Hi Insiders, Osborne here.
Welcome to the seventeenth edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.
This week RBI proposed to simplify India’s NBFC industry. HDFC Bank submitted its plan to fix the tech outages. India’s sleeping giant, feared by Founders and VC’s, is throwing down the gauntlet on Fintechs. Lastly, Bytedance is getting into Fintech!
In other news: congratulations to folks in US. India’s SENSEX index touched 50K points — while we’re still in a pandemic. Some kind folks made a useful guide on how to build an escrow product (US). CRED open sourced its neumorphic design framework.
🤔 One Big Thought
Apologies, dear Insider.
This past week has been a little crazy for me work-wise and so I couldn’t finish this piece in time. To compensate, I’ve added a bonus top story in the next section. Again, my sincere apologies.
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3️⃣ Fintech Top Three
1️⃣ RBI released a discussion paper for changes to NBFC licensing
The discussion paper proposes a 4-tier structure for India’s NBFC industry. The tiers will be based on deposit taking nature and systematic importance. The tiers are — Base Layer (least regulation), Middle Layer, Upper Layer and Top Layer (Bank level regulation). It also suggests raising net-owned funds from INR 2 Cr (USD ~270K) to INR 20 Cr (USD 2.7 mn). NBFC’s will be given 5-years to comply with these regulations once implemented.
Takeaway: Disclaimer: I have not read the entire discussion paper. This seems like a simplification of the NBFC industry than anything else and will not have material impact on Fintech’s at least. IMO, it’s more a response to the NBFC crises of 2018 — IL&FS and DHFL. Wouldn’t read too much into it for majority of the Fintechs at least for those with AuM of less than INR 1000 Cr (USD 135 mn)
The biggest impact on Fintech’s will be the increase of minimum net-owned funds. The increase being proposed is from INR 2 cr (USD 270K) to INR 20 cr (USD 2.7 mn). Besides the fact that RBI doesn’t just dole out NBFC licenses, early stage Fintech’s looking to lend with an NBFC license will need to raise higher funding — which is also tough to come by.
2️⃣ HDFC Bank submitted its plan to tide with outages at the bank
HDFC Bank submitted a detailed plan to RBI to repeated service disruption at the bank. HDFC Bank said it will take 10–12 weeks to sort out the issues and expects to close all pending issues by the end of 3 months. Earlier, RBI had barred the bank from issuing new credit cards or launching new digital banking initiatives.
Takeaway: The RBI schooled HDFC Bank and the bank seems to have done its homework now. IMO, this event is only going to fortify HDFC Bank’s position in Indian Banking. If HDFC really gets its act together and gets its tech right, what’s stopping them in the future? That 20% growth rate will continue.
Further, despite RBI barring the Bank from issuing new cards, the bank’s credit card outstanding grew 10% YoY at 2x the size of the next credit card co. — SBI Cards. That scale of HDFC bank is just insane.
3️⃣ Bajaj Finance throws down the gauntlet at Fintechs
Bajaj Finance announced concrete plans to launch marketplace apps for its Consumer and Merchant audiences. The consumer app is a payments app for UPI and other methods. For merchants, the NBFC mentioned bigger plans to launch 4 apps comprising EMI Store, Insurance, Health and Wealth marketplaces. These apps will be launched through its group companies.
Takeaway: The not-so-sleepy giant every Fintech Founder & VC feared, is awakening. This is an ambitious transformation plan for the lender with assets of USD 19 bn. Bajaj already runs a pretty tight ship across its lending and insurance business. Some even call it best in the industry. Bajaj has 46.3 mn retail customers (Dec-2020)! Payments is a tough game to crack with Paytm, Google, WhatsApp, PhonePe and more vying for the top spot. It will be interesting to track this launch and adoption. There’s also the 30% market share limit that NPCI is contemplating.
I’m a fan of their merchant plans though and I feel that’s where the “kicker” will be. Bajaj has 103K merchants and it plans to utilise them in the way they know best. From what I understand, Bajaj will use the “LIC Agent model” to get the merchants to cross-sell financial products to consumers. This model has not worked at scale for most Fintech’s, but this is Bajaj, so who’s to say. I’m most bullish on their EMI Store and Insurance Marketplaces. When these products are launched it will be good to see how many products are cross-sold per customer.
🎁 BONUS: Bytedance introduced payments within Douyin — its TikTok version in China
TikTok-owner Bytedance introduced its own payment option within Douyin, the Chinese version of TikTok. Douyin has 600 mn monthly active users in 2020. Earlier, Bytedance used Alipay and Wechat Pay for Payments and this launch gives Douyin greater control over its payments.
Takeaway: It’s still to be seen how the payment will actually be processed from a UX perspective. However, Bytedance launching payments within its short-video app is a great example of embedded payments. Sure, we’ve already had payments embedded in chat — WeChat Pay and now WhatsApp Pay, but this integration takes it up a notch. The problem of payments during a live-video is a UX one — you do not want the user to step out of their live-video experience to process a payment in another window. The purchase needs to be completed without compromising on the experience.
Further, I’m absolutely convinced we’re only going to see more of such integrations / product launches. Think about live stream-commerce, influencer commerce, device-agnostic commerce and more. Video is becoming more prevalent in the way we consume content, commerce has already found its way to video all that’s left is payments to provide a full experience.
📰 Market Updates:
- FINTECH’s: OneMoney expects 6 banks to onboard for Account Aggregator by launch. Dvara Capital merged with CabDost for financial services for cab drivers. Report: 1/3rd of Indian households use digital payments. BharatPe offered to pay 100% of PMC’s depositors.
Paytm hived off its payments platform as separate entity. WhatsApp grew UPI payments volume, value by 2x in Dec-2020. Mobikwik’s revenues grew 134% in 2020. Digital lending Association claims disbursal aggressive growth led to higher defaults.
Financial Data of 330K users of BuyUCoin found on dark web. India’s Enforcement Directorate and Central Bureau of Investigation is set ot launch probes against two-dozen Chinese lending apps. OkCredit reported zero revenue and USD 21 mn in losses in FY20.
- TRADITIONAL BANKING: Average transaction value of UPI is USD 25. Bank credit grew 3.2% in Apr-Dec, 2020. AuM of SIP’s crossed INR 4 tn (USD 54 bn). Non-food credit grew to 8-month high at 6.53%. HDFC Bank expects to solve digital banking issues in 10–12 weeks.
- SEBI (securities): Fined HDFC Bank USD 135K and asked them to deposit USD 21 mn.
- IRDAI (Insurance): Asked Insurers to cover Covid-19 vaccine cost, GIC objected.
🚀 Product Launches:
- FINTECH’s: AlignBooks partnered with ICICI Bank for SMB banking. Flipkart opened up its rewards program SuperCoin for payments at 5,000 merchants. Upstox launched digital gold trading platform. CoinDCX launched its cryto trading platform.
- TRADITIONAL BANKING: YES Bank launched YES MSME for credit to SMB’s. NPCI partnered with Universal Sompo for UPI, Rupay users to buy health insurance digitally. Bombay Stock Exchange (BSE) launched a premium platform for mutual fund distributors.
🌏 South East Asia
📰 Market Updates:
- FINTECH’s: Report: Singapore Fintech market — total Fintech funding in 2020 was USD 346 mn. UNIQLO will launch payments features. Payments startup Payoneer in merger talks with SPAC’s.
ANT-backed Philippine payments startup Mynt to raise additional funds after raising USD 175 mn. KingSwap, DeFi liquidity pool platform unveiled a VISA card. TNG Digital, Malaysian eWallet platform, is expected to close USD 150 mn.
- INCUMBENT BANKING: Mastercard launched a resource site for SMB’s to go digital.
💰 Funding Announcements:
📰 Market Updates:
- FINTECH’s: Tide (England) is launching its SMB lending platform in India, hired India CEO. Alan (Germany) is launching multiple apps for health insurance. Monzo’s (UK) founder is exiting the firm for mental health reasons.
🚀 Product Launches:
- FINTECH’s: Transferwise (England) appointed bankers for London IPO. Pensionbee (England) launched a pension product for self-employed. Dashly (England) launched a chrome extension to suggest mortgage deals. WeOwn launched a platform for startups to raise funding.
iBanFirst (Belgium), launched a Payment Tracker to track cross border payments. BitPanda (Germany) launched a multi-asset (crypto, fiat etc.) debit card. Revolut (England) launched USD savings account for UK customers.
N26 (Germany) is extending its insurance coverage with Allianz to cover pandemic travel claims. Revolut (England) launched purchase protection in partnership with Chubb. Cushon (Belgium) launched world’s first net-zero pension.
💰 Funding Announcements:
Read the funding announcements: LeoCare (France). Perenna (England). Finance Unlocked (England). TradeTeq (England). SpringboxAI. Georges/Indy (France). Elinvar (Germany). Quirk (England). Numbrs (Switzerland). WealthPilot (Germany). PPro (England).
👋🏾 That’s all Folks
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See you in the next edition.