Fintech Inside #23–06th Mar, 2021 | Regulation

9 min readMar 6, 2021

Hi Insiders, Osborne here.

Welcome to the 23rd edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.

If there was one regulation you wish existed to better your Fintech offering, what would it be and why? I asked a few Fintech founders their views for today’s post. Their responses are very thoughtful. Which regulation is on your “wish list”?

There’s also news on Razorpay’s, payments platform, largest ESOP buyback. A frenzied rush for partnerships to apply for New Umbrella Entity license for payments in India as the deadline looms. Groww, Indian investments platform, is in talks to raise USD 125 mn from Ribbit and Tiger Global.

Globally, Walmart is making large moves by hiring Goldman’s retail banking head. Square launched it’s banking offering, Australian Finance industry launched a voluntary code for BNPL, Apple Card is disabling other Apple services for delayed repayment.

Germany’s central bank, BaFin, filed a criminal complaint against Softbank-funded Greensill after several irregularities were found in its financial statements. McKinsey released a great essay on trends in embedded finance. Here’s a broad overview of digital banking in Asia.

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🤔 One Big Thought

Which regulation would make your Fintech offering better?

This week’s post is a bit different. I reached out to several founders in India’s Fintech ecosystem and asked them this question (title). Each of them had a different perspective, even thought say were from similar sub-sectors. From their responses it’s clear to me, that Fintech founders would like to have regulation but that regulation should be unambiguous. Without wasting too much time, below are the responses from these founders.

Abhishek Poddar, Co-founder and CEO at Plum (insurance)
We are building Plum, a digital employee health insurance platform for startups and enterprises. We have three wishes for the insurance regulator. Firstly, allow Corporate Agents to partner with more than 3 insurers. Secondly, remove capping on commissions & rewards, especially on the group products, and let the market (corporates, insurers & intermediaries) drive the commission percentage based on value & competition. This would also make the insurance companies more transparent. And lastly, simplify the process for intermediaries to change their license (e.g., Corporate Agent to Broker) since the business models of these insurtech companies could evolve over time.

Rahul Mathur, Founder and CEO at BimaPe (Insurance)
The one thing I really want as a startup founder is for the government to implement the UK Sinha MSME report recommendation of the UEI (Unique Enterprise Identifier). The reason for this is — so many government ID’s linked to a single company — TAN , PAN, CIN, UIN, PT etc. It would be much easier to throw one meta layer on top of these — run a deeper one-time KYC and then use that very KYC for all of the below purposes, similar to what is done for cKYC in Banking.

Satyam Kumar, Co-founder and CEO at LoanTap (lending)
We believe that there is a dire need to differentiate between NBFCs and unregulated digital moneylenders. This shall not only create a sustainable path for NBFCs but will also help in eliminating unnecessary hardships faced by NBFCs. As per our view, these unregulated digital lenders can be controlled/eliminated by bringing strong code of conduct, data storage & protection policies.

Sandeep Srinivasa, Co-founder and CEO at RedCarpetUp (lending)
The single biggest challenge for scaling card transactions in India is the regulations on the merchant side. You cannot use a mobile phone to accept card transactions through an app. There are lot of security restrictions in place to disallow this. The Feb-18 guideline by the RBI strengthens the regulations to be followed while storing card numbers, however there is a way to let kirana merchants accept card numbers without violating security i.e. by adopting the exact same mechanism that UPI uses — QR cards. India’s largest payment system already uses QR codes effectively. To meet the RBI’s own goal of operationalising 30 lakh (3 mn) merchants to accept card payments, it must allow QR code based card authentication exactly in the same way NFC is used to authenticate cards today. In fact the RBI recognises NFC as the only “contactless” method which gives NFC a waiver from OTP for sub-INR 5K (USD 65) transactions. Which is what I hope to have changed.

Amit Kapoor, Founder and CEO at OneStack (account aggregators)
Allow Aadhaar-based digital on boarding and validation for Fintech. Aadhaar-based verification is different for banks and for fin techs — they should typically be the same process as most of the Fintech’s are offering Banks services and products. The reason also to ask for the same is so the consumer sees a single journey on both service providers.

Rohit Taneja, Co-founder and CEO at Decentro (Banking API/Infra)
The regulation that I wish should exist is for legitimising all forms of online gaming in the banking and fintech context. Currently, skill based gaming companies are considered legit from the banking API perspective, but not luck based gaming and any related models. Controlling the market here pretty much means killing it, as people always tend to find workarounds. A better way is to create awareness and let consumers choose themselves.

Deepak Abott, Co-founder at IndiaGold (gold-backed lending/savings)
Instead of one regulation for Fintech’s, this is what I wish for — We need a single window under StartupIndia initiative of India’s DPIIT which allows startups to get all compliances through a single application including GST, labor laws, EPFO, Shop & establishment & other registrations required to operate a private limited company in India. Collectively all these registrations take several months and hours of bandwidth. This will save time & cost for startups.

Suman Gandhan, Co-founder at Finin (neo banking)
Dream regulation for me is the Digital Banking license, it’s the holy grail for a Neo bank. A digital banking license can change the banking landscape especially for the Neo bank players like Finin where we can build the whole bank from ground up keeping consumers in mind. Recently Singapore and Hong Kong started issuing Digital bank licenses and as we always look up to Singapore for anything related to finance I think this dream regulation is going to be a reality soon.

What regulation do you wish for? What would help you drastically improve your offering? Share your thoughts via email me here or schedule a meeting here. If you’d like to double down on any topic here with the founders, I can introduce you to them — email me.

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💼 Fintech’s Hiring

TONIK Bank, Philippines digital bank, is looking to hire a Head of Data Science based in Chennai, Singapore or Manila. You can apply via email to hr@tonikbank.com
Klub, a revenue based finance startup, is hiring for several roles in Growth and Risk. Please apply at careers@klubworks.com.

Please help these Fintech’s in hiring the right talent. Share this with your network. If you’re keen to learn more about these Fintech’s, email me, I can even introduce you directly to the Founders.

If you’re a Fintech who’s hiring I’d like to help. Write to me and I’ll put your requirement here.

🚀 Featured Fintechs

Featuring 3 Fintech’s weekly that have a unique business model, unique product or have recently launched.

ProgCap — SME Finance (Series A)

ProgCap provides a financing solution for last mile retailers in India
It claims to be present in 500+ towns with access to 50,000+ retailers and facilitates INR 100 cr (USD 15 mn) in business volume
Founded in 2017 the startup raised USD 7.4 mn in total. Investors include Sequoia Capital, Contrarian Capital and others.

2. WazirX — crypto-currency exchange (acquired)

WazirX is a large crypto-currency trading platform in India
The startup was acquired by Binance, global crypto-currency platform, in Nov-2019 for USD 5–10 mn
This week WazirX claimed to have processed USD 2 bn in volume on its platform in Feb-21 alone

3. Finch (US) — savings and investment (Seed)

Finch has created an all-in-one checking and savings account.
It collects user deposits and invests it in liquid mutual funds to give superior return on deposits compared to regular banking products
Along with providing superior returns, a user can also opt for a debit card to utilise that deposit at merchant stores
Finch raised USD 1.8 mn so far and launched in Sept-2020

Let’s get your startup featured here. Submit your Fintech startup

🇮🇳 India

(Updates up to 04th Mar, 2021)

- 📰 Market Updates:

- FINTECH’s: Groww, investment management startup, is in talks with Tiger Global and Ribbit Capital to raise up to USD 125 mn. State government of Rajasthan to develop Fintech City in Jaipur.

Paytm, mobile payments Fintech, claimed to process 1.2 bn transactions/month, more than any other mobile payments Fintech. Paytm Money crossed INR 1,500 Cr (USD 200 mn) in mutual fund investments processed.

Visa and Mastercard are having ‘second thoughts’ on their participation in New Umbrella Entities (NUEs) after legal experts signalled “conflict of interest” with their own payments businesses. Flipkart, Mastercard and PayU to hold 30% in Tata NUE for payments.

Policybazaar provided a secondary exit worth USD 45 mn to few investors at a valuation of USD 2.4 bn. UPI volume (-0.4%) and value (-1.42%) dropped M-o-M for the first time in Feb-21 since Apr-20.

Groww, investment platform, reported 4.7x YoY growth in revenue and 20x YoY growth in expenses in FY20. Upstox’s, Fintech stock broker, revenue touches Rs 155 Cr (USD ~20 mn) in FY20 & expense balloons over 3x.

WazirX, crypto-currency exchange, crossed trade volumes USD 2 bn in Feb-20. Razorpay, payments platform, bought back ESOP’s worth USD 10 mn — its largest to date.

KPMG, in it’s Pulse of Fintech Report, claimed that India’s Fintech funding dropped by 23% Y-o-Y to USD 2.7 bn in 2020.

- TRADITIONAL BANKING: RBI will issue guidelines and policy Paper on digital currency soon. GST collections crossed INR 1.1 Tn (USD 14.9 bn) in Feb-2021.

Tata Group takes over SBI and Bank of Baroda bid for NUE license. Reliance teams up with Google and Facebook for NUE license. SBI Bank made a fresh application of NUE license.

HDFC Bank faced intermittent downtime on payments stack. Explainer on How FastTag works (h/t Anirudha Basak). Bajaj Finance was the largest lender of the government backed SME credit scheme.

- 🚀 Product Launches:

Cashfree partnered with Paypal for international payments. Axis Bank launched WhatsApp Banking offering

- 📝 Regulatory Updates:

- RBI (central bank): Wants banks to limit ownership in capital intensive insurance companies at a maximum 20% (earlier 50%).

- IRDAI (insurance): Directed insurers to periodically notify health insurance policyholders. Brought insurance brokers and agents under purview of the Ombudsman for complaints.

- SEBI (securities): Proposed tighter eligibility and appointment rules for independent directors of listed companies.

- 💰 Funding Announcements:

No fund raise announcements in India this week. Have I missed an announcement? Let me know.

🌏 Asia

(Updates up to 04th Mar, 2021)

- 📰 Market Updates:

Traveloka plans to launch BNPL services to its 40 mn users in Thailand and Vietnam. Singapore’s Monetary Authority is not aiming to be a cashless economy.

ANZ wrote down its stake in Malaysia’s AmBank after 1MDB scandal settlement. Malaysian fintech companies MyMy and Sukaniaga teamed up to form a Shariah-compliant digital banking consortium and bid for one of five digital banking licenses.

Philippine banks’ bad loans swell far faster than ASEAN peers’.

- 💰 Funding Announcements:

- Funding: Xiaobangguihua (Insurance, China). Xendit (Payments, Indonesia). Symbo (Insurance, Singapore)

- Mergers: Softbank, in Japan, merged its PayPay payments app with LINE Pay.

🌏 International

👋🏾 That’s all Folks

If you’ve made it this far — thanks! As always, you can always reach me at connect@osborne.vc. I’d genuinely appreciate any and all feedback. If you liked what you read, please consider sharing or subscribing.