General Atlantic-backed fintech giant PhonePe’s net loss crossed the INR 2,500 Cr mark in the financial year ended March 31, 2023. The Bengaluru-based decacorn’s consolidated net loss rose 39% to INR 2,795.3 Cr in the financial year 2022-23 (FY23) from INR 2,013.7 Cr in the previous fiscal year due to a sharp increase in its ESOP expenses.

PhonePe’s operating revenue surged an impressive 77% to INR 2,913.7 Cr during the year under review from INR 1,646.2 Cr in FY22. In comparison, the operating revenue of the startup’s archrival, Paytm, zoomed 61% to INR 7,990.3 Cr in FY23.

PhonePe primarily earns revenue through its payments and allied services. It earned INR 2,707.1 Cr from this revenue stream during the year under review as compared to INR 1,6301.4 Cr in the previous fiscal year.

Founded in December 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer, PhonePe offers financial services to users. It offers digital payments service, mutual funds and insurance products.

Earlier this year, PhonePe attributed the increase in its revenue in FY23 to growth in money transfers, mobile recharges and bill payments.

The Walmart-owned company also said that the growth in revenue was driven by the launch and scale-up of new products and businesses such as smart speakers, rent payments, and insurance distribution. PhonePe said its smart speaker deployment stood at 4.1 Mn as of  August 31, 2023. 

Meanwhile, its market share in the total payments value (TPV) for UPI stood at 50.54% in the month of March 2023. PhonePe competes against the likes of Paytm, Google Pay, and CRED in the UPI transactions category.

Including other income, PhonePe’s consolidated total income grew over 80% to INR 3,084.6 Cr in FY23 from INR 1,692.7 Cr in the previous fiscal year.

Where Did PhonePe Spend?

The digital payments giant’s total expenses shot up 59% to INR 5,886.3 Cr in FY23 from INR 3,705.6 Cr in FY22.

Employee Benefit Expenses Zoom: Employee costs accounted for the lion’s share of the total expenses of PhonePe. The startup spent INR 3,096 Cr on employees in FY23, an increase of 78% from INR 1,741 Cr in the previous fiscal year. Within this, ESOP expenses increased 73% to INR 2,057 Cr from INR 1,185.8 Cr in FY22.

Advertising Expenses Decline: The startup’s advertising cost dropped 23% to INR 671.3 Cr in FY23 from INR 866.2 Cr in the previous fiscal year.  

IT Costs Rise: Being a fintech company, PhonePe has to spend on IT infrastructure. In FY23, its IT expenses rose 54% to INR 216.3 Cr from INR 139.8 Cr a year ago. 

After raising nearly $1 Bn in 2023, PhonePe has been on an expansion spree, launching multiple new offerings, including separate apps for ecommerce (Pincode) and investment tech (Share.Market) and also its own apps store, Indus Appstore.

Earlier today, the startup also rolled out a new feature on the platform that will allow its users to manage their credit cards and pay bills and loans.

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Walmart-owned digital payments app PhonePe has rolled out a new feature on the platform that will allow its users to manage their credit cards as well as pay bills and loans.

The ‘Credit’ section will enable users to view their credit bureau score without any additional cost, PhonePe said in a statement, adding that the credit bureau report will also provide summarised credit insights such as their credit utilisation, credit age, on-time payments and more. 

Founded in December 2015 by Sameer Nigam, Rahul Chari, and Burzin Engineer, PhonePe offers financial services to users. It competes with publicly listed Paytm and Google Pay in the digital payments space and also provides mutual funds and insurance products.

Commenting on the launch, Hemant Gala, chief executive at PhonePe Credit, said, “We believe that financial empowerment starts with understanding and managing your credit health. This launch is a significant step towards providing our users with the tools and knowledge they need to make informed financial decisions.’’ 

The startup’s ‘Credit’ feature is aimed at offering easily accessible and simple tools to users to enable them to achieve their financial goals by launching financial services like insurance, stock broking and mutual funds.

PhonePe further said that it will soon expand its credit offerings by launching consumer loans within the app. With this, the company aims to address the diverse credit requirements of its customer base across various segments. 

The fintech unicorn is also working on the development of a lending platform distributing diverse products by partnering with the banking and non-banking financial company (NBFC) industry while adhering to the policy and guidelines set by the regulator. 

The announcement comes weeks after Walmart’s chief financial officer David Rainey said that PhonePe reached a total payment value (TPV) of $1.3 Tn, equating with some of the largest fintech firms in the US market.

After raising nearly $1 Bn in 2023, PhonePe is on an expansion spree and has launched a number of new offerings in recent times, including separate apps for ecommerce (Pincode) and investment tech (Share.Market) and Indus Appstore.

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Fintech major Paytm is aiming to generate an operating profit in under a year by bolstering its online wealth management services and onboarding more merchants on its network, coupled with cost savings from AI automation.

Paytm founder and CEO Vijay Shekhar Sharma made the projection in an interview with Bloomberg, highlighting the company’s plans to hire over 50,000 salespeople to onboard more merchants and revamp its online wealth management services.

“We have learned and we will amplify our ability to serve India, its small merchants and businesses,” Sharma was quoted as saying. “We should be crossing about 50 Mn merchant-base signed up on the Paytm platform in the year.”

Sharma’s interaction with the publication came days after Paytm faced a major setback in its growth trajectory due to the Reserve Bank of India (RBI) tightening regulations around unsecured loans. 

Earlier this month, Paytm said that it would scale down its small-ticket loans of less than INR 50K, which predominantly comprise its postpaid loan business. However, to compensate for this major change, the company said it would increase its focus on the merchant and personal loan business.

Multiple brokerages cut their estimates on Paytm’s various metrics such as revenue and EBITDA in the medium to long term following the changes in its loan disbursal business.

Besides, Paytm’s share price also took a hit, falling to more than a seven-month low. While the shares were trading over 80% year to date till October, they nosedived due to the company’s decision to scale down postpaid loans. Shares of Paytm are currently trading a little over 15% higher.

Besides the loan disbursement business, which comprises a relatively smaller part of the company’s total revenue, Paytm also has a payments business. It had around 38 Mn merchants as of September, of which nearly 10 Mn paid for offerings such as QR codes, Paytm soundboxes, and card machines.

Paytm also operates wealth management platform Paytm Money. Speaking to Bloomberg, the Paytm boss said that the company now wants to double down on this business, layering it with AI, as India’s middle class is increasingly going online to invest in the capital markets.

Meanwhile, by using automation, Paytm also plans to bring down its employee costs.

“We will be able to save the targeted 10% to 15% that we had planned in employee costs, all because AI has actually delivered more than what we expected it to,” Sharma said. 

The statements also come at a time Paytm is seeing a rise in competition. Most recently, Jio Financial Services’ marked its full-fledged foray into the fintech space, while PhonePe is also looking to diversify its offerings and launched stock broking platform Share.Market earlier this year.

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Fintech unicorn BharatPe is looking to secure INR 500 Cr debt through unlisted non-convertible debentures (NCDs).

Although a final decision on the issue price is pending, the company plans to secure the funds in multiple tranches throughout the upcoming year, ET reported.

BharatPe’s board sanctioned the fundraising initiative last week. Additionally, the board also approved the appointment of Colin Bryant, chief operating officer (Private Equity) and general partner at the US-based hedge fund Coatue, as a director. Bryant is set to succeed Rahul Kishore, the previous nominee from Coatue who departed the fund in November.

Furthermore, the company elevated its General Counsel, Sumeet Singh, to the position of a whole-time director. Singh, who assumed roles at BharatPe in 2021, has been instrumental in overseeing corporate strategy, corporate affairs, and fundraising. In February of the current year, he was appointed as an additional executive director.

Peak XV-backed BharatPe last raised $370 Mn at a valuation of $2.9 Bn in 2021. Earlier in September, it was reported that BharatPe was in talks with existing investors to raise $100 Mn in a new round of funding.

Meanwhile, the fintech startup has claimed to have turned EBITDA positive in the month of October. The startup said that its annualised revenue has crossed INR 1,500 Cr in FY24, a 31% increase from FY23.

BharatPe’s lending vertical, in October alone, has facilitated loans exceeding INR 640 Cr for its merchants in partnership with its NBFC, demonstrating a 36% year-on-year jump as compared to FY22. The startup has facilitated loans worth INR 12,400 Cr since its foray into the lending business in late 2019.

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Days after the Supreme Court directed consolidation of all FIRs in the GainBitcoin scam for investigation by the Central Bureau of Investigation (CBI), the Enforcement Directorate (ED) apprehended Simpy Bhardwaj, the spouse of Ajay Bhardwaj, a principal figure in the Ponzi scheme. 

In a statement, the ED alleged that Simpy Bhardwaj, who was arrested on December 17, along with Ajay Bhardwaj, actively participated in enticing unsuspecting investors with promises of substantial returns on their investments and ultimately defrauding the public through fraudulent activities.

The City Session Court in Mumbai has granted the ED the custody of Simpy Bhardwaj till December 26. Ajay Bhardwaj and Mahendra Bhardwaj, identified as key suspects, have been declared absconders by the ED.

Earlier, in a hearing on December 13, the Supreme Court, while hearing a petition filed by Ajay Bhardwaj, ordered a CBI investigation into the case. The ED was directed to concurrently continue its investigation under the Prevention of Money Laundering Act (PMLA), 2002.

“Considering that all the FIRs have similar allegations and are directed against Variabletech Pte Ltd, which had allegedly extended false promises on investment in Bitcoins, we are of the considered opinion that all these FIRs should be directed to be investigated by a common agency,” the court said.

“We, therefore, deem it appropriate to direct the Central Bureau of Investigation (CBI) to investigate all these FIRs. During the investigation, it shall be open to the CBI to club/consolidate any one or more of the FIRs. It is further clarified that in the event that charge sheets have already been filed by the local Police in connection with any of the FIR, this shall not preclude the CBI from conducting further investigation and thereafter file charge sheets or supplementary charge sheets, as the case may be,” ordered the three-judge bench comprising CJI DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra. 

 What Role Did Simpy Bhardwaj Play? 

The ED alleged that illicit gains from the Bitcoin scam were funnelled into overseas companies and utilised for acquiring properties abroad, with Simpy Bhardwaj actively involved in generating, concealing, and layering these proceeds of crime. 

The agency said it carried out search operations at the residences of Simpy Bhardwaj and Ajay Bhardwaj, resulting in the seizure of three cars, including a Mercedes GLS350D and Audi Q3, incriminating documents, and jewellery valued at INR 18.91 lakh. 

The ED’s ongoing investigation has led to the attachment of properties totalling INR 69 Cr in the case so far.

GainBitcoin is recognised as one of the largest global Ponzi schemes, causing financial losses to about 1 Lakh investors.

Insiders close to Amit Bhardwaj claim that the ED and Pune Police’s special investigation team have merely scratched the surface of the operation. While Amit was prominently featured as the mastermind, the entire operation was orchestrated by the three brothers — Amit, Ajay, and Vivek, alongside their father Mahendra Kumar and a few other associates. 

According to the victims of the scam, Ajay, an IT professional, managed wallets and overall operations in recent years. The complainants are now seeking a full-fledged interrogation of Ajay. 

As per the Pune Police’s chargesheet, Amit and Vivek established Variabletech in Singapore in 2014. This entity launched a cryptocurrency exchange named BitEx, subsequently introducing the GainBitcoin MLM scheme and offering Bitcoin mining contracts with a promised 10% monthly return on investments for 18 months, paid out in Bitcoin.

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Nasdaq-listed Ebix Inc., a software and ecommerce solutions provider to the insurance industry, has filed for bankruptcy protection in the United States Bankruptcy Court, Northern District of Texas, after defaulting on a $617 Mn loan.

The court filing was done on Sunday (December 17). As per a Bloomberg report, several subsidiaries of Ebix have also filed for bankruptcy and each subsidiary and advisors will “conduct a fulsome marketing and sale process” for the assets of the company. 

The Texas court will reportedly hear the case on December 19.

Ebix has been struggling to repay the $617 Mn loan for months now. Last month, the company failed to meet another deadline and was given time till December 17 to raise the money for the repayment.

In September, its creditors had declared the company in default after earlier repayment delays and were pushing Raina’s firm to sell off its assets, a Bloomberg report said. 

The India-American entrepreneur Robin Raina-led company was aggressively looking to tap the public market to raise funds. Its India entity EbixCash filed its draft red herring prospectus (DRHP) with the market regulator SEBI in early 2022 for an INR 6,000 Cr IPO.

In April this year, the IPO also received SEBI’s nod and there were reports doing rounds about EbixCash launching its public offering sometime in mid-2023. However, the company also hadn’t disclosed a case hearing in Singapore in the IPO filing, which was expected to cost the company INR 100 Cr-INR 200 Cr.

Some of the major shareholders in Ebix Inc. include Blackrock, Vanguard Group, State Street Corp, and Invesco. Meanwhile, the company president and CEO Raina himself is the largest shareholder.

In Q3 2023, Ebix’s GAAP operating income declined 32.4% year-over-year to $20.5 Mn, which the company attributed primarily to certain one-time increased expenses related to credit agreement and EbixCash IPO marketing costs.

“These are difficult times for the Company. In spite of that, the company’s operating results after excluding the one-time items are consistent with our expectations,” Raina had said in a statement.

In India, EbixCash is profitable. Its net profit increased to INR 751.3 Cr in FY23 from INR 482 Cr last year.

Amid the legal fiasco, shares of Ebix Inc. have nosedived over 80% since the end of July this year. On Monday, the stock was also dropped from S&P Software & Services Select Industry Index.

