTO and Co-founder, Coverfox.com: He graduated from IIT Mumbai in 2005 with a Bachelors and Masters degree in
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
part of his thesis.
Prior to Coverfox, he has co-founded two companies, one specializing in User experience design and the other providing technology
services to Financial and Insurance domain.
He has worked with many tech. startups at various stages. He is experienced in conceptualizing appropriate Minimum Viable
Product (MVP) for startups as well as enterprises. He has managed globally distributed projects and teams, and has a pragmatic
understanding of developing products in such environments. With his valuable experience in large scale consumer and enterprise
platforms, he understands scalability of an evolving product as it goes from being an MVP to a successful product.
Some of the key projects developed by him in the consumer domain are:
l hoonur.com : A talent hunt portal by Balaji Telefilms, acquired by StarPlus. Scaled to 100,000 profiles in 6 months. Role : Technol-
ogy consultant for scalability and high availability.
l duboo.com : Flash based Audio Manipulation and Dubbing Tool. Role : Lead developer
l chaupaati.in : A web and mobile based market place for second hand products, acquired by Future Bazaar. Role: Backend
Developer
l homestaysdos.com : now Tripvillas.com, Asia's largest vacation home stays portal. Role : Sole Developer and Designer
l gototest.com : An online education portal for schools and colleges, currently operating in 10,000 schools. Role : Sole Developer
l qilpmedia.com : Browser and Desktop based rich media application. Funded by Norvest ventures. Roles: Senior Developer

Financial Foresights 17
Industry Insights

In 2017, Can FinTech Make


Everything About Money Easy?
Rajat Gandhi
Founder & CEO
Faircent.com

R
ecently I got talking with a 2010 days, to the slump that Complex
journalist and the followed, micro-finance was a
FinTech is probably one of the most
conversation veered to how casualty of a sector growing at
complex sectors around primarily
fast technology companies were breakneck speed.
because it needs experience in two
growing in India. With four digit For the FinTech industry, especially of the most varied disciplines -
growth, some tech companies are peer-to -peer lending, it is finance and technology. The
scorching the landscape with their important to find the sweet spot financial world is one of the slowest
phenomenal business. However, where growth does not come at the
adopter of technology and tech on
barring a major digital wallet cost of the business itself. One way
the other hand has tried to stay
company, the journalist said of growing is to grow at any cost
away from addressing the hardcore
FinTech startups were conspicuous and the other is to get it right.
concepts around money. As a
with their absence. After all, When you are dealing with money
from the public at large, you have result, there is a dearth of talented
FinTech is supposed to be one of
the added responsibility to ensure entrepreneurs and teams that can
the hottest sectors in India.
there are no undue risks associated. target large, complex pieces in the
While the spotlight has been on financial domain. Also, large banks
FinTech, more so after November 8, Nascent and financial institutions have been
it is important to understand where wary of technology and disruptive
FinTech in India is only about half a
we stand today and where we need ideas that can change the status
decade old and is at a very nascent
to go. For that we have to look at quo. As a result, most financial
stage. For any sector to grow and
history, analyze what others have instruments and products have
mature it takes far longer and
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
ensure fly-by-night operators and world face the challenge of talent. It
While every sector wants to grow at unscrupulous elements are kept in is not easy to build a team that can
impressive levels, it is always check. What is helping is that the imagine solutions which can impact
important to find that optimal level regulators are making the right millions by combining the power of
where your growth is not at the cost noise and have come up with a technology with the impact of
of everything else. We do not have draft set of guidelines that seem to innovative financial solutions.
to go far to look at what skewed point in the correct direction. The
growth can do. Once considered the guidelines are very important for Evolving
answer to financial inclusion and sectors like P2P and crowdfunding
The entire technology piece in
getting credit to the poor, micro- where public money is involved
FinTech is also not stagnant. For
finance in India has seen its share of and barriers to entry are relatively
example, when Bitcoin burst into
highs and lows. From heady pre- low.
the scene, it was largely touted as

Financial Foresights 18
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
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
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.
fact the SEBI Chairman UK Sinha fact that returns are better than P2P as a model also works
recently added that the market what stocks, mutual funds or any beautifully on top of a digital
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
world is undergoing a sea of borrowers, interest rates are much lending through the digital medium
change and technology is lower compared to what banks is a big step in that direction.
continuously evolving. It is difficult charge and the ease with which one
to figure out where technology is The FinTech space opened strong in
can raise credit. P2P also enables a 2016 and ended with a flurry of
headed, which makes it difficult to wider group of people to access
determine what works best. activities. The demonetization
formal channels of credit compared exercise has meant everyone is
Role of P2P and relevance to what banks or other financial looking at the sector to provide
institutions cater to. answers. In the P2P space, Faircent
in India:
The growing interest in the sector along with other players in the
Within the FinTech bucket, one of and its popularity has meant space have taken the responsibility
the most exciting models is P2P investors are keen to put their to ensure that we have the right set
lending where an online platform money in genetic startups. of guidelines and the sector grows
connects an individual lender to an According to Tracxn, Mobile in a way that adds value. P2P
individual borrower. Like the rest payments ($212M) and Lending lending has the potential to be a
of the world, lending has largely ($199M) accounted for nearly 80% game changer in terms of getting
been limited to banks and other of the total funding that went into credit to individuals outside the
financial institutions, but India also the Indian FinTech space, in the formal network of credit. Along
has a large presence in the informal year to date. Although, in terms of with the potential, however, comes
sector in lending, which mostly overall funding, there was an the responsibility that we do not
comprises of money lenders. P2P almost 64% year-on- year decline at squander what we can achieve. n
changes the mix, which has been

Rajat Gandhi, Founder & CEO, Faircent.com: Rajat has over 20 years of experience in marketing, strategy and brand building
especially in online and digital space. One of the earliest professionals of Internet in India, he gathered extensive hands on
experience in launching and building Portals, online Classifieds, Communities, E-Commerce and Digital Advertising businesses.
In the past, he has headed multiple initiatives at The Times Group including member of the founding team that launched brands
like Timesjobs.com, Magicbricks.com and Simplymarry.com and India Head at Performics, a digital marketing agency of
Chicago-based Publicis Group.
Faircent.com is India's largest peer to peer lending website which caters to retail and business loans. Faircent helps in eliminating
the high margins, which intermediaries like banks and other financial institutions make on loan transactions thereby helping
borrowers get faster and cheaper access to credit and lenders make greater returns.
Faircent.com has in its nascent history garnered recognition from the Industry. It was showcased as one of the top start-ups at
Start Up India, selected for the first batch of NASSCOM 10,000, part of the Microsoft Accelerator program and one of the top 10
companies from India to be selected for Web Summit in 2013. Faircent is acclaimed as the 'Interbrand Breakthrough Brand in
Finance' by Interbrand, NYSE and Facebook in its Breakthrough Brands report 2016. Recently, it was selected as part of
NASSCOM Emerge50 2016 awarded to India's most innovative Top 50 emerging IT product companies.

Financial Foresights 19
Industry Insights

Path To The Ultimate


FinTech Offering
Jitendra Gupta Anurag Pandey
MD/Founder AVP, Product & Strategy
Citrus Payment PayU India

W
ith the announcement KYC and servicing a consumer our daily exercise. The deepest
on 8th November 2016 (IndusInd Mobile Fingerprint darkest troubles caused by
by the Prime Minister, Banking, Aadhaar Payment Bridge), demonetization during the last few
the industry is now in the midst of there exist solutions to tackle every weeks have been our inability to
heady excitement, an arms race of problem. transact due to non availability of
sort is on to capture and serve the small denominations of cash. We
While each of these solutions has
rapidly digitising consumer in run our lives transacting - buying
targeted a specific problem, no
India for electronic payments as milk and groceries, getting to work
FinTech player (apart from Alipay
well as other financial services. by cab, auto, bus or train, paying
in China) has yet been able to build
"FinTech" is the buzzword du jour! for electricity, water, rent, parking,
a complete solution that satisfies all
It is however unfair to treat this entertaining ourselves by eating out
consumer needs in one place. We
industry as a flavour of the season. or watching movies or going for a
are still to see the Apple or Google
For many years now, across the holiday.
of the FinTech world, a product so
globe startups and financial
refined, easy to use and understand The first step is to build a best in
services institutions have been
and backed by latest technology class digital payments system that
creating compelling solutions to
incorporating behavioural and solves not only problems for
benefit consumers and businesses.
transactional analytics, machine consumer experience but also for
From alternate lending solutions learning, blockchain, biometrics businesses both big and small. Even
smartly underwritten on non and mobile. Here we present, the In 2016, almost 10-15% of
traditional data sources that let you journey to build the ultimate transactions are lost between
pay later (Klarna, OnEMI, Ola FinTech offering. The journey that payment gateways and issuing
Credit, LazyPay), to providing will ensure that the FinTech banks due to infrastructure issues.
working capital for your business revolution sweeping this country is Such high incidents of failures
(Capital Float, LendingKart). From not just a flash in the pan but a (resulting in direct loss of revenue)
simplifying acceptance of payments bonafide success positively damage the credibility of banks and
on online or mobile (Stripe, PayU, impacting the population in easing payment processors and inhibit the
CitrusPay) to making offline how we transact and manage our use of digital payments. Add to
payments ubiquitous (Square, finances. this, the problems created by the
mSwipe, ApplePay, ItzCash). From poor quality of internet on mobile
banking solutions that don't ever First comes payments devices (A page load takes on an
need a visit to a branch (Simple, average 5.9 seconds on mobile and
Payments are our basic daily
BankMobile, DigiBank DBS) to 4.1 seconds on broadband in India.
necessity, it is akin to drinking
using biometrics to reduce cost of This is in stark contrast to China,
water, eating our food & getting

Financial Foresights 20
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
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
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 they have insurance needs so that
with the consumer, where they start
but difficult problems, acceptance is they aren't burdened with
to come on your platform to pay
built on the merchant side. As unexpected expenditure in an
their dues.
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.
and wallet balance help drive covered, where credit decisioning
repeat transactions on such can be done in milliseconds based To start with the consumer can be
merchants. As transactions on the predictive ability of the engaged to get a financial health
continue to grow, data begins to get complex and intelligent scoring check up of their existing portfolio.
rich. Information on who is modelled both on payment and From here the consumer can be
transacting where, and for how lending behaviour of consumers. guided to create a goal based
much and how often, what time of Collaborations with merchants on portfolio for both short term and
the day. use of their data as well as data long term needs. This portfolio will
from financial institutions can help be rebalanced automatically for
While this information will lay the
improve the efficacy of the models. both tax and returns. All insurance
groundwork for the next step of the
journey, it is also helpful in further Further foray can also be made into needs can also be managed from
optimising the payment platform. credit solutions for small merchants the platform. Tax filing services can
Continuous investment on - this again helps to drive the also be automated for the
automation, settlements, ecosystem by creating more and consumer. All of these can be easily
operations, platform scaling still more merchants that keep the achieved by partnering with fin-
needs to be made to ensure that payments and lending platforms techs who are already operating in
more merchants are getting more growing and servicing more each specific area such as robo
success for lesser effort on their consumers. At this stage, the advisory, insurance aggregators,
part. As the payments flywheel lending flywheel is also rotating at and tax planners.
starts to spin at a relentless pace, it speed and that along with
Not only will such a system be a
is time to take the next step. payments acts as a propeller into
simple automation of investment,
the third and final phase of the
With rich data come rich insurance, liquidity and tax
journey.
compliance needs but will be
possibilities
Time to take-off! intelligent enough to anticipate
Data from the payment platform change in goals as the person ages
and other available sources are built With engines of payments and and suggest changes in investment
together to predict the lending running on full throttle, the thesis. Such a system will create
creditworthiness of a consumer. next step is to incentivise the great opportunities to earn
These involve both the ability and consumer to use your platform for revenues as the regulators (RBI,
willingness of a consumer to pay. not only payment and lending
SEBI, IRDA) are already
Armed with this, a convenience and needs but also as their gateway to
incentivising providers to charge on
small ticket (less than $30) based all other financial services. This is
advisory and not from commissions

Financial Foresights 21
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
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
financial needs for consumers on a biometrics) and simple experience digital natives and are below the
(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
data and intelligence algorithms, businesses and models will emerge
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
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. FinTech taking this opportunity. n

Jitendra Gupta, MD/Founder, Citrus Payment: Jitendra was Founder and MD of Citrus Pay, a leading digital payments company in
India. Post acquisition of Citrus Pay by Naspers, he leads the consumer businesses at the combined entity, PayU India, as their
Managing Director.
He has more than 12 years of work experience in banking and financial services industry and considered an expert in payments
industry. Prior to Citrus, he was working with ICICI bank for 7 years, wherein he was part of founding team of Retail cross sell
and Investment banking division in the bank. During his last stint with the bank, he led the whole initiative of stitching a joint
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.
During his tenure at Citrus, he grew the company to a 300 member+ strong team. Citrus counted its investors base from Sequoia
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
in India, with the acquisition of Citrus by Naspers Group in September 2016.
He graduated from Sydenham College, Mumbai and is a qualified Chartered Accountant

Anurag Pandey, AVP, Product & Strategy, PayU India: Anurag is a Product & Strategy professional, currently working in the
CEO's office in driving the integration between PayU India and Citrus Pay. Over the last 3 years at Citrus Pay, he was leading
product on wallet, mobile, proximity and identity management central to experiments in consumer payments.
He has worked for 10+ years across payments, voice telephony, broadband, mobile commerce companies or verticals. Prior to his
MBA from HKUST Business School, Hong Kong he worked in India and Europe for leading technology players such as Infosys
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
Industry Insights

The Evolving FinTech


Landscape in India
Gaurav Hinduja
Co-Founder & Managing Director
Capital Float

O
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
has 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-
Capital Float, Lendingkart,
efficient and effective than those rithms, machine learning and big
Indifi, NeoGrowth, etc.
provided by traditional financial data, which are swiftly replacing
institutions. traditional financial practices. l Payment Services: These
Backed by such powerful armory, companies allow individuals
Merely a technological FinTech is completely changing the and businesses to accept
advancement? corporate landscape in multiple payments without even swiping
industries and reinventing the way a card. Payments are made
Technology has been used by online and the payer just needs a
companies gain access to finance.
financial institutions for more than smartphone, without the
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
playing a more critical role in the MobiKwik are among the top
financial sector. Modern banking or Traditional banking functions are players in this space.
financial services would struggle to being taken up individually by
stay relevant in the absence of various companies that are creating l Savings & Wealth Management:
technology. So, the question is: is separate constructs of the services. These companies help individu-

Financial Foresights 23
Industry Insights

als save money as well as make increase in global investments. In ogy, as it helps reach a wider
and manage their own invest- fact, FinTech became Investopedia's audience when compared to a feet-
ments. Software helps to quickly "Top 10 Terms of 2015". on-street approach. Additionally,
compare different options and the extent of technological aware-
The global FinTech sector received
allows for people to make ness also spreads across the masses,
an investment of a whopping $5.4
decisions based on their facilitating a higher acceptance rate
billion in the first quarter of 2016,
individual needs. Scripbox and for new-age lending.
according to figures published by
Funds India are among the
Accenture. This represented a 67% Internet penetration: The US might
popular firms operating in this
jump over the figures of the same have a higher internet penetration
segment.
quarter in 2015. While the FinTech at 89%, but due to the relatively
l Remittances: Inward and emerged in the Western world, the smaller size of the population, the
outward remittances can be growth in the first quarter of 2016 reach is limited to a little less than
complex, time-consuming and was driven by investments in the 300 million users. India, on the
expensive. FinTech companies Asia-Pacific region. other hand, might have a lower
have made these transactions internet penetration at just 35%, but
simple and affordable. Oxigen India is playing catchup because of the vast population, the
and Payworld are among the reach is significantly higher,
India is not very far behind the
notable remittance platforms. towering at almost 500 million
world in terms of the state of the
POS: Several new players have individuals with access to the
l FinTech sector, although there's
emerged in this space, which has internet. The figure surged from
room for massive growth. The
become prominent post 18% in 2014 to 35% in 2016. This
country has recorded $1.77 billion
demonetization. Companies highlights the fact that internet
in FinTech investments between
operating in this segment penetration is not just growing
2014 and 2015 through a total of 158
provide card swipe machines rapidly, but has ample room to
deals, according to Inc42's FinTech
that enable customers to make grow over the next few years.
Market Report 2014-2016. The
cashless payments. Mswipe, FinTech lenders can capitalize on
average deal size was $9.82 million.
PineLabs, ICICI Merchant this surge in internet penetration, as
While these figures highlight the it inherently increases the segment's
Services, etc are some of the
growth of FinTech in India, there reach to geographical locations that
larger POS machine providers in
are several factors in play that were previously hard to serve due
this space.
support phenomenal growth in the to logistical barriers.
l Insurance: FinTech has helped near future.
the insurance sector transform Government policies: The latest
from being document-heavy to Factors supporting surprise demonetization move has
becoming paperless. Several new given a massive fillip to the FinTech
FinTech growth in India
companies are increasing the sector. Government policies in
ease of decisioning at the High adoption of technology: India are evolving quickly,
consumer end by aggregating India has already proved itself as providing a favorable backdrop for
insurance provider data and being pro-technology. Its high rate FinTech. By encouraging
simplifying the application of technology adoption can be seen digitization, by promoting uniform
experience. Coverfox and in the penetration of smartphones. and widespread identification
Policybazaar are chief among the India has already overtaken the US (Aadhaar Card) and through bank
companies that have risen to to become the world's second- account schemes, the government
prominence in the last few years. largest smartphone market, with has taken several initiatives to boost
more than 220 million active unique the FinTech ecosystem.
Growth of FinTech in the smartphone users, according to a
Increasing financial inclusion:
global economy report by Counterpoint Research.
Currently, Indian's financial
Lending is made significantly easier
Funding in this segment has grown inclusion penetration is extremely
through high adoption of technol-
rapidly, and 2015 recorded a 75%

Financial Foresights 24
Industry Insights

low, with as many as 145 million are generating digital footprints of critical sector faces several hurdles
households not having access to customers. This data helps FinTech in raising funds the traditional way
banking services. However, the companies to understand and due to stringent eligibility criteria,
RBI's target is for the penetration to underwrite customers better, long processing times, high interest
reach 90% by 2021. The push for contributing to the development of rates and rigid lending terms and
financial inclusion from the customized financial solutions. conditions of traditional lending
Government helps FinTech lenders, solutions. Mostly, traditional
Huge working population: India
as digital lending platforms can financial institutions were reluctant
has a population of more than 1.3
target customer segments that were to sanction loans to smaller
billion and a third of this popula-
previously underserved. companies or lowering interest
tion is urban. The median age in
rates as these enterprises are
Investors getting more interested: India is around 27 years, which
perceived as being high risk entities
Venture capitalists, angel investors, means that most of the population
from a credit perspective. Banks
high net worth individuals and is working and generating income.
typically charge 10-20% interest on
private equity houses consider Working adults typically adopt
loans. If SMEs don't the meet the
FinTech an attractive investment technology much faster than the
criteria set by banks for availing a
option. According to a report retired elderly. These working
loan, they turn to informal money
published by KPMG, FinTech adults would have greater enthusi-
lenders for finance. These lenders
investment in India surged from asm to avail the services offered by
charge exorbitant rates of interest,
$245 million in 2014 to over $1.5 the FinTech sector. Availing credit
ranging between 36-70%
billion in 2015. Although India has will become significantly easier for
only about 1,800 angel investors (as young adults due to their familiar- This led to a huge mismatch
compared to roughly 300,000 in the ity with technology and data rich between the demand and supply of
US), there has been a surge in their eco-systems that they frequently funding, often resulting in the
interest in the FinTech Sector, as engage with. SMEs having to shelve expansion
reflected in the increase in deals plans or even shut shop.
from 370 in 2014 to 691 in 2015. Necessity: The mother of
FinTech emerged as an innovative
Movement from 'data poor' to 'data
invention way of securing funds quickly and
rich': India now ranks third among While all the above factors support easily. SMEs are now able to apply
global startup ecosystems, and is the growth of FinTech, the primary online by uploading all the
expected to end 2016 with 4,750 driving force has been necessity. necessary documents. The algo-
startups. Taking into account the The need for such solutions was rithms being used by FinTech
current momentum, India is most strongly felt by the Small and companies are capable of executing
expected to have more than 10,500 Medium Enterprises (SME) sector, the initial screening in minutes.
startups by 2020, providing which were being stifled by the lack Moreover, cutting-edge technology
employment to almost 2.1 lakh of credit support offered by allows FinTech companies to offer a
people, according to a report by traditional financial institutions. lot of flexibility to SMEs. They can
NASSCOM. The startup wave and FinTech promises solutions to the now raise smaller loans for shorter
the huge investment (in excess of $5 bottlenecks that are inherent in the timeframes and pay lower interest
billion in 2015) supports FinTech traditional financial systems. rates.
because this sector needs entrepre-
neurs who are open to innovation, Over the past decade, the Small and The future of FinTech in
Medium Enterprises (SME) sector
are willing to experiment and are India
not tied to traditional ways of has emerged as an important part
getting things done. The evolving of the Indian economy, with 36 The global FinTech sector is
ecosystem of India, including million units, providing employ- expected to become $45 billion in
government policies, digital ment to over 80 million people and value by 2020, growing at a CAGR
services like e-commerce and contributing about 8% to the of 7.1%. India would play a critical
growing prevalence of social media, country's GDP. However, this role, given that the backdrop is

Financial Foresights 25
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
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.
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
traditional banking sector. Collabo- players in an extremely challeng-
purposes, FinTech companies bring
rations between the two can bring ing, cost-conscious Indian
technological expertise, customized
together the best of both worlds market. n

Gaurav Hinduja, Co-Founder & Managing Director, Capital Float: Gaurav Hinduja co-founded Capital Float, an online lending
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
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
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.

Financial Foresights 26
Industry Insights

Taking on the Indian Financial Goliath -


The Story of the FinTech David
Harshvardhan Lunia
Co-Founder & CEO
Lendingkart Technologies Pvt. Ltd.

O
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
India, where the literacy particularly lacklustre figure for a statistics presented by IAMAI
rate is at around 74%, mobile couple of years now, Indias 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
7 6.7
10
6 5.6 5.7 8.5
8 7.6 7.6 7.7 7.7
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
2010

2016
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 5.6 6
5.1

4 4

2 2

0 0
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2011

2013

2015
2010

2016
2009

2014
2012

2017

Financial Foresights 27
Industry Insights

Mobile Internet Users In India Urban vs Rural 2. Non-trusting populace when it


comes to their financial informa-
371 tion
From the above, it is evidently clear
Urban
what can be banked upon when
Rural
concerning the growth of FinTech
239
in India. Non-transparent processes
262
185 and lower reach of traditional
155 financial services give smart and
130 digital FinTech companies a
171
110 153 definite winning edge. The FinTech
91 126 industry should bear in mind that it
48 103 is operating in a former predomi-
85
70 nantly cash-based economy that has
44
been goaded into a less-cash
Jun-12 Jun-13 Oct-13 Dec-13 Mar-14 Jun-14 Jun-15 Jun-16 model. While businesses and
Source: IAMAI people will be trying their best to
go digital, there will be gaps that
Taking all these figures into 4. Low penetration of technology in would require impeccable customer
consideration, the in-situ conditions Tier-2, Tier-3 cities service to bridge the provider and
for startups and in specific, the customer.
Opportunities
FinTechs organisations are great.
1. Under-penetrated financial The expected internet user base in
All the segments of FinTechs space
services India is supposed to outweigh its
be it, e-wallets, crowdfunding,
counterpart in the United States
remittances, asset management, 2. High TAT for approvals and/or soon. As of 2014, India stood at the
insurance, share trading, credit rejections third position as far as number of
cards, consumer lending, payments
3. Non-transparency in processes internet users mattered. In the same
or business lending, are witnessing
study, it has been found that
traction from entrepreneurs and 4. Traditional financial institutions majority of these users have been
venture capitalists alike. India, with not very tech-savvy within the ages of 15 and 44 years.
its gamut of under-penetrated
Threats This customer cohort has huge
categories of financial services is
potential when it comes to using
ripe for a FinTech revolution. 1. Low financial inclusion
and adopting new technology.
Lets take a comprehensive look at a
SWOT analysis for FinTechs in Growth of Internet Users vs Mobile Internet in
India.
India 2012 - 2016
Strengths
1. Rapid adoption of 462

smartphones/portable comput-
Mobile Internet 402
ing devices due to declining
Total Internet Users 375
average selling price 354
330 371
2. Good growth of economy at 7%
302
plus GDP 278
306
3. Recent move of demonetization 243
276
4. Governments push towards 205
238
190
digitization of payments
192
Weaknesses 137 173
159
1. Invasive red tape policies 137
2. Low ratio of business registra- 110
91
tion to business operation
48
3. Poor internet connectivity across
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
Industry Insights

Post the demonetization move, the to this due to their model of FinTech as an industry is expected
association of banks with FinTech paperless and presence less model. to perform better and outlast the
players can be considered a boom that ecommerce experienced.
With a push towards a less cash That is not solely due to the fact
symbiotic relationship that can
economy being unavoidable, the that it deals with the lifeblood of
benefit both parties. Considering
trend of banks partnering with every transaction, but also because
that the top categories in Indian
FinTech companies has already it allows multiple benefits to the
FinTech are alternative lending,
picked up. From the FinTech point end-user.
consumer finance, investment tech
of view, apart from having access to
and mobile wallets, the reach of While funding and regulatory
a larger consumer base, startups
banks can be geometrically support are still in the nascent
will become more organized owing
expanded across the nation by stages in India for the FinTech
to the established norms provided
partnering with these customer- industry, entrepreneurial and
by banks. That in turn, will allow a
friendly options. In the cases of innovative mindset is gaining
steady growth rate to aspects of the
NBFCs, alternative lenders can help steadily, boosted by technological
FinTech business that are not
provide more customers to banks readiness and congruent business
overtly disruptive or innovative. environment. Government
using digital means and evaluate
thin file customer using alternative With online transactions in banks incentives are an area that is still in
data sources to access credit on the rise, banks continually need the grey but that will be changing
worthiness. In the same spirit, for the better to aid in the develop-
to improve on their technological
mobile wallets allow merchants to ment of digital India.
architecture to cater to a population
send/receive payments from a that takes time to adopt new
variety of banks and the same also
How the Indian FinTech
practices but is quick on the uptake
happens through payment once the learning curve is met. To
playing field looks like
processing firms. Banks can, of state the obvious, here are some There are several themes that
course, develop applications of statistics from NPCI showing how FinTech can adapt to, and thus
their own, the Unified Payment IMPS transactions have increased revolutionize the financial services
Interface being one of them. But the over the past year. The trend is sphere in India. Payments, P2P
base principle that banks operate on headed upstream going by the lending, bank in a box, financial
requires a physical location. Fintech recent changes announced by the inclusion, robo-advisory, security
companies are more or less immune government. and biometrics are ways in which
FinTech companies can leverage
their technological capabilities.
Number of IMPS Transactions in India
Payments comprise the most
35 popular startups in India due to the
31
30 28.5 29.5 capability to empower customers to
26.2 carry out their business in a hassle-
24.2 24.4
25
free manner as far as sending and
20.9 20.4
20 17.8
18.9 receiving money is concerned. UPI
16.5
14.8 introduced in many banks now is a
15
precursor to how digital payments
10 will be defined in the future.
5 FinTech firms specializing in
payments and trade processing
0
account for nearly 46 percent of the
Jun-15

Jun-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Indian FinTech industry. After


payments, come P2P lending
Source: NPCI

Financial Foresights 29
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
allow easier business transactions, time high. mindset, government incentives
P2P lending along with alternative offered, technological readiness,
Block chain methodology can aid compliance with regulatory
lending allows easy access to
the FinTech industry in becoming support, business environment and
personal and business finance. A
better at leveraging existing funding options, the mentioned
community spirit fosters account-
technology and making innovations regions are a haven for FinTech
ability, transparency and knowl-
on a more rapid scale. Making companies. India, by the same
edge sharing among peers. 20 new
smaller transactions simpler, robo- standards, still is an emerging
P2P lenders have come up in India
advisory is a nifty feature that is market, with none of the factors at a
in 2015.
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
payment banks and amalgamated Aadhaar-linked biometrics are the value-add to financial service
regional rural banks to quickly first step towards a secure FinTech providers and customers can be
adopt standard banking regulations space. Banks are already exploring provided only through a smart
and scale up their business voice-recognition systems to help in congruency of FinTech, banks and
efficiently. Thus, financial inclusion authorizing transactions. Technol- non-finance technology firms. The
is being jet-propelled forward, also ogy plays a vital role here and increasing acceptance of e-wallets,
owing to various government-led FinTech players are not going to be electronic transactions and mobile
initiatives. FinTech companies are left behind in this race. banking are the harbingers of a
on the same ride, being accelerated truly mobile and unhinged
The current markets where the
towards growth. Plans developed financial experience for the
FinTech hub is at its best opera-
in line with India Vision 2020 aim nation. n
tional frequency are the United
to bring financial exclusion down to

Harshvardhan Lunia, Co-Founder & CEO, Lendingkart Technologies Pvt. Ltd.: Harshvardhan Lunia is the co-founder and CEO at
Lendingkart Technologies Private Limited. He drives the primary aspect of business in the company: Designing innovative credit
solutions and delivering them in the simplest and most efficient manner to SMBs. Harshvardhan had about a decade of
experience in corporate banking before he embarked on an entrepreneurial route.
He started his career with large private sector and multinational banks in their small loan divisions. He has worked with top
companies like ICICI Bank, Standard Chartered Bank and HDFC Bank. Early in his career, he was intrigued by the passion of
small business owners who despite being creditworthy were not served by existing lenders. Additionally, he understood the
anxiety one went through waiting for credit decisions to come through, which, in banks can take months. This is what spurred
him to do something of his own in this sector, replete with opportunities. In December 2010, he launched Domestic Finance &
Investment Private Limited. Lendingkart was incorporated in April 2014 with a vision to provide financing solutions to those who
are creditworthy but would be overlooked by traditional financial institutions.
His vision is to implement Big Data credit scoring with analytics and artificial intelligence. He wants to make Lendingkart
synonymous with an online credit provider that has the simplest and most efficient loan delivery system, the easiest access and
the most flexible terms. He plans to helm the expansion of Lendingkart by leveraging cutting-edge technology and data analytics
for credit appraisal and cash management.
Harshvardhan is a Chartered Accountant and has completed his Post Graduation from the prestigious ISB (Indian School of
Business, Hyderabad). In his free time, he loves walking and exploring the world with his wife.

Financial Foresights 30
Industry Insights

Emerging New Trends/Technologies


in the Online Lending Space
Akshay Mehrotra
CEO
EarlySalary

2
017 will mark the year of Check-Out etc basis credit check disrupting this market by offering
FinTech and online lending and small unsecured loans which instant cash loans on a mobile app
ecosystem innovation. For offer similar services like to salaried individuals for tenures
the past 6 years most online BillMeLater from PayPal and less than one month.
disruption has taken space in the e- PayLater by Wonga from the West.
commerce & e-classified space. This Disrupting the credit
is will see the largest see tech start- EMI on consumer score driven by Credit
ups disrupting the traditional durables and Bureau's
banking ecosystem. The ecosystem
consumerism on monthly
is aiming to improve both Traditionally, CIBIL score is what
consumer credit side and SME
instalment you need to get any form of credit.
credit pain points where traditional Bajaj Finance & Capital First have But this is very age bias and relies
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
Taking of the C out of the credit card, building complex combing credit bureau reports to
COD machine learning credit scoring and social media profile of the user to
social profiling systems to lend make their decision faster and more
One of the biggest factor to the accurate.
faster, the new age FinTech players
e-commerce growth story in India
will disrupt the current consumer
has been Cash-On-Delivery with Financier disruption with
durable credit market considerably.
nearly 60% of all transactions today
Peer to Peer (P2P) model
being COD. From this 60% around
Instant cash
60% result in return/cancellation P2P model is changing the
on delivery causing the biggest
advance/loans landscape of capital provider for
pain point in the e-commerce Traditionally banks offers over lending. Traditionally banks and
growth story today. To solve this draft facilities and a few companies NBFCs borrowed to lend to others,
problem, many FinTech players are offers salaried loans to employees. and customer had to approach
entering into this place to build players like EarlySalary are these institutions to borrow. Peer to
concepts like Pay Later, Credit on

Financial Foresights 31
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
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
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.
stage already and many FinTech and loan requests. n

Akshay Mehrotra, CEO, EarlySalary: Armed with a Master's Degree in Business Administration from Symbiosis Pune, Askhay
Mehrotra is now spearheading his own Start-up venture EarlySalary along with two other partners.
EarlySalary is a Fintech Start-Up which uses new age technology for lending funds. The company aims to deliver a revolutionary
new business model set to change the lending market in India by introducing ultra short term loans.
Prior to this, Akshay was associated with brands like Future Retail Ltd, PolicyBazaar.com, Big Bazaar and Bajaj Allianz Life
Insurance Co. Ltd. An exemplary leader, Akshay brings with him a rich experience of 12 years in strategic planning and
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
Asia.
As the Chief Executive Officer at EarlySalary, Akshay oversees the implementation of the company's product strategy and is
focused towards building the business and building EarlySalary as a Financial Institution. Akshay has a sharp business mind-set
with attention to details. An unwavering passion for customer service, he believes that one of the biggest features and the most
significant competitive edge of any company is giving personalized attention to the customers and this is what he and his team
strive to achieve.
In his leisure time he likes to go for short trips, exploring new places and spend time with his family.

Financial Foresights 32
Industry Insights

Aadhaar Enabled Digital Process


Transformation in Indian BFSI Sector
Sanket Nayak
Co-founder
Digio

F
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
in 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.
However, one of the core companies building products
components responsible for and leveraging Aadhaar. Coming to its All this can now happen in a
powering the growing adoption impact; completely paperless & presence
and success of these companies less manner.
l The cost of service delivery can
remains the "Enablers" which work
come down from Rs. 1200-2300 Think of it, the aforementioned
"under-the-hood".
to Rs. 75 per customer and; FinTech startups primarily cater to
While these businesses continue to the top 37-40 million of the
l Time taken for service fulfilment
innovate, if conventional businesses population (with the exception of
could be reduce from 7-10
like Banks, NBFCs, Mutual Funds, wallets). Investments, credit &
working days to few minutes,
Brokerages etc need to catch up, insurance for the bottom-of-the
and all this disruption can at
they too need to leverage such pyramid, which is fundamental to
scale
enablers.

Financial Foresights 33
Industry Insights

financial inclusion and social PMJDY as a case study for debit mandates etc, which today
security is still primarily dominated work on wet-ink signatures. Also,
digital service delivery
by large financial institutions. Last the only way to establish the
mile banking currently not being a The Pradhan Mantri Jan Dhan authenticity of a wet-ink signature
profitable operation, this could Yojana (PMJDY) is a classic case for possible fraud is using forensics.
fundamentally change things. study wherein 26 crore bank It is time, that the industries adopt
accounts have been opened in legally accepted, non-repudiable
Next steps record time. It is important to note Aadhaar based digital signatures
that of these accounts only a across the board, so that its fraud
Identity is fundamental to any
meagre 23-24% accounts are zero proof, tamper proof, secure and
business and a consumer's identity
balance accounts. This augmented cost efficient
is singular, while his/her service
with Banking Mitra/ Business
provider relationships could be 1-Click Service Delivery
Correspondent model for cash
multiple. How do we efficiently
collection for deposits, mass roll- As a consumer, all your documents
manage the consumer's identity
out of Rupay Cards, conversion of could be stored on your
and documents (which do not
Kisaan Credit Cards to Rupay mobile/cloud, and whenever you
change with industry/use case)
Cards, Micro ATM infrastructure apply for a service (eg: bank
across his/her multiple service
would further reduce the number account, credit card, loan etc), the
relationships ? That is the key
of zero balance accounts. business could fetch this
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
to study is "The Digital Banking
Someday we could see plastic cards
Report - 2014" by BCG which covers As the demography shifts from
becoming obsolete for cash
all these aspects and calls out for writing with pen-paper to typing
withdrawal at ATMs or for
the need of a truly digital banking on computers, our physical
transactions at point-of-sale. All
industry. signatures are prone to mismatch
you need is to know your PIN
resulting in declining of cheques,

Financial Foresights 34
Industry Insights

(passcode) and authenticate using for investment advisory, prudent l Large businesses: To serve as
your Fingerprint/Iris. There could credit decisioning etc. the adopters & benefactors of
also be biometric verification hubs this disruption by partnering
To sum it up, it is imperative that
which can be leveraged by with technology companies and
for financial inclusion to happen,
businesses rather than investing in bring in the "pull-factor" and
digital inclusion needs to happen
capex. This will significantly bring "trust" into the equation for the
first and everyone has a role to play
down the cost of KYC and consumer
here:
operations.
l Technology companies: To
l Consumers: Adopt digital
Single View build applications to enable this
practices for secure, hassle-free
digital infrastructure
Similarly, other data intelligence and faster service delivery
models will emerge with time. With If this is achieved, it will be a
l Government: Continue
a unique identifier like Aadhaar if leapfrog moment for India's
providing conducive policy
seeded and available across data banking and financial industry and
environment for digital
records (deposits, credit, insurance, could translate to a minimum of
inclusion
investments), a comprehensive 10,000 crores of operational cost
"single view" of the consumer's l Central regulators: To come up savings over next 5 years. n
financial health could be arrived at with unambiguous and
harmonised KYC guidelines

Sanket Nayak, Co-founder, Digio: Sanket is the Co-Founder of Digio (www.digio.in), a Bangalore based company, building
products for bringing paperless, presence less, hassle free service delivery to business processes for Digital India. Within 5 months
of launching its first product, Digio is currently integrating with more than 50 businesses across Banking, Brokerage, Insurance,
Consumer Lending, SME Lending, P2P Lending, Taxation etc.
Prior to Digio, he was responsible for Twitter's product portfolio for emerging markets, early member at ZipDial through its
acquisition by Twitter Inc. serving as its Director of Global Operations, responsible for scaling India operations and setting up its
international operations in 4 geographies. Prior to ZipDial, he was part of the early core team member of High Mark Credit
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 35
Industry Insights

India Stack Moment in the Sun for


Indian Capital Markets
Karthik Rangappa
Vice President Education & Research Services
Zerodha

T
alk about the Indian packs in different technological 2% of its population participating in
'FinTech' industry, and you layers. Each of these layers enables the capital markets. One of the
will 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-
the online application from the
India stack, with its set of open pants can be on boarded.
comfort of his home, upload the
Application program interface
It is quite unfortunate that a necessary documents, and request
(API) and digital infrastructure,
country like India has lesser than for a verification. At the back end,

Financial Foresights 36
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
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
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-
APIs, is poised to revolutionize the
Aadhaar number. Needless to say, boarding process is user friendly, as
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,
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.
a matter of few minutes as opposed deal with. n

Karthik Rangappa, Vice President Education & Research Services, Zerodha: Karthik Rangappa is a senior equity research and
investment professional with over 15 years of experience. He specializes in financial modeling, equity valuation, equity derivative
strategies, portfolio creation, and portfolio analytics. He has a passion for teaching and education. Besides handling the education
services VARSITY at Zerodha, he also handles full credit courses related to markets and finance at leading Business schools in
Bengaluru. He holds a post graduate degree in Risk and Asset Management from EDHEC Business School, France and a Bachelors
Degree in Engineering from Bangalore University.

Financial Foresights 37
Industry Insights

Cryptography: The Vault for


Today's Banks
Ankit Ratan
CEO
SIGNZY

Introduction This small instance reveals a very of currency present. And hence the
important aspect of banking. Safety entire banking system
Cryptography is a sub-field of is paramount. Banks have fundamentally relies on this
theoretical computer science. It constantly been the biggest buyers consumer trust in banking.
leverages advanced number theory of safe and vaults. Thus companies
and hence needs a strong creating locks and vaults have been Need for security
background in mathematics. Inspite strong partners in banking growth.
of its abstract background, it is When the infamous thief Willie
already widely used in everyday Even today, banks pay tremendous Sutton was asked why he robbed
applications. All digital attention to detail as regards safety banks, he answered, "Because that's
communications today leverage and security. The vault of the where the money is." While the
some form of public key Federal Reserve Bank of New York witty comeback still "holds up"
cryptography. Emails are a prime is safeguarded by a comprehensive today, the weapon of choice now is
example. As banking goes digital, multi-layered security system, the more likely to be a pen/computer
cryptography would play a major highlight of which is a 90-ton steel than a gun. The business of a
role in ensuring security and cylinder protecting the main vault. bank/financial institution is
establishing trust. The only entry into the vault creates constantly under threat from
an airtight and watertight seal menaces of robbery, or even fraud.
Recently, when the Edgartown which is impenetrable. Banks have always placed
Bank in Massachusetts, USA tremendous value on ensuring high
needed more space, they made a This security is important as banks
standards of safety and security.
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.
removing the vault meant entire amount when need be. But
The same report states that as 75%
destabilizing the complete banks deal with monetary values
of the population of India has a
infrastructure. and transaction amounts which are
mobile phone, 'banking on the go'
far greater than the actual amount

Financial Foresights 38
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
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
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
Building skill and knowledge base
As the world moves to digital there partners for banking in the 19th and
in cryptography might be a good
is a corresponding need of this 20th century. Startups today can fill
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.
attributes: It has driven businesses to re-
imagine how their networks Conclusion
1. Confidentiality: The protection of
operate and has become
information and prevention of
synonymous with alternative Banks in India have started
unauthorized access;
business models. At its core, realizing that consumer experience
2. Privacy: Protecting the personal however, Blockchain leverages hash and ease of banking are very
information of individuals; and public key encryption important. This has led to several
algorithms. These two form the collaborations between the FinTech
3. Non-repudiation: The inability to major pillars of cryptography, as start-ups and banks. What would
deny an action took place; and well. The benefits of Blockchain are probably be the next wave is tie-ups
4. Integrity: Assurance that well known today. It enables with startups focussing on digital
information cannot be confidentiality, privacy and security. This will help banks bring
manipulated. security of data and user identities. the "offline" trust to the online
Apart from its security benefits, world. Banks which focus on digital
As banking moves digital, Blockchain also increases the speed security and safety are more likely
cryptography will become as of different transactions. Thus, it is to build consumer trust in the
important as the steel vaults were being seen as the modern coming future. Thus it is safe to say
in the yesteryears. It will play a equivalent of the internet. that cryptography may hold the
crucial role in preventing electronic 'key' to winning this digital
fraud thereby ensuring the validity Companies that can effectively
world. n
of financial transactions. leverage Blockchain would as a

Ankit Ratan, CEO, SIGNZY: Over 6 years of experience working with financial institutions. Worked for boutique Analytics firm
in US deploying AML/CFT solutions at Citi Bank and Metlife. Started own company in Analytics in India in 2013, worked with
Axis Bank, Maersk and Benetton helping them with Analytics needs specializing in fraud analytics. Was silver medallist at IIT
Delhi where he also published 3 research papers and a patent.
Currently building Signzy, where we use cryptography, Artificial Intelligence and India Stack to build trust APIs for digital
banking.

Financial Foresights 39
Industry Insights

FinTechs & Banks:


Together Creating Value for Customer
Amit Sachdev
Co-founder and CEO
CoinTribe

Two speed world entrant with slightest of innovation innovations have emerged with
to cause disruption. focus on easier transaction
Innovation friendly Vs enablement such as mobile wallet,
BAU industries Banking - Innovation POS aggregators & payment
We are fast witnessing the friendly or BAU industry? gateways. The exponential growth
emergence of a two-speed world. of some of these models is
This question doesnt have an testimony to how small ticket high
One end of this world is witnessing overarching answer but needs to be
technology driven disruption in volume segments can be made
looked at in the context of three profitable using technology
innovation friendly industries such different aspects of Banking
as e-commerce, telecom, travel and effectively. Banks have now begun
liabilities, transactions and assets. to collaborate with these FinTechs
tourism, logistics etc, while at the Opening up of Banking industry to
other end there is Business As to offer state-of-the-art solutions to
private competition in four their customers and leverage the
Usual (BAU) in industries that are different phases between 1994 and
insulated from significant tremendous potential this part of
2016 has led to liability customers business offers.
competition due to regulations, benefiting from several technology-
government control, capital driven innovations. With Internet Asset side of banking has, however,
intensive nature or involving Banking, Mobile Banking, tab based seen the least amount of tech
technical complexities such as banking, ATMs, Cash Deposit innovation so far. With less than
infrastructure, utilities etc. The Machines and now Bots based 70% of banks asset base to be
constant focus on building customer services, liability side of deployed in loans and over 50%
competitive advantage through banking has been one of the early share of corporate segment in the
enhancing user experience, adopters of technology. Given loan market compounded by vast
simplicity, convenience in larger amount of banks focus on unmet need in MSME lending, the
innovation friendly industries, as retail liabilities and the increasing competition in retail and MSME
experienced in Uber, Airbnb, competition, these innovations loan segments has been relatively
Paytm, etc is taking customer helped private banks garner large less compared to liabilities thus,
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
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 wooing role. Consequently,
industries, the gap between could build profitable models the processes and associated
customer expectations and what around small ticket retail efficiencies involved in Retail and
BAU focused industries offer is transactions, most banks found this MSME loans and have largely
widening. The end-result on as economically unattractive. Since remained the same over the years
customer satisfaction levels in BAU this area was opened-up to non- with plenty of manual intervention
focused industries is anybodys banking players, multiple FinTech at each stage. Turn-around-times
guess leaving room for a new models with technology led (TAT) of 15-20 days and complex

Financial Foresights 40
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
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
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
FinTech companies to emerge in have brands and large distribution
to keep pace with changes in
each part of the loan value chain footprints. They also have rich data
customer needs and evolution of
customer sourcing, onboarding, on each of these areas to aid
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.
VC funds, transactional
use of technology in the complex FinTech companies offer the partnerships - that can be
area of risk assessment or in nimbleness and agility required for potentially used for this purpose.
digitizing the complete application As mentioned in a recent report1,
quick pilots and experimentation in
to disbursement process which is large majority of banks prefer to
the form of flexible technology
increasing being enabled by the engage through equity
systems and new development in
India Stack. participation with FinTech
an agile manner. They also offer
Banking ecosystem is structurally outside-in perspective and first companies. This enables both
not conducive to technology led principle thinking on how to solve partners to work in an open
innovation. Multiple elements in some of the complex issues simply environment of trust and brings out
banking ecosystem such as limited the best form both partners.
and with good user experience.
competition given licensing However, it is important for banks
requirements, philosophy of (over) An ideal partnership model to be very careful in selection of
compliance, large and complex between banks and FinTechs would FinTech partners. It is important for
organizations with multiple involve co-innovating the business Banks to partner with FinTech
decision contributors (not makers) model by leveraging the strengths having complementary capabilities
that slow down decision making of both partners. While this and focus on constant innovation.
etc. make it difficult to incentivize business model design would offer
and breed innovation in Banking Trust is the hallmark of bank's
some clear answers, there would be relationship with customers and
DNA.
quite a few hypotheses to be tested. banks have strong brands and
Partnership between The tech platforms of FinTech reputation to protect. Hence, it is
Banks and FintTechs: partner can be used for rapid important for banks to work with
prototyping and multiple pilots partners who are credible, have
Potential Solution? across segments and geographies to strong management and promoters
Partnerships between banks and validate these hypotheses. Basis backing. n
FinTechs offers a win-win solution learning from pilots, the model and

1
PwC Global Fintech survey 2016

Amit Sachdev, Co-founder and CEO, CoinTribe: Amit Sachdev is the Co-founder and Chief Executive Officer of CoinTribe, the
leading online loan disbursement platform. Amit aims to revolutionize the lending processes in India, make it completely
technology-driven and enable CoinTribe to emerge as the largest online lending marketplace of our country. His alma maters
include IIT Varanasi as well as IIM Lucknow and has served prestigious Boston Consulting Group as a Principal.
He has worked closely with several prominent financial institutions and has assisted them with new business build, strategic
planning, design and execution of transformation agenda, digital agenda, product-growth strategy, risk management, and many
more key business problems. Amits 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 41
Industry Insights

The Emergence of
FinTech in India
Deepak Sharma
Chief Digital Officer
Kotak Mahindra Bank Ltd.

I
n the last couple of years, we Payment System (AEPS), Bharat Bill processing, analytics, transaction
have witnessed the making of Pay (BBPS) & USSD creates one of authentication and security
FinTech in India with several the largest interoperable payment solution, or customer facing like
successful companies, marking ecosystems in the world. lending, wallets, investments etc.
their presence at Asian/Global Depending on space, business
As India leap frogs towards
level. As FinTech reaches the model and underlying technology,
adoption of data and device, i.e.
adolescence phase, it is showing FinTechs can sharpen their play.
smart phone, which crossed 325
confidence and seeking recognition
million mark, it will be fair to say Today, richness of data across
from peers and others alike.
that India is mobile first country, if credit, social media, merchant
FinTechs are looking at
not mobile only. Demographic transaction, spends and financial
incorporating global best practises
dividend, social media adoption aggregator is making us data rich
in the Indian context keeping
and mass urbanisation have created country, and companies focussed
consumer insights & broader
large segment of digital native on data science and analytics can
ecosystem in mind. The FinTech
which will continue to support leverage this across business
opportunity in India has five broad
growth of new business models. models. Such data can be initial
dimensions - Ecosystem, FinTech
capital to build business models in
companies / start-ups, Banks & As Government continues the push
areas like lending, insurance,
Financial institutions, Consumers towards cashless economy with
payments and investment
and Regulators. measures like government payment
solutions. As motor vehicle, health,
and taxes moving online, incentives
Ecosystem land and property records get
for digital transaction etc., we are
digitised, we will witness more new
In the last 5 years, India has built likely to see growth in consumer
innovative solutions from FinTech.
one of the unique and robust adoption of digital mediums. This
infrastructures for incubation and along with growth in e-commerce Technology is playing another
growth of FinTech. India Stack, transaction has resulted in changing pivotal role in the growth of
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
locker, is major boost for FinTechs financial & infra support means. play offices and access to
to build their business. This technology at low cost. Areas
FinTech around identity & fraud
combined with Payment Stack
(including recent initiatives) viz. FinTechs have various management, artificial intelligence
Immediate Payment Service (IMPS), opportunities, and can choose the and natural language processing
National Automated Clearing space they want to get into. It can (NLP), advance analytics,
House (NACH), India Quick be B2B, where one is blockchain, Internet of Things (IoT),
Response (QR), Unified Payment partnering/offering services to augmented & virtual reality
Interface (UPI), Aadhar Enabled institutional clients like payment provides unimaginable range of

Financial Foresights 42
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
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
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 privacy and risk is not
This provides revenue opportunity
effective & easy for many start-ups. compromised, majority of FinTechs
and scale to FinTechs, and at the
Access to capital and readiness of same time banks are able to roll out operate in unregulated space. As
banks & financial institutions to solutions at a faster pace. Various they become customer facing, either
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
Banks & Financial complimentary value. understand regulatory landscape of
Institutions (BFSI) India better. Some models that may
Consumer work in other parts of the world
There has been a long debate about cannot be blindly adopted here.
FinTechs vs. banks & how the As everyone fights for consumers
Regular interaction, ideation and
growth of FinTech will impact BFSI. wallets and mind share, it is
discussion with regulators can help
FinTechs with unique strength of becoming pertinent that no one
build better understanding on both
focussed product, solution & owns the consumer. Consumers are
sides, thus reducing speed bumps.
segment depth have been good in increasingly becoming demanding
solving identified problems. as they are presented with several Overall, it is a great time for
FinTechs are agile, have high choices. Be it aggregators offering FinTech players in India, provided
adaptability & ability to pivot or range of financial products on a the companies choose customer
persevere with solution and single platform or chatbots segments, problem that they are
experience. At the same time, the executing errand, there are several trying to solve, business model and
FinTech industry lacks access to options in every category. Due to unit economics well. It is important
customers, trust, distribution this, consumers have come to to note that technology can be a
footprint and regulatory oversight. expect convenience, user experience great leveller and is also easy to
This provides a perfect synergy for and offers/ deals while interacting copy. Those who combine
Banks & FI to work with FinTechs with digital interface on web, technology with consumer insights,
& vice-versa. Many banks including mobile or social media. It is, ecosystem partnership and speed to
Kotak have set up an innovation therefore, a great time to be a market will succeed.
lab, and is partnering with various consumer. Consumer engagement Disclaimer: The views expressed in the
FinTechs to jointly develop Proof of on digital platforms also helps article are personal and do not reflect
Concept (POC) & roll out products. FinTech and other ecosystem the views of Kotak Mahindra
As banks moves towards API players become data rich, which in Bank Ltd. n
banking, many banks are making undeniably the new currency.

Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank Ltd.: global first products like Jifi, Hashtag banking, Bharat Banking, M-
Store & Kaypay. Deepak believes in constant innovation and focuses on building business models which are customer centric and
disruptive.
Deepak has worked across various international markets and brings global perspective to his business. Prior to this, he was
responsible for setting up the Banks highly successful Non Resident Indian (NRI) & International Remittance business. Deepak
also played a key role in launching the Banks affluent banking programme - Privy League.
With over 22 years of experience, Deepaks professional tenure spans across the banking, telecom and service verticals. Prior to
joining Kotak, he was part of the leadership team of Consumer Banking at Standard Chartered bank from 2003 to 2008. As
National Head for Corporate Business, he was responsible for building the corporate payroll and Wealth Management business.
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 43
Industry Insights

The Future of Personal Finance is Instant,


Cashless, Paperless-and Presence-Less
The Evolving FinTech Landscape of India.
Adhil Shetty
Founder & CEO
Bank Bazaar

I
n June 2016, KPMG reported consumer and institutional finance. FinTech company that attracts 100
that the FinTech software and More recently, the word has come million users every year,
services industry is expected to to encompass "technological BankBazaar is a technological and
become worth $45 billion in 2020, innovation in the financial sector, marketing platform. It connects
growing at approximately 7.1% including innovations in financial banks and customers in a
annually. In India, as per the same literacy and education, retail frictionless environment. It helps
report, the FinTech software market banking, investment and even banks acquire more customers,
stood at $1.2 billion in 2016, and is crypto-currencies like bitcoin," while customers are helped in
expected to double by 2020. according to Investopedia. making informed decisions about
their purchase by letting them
Goldman Sachs reported earlier this FinTech in India has multiple ways
compare products on various
year that with 440 million forward. It can compete with
parameters such as price and
millennials and 390 million Gen Z- established financial institutions. Or
features.
ers (those born after 2000), and with it can enable those very institutions,
a per capita GDP of $1650 that partnering them into creating an Technology has a large role to play
compares with China in 2005, India integrated, easily accessible, in taking more Indians towards
is expected to fast-forward in terms democratised financial system that economic prosperity. Rather than
of internet connectivity and e- could bring hundreds of millions of be threatened by it, more customers
commerce. Naturally, the growth of more Indians under the ambit of and banks can prepare to embrace
FinTech in India is expected to pair formal banking. this shift from offline to online,
with the growth of internet users from paper to paperless, from cash
Infosys co-founder and former
and e-commerce in India. to cashless.
UIDAI chairman Nandan Nilekani
So what is FinTech? And how has it described this phase as the Indian Democratising finance in
become so important? According to financial services sector's
Investopedia, the internet-based 'Whatsapp moment'. "Banking as
India
financial encyclopaedia, "FinTech is we know it will stand on its head in Technology is now allowing
a portmanteau of financial the next 10 years," Nilekani recently financial services providers to
technology that describes an said while talking of disruptions in increase financial inclusion in India.
emerging financial services sector the marketplace, comparing recent The cellphone has become a
in the 21st century." trends to how Whatsapp had differentiator, as is having an
disrupted instant messaging. Aadhaar number. The number of
The meaning of the word has
evolved. Around the turn of the Where does a company like Indians having either a cellphone or
century, the word was used to BankBazaar fit into this fast- an Aadhaar card is now one billion.
describe the technology powering evolving financial landscape? As a Armed with one or both of these

Financial Foresights 44
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 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
example and understand the large-
population of 1230 million. With through a cellphone OTP, and buy
scale implications of FinTech.
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.
following the demonetisation, the 1000 million, there's potentially a In the offline world, the same
Union Government and the RBI gap of 300 million people that process would require a visit to the
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
allows regulated entities to on-
perhaps approximately 530 million allows the financial service
board new customers by
strong - can thus eventually hope to provider to reduce costs on human
authenticating them through OTP-
benefit from an OTP or Aadhaar- resources and paperwork. This
based eKYC instead of the normal
linked eKYC-based account reduction in costs can be as high as
KYC process which requires
opening processes. They can then 20-30% in case of insurance
papers, presence and considerable
come under the ambit of the formal products and 2-3% for banking
time.
financial system and have easy, products. In the long run, paperless
By authenticating themselves instant, presence-less and paperless products allow the financial
through an OTP received on their access to savings accounts, loan services industry to cut costs and
cellphone, customers can open products, insurance products and reduce non-performing assets.
deposit and loan accounts investment options. Since the products are paperless,
paperlessly, presence-lessly, and there are also savings in terms of
The financial inclusion of half a
instantly. costs to the environment.
billion more people can then lead to
This being a pilot run for the RBI in a better standard of living, higher Customers stand to benefit from the
terms of eKYC implementation, tax collection, and greater reduced costs of these products.
caps have been imposed on the prosperity and development all Considering that the service tax on
current process. There's a cap of Rs. round. Without technology and the insurance products has been
60,000 per loan account per year, reach of cellphones, creating this trending upwards in the last
and an aggregate of Rs. 200,000 level of financial inclusion would decade, paperless products would
(and no more than Rs. 100,000 per have been much more difficult. allow them the possibility of buying
deposit) per deposit account per the same products at significantly
year. The caps can be lifted as soon Paperless finance: A new reduced prices.
as the usual KYC processes have wave Then, there's the matter of reach.
been completed within a 12 month
When we're trying to reach and sell Cellphone and internet connectivity
period.
to people on their cellphones, the may reach where the brick and
This may seem like a small step by financial products need to be mortar financial institutions will
the RBI. But it has the potential to instant and paperless. These not. By buying financial products
bank India's several hundred products are the way forward. Let's with their cellphones, customers
million unbanked people. Former understand this first through costs. may avoid the hardship and costs
RBI governor Raghuram Rajan said associated with having to travel to
India is home to 21% of the world's A paperless product can be their nearest banks. Our belief in
unbanked population, the largest processed and disbursed by an being online is vindicated each time
share for any country. The ballpark internet-linked technological engine

Financial Foresights 45
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
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
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.
consider threats to information This is detrimental to the very idea
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
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
certifications pertaining to info the IT Act of 2000 was amended to quote the report precisely.
security. providing legal sanctity to e-
Financial inclusion in SEA can be
signatures based on asymmetric
Why eKYC and eSign are improved much the same way it is
cryptosystems. In addition, Sections
being done in India. Increasing the
necessary 47A, 67A, 73A, and 85B were added
scope of basic, mobile-based
to the Indian Evidence Act of 1872,
Instant and paperless products, as I transacting, using OTP-based
thus making e-signatures valid and
argued above, can also lead to authenticating, increasing the use of
admissible evidence in the court of
greater financial inclusion. There paperless and presence-less
law and for all legal purposes.
are two keys to achieving paperless. products, providing frictionless
This is the large-scale adoption of Once the RBI decides to approve experiences and benefits to
eKYC and e-signature. As the use of e-signatures along with customers, and using the internet
mentioned above, eKYC is now its current sanction to eKYC, for increased reach and instant
already a reality, with the RBI paperless and instant products can delivery of financial services - these
agreeing to adopt it in the opening become a reality. are broadly the way forward for
FinTech. n

Adhil Shetty, Founder & CEO, Bank Bazaar: Adhil Shetty serves as the CEO of BankBazaar.com. Also the co-founder of the
company, he has set for himself an incisive vision that of making BankBazaar.com the go-to brand for investors and loan
aspirants which is shifting the contours of how loans, cards and insurance products are consumed in India today.
BankBazaar.com was born in 2008 as the result of a frustrating personal search for a loan. Adhil, along with other co-founders,
conceptualized India's first and leading world-class digital marketplace that provides a platform where users not only could
search and compare personal finance products but also purchase it on the platform be it credit cards, secured or unsecured
loans, insurance, or savings and investments from all the leading financial institution in India. The core idea has been to digitize
the process as much as possible so that it delivers financial products to users instantly in a customized, presence-less, paperless
manner. Today, this vision is becoming the face of Fintech in India, and consuming financial products is becoming as easy as
shopping for any other consumer durable.
An engineering graduate from Anna University and holder of a Master's degree in International Relations from Columbia
University, Adhil held decisive positions at Deloitte Touche Tomahatsu's US East Alliance and Cisco Systems before he dived
headlong into scripting the BankBazaar story.

Financial Foresights 46
Industry Insights

Leveraging FinTech
opportunities in India
Bipin Preet Singh
Founder CEO & Director
Mobikwik

W
e live in uncertain yet like still immature start-up connect, engage and share ideas
exciting times. It is no environment and labyrinth-like across vibrant communities and
less than a challenge - laws and regulations. networks. It also identifies and
more so a necessity - for converts opportunities into
corporations worldwide to manage
Growth drivers business. In the current age of
internal and external risks, and Innovation and technology are technology-driven financial
stand resilient to evolving economic bringing radical changes in services, no market participant can
and political circumstances. traditional financial services. A new afford to operate in silos.
India - the world's fastest growing generation of start-ups is utilising
tech tools and forging disruptive Booming businesses
major economy - is meanwhile
shining under a spotlight with business models to bring in India is transitioning into a
young entrepreneurs, innovators seamless and innovative financial dynamic ecosystem offering
and visionaries reshaping how services for the banked and FinTech start-ups a platform to
business is done. While disruptions unbanked population - from potentially grow into billion-dollar
and unexpected events are a fact of payments to wealth management to unicorns. From tapping new
life, the country continues to show peer-to-peer lending to crowd segments to exploring foreign
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
innovation-led entrepreneurship. with financial institutions, The transaction value for the Indian
Young people are deploying new universities and research FinTech sector is estimated to be 33
digital tools and communication institutions, technology experts, billion dollars and forecast to reach
technologies to disrupt the old government agencies, industry 73 billion dollars by 2020, growing
order. consultants and associations. at a CAGR of 22 per cent - over
Through these partnerships, they three times the GDP growth rate.
The 1.3 billion people, economy create a highly integrated The wave continues due to a strong
growing at 7.4 per cent annually, ecosystem that brings together their talent pipeline of cost-effective tech
English-speaking workforce, robust expertise, experience, technology workforce.
information technology sector and and facilities.
booming IT-related services are From e-wallets to lending to
attracting investments in billions of A successful FinTech ecosystem is insurance, the services of FinTech
dollars, undaunted by challenges where all market participants have redefined the way businesses

Financial Foresights 47
Industry Insights

and consumers carry out routine travelling to and from a bank. Can more than 50 per cent of their
transactions. Channels like e- digital payments address this? The transactions digitally, 80 per cent
commerce and m-commerce are scope is huge. The report says rebates on patent costs for start-ups,
opening up new ways for digital payments services in India income tax exemption for start-ups
consumers to make purchases - like can add 700 billion dollars to GDP for first three years, and exemption
tapping their mobile phone, or by 2025 and create 21 million new on capital gains tax for investments
reading a quick response code, or a jobs. in unlisted companies for longer
wearable watch onto a contactless than two years.
payment terminal. Adoption of
Key enablers
The RBI has been trying to create an
these new innovations can help The government along with environment for unhindered
create new revenue channels and regulators such as the Securities innovations by FinTech companies,
reduce overheads, positively and Exchange Board of India (SEBI) expanding the reach of banking
impacting financial bottom lines of and the Reserve Bank of India (RBI) services for unbanked population,
companies. are aggressively supporting the regulating an efficient electronic
ambition of becoming a cashless payment system and providing
Going cashless digital economy with a strong alternative options to consumers.
In the world's most sweeping FinTech ecosystem via both FinTech enablement has been
currency policy change in decades, funding and promotional primarily across payments, lending,
Prime Minister Narendra Modi initiatives. security / biometrics and wealth
announced on November 8, 2016 The Jan Dhan Yojana added over management.
that all Rs 500 and 1,000 notes will 200 million unbanked individuals
be taken out of circulation. Aimed into the banking sector. The
Investors' role
at eliminating widespread Aadhaar card programme started FinTech investment increased
corruption and widening the tax as a 12-digit individual manifold from 247 million dollars
base, the move had sent hundreds identification number enabling in 2014 to more than 1.5 billion
of thousands of people queuing up online and cost-effective dollars in 2015. India has a far lesser
at banks across the country to identification for every resident number of angel investors (about
deposit idle cash or replace them Indian. It has already been 1,800 in 2016) as compared to
with new notes. extended for pension, provident 300,000 in the United States.
Since the move invalidated 86 per fund and the Jan Dhan Yojana. However, India is witnessing
cent of the total currency in Innovations leveraging the Aadhaar increasing interest levels in start-up
circulation, an unprecedented cash card are expected to assist the funding, which is evident by
crunch ensued, prompting more financially excluded segments and increasing number of angel deals
and more Indians to seek succour in remove financial untouchability. from 370 in 2014 to 691 in 2015.
e-wallets. This proves that the The opportunity for FinTech is Bengaluru has the highest number
market is huge and mostly enormous in the areas of of start-ups and accelerators in the
untapped. With cash constituting government-to-person cash country, while Delhi NCR region is
about 98 per cent of all consumer transfers too. The Direct Benefit home to big-ticket players.
transactions by volume and about Transfer (DBT) scheme will enable Investors are coming to terms that
68 per cent by value, 12 per cent of deeper penetration of financial FinTech is more than just payments
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
contrary, constitute a mere two per Cities initiatives have been investing, lending, wealth
cent of the GDP. launched to promote digital management, credit reporting
A report by McKinsey Global infrastructure development in the among others.
Institute titled 'Digital Finance for country as well as attract foreign The BFSI sector is gearing for both
All: Powering Inclusive Growth in investments. acquisitions and funding-based
Emerging Economies' says Indians Among the notable initiatives on routes to increase its presence in the
lose more than two billion dollar a tax and surcharge relief are: tax emerging FinTech space. For
year in forgone income simply rebates for merchants accepting example Citi Bank, Barclays and
because of the time it takes Goldman Sachs have launched

Financial Foresights 48
Industry Insights

FinTech focused accelerator technology is receiving encouraging financial firms operating in these
programmes. Partnerships by reviews from market players in the inaccessible areas. At present, the
FinTech product firms (in point-of- country. The RBI has set up a financial inclusion penetration is
sale hardware, credit deals and committee to understand the low where 145 million households
social lending) with banks with a possibility of using block-chain do not have access to banking
synchronised go-to-market strategy technology and to determine services.
are addressing the immediate suitable regulatory policies. Rapidly growing penetration of
demand of digital-age consumers. There have been initial concerns smart phones and internet has led
To counter a steady challenge by over the emergence of virtual to the emergence of multiple
venture backed FinTech firms, currency schemes. But the technologies for replacing cash,
many incumbents are augmenting government recognises the need for providing credit information for
their value chain with competing regulators and authorities to keep screening, enabling online lending
offerings and leveraging their own pace with developments. Crypto- and purchasing of financial
distribution and client base. Setting currencies have garnered products through digital means.
up, managing or investing in worldwide attention with the Going forward, the recent provision
centres of excellence and FinTech World Economic Forum, the of payment bank licenses by the
hubs is an excellent strategy to take Pentagon, Central Banks and the RBI is likely to aid in monetising
an inside view of the emerging Government of Dubai announcing this digital trend and making
FinTech firms' working, and to massive projects to rewrite the technology as the core offering.
nurture talent for a future history of money. The RBI has also given licenses to
competitive advantage. Many of the world's largest banks 10 entities for setting up small
Block-chain technology are said to be supporting a joint finance banks. Through this
effort for setting up of private initiative, the central bank aims to
Built on the block-chain block-chain and building an extend credit facilities to micro and
infrastructure, virtual currency is industry-wide platform for unorganised sectors. It has also
enabling better speed and efficiency standardising the use of this come up with a report on medium-
of transaction. With more than 90 technology. This could transform term path for financial inclusion
per cent share globally, Bitcoin is functioning in back offices of banks, which aims to achieve 90 per cent
the leading virtual currency in a increase the speed and cost coverage by 2021.
seven billion dollar market. Block- efficiency in payment systems and
chain is being perceived in India as While the FinTech sector offers
trade finance. innovation and disruptive
a game changer. If used to its full
potential, it can offer an innocuous, New normals technologies, banks can drive
quick and economical way for customer demand. It is thus for
In India, financial inclusion is banks to leverage these concepts
transactions, simplify international projected to be driven largely by
remittances and reduce transaction and disruptive ideas and adopt
creation of an ecosystem where them into their mode. Banks will
times by more than half. people get the opportunities to use likely consume and integrate
Though it is at a very nascent stage financial instruments in their daily FinTech ideas into their normal
and is yet to mature into a lives and banks make best use of course of business in coming
mainstream application, the the spread of FinTech and non- times. n

Bipin Preet Singh, Founder CEO & Director, Mobikwik: Bipin founded MobiKwik with the vision of making mobile payments easier
for the average Indian. He has worn several hats at MobiKwik, from engineering to leading the business development, marketing,
and advertising teams. Bipin's current focus is on taking the wallet to a billion Indians by driving product innovation and brand
marketing.
Prior to his entrepreneurial journey, Bipin spent 7 years as a Platform Architect at companies such as Intel, Nvidia, and Freescale.
He also dabbled in advertising as a Partner with Star Auto and in civic advocacy with Janaagraha, a non-profit organization based
in Bengaluru.
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
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
that saw him making a difficult shift from hardware to software, learn programming from scratch and bootstrap his way to
success. Given his success as a seasoned entrepreneur Fortune featured him under the prestigious "40 under 40" list for 2016.

Financial Foresights 49
Industry Insights

FinTech-Making India a New


Techno Banking Empire
Manavjeet Singh
Founder and CEO
Rubique

I
ndia is transitioning into a The absence of a broad-based combined platform for quick
vibrant ecosystem offering financial transaction infrastructure sanction of loans. Such neutral
FinTech start-ups a platform to has been a major bottleneck in India platforms offering a wide range of
potentially grow into billion dollar and is largely responsible for the loan products and end-to-end loan
unicorns. Although relatively lack of penetration. For instance, fulfillment allows individuals to
young at present, the FinTech the application for a loan in India focus on building their businesses
sector is escalating rapidly, fueled once required several physical instead of worrying about getting
by the large innovation-driven documents - identification proof, the funding to fulfill the gap in their
start-up landscape, and responsive salary slips and attested copies of cash flows or fund their expansion
government policies and regula- all documents, signatures, in- and growth plans.
tions. As per NASSCOM, the person verification, physical
Technology today is transforming
industry is forecasted to touch USD inspections of property, and half a
the financial services industry
2.4 billion by 2020 from the current dozen other items that almost stock
bringing it at the forefront of
USD 1.2 billion. The year 2016 up a fat binder. Similarly, without
providing efficiencies, but digital
witnessed major technology meaningful financial data, the risk
presents a whole new prototype. By
changes in the country's financial of lending to hundreds of millions
evaluating, implementing, and
services industry. The traditionally of undocumented and unverifiable
combining the right digital uses for
cash-driven Indian economy has Indians became high even if the
their needs, emerging FinTech
responded well to the FinTech income sufficiency tests were met
startups are accelerating the speed
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
the financial services industry
for convenience with cashless helping overcome barriers that
drastically by creating disruption
transactions fast gaining momen- have stood as a growth hurdle for
through innovative and dynamic
tum on one hand and promising decades in this area.
use of technology in the lending
categories like lending, Personal
The new age fin-tech lending process. For instance, while
Finance Management (PFM),
marketplaces foresee revolutioniz- traditional banks in India use
Insurance, investment platforms,
ing the country's financial lending technology to simply calculate
banking technology, security,
business by changing the way it credit scores, FinTech ventures use
loyalty management, e-tax filing
works, through giving loans machine learning algorithms and
and Saas-based subscription billing,
without collateral or by connecting alternate data points like social
etc. all set to transform the way of
the consumers or small business media trails, call records, shopping
life for both urban and rural
owners to financial institutions on a histories, and payments to utility
consumers.

Financial Foresights 50
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
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
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
Digital access to loans has mas- Considering this pain point,
access financial services such as
sively impacted the MSME sector FinTech platforms offers unique
digital remittance, credit, insurance
that has been playing a vital role in technology solutions with match-
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
dominate all other channels. The
industrial output, exports and in the customer to get the best deal in
success factors for Fintech players
creation of employment opportuni- the quickest possible time while
in India will be the usability,
ties for millions of people in the lowering the cost of customer
affordability, reliability, and
country. But when it comes to acquisition for the financial
ubiquity of their services. To
raising adequate finances, they are institution.
ultimately benefit consumers at the
left under-served by banks and
The emergence of P2P lending grassroots level, presence of
financial lenders which would
where lenders are connected to the financial literacy, awareness and
rather reach out for the top of the
borrowers directly through online trust factor are necessary to
pyramid.
applications and websites is also mobilize rural and semi-urban
Hunting for credit has always been enabling a social impact and consumers in transitioning into
the biggest challenge for millions of providing easier access to credit to digital channels. The confluence of
small businesses in a country like small and medium entrepreneurs. finance, technology, and innovation
India which has more than 50 Their lower rates of interest are not only making the possibili-
million MSMEs operating at compared with other money ties endless but also making the
present. They run from pillar to lenders and with the unorganized journey to a formal financial system
post to get finance for working sector make them user-friendly and for millions of Indians easier than
capital or any other financing approachable for SME borrowers. ever imagined. n
requirements. Many MSME units

Manavjeet Singh, Founder and CEO, Rubique: First generation entrepreneur Mr. Manavjeet Singh is the Founder & CEO of
Rubique (earlier known as bestdealdinance), one of the largest financial portals offering a comprehensive range of financial
products and services from multiple Banks and Financial Institutions, through a cutting-edge technology platform. A veteran
banker with more than 23 years of rich experience in the field of banking & financial services, he is a well-recognized name in the
industry.
Manavjeet started his professional career with Xerox followed by several strategic leadership positions in prestigious corporate
organizations like Citibank India, SBI Mutual Fund, HDFC Bank, Reliance Consumer Finance, Reliance Broadcast Network Ltd
and YES Bank. In his career, he has handled various types of products ranging from retail & MSME loans, mutual funds,
microfinance, to unsecured business lending. Manavjeet has also played an instrumental role in setting up businesses before
launching his first entrepreneurial venture, bestdealfinance.com (now Rubique) along with his partner Mr. Sandeep Nambiar on
October 2014. He conceptualized the online financial platform with a vision to bring transparency and to make finance simple &
accessible through technology and create disruption in the online lending domain.
A professional with a distinguished reputation of being the driving force, Manavjeet has a proven strategic track record in
operational efficiencies, business development, sales productivity, managing large teams & financial management. With his
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 51
Industry Insights

Change is the New Normal


Ajay Srinivasan
Chief Executive - Financial Services
Aditya Birla Group

A
s 2016 came to an end, I services industry. Over the past According to industry reports, the
can't but reflect on how decade, FinTech has been growing Indian FinTech market is forecasted
much disruption the year with a focus on customer-centric to touch $2.4 Bn by 2020, a two-fold
had witnessed. Interestingly innovation. While 2015 saw increase from the market size
enough, the most common words in FinTech companies transforming today. Lending and payments, in
business today too resonate the customer experiences by focusing particular are expected to pave the
same sentiment of disruption, on convenience, efficiency and user path for this unprecedented
innovation and transformation. interface, 2016 has brought about growth. The increase in smartphone
Given the sheer amount of conver- an increased collaboration between adoption, growth of rural telephony
sations on disruption and innova- traditional financial institutions and penetration, the larger play of
tion, I think it's fair to say this is an FinTech start-ups. FinTech Indian digitization and the recent
issue that seems to be a discussion companies are benefiting from scale demonetisation will be other factors
point in every business today. by integrating with banks and driving the growth in this vibrant
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
providers could be unseated in the think of better solutions to cus- users accessing internet services on
market by smaller rivals, who tomer problems or needs. We have mobile is expected to reach 3 billion
offered solutions more simply or at seen FinTech companies increase by 2020, covering 65% of the
a much lower cost. While a lot of their focus to meet the needs of world's adult population as
the hype on disruption is probably millennials, look at increased compared to approximately 1.9
exaggerated, the truth is that it has traction and in online advice and billion in 2015. It predicts that about
already changed a few sectors while discretionary wealth management 80% of all internet users will be
many others face challenges that tools, focus on Big Data and accessing the Internet through
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.
take centre-stage tomorrow. (P2P) lending and of course Given that smartphone devices are
continue to focus on payments and equipped with powerful proces-
Let us consider the disruption that
remittances. sors, substantial memory, high-
is happening in the financial
resolution cameras. barcode

Financial Foresights 52
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
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
tions in payment access and have also taken cognizance of the propose to roll out in the first half
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
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
analytics offer transformative we have witnessed the power of payment gateways has paved the
potential to predict "next best incorporating financial technologies way for FinTech disruption. For
actions," understand customer into traditional services first-hand. those who can move fast to emerge
needs, and utilize a host of data to For instance we have just launched with a customer centric engage-
determine profiles and clusters. Active Account - an app which ment strategy, the potential to
IDC estimated that the digital quite simply helps make your develop a winning model is
universe is doubling its size yearly money work harder than it does in enormous. For the rest, 2017 will be
and would reach 44 ZB in 2020 a typical bank account. about collaborations with the right
from 4.4 ZB of data generated in partners to provide enriched
On the lending side, we have
2013. It also forecasted that the big customer experiences.
launched a complete end-to-end
data technology and services
digital lending proposition wherein In any case, watch this space, as the
market will grow at 26.4% com-
we have back-end algorithms to action is heating up! n
pound annual growth rate to $41.5

Ajay Srinivasan, Chief Executive - Financial Services, Aditya Birla Group: Ajay Srinivasan has been the Chief Executive of the
Financial Services business at the Aditya Birla Group since July 2007.
In his role as Chief Executive, Financial Services, he sets the strategic direction and leadership for the Group's Financial Services
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,
health insurance, pension fund management and online personal finance management.
Under his leadership, the financial services business has diversified into a large conglomerate with 13 new verticals. Aditya Birla
Financial Services Group (ABFSG) ranks among the top 5 fund managers in India (excluding LIC) with an AUM of INR 217, 840
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
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.
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
including Pride India and the Ashoka Fellowships.
Ajay is an Alumnus from St Stephens College, University of Delhi and the Indian Institute of Management, Ahmedabad.

Financial Foresights 53
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

Top 10 ECM Deals-FY 2016


Date Issuer Sector Deal Type Deal Value Bookrunners
($m)
22-Sep ICICI Prudential Life Insurance IPO 903 BAML, ICICI, DB, HSBC, CITIC, IIFL,
JM Financial, SBI, UBS
24-Feb NTPC Ltd Utility & Energy FO 734 SBI, ICICI, EDEL, DB
29-Sep Kotak Mahindra Bank Finance FO 549 Kotak, CITI, DB, JPM
2-Nov PNB Housing Finance Finance IPO 450 Kotak, BAML, JM Financial, JPM, MS
28-Apr NHPC Ltd Utility & Energy FO 411 EDEL, HSBC, IDFC
National Buildings
21-Oct Construction Co- Construction/Building FO 333 AXIS, CITI, NOM
NBCC
11-Apr Equitas Holdings Ltd Finance IPO 327 AXIS, EDEL, HSBC,
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

Asia Pacific ECM Volume by Nation FY 2016


Pos. Nationality Deal Value ($m) No. % Share
1 China 214,886 908 68.8
2 Japan 26,378 190 8.4
3 Australia 20,656 792 6.6
4 South Korea 14,145 180 4.5
5 India 10,073 150 3.2
6 Hong Kong 6,959 270 2.2
7 Singapore 4,265 52 1.4
8 Malaysia 3,484 76 1.1
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
FICCI Data Centre

India IPO Volume FY 2016


Pos. Bookrunner Parent Deal Value ($m) No. % Share
1 ICICI Bank 467 12 11.3
2 Kotak Mahindra Bank Ltd 450 10 10.9
3 Axis Bank 342 8 8.3
4 JM Financial Ltd 308 6 7.4
5 Citi 295 5 7.1
6 State Bank of India 277 7 6.7
7 IIFL Holdings Ltd 238 7 5.7
8 Bank of America Merrill Lynch 224 3 5.4
9 HSBC 182 2 4.4
10 Edelweiss Financial Services Ltd 160 4 3.9

India FO and Conv. Volume FY 2016


Pos. Bookrunner Parent Deal Value ($m) No. % Share
1 Citi 1,472 10 24.8
2 ICICI Bank 755 9 12.7
3 Edelweiss Financial Services Ltd 476 6 8.0
4 Morgan Stanley 413 3 7.0
5 Deutsche Bank 359 4 6.1
6 JP Morgan 337 2 5.7
7 Kotak Mahindra Bank Ltd 251 3 4.2
8 State Bank of India 242 5 4.1
9 UBS 199 3 3.4
10 Credit Suisse 194 2 3.3

Financial Foresights 59
FICCI Data Centre

Mergers & Acquisitions


l India ranked as the fourth targeted nation in Asia Pacific region for 2016 with $62.3bn, up 24% on the $50.4bn
announced for 2015
l India Outbound M&A volume increased 81% to $8.9bn for 2016 compared to $4.9bn for 2015
l India Inbound M&A volume increased considerably to $33.2bn for 2016 from the $16.2bn for 2015
l Domestic M&A volume dropped 15% to $29.0bn for 2016, compared to $34.0bn for 2015
l Rosneftegaz OAO, the Russian state-owned oil and gas company, and a consortium led by Trafigura Beheer BV
and United Capital Partners Advisory OOOs acquisition of Essar Oil and Vadinar Oil Terminal Ltd - VOTL from
Essar Group for $12.9bn, is the largest announced Indian M&A transaction for 2016

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
FICCI Data Centre

India Announced M&A Attorney Ranking FY 2016


Pos. Attorney Value $m # Deals % Share
1 Cyril Amarchand Mangaldas 19,614 48 31.6
2 AZB & Partners 15,873 104 25.6
3 Freshfields 15,156 6 24.4
4 Khaitan & Co 11,693 48 18.8
5 J Sagar Associates 8,716 40 14.0
6 Shardul Amarchand Mangaldas & Co 7,035 35 11.3
7 Kirkland & Ellis LLP 6,422 2 10.3
8 Slaughter & May 5,896 2 9.5
9 Simpson Thacher & Bartlett 3,417 4 5.5
10 Herbert Smith Freehills 2,700 5 4.4

Financial Foresights 61
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
FICCI Data Centre

Financial Foresights 63
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 TokyoMitsubishi, Citi, Mizuho and
Sumitomo Mitsui Banking Corp is the largest loan transaction for 2016

Financial Foresights 64
FICCI Data Centre

Financial Foresights 65
FICCI Data Centre

Project Finance
India Project Finance Loans Ranking FY 2016
Pos. Mandated Lead Arranger Value $m # Deals % Share
1 State Bank of India 8,055 34 53.3
2 Axis Bank Ltd 1,787 16 11.8
3 ICICI Bank Ltd 1,167 17 7.7
4 IDFC Bank Ltd 566 8 3.7
5 Yes Bank Ltd 523 6 3.5
6 Rural Electrification Corp Ltd 478 4 3.2
7 IDBI Bank Ltd 379 3 2.5
8 Oriental Bank of Commerce 378 3 2.5
9 Punjab National Bank 369 3 2.4
10 Power Finance Corp Ltd 249 1 1.6

India Sponsor Ranking for Project Finance FY 2016


Pos. Sponsor Value $m # Deals % Share
1 Reliance Anil Dhirubhai Ambani Group 2,873 1 9.3
2 KSK Power Ventur plc 2,511 4 8.1
3 Adani Group 1,311 17 4.2
4 Jindal Steel & Power Ltd 1,136 6 3.7
5 GMR Infrastructure Ltd 925 7 3.0
6 Chambal Fertilisers & Chemicals Ltd 708 1 2.3
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
FICCI Data Centre

Top 10 Indian Project Finance Deals FY 2016


Financial Borrower Project Name Sector Value $m
Close Date
23Aug Sasan Power Ltd Sasan Coal Based Power Plant Refinancing Power 2,873

27Jun KSK Mahanadi Power Co Ltd KSK Mahanadi Power Project Power 1,220
Additional Financing
25Nov Rattan India Nasik Power Ltd Nasik Thermal Power Project Phase Power 1,073
Additional Financing
25Nov KSK Mahanadi Power Co Ltd KSK Mahanadi Power Project Cost Power 841
Overrun Financing
26Sep Ramagundam Fertilizers & Ramagundam Fertiliser Plant Expansion Plant 787
Chemicals Ltd Project Petrochemical/Chemical
24Oct Thermal Powertech Corp India 1320MW Andhra Pradesh Thermal Power Plant Refinancing 761
Ltd Power
5Mar Chambal Fertilisers & Chambal Fertilizer Plant Expansion Plant 708
Chemicals Ltd Project Petrochemical/Chemical
22Mar HPCLMittal Energy Ltd HPCL Mittal Refinery Expansion Oil Refinery/LNG 706
Refinancing 2016 and LPG Plants
20Oct Delhi International Airport Delhi Airport PPP Bond Refinancing 2 Airport 523
Pvt Ltd
9Sep Meenakshi Energy Pvt Ltd Meenakshi Energy Thermal Power Plant Power 502
Phase III Financing

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
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: finance@ficci.com
(CIN): U99999DL1956NPL002635
www.ficci.com

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