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It’s been a tale of two halves for PhonePe in 2023. But now at the end of the year, it would seem the stage is set for the fintech giant’s biggest onslaught so far.

If the first half of the year was all about getting armed for the battle with nearly $1 Bn in funding, the rest of it was about showing what it plans to do with all that money, with several new products ranging from lending to insurance to app development and digital commerce.

But beyond the announcements and the fundraises, PhonePe is perhaps signalling to the Indian tech ecosystem that this is its time.

To put things in context, the company has raised nearly 10% of all funding raised by Indian startups this year. Naturally, there’s a feeling that PhonePe is growing too big to fail, and many compared it to how Walmart gave Flipkart some much-needed impetus in 2017 and 2018 post the acquisition by the US retail giant and subsequently multiple rounds of capital infusion.

“This is what catapulted Flipkart in 2018 towards its current status as the de facto ‘Indian’ ecommerce player, and now it’s PhonePe’s time to grow into its valuation,” a CXO at a Bengaluru-based fintech unicorn told us.

Indeed, it’s hard to escape PhonePe in Bengaluru where it’s the default payments app and its soundboxes and point-of-sale devices are ubiquitous at most small merchants — whether roadside vendors or bakeries.

Such is the dominance of PhonePe in its hometown that spotting a Paytm soundbox or any other rival comes as a surprise. But it would be wrong to think that this is PhonePe’s endgame.

As we have seen throughout this year, PhonePe has much bigger plans. It has the capital, the key personnel and the burgeoning product line-up to bank on. The year has almost come to an end, but PhonePe’s era is just beginning.

With new products in lending, insurance and tax payments on the core PhonePe app, as well as separate apps for ecommerce (Pincode) and investment tech (Share.Market), PhonePe is gearing up in a big way for 2024. Even though some of these products are uncharted territory for PhonePe, it has the resources to succeed in these new areas.

In many ways, 2023 was about setting the stage for this completely new vision. Now as PhonePe prepares for a potential initial public offering (IPO) in 2024-2025, it’s important to understand where the company finds itself at the end of the year.

Recapping PhonePe’s 2023

It all started in late 2022 with the separation from Flipkart and redomiciling to India. This was a critical first step in the plan, which came with a huge tax bill for many of PhonePe’s investors.

The INR 8,000 Cr tax outlay seems like a huge expense, but it was a necessary step to bring PhonePe to India and ensure that the big product plans are not derailed by corporate structures.

Even beyond the tax bill, there was more confidence from investors when they poured millions into the fintech decacorn. The funding spree was led by Walmart, General Atlantic, Ribbit Capital, TVS Capital Funds and others. The plan was to raise $1 Bn, but  PhonePe managed to secure $850 Mn.

PhonePe had its war chest ready and soon after came a flurry of new products that have changed the company considerably and given observers a thing or two to ponder upon.

In April, it launched Pincode, an ONDC-integrated digital commerce app, followed by merchant lending services in June. Then came a new point-of-sale device for UPI and cards, income tax payments and health insurance products in July.

In August, we saw the introduction of Share.Market, a separate product for investments and stock broking, and finally the formal launch of the Indus Appstore in September.

Interestingly, with the last of these product launches, PhonePe is not just a fintech app any more. And indeed Indus Appstore holds plenty of potential for PhonePe in the long run.

A New Trump Card: Indus Appstore

In March, we said that PhonePe wants to be Paytm, but that comparison seems off the mark given the launch of Indus Appstore, which promises to be another lucrative long-term revenue stream.

The app store is an alternative to Google Play on Android, and PhonePe’s investment and acquisition was finalised soon after the Competition Commission of India ruled to allow third party app stores on Android devices.

So the more we think about what PhonePe is doing at the end of 2023, the more we wonder whether the Walmart-owned giant is indeed more than a fintech platform.

With 500 Mn lifetime registered users and 37 Mn+ merchants on its platform, PhonePe is poised to press ahead on other fronts besides payment and fintech.

The Indus Appstore product is unmatched by PhonePe’s primary competition such as Paytm, CRED or Groww. While these are also fast building up platform plays around multiple products, PhonePe’s Indus Appstore could be the trump card in the revenue race.

For context, in-app spending is forecast to reach $182 Bn by 2024 and $207 Bn in 2025, according to research firm Sensor Tower. Consumers are said to have spent $132 Bn in 2021, so the projected figures for 2024 represent nearly 40% growth in two years.

Google will get about $10.3 Bn in revenue from app sales and in-app purchases from the Play Store globally in 2023, according to a Time report. In this context, it’s easy to see why PhonePe has invested heavily in an app store. More importantly, Indus does not have Google’s stipulations around commissions and billing policy.

The likes of MPL, Dream11, Nazara, A23, Gameskraft and others have already come on board the Indus Appstore thanks to its zero commission policy. Plus, Indus Appstore is available in 12 Indian languages, which is also expected to be a major competitive advantage against Google and Apple.

While zero commissions have added to the initial attraction for Indus Appstore, PhonePe is likely to add commissions in the future to make this a veritable revenue source.

Both Google and Apple have been hit by antitrust cases in the US and India in relation to their app store policies. It’s the perfect entry point for PhonePe. PhonePe’s marketing machine has also stepped on the accelerator in recent times to show that it has the user base to capitalise.

The PhonePe-Verse 

“PhonePe is living up to its name. It wants to be everything on your smartphone, from the app store to financial services to digital commerce and more. The Indian market is fast maturing and this is perhaps the best time for a super app or platform play,” says the founder quoted above.

It is impossible to look at PhonePe’s year, without seeing the similarities with the competition that is on a comparable scale. The super app movement or the convergence of financial services is a clear theme emerging in 2023.

For several years, it was believed that Indian apps could replicate the success of super apps such as WeChat, Grab or Gojek in China and Southeast Asia.

But while the likes of Paytm tried this in the past, the strategy did not succeed fully due to a lack of market depth and consumer maturity. Even as late as 2021, Paytm bemoaned the fact that the platform model was not well understood by retail investors.

But times have changed and now the Indian market is looking like a better bet for super app players. Let’s look at two key pieces in PhonePe’s armoury in this battle — ecommerce and investment tech.

ONDC’s New Wings

Built on ONDC, the Pincode app was launched in Bengaluru in April where it has already delivered over 1 Lakh orders as of July 2023, and PhonePe has expanded to Delhi NCR, Mumbai, Chennai, Hyderabad, and Pune, among other cities.

ONDC has become the crutch for non-ecommerce players to scale up their digital commerce footprint quickly.

Take for instance, Paytm Mall, which was once a unicorn, but has faded into the background in comparison to marketplace giants Flipkart and Amazon India. Today, Paytm’s digital commerce business also hinges on ONDC, just like PhonePe’s Pincode.

CRED is relying on a highly curated marketplace approach, while Google Pay is playing the aggregator game. PhonePe’s dedicated app is an interesting approach in this space and unlike any other player in the super app race.

A company spokesperson told us, “The initial response and rapid consumer adoption of Pincode has given us the confidence to expand our services. We are fully committed to championing local sellers and delivering an exceptional shopping experience to our consumers.”

The company added that it will be investing heavily to expand to more cities and into more categories, including medicines, fashion, and electronics to become a full-fledged ecommerce app.

Entering The Investment Fray

The other big piece of the puzzle is Share.Market, which PhonePe has sequestered from its core business as is standard practice. Even though it’s a separate app with a stockbroking licence, Share.Market’s revenue growth will be a key contributor to PhonePe’s business in the long run.

The revenue model for stock broking is relatively straightforward as platforms take a cut on trades and transactions. With the right scale, profitability is not a long shot either.

Fellow Bengaluru fintech unicorn Groww reached profitability in FY23 thanks to its growing user base and today has more than 6.63 Mn+ active investors.

This makes the company the biggest discount brokerage by clients in India. PhonePe would be betting that its existing user base of 200 Mn+ monthly active users can help it leapfrog Groww, Zerodha and others.

At the scale that PhonePe operates on, even an incremental increase in the volume means tens of millions more revenue-generating transactions. For instance, Paytm Money turned profitable in FY23, posting a net profit of INR 42.8 Cr and bounced back from a loss of INR 10.7 Cr in FY22, helped by steadily growing brokerage income.

In a statement, a PhonePe spokesperson added that in the past two years, the company has seen a huge increase in adoption from Tier III  and IV cities and beyond when it comes to payments and other in-app services.

And now is the time to press the accelerator on other products that are tied into the payments core. PhonePe said it registered INR 2,914 Cr as revenue on a consolidated basis in FY23, but the company did not reveal whether it has managed to bring its losses down from the INR 2,013 Cr it reported in FY22.

What we do know is that PhonePe has reached a $1.3 Bn in lifetime total payments value, according to Walmart CFO John David Rainey. Will this translate into profits in the next year?

Where Will PhonePe Go In 2024?

Revenue from the investment tech business will likely contribute in a major way towards bringing the consolidated business towards the black. But other parts of the PhonePe empire will also be key to getting out of the loss-making streak.

It’s interesting that the new products at PhonePe are grabbing a lot of the interest internally from the company, but let’s not forget that PhonePe’s fintech services primarily hold the key for the turnaround.

Merchant services — lending and device subscription — is likely to be a crucial piece. PhonePe is gearing up to roll out consumer lending services on its platform by January next year. Marking its foray into the consumer lending space, Walmart-backed company is likely to operate initially as a distributor for personal loans.

“The Indian market has seen a lot of maturity in 2023. The most active and habituated fintech customers have become familiar with digital-first financial services, and we believe the opportunity is rich for platforms to accelerate the process of unlocking the flow of money and access to services,” the company spokesperson said.

PhonePe’s trajectory is very similar to Paytm, even if there are many differences in strategy. The scale of both companies is similar in terms of the users, and they have got the market timing right on a number of new products. But Paytm is still a long way away from PhonePe in terms of revenue — INR 7,990 Cr for the listed giant vs INR 2,914 Cr for PhonePe.

For PhonePe, 2024 will be about not just proving its thesis around the platform play, but also utilising its deep pockets to grow sustainably and show profits by the end of the year. This is a critical juncture for the company.

Several startups seemed to have cracked the profitability question in FY23 and many of them did not have the luxury of having raised $850 Mn in the year. PhonePe is like royalty in that sense, but even empires face pressure eventually, even when they have a large war chest.

Funding is not a guarantee of success. PhonePe has the right tools and the stage is set, can the fintech giant make something of it in 2024?

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The Indian fintech landscape has been in a phase of rapid growth supported by new and sector-first tech innovations and thriving consumer/business demands. The total addressable market for Indian fintech is expected to reach $2.1 tn by 2030. 

In fact, the Economic Survey 2022-23 states that, India has the highest fintech adoption rate of 87% among the public, compared to a global average of 64%. These growth matrices testify India is one of the most innovative players in the fintech world. 

As a country that is enabling and empowering the unbanked and underserved population, India has a growing tech-savvy generation, a high number of enterprises as well as small businesses with inclusive financial services. Digital Payments, as a sector, has been essential in spearheading this revolution. 

While this upward trend is definitely boosting our economy, it also comes with certain vulnerabilities and challenges. In 2022, India encountered approximately 7 lakh cyber or malware attacks, ranking 10 among the nations that witnessed such attacks, with the finance sector being the most susceptible. 

In light of this, it is imperative to stay ahead of evolving breaches and vulnerabilities. This can only be done by consistently building, enhancing and addressing security aspects of fintech products and solutions.  

Innovative Security Measures Driving Digital Transactions 

Today, building and continuously strengthening the ecosystem for safe and secure digital transactions is non-negotiable. In fact, it is good to see the consistent progress in safeguarding customers/businesses through government initiatives, policies and regulations, and advanced tech innovations. 

For instance, the shift towards a risk-based KYC approach, particularly prioritizing higher-risk merchants, is a significant step towards enhancing the security and efficiency of the e-KYC process. 

This year’s Union Budget’s emphasis on this strategic shift indicates a proactive approach to risk mitigation, which is commendable. Similarly, Indian fintech companies are making significant strides by harnessing evolved technologies like contactless payments and tokenisation to protect sensitive information as well as prevent data exposure. 

Overall, the right government support and regulations will help foster a more robust and secure fintech ecosystem. Perhaps, a government-funded open-source infrastructure solely for security purposes that can be integrated into other software and platforms can help boost this further.

Payments Aggregators As Security Guardians 

Payment aggregators (PAs) have emerged as key players between merchants and the complex network of banks and payment gateways, simplifying transactions for both parties. As this particular type of intermediary, PAs have become synonymous with seamless and secure transactions because of robust security measures including encryption, tokenisation, and fraud detection algorithms. 

Besides protecting merchants and consumers from potential financial loss, PAs have also bolstered the market’s confidence in digital transactions, driving a swifter adoption of cashless payments. 

PAs leverage nuanced AI/ML integrations, which have demonstrated remarkable success in payment security. AI-powered fraud detection assists in identifying and preventing fraudulent transactions, leading to substantial reductions in financial losses and improved customer trust. For instance, AI algorithms can identify unusual spending patterns, detect unauthorised account access attempts, and analyse large-scale data breaches to proactively safeguard user accounts. 

Also, it can assist merchants in identifying fraudulent orders and preventing chargebacks, ensuring secure and seamless payment experiences for customers. The utility of such systems will certainly witness requisite refinements, creating robust and intelligent solutions to combat evolving security concerns.

This imperative is also attracting much-needed regulatory attention. For example, this June, the RBI rolled out Draft Master Directions on Cyber Resilience and Digital Payment Security Controls for payment system operators (PSOs) – making this another positive intervention for all stakeholders to enhance security control. 

The Roadmap Of Security Evolution 

The Indian fintech sector has drawn in investments exceeding $25.8 bn since 2014, leading to the creation of 22 unicorns and 33 soonicorns. Our country has a significant R&D advantage to combat cyber fraud and malware. 

As a matter of fact, India is among the very few nations that protect digital payment users with a two-factor authentication process. Along with government-backed initiatives, multiple stakeholders are making great efforts to ensure absolute cybersecurity in the world of finance. 

Interestingly, the unprecedented collaboration among fintechs, government bodies and regulators, collectively working to devise resilient solutions, distinguishes the current landscape from preceding years. Innovations such as next-gen firewalls, vulnerability management, and Secure Access Service Edge (SASE) are thriving in our country, inspiring new talent and international markets. Other technologies, such as Extended Detection and Retention (XDR), also take root in India from global markets. 

As the sector continues to innovate, digital payments will continue to further fuel the growth of our economy – offering convenience, efficiency, and inclusion. The Indian fintech space, dominated by the progress of digital transactions, has set precedence for other international markets to follow. 

This progress has put us on the map for its level of accessibility, interoperability and secure robust infrastructure, making us a critical innovation hub in APAC while expanding our financial inclusion programs to Europe and the rest of the world.

The post Security As A Lens For Navigating The Future Of Digital Payments appeared first on Inc42 Media.

In the ever-evolving realm of finance, where data reigns supreme, a groundbreaking paradigm is reshaping the landscape for fintech companies. The convergence of two transformative technologies, Artificial Intelligence (AI) and Data Lakehouse, stands as a powerful force revolutionising how financial institutions harness the potential of data.

Gone are the days of traditional data warehousing solutions grappling with scalability challenges and fragmented data silos. Today, fintechs face the imperative need to integrate unstructured data, generate real-time insights, facilitate segmentation, and employ predictive analytics capabilities to navigate the dynamic financial markets. 

Enter the Data Lakehouse – a unified data platform poised to redefine how financial data is managed and analysed.

At its core, the Data Lakehouse harmonises the expansive storage capabilities of data lakes with the structured querying power of data warehouses. This fusion grants the flexibility to work with any type of data without the risk and complexity involved in copying and moving data around. 

You can directly interact with the data, whether it’s structured, unstructured, or semi-structured, within the data lake. A transaction layer operates between the data in your lake and the tools used for business intelligence, reporting, data science, machine learning, and other types of analysis. 

This liberation from data silos provides fintechs with a holistic view of their operations, crucial for making informed decisions in near-real time.

A Data Lakehouse isn’t just about consolidation; it’s a game-changer. It slashes infrastructure costs by breaking data silos, reducing computation costs of data transfers, and streamlining data management. 

This unified setup doesn’t merely grant access to extensive data and varied workloads in one spot; it unlocks endless possibilities beyond traditional analytics, empowering advanced applications like machine learning, data science, and even integrating with LLMs. 

This opens up the opportunity to deploy advanced solutions such as fraud detection Systems, Recommendation Engines for tackling delinquencies, quicker creditworthiness assessments, risk summaries for underwriters, and AI-augmented marketing campaign strategies, among many others.

Moreover, this union fortifies data security and compliance, ensuring continuous monitoring, anomaly detection, and proactive measures against potential breaches. As the financial industry navigates evolving regulations and data security challenges, the AI-driven Data Lakehouse stands as a fortress safeguarding sensitive financial information.

Most fintechs heavily rely on data to run their operations, but every organisation’s data landscape is unique. Determining if a data lakehouse suits specific needs depends on several indicators:

• Does your organisation ingest multiple types of data, such as text, images, video, audio, clicks, sensor data, or log files?
• Do you need to ingest data in real time but are currently limited to batch loads?
• Does your organisation acquire data from external (third-party) providers?
• Is deploying data science and machine learning for new use cases a challenge?
• Is your organisation burdened with disparate data silos, leading to frequent data duplication or movement?
• Does data transformation and analysis take longer than desired?
• Are manual methods or spreadsheets still predominant for data organisation?
• Do issues with outdated or duplicated data impact decision-making?

If your organisation is grappling with these challenges, then a Data Lakehouse could yield significant benefits. This synergy between AI and the Data Lakehouse signals just the beginning of FinTech’s transformation. With evolving AI models and advancing Data Lakehouse frameworks, anticipate deeper insights, fortified security, and seamless scalability. It marks an unprecedented era of data innovation.

In the intricate web of financial data, the fusion of AI and the Data Lakehouse emerges as an innovation beacon. For fintechs navigating a data-rich landscape, this fusion isn’t just a strategy; it’s imperative for sustained success. As technology evolves, the AI-driven Data Lakehouse shapes the future of data analytics, empowering fintechs to flourish in a changing financial terrain. This synergy heralds a new era of possibilities, where data becomes not just a tool but a guiding force propelling fintechs into the future.

The post Empowering Fintechs: How AI And Data Lakehouse Is Redefining Data Dynamics? appeared first on Inc42 Media.

Japanese investment major SoftBank offloaded 2.53% of its stake in PB Fintech in multiple block deals worth a cumulative INR 913.7 Cr.

SoftBank’s SVF Python II (Cayman) Limited held 1.97 Cr shares, or a 4.39% stake, in the parent entity of the insurtech platform Policybazaar in the quarter ended September 2023. 

Following the deal on Friday (December 16) involving 1.14 Cr shares, SoftBank is now expected to hold 83.23 Lakh shares in PB Fintech.

The offloaded shares were lapped up by Societe Generale, HDFC Mutual Fund, Goldman Sachs (Singapore) Pte, Smallcap World Fund, ICICI Prudential Life Insurance Company Limited, and a few others.

While Societe Generale and HDFC Mutual Fund bought 15.5 Lakh PB Fintech shares each in block deals, Government Pension Fund Global bought 16.5 Lakh offloaded shares. New World Fund lapped up 16.4 Lakh shares from SVF Python II’s offloaded stake.

SoftBank’s stake sale in PB Fintech comes a year after the Japanese conglomerate sold over 5% stake in the company last year.

Following SoftBank’s stake sale, shares of PB Fintech fell 2.3%, ending Friday’s session at INR 789.45 on the BSE.

SoftBank’s stake sale in PB Fintech comes a week after it offloaded 9.35 Cr shares of foodtech giant Zomato in an INR 1,127 Cr block deal last Friday, likely exiting the company.

In November, SVF Doorbell (Cayman) had also offloaded 2.5% of its stake in logistics unicorn Delhivery for almost INR 740 Cr. 

The Japanese investment major has been cutting its shareholding in most Indian listed entities since last year amid its increasing losses.

Meanwhile, PB Fintech has been seeing an improvement in its bottom line for the last few quarters. Its net loss declined over 89% year-on-year (YoY) to INR 21 Cr in Q2 FY24. The fintech major also reported its third consecutive adjusted EBITDA-positive quarter in Q2.

On Friday, PB Fintech also informed the exchanges that Income Tax (IT) officials ‘visited’ the offices of its subsidiary Paisabazaar earlier this week.

The post SoftBank’s Stake Sale Continues, Offloads 1.14 Cr PB Fintech Shares Worth INR 914 Cr appeared first on Inc42 Media.

Listed startup PB Fintech informed the bourses that Income Tax (IT) sleuths ‘visited’ the offices of its subsidiary Paisabazaar earlier this week.

In a filing with the BSE, the fintech major said that the visits were conducted on December 13 and 14 and pertained to certain vendors of Paisabazaar.

“We hereby inform you that the Income Tax officials visited Paisabazaar, a wholly owned subsidiary and PB Fintech Limited on 13th & 14th December, 2023 and enquired about certain vendors of Paisabazaar,” said the company. 

The company said that it has furnished information sought by the officials and will continue to provide further details that might be required by the Department in future. Assuaging the investors, PB Fintech added that the business operations of Paisabazaar continue as usual and were not impacted on account of the visits. 

This comes nearly two months after the Securities and Exchange Board of India (SEBI) imposed a fine of INR 1 Lakh on Paisabazaar for employing a principal officer without requisite qualification. The markets regulator then said that Paisabazaar cofounder and chief executive officer (CEO) Naveen Kukreja, who was also the company’s principal officer, did not possess the National Institute of Securities Markets (NISM) certification.

The visits come when Paisabazaar has been clocking hefty revenue growth while scaling up operations. Paisabazaar closed the second quarter (Q2) of the financial year 2023-24 (FY24) with a revenue of INR 154 Cr, contributing little more than 25% to the parent PB Fintech’s core quarterly revenues.

At the end of the September quarter, the credit marketplace vertical clocked an annual loan disbursal rate of INR 16,600 Cr, having disbursed loans worth INR 4,129 Cr on the platform during the three-month period.

Meanwhile, PB Fintech reported a loss of INR 21 Cr in the second quarter (Q2) of the financial year 2023-24 (FY24), down more than 89% year-on-year (YoY). Meanwhile, revenues soared 42% YoY to INR 812 Cr during the same period. 

The quarter ended September 2023 was the third consecutive adjusted EBITDA-positive quarter for PB Fintech. The company’s consolidated EBITDA, excluding ESOP costs, hovered around the INR 13 Cr mark in Q2 FY24 against an adjusted EBITDA loss of INR 53 Cr during the same period last year. 

Last month, PB Fintech chairman and CEO Yashish Dahiya affirmed that the company would begin clocking profits from Q3 onwards.

Meanwhile, PB Fintech closed the day 2.31% lower at INR 789.45 on the BSE on Friday (December 16).

The post Paisabazaar Under Income Tax Dept’s Scanner Over ‘Certain Vendors’ appeared first on Inc42 Media.

The Delhi High Court on Friday (December 15) rejected an interim application filed by BharatPe cofounder Shashvat Nakrani that sought to restrain the fintech unicorn’s former managing director (MD) Ashneer Grover from selling or alienating the shares that the former sold to him.

A single-judge bench of Justice Sachin Datta dismissed the plea but directed Grover to intimate Nakrani when he decides to sell or transfer the shares in question. 

Nakrani claimed that he had transferred his shares to Grover but never received any money for it. However, Grover claimed to have paid for them in cash.

In recap, BharatPe was founded by Nakrani and Bhavik Koladiya in March 2018. Grover joined the company as a third cofounder and board member in July 2018 and purchased 3,192 shares (2,447 from Nakrani and 745 from Koladiya for INR 10 apiece).

In March, Inc42 reported that Grover was supposed to pay INR 24,470 to Nakrani and INR 7,450 to Koladiya. However, Nakrani claimed the former MD is yet to pay for the shares. With time, the 2,447 shares that Nakrani transferred to Grover now translate to 24,470 shares due to share splits and are worth around INR 4 Lakh each.

Appearing for Grover, advocate Giriraj Subramanium argued that Nakrani’s case is based on a complete ‘misreading, misinterpretation and misunderstanding’ of the Sale of Goods Act, 1930.

He noted that the transfer of shares to Grover, and permitting him to join and remain a member of BharatPe for nearly five years, showed that Nakrani not only delivered the shares to the former MD on July 2, 2018 but also never reserved any right of disposal whatsoever. 

Subramanium further contended that, in this case, the contract was adhered to in its entirety. He also argued that the share transfer form was duly executed and Grover’s name was entered into the shareholders’ register as per set norms. This makes it evident that the title to the shares has passed to Grover, he submitted. 

Incidentally, BharatPe’s other cofounder, Bhavik Koladiya, has also sued Grover over a dispute about the transfer of shares. According to media reports, Koladiya (the largest shareholder in the startup) had to allegedly leave BharatPe as his past conviction in the United States in a credit card fraud case was hindering talks with investors.

As he resigned, Koladiya transferred his shares to Grover, Nakrani and one Mansukhbhai Mohanbhai Nakrani, as well as some other early-stage and angel investors. The consideration for the transfer of the shares was approximately INR 88 Lakh. He has claimed that to date, Grover has not paid the purchase consideration.

In Koladiya’s case, Grover claimed that his wife transferred INR 8 Cr to Koladiya’s wife, a payment which also included the INR 88 Lakh for the shares. However, Grover agreed, in January this year, to not create any third-party interest in the 16,110 BharatPe shares in question and in any rights that accrue to him as a consequence thereof.

Grover’s stake in BharatPe has become a major bone of contention for all parties involved in the nearly two-year-long saga since the former Shark Tank India judge’s acrimonious exit from the fintech unicorn in March 2022.

While Nakrani and Koladiya have claimed they did not receive payment for the stake they sold to the former MD, BharatPe approached the Singapore International Arbitration Centre (SIAC) earlier this year, seeking to claw back Grover’s restricted shareholding in the company.

The post Delhi HC Rejects BharatPe Cofounder Shashvat Nakrani’s Appeal Against Ashneer Grover appeared first on Inc42 Media.

In a decisive move, the Supreme Court has mandated the Central Bureau of Investigation (CBI) to probe the notorious ‘GainBitcoin Ponzi Scheme’. The Court has also transferred the trial of all the cases related to GainBitcoin to the CBI Court, Rouse Avenue, New Delhi

The directive came during the hearing of GainBitcoin-related cases and follows the court’s disposal of a batch of writ petitions filed by the accused, seeking interim protection and other reliefs, including consolidation of FIRs.

The bench, comprising Chief Justice of India D.Y. Chandrachud, Justices J.B. Pardiwala and Manoj Misra, also rescinded a previous interim order from August 2019 that granted anticipatory bail to the accused. Additionally, the court directed the transfer of INR 1 Cr, deposited by the accused with the Supreme Court registry, along with their passports, to the trial court.

GainBitcoin Case Overview

Floated in 2016-2017, GainBitcoin, a multi-level marketing (MLM) scheme, made grand promises of a highly inflated 10% monthly return on Bitcoin investments. 

Spearheaded by the late Amit Bhardwaj, along with his brother Ajay Bhardwaj and other family members, and the so-called second layer of ‘Seven Stars’, the scheme eventually unravelled like all other Ponzi schemes. 

It is also pertinent to note that Amit Bhardwaj, the mastermind behind the scam, died of a cardiac arrest in January last year.

An investigation by Inc42 found that the GainBitcoin scam victimised over 1 Lakh individuals. As per the data seized from one of the ‘Seven Stars’, we found a list of 80,000 user IDs of defrauded customers. 

Over 46 FIRs have been registered against Amit Bhardwaj and his associates across the country.

This Will Only Delay The Investigation: Victims

The decision to hand over the case to the CBI has sparked a debate, particularly as the allegations involve violations of the Prevention of Money Laundering Act, 2002 (PMLA) and the Foreign Exchange Management Act (FEMA). 

Some of the victims argue that the Enforcement Directorate (ED) holds more expertise in such matters, given their jurisdiction and experience in similar cases. Further, “CBI will again start from scratch and the case will be dragged for another six-seven years and more while we have not received a penny. Efforts should have been made to fasten the investigation and not the otherwise,” said one of the victims.

A victim Parvendra Singh Shahoo told Inc42, “The Indian apex agencies should take a clue from their global counterparts on how crypto cases are being investigated and solved. In most cases, the investigators first seize all the crypto and charge a hefty amount to grant bail to the accused. 

Expressing dissatisfaction with the current proceedings, victims have urged Indian authorities to learn from global counterparts in handling crypto-related cases. Some victims questioned the competency of the CBI in resolving crypto cases, citing the lack of prior investigations and successful resolutions.

Notably, multiple victims are demanding an explanation as to why the case should not be led by the Maharashtra Police, which has played a leading role in the investigation. 

The victims have highlighted the need for stringent measures, akin to global standards, such as seizing crypto assets and imposing substantial bail amounts to ensure accountability.

In response to these concerns, the ED maintains its position that Ajay Bhardwaj, a key figure in the investigation, has not cooperated adequately with the ongoing inquiry. 

The complexities of this case underscore the challenges India faces in addressing crypto-related financial crimes and the imperative for a thorough and effective investigative process.

The post GainBitcoin Scam: Supreme Court Orders CBI To Conduct A Probe appeared first on Inc42 Media.

Update: December 14, 5:30 PM | The story has been edited to add Juspay’s statement.

Payments solution provider Juspay, which counts SoftBank and Vostok Emerging Finance among its investors, has received an in-principle nod from the Reserve Bank of India (RBI) to operate as a payment aggregator (PA), ET reported.

With this approval, Juspay is expected to join the PA league with other fintech platforms like Razorpay, PayU, Paymate, SabPaisa, PayGlocal and MobiKwik’s payment gateway Zaakpay among others soon.

However, hours after the publishing of this story, Juspay told Inc42 in a statement that the development isn’t new and the company secured in-principle approval from the central bank in the third quarter of 2022.

Earlier this year, the RBI granted a total of 32 in-principle authorisations to existing PAs to operate as online payment aggregators.

The central bank also accepted a total of 19 new applications from firms including Groww Pay Services, Juspay Technologies, Mswipe Technologies, Tata Payments and Zoho Payment Technologies in February 2023.

Now, Juspay has reached to the second stage of approval, however, it cannot start operations without the final approval from the RBI.

Founded in 2012 by Vimal Kumar, Juspay offers a technology platform that unifies payment gateways to offer merchants a seamless, secure, reliable, end-to-end, enterprise-grade payment stack.

The startup’s offerings include Justpay Safe – a payment browser, HyperSDK – a payment SDK (software development kit), Express Checkout – a payment orchestration platform, and an UPI option.

In January 2022, the startup increased its ESOP pool scheme size by 232X.

Juspay raked in $60 Mn in its Series C round of funding in December 2021. The fundraise was led by Masayoshi Son-led SoftBank Vision Fund II. While SoftBank has alone invested $50 Mn in the new round, the remaining amount was infused by the startup’s existing investors VEF and Wellington Management.

Prior to that, in April 2020, Juspay mopped $21.6 Mn in a Series B funding round led by Sweden-based Vostok Emerging Finance (VEF) with an investment of $13 Mn.

This year, Juspay also partnered with Yes Bank to launch HyperUPI – NPCI’s plug-in SDK that powers in-app UPI payments in merchant apps. While, traditional UPI payments in merchant apps involve multiple clicks, creating several points for customers to abandon the payment process,  the UPI Plug-in SDK simplifies the payment experience to just a single click.

Juspay has also been a part of India’s UPI journey from the beginning. It claims to be the first technology player to build the UPI PSP on cloud, which has recorded an uptime of 99.99+% and the highest TPS of 5000.

As of September 2023, Juspay has processed more than 50 Mn transactions per day across its products, which translates to a TPV of more than $500 Bn annually.  Its clientele includes companies such as – Amazon, Google, Flipkart, Swiggy, Big Basket, Cred, Ajio, Airtel, Ixigo, Axis Bank, Yes Bank, and Tata Digital.

The post SoftBank-Backed Juspay To Join Razorpay, PayU, Others In Payment Aggregator League appeared first on Inc42 Media.

IPO-bound B2B payments solutions provider PayMate managed to narrow its consolidated net loss by a marginal 3.5% year-on-year (YoY) to INR 55.7 Cr in the financial year 2022-23 (FY23).

In FY22, the startup’s loss stood at INR 57.7 Cr on an operating revenue of INR 1,208.9 Cr.

PayMate’s operating revenue rose 11.7% YoY to INR 1,350.1 Cr in FY23.

As a payment solutions provider for enterprises and SMEs, PayMate earns a majority of revenue from sale of services. The PayMate platform provides an upgrade from traditional paper-based workflows to software-driven workloads with digital payment streams like digital invoicing and several complementary features.

It recognises revenue when it transfers control over a product or service to the customer. As per its regulatory filing, when PayMate acts as an agent for selling goods or services, only the commission income is included in the revenue. It also earns some revenue as service fee from merchants.

Speaking about the rise in sales in FY23, PayMate said in a recent statement that it saw a 84.53% surge in adoption among customers as compared to FY22, taking the total count of customers beyond 390,000. 

The company, with a large customer base in India and the UAE, is now also expanding to Central Europe, Middle East, and Africa (CEMEA) and the Asia-Pacific (APAC) regions. 

It also claimed to have achieved a total payment volume of INR 84,519 Cr in FY23, registering a 21% YoY rise.

“During the last financial year, we focused on operational efficiency and driving growth. Throughout this period, we were able to maintain efficient operations and grow our gross profit year-over-year while expanding our customer base and enhancing collaboration opportunities within the fintech ecosystem,” said Ajay Adiseshan, founder and CEO of PayMate, in the statement.

Last year, PayMate had said in a statement to Inc42 that its gross profit was INR 1.4 Cr. As per our calculation, its gross profit in FY23 was over INR 11 Cr.

Following an increase in its non-operating income, such as interest on income tax refunds and others, PayMate’s total revenue stood at INR 1,351.6 Cr in FY23 as against INR 1,209.2 Cr in the prior year.

PayMate’s Expenses In FY23

The fintech startup’s total expenses increased 11% to INR 1,407.3 Cr during the year under review from INR 1,266.9 Cr in FY22. In that, the cost of materials accounted for a significant 95%.

Cost Of Materials Consumed: PayMate spent INR 1,339 Cr in this bucket, which increased almost 11% from INR 1,207.5 Cr in FY22.

Employee Cost: PayMate’s employee benefit expenses increased slightly by 1.6% to INR 50.5 Cr in FY23 from INR 49.7 Cr a year ago.

Of this, spending on salaries and wages stood at INR 32.7 Cr as against INR 24.2 Cr in FY22.

Advertising Promotional Expenses: PayMate’s ad expenses more than tripled to INR 1.3 Cr in the reported period from INR 44.7 Lakh in FY22.

Founded in 2006 by Adiseshan, PayMate is backed by Visa, Lightbox, Recruit Strategic Partners, and several other marquee names. The startup first filed its DRHP with the SEBI in 2022 but did not go for an IPO given tumultuous market conditions.

Earlier this year, the company told Inc42 it would likely refile its DRHP in the near future, subject to regulatory processes and market conditions. However, it is yet to refile the draft papers for IPO.

The post IPO-Bound PayMate’s FY23 Loss Narrows Marginally To INR 55.7 Cr appeared first on Inc42 Media.

Chennai-based business-to-business (B2B) fintech startup M2P has bought big data analytics and intelligence platform Goals101 in a cash-and-equity deal. 

Though the company has not disclosed the financial terms of the company. However, as per sources, the deal is valued at around INR 250 Cr (around $30 Mn).

With this buyout, M2P will integrate Goals101’s technology into its existing suite of financial services.

Established in 2016 by Milan Naik, Visham Sikand, Anshuman Pandey, Ishank Joshi and Anupam Bhat, Goals101 uses artificial intelligence (AI)- powered proprietary technology to enable financial institutions to gather insights into their data that can be tailored to accelerate their business growth.

The company counts Nexus Venture Partners, Sprout Venture Partners and Dentsu among its marquee investors.

“The global banking technology space is undergoing a tectonic shift with respect to leveraging data and AI in the most prominent areas like customer service, product and portfolio management, risk and compliance. It is imminent that data intelligence will make the ‘new oil’ refine insights that are actionable and can deliver outcomes,” said M2P’s cofounder and chief executive Madhusudanan R.

He further added that M2P aims to bring together capabilities that will deliver a holistic next-generation banking experience for its customers. 

Meanwhile, M2P was launched in 2014 by Madhusudanan R, Muthukumar A(M2P) and Prabhu Rangarajan. It offers technology which powers the digital ambitions of banks, lenders, fintechs and other financial services players. It claims to be operational in 20 markets across the Asia Pacific, MENA, and Oceania regions.

M2P reported a 6.2X surge in its net loss to INR 40.9 Cr in FY22 as against  INR 6.5 Cr in the previous year. 

According to Inc42’s State Of Indian Fintech Report, Q3 2023, the fintech ecosystem is pegged at more than $584 Bn and is expected to reach $2.1 Tn by 2030 at 18% CAGR.

The post M2P Fintech Takes Over Nexus Ventures-Backed Goals101 For $30 Mn appeared first on Inc42 Media.

Aye Finance has raised INR 310 Cr in a Series F funding round led by the UK’s British International Investment (BII). The Waterfield Fund of Funds and Aye’s existing shareholder A91 Partners also participated in the round.

The primary equity funding round comes after the startup raised INR 210 Cr ($27 Mn at then exchange rates) in its Series E funding round in June 2020. Avendus Capital was the exclusive financial advisor to Aye Finance for this transaction.

Founded in 2014 by Sanjay Sharma and Vikram Jetley, Aye Finance offers affordable business loans to microenterprises in the country. It uses cluster-based credit assessment with AI algorithms to assess risk in the absence of traditional business documents.

“We have been growing consistently for the last two years, so there is a need for equity so that we can leverage our growth. Primarily, the money is for bolstering our portfolio and the lending book. A small part will be invested in expanding our branch network,” Sharma said.

The Aye Finance MD and CEO, Sharma, added that while Aye Finance is currently operating 395 branches across the country, it is looking to open another 80 branches in FY24.

The funding round also comes after Aye Finance raised more than INR 550 Cr in debt funding in the last three months of 2022 from BlueOrchard (INR 87 Cr), Triple Jump BV and Northern Arc (INR 75 Cr), Symbiotics (INR 65 Cr) and responsAbility Investments (INR 81.2 Cr). 

According to Sharma, despite raising INR 550 Cr in debt, Aye Finance’s debt-to-equity ratio stands at 3.3-3.4. This allows the company to raise further equity funding if need be.

Providing further insight into the startup’s business metrics, Sharma noted that Aye Finance’s gross NPA stood at 2.5%, which is under the Reserve Bank of India’s (RBI) sub-target of 7.5% of adjusted net bank credit (ANBC) or credit equivalent of off-balance sheet exposure (CEOBE), whichever is higher, for MSME lending.

The company claims to have over INR 3,600 Cr in assets under management (AUM) and has delivered INR 80 Cr of PAT in the first six months of FY24. According to Sharma, Aye’s first-half performance equated to a return on equity (RoE) of 19.5%. 

“In the second half, this number is likely to increase because of the AUM buildup in the first half of the year,” he said.

Earlier this year, the startup reported that its Q1 FY24 profit after tax stood at INR 38.67 Cr, up 4X from INR 9.78 Cr in Q1 FY23.

The startup backs microenterprises in manufacturing, services, trading, job work, and dairy segments and competes with ftcash, ARTH, FlexiLoans, Lendingkart, LenDenClub and Kinara Capital in the lending tech space.

The post Aye Finance Raises INR 310 Cr To Expand Geographies appeared first on Inc42 Media.

Crypto unicorn CoinSwitch unveiled an umbrella brand, PeepalCo, on December 12 (Tuesday) to house all its business verticals amid an ongoing transition to wealthtech.

The crypto unicorn is looking to diversify its offerings to include investment products like fixed deposits, bonds, exchange-traded funds (ETFs), stocks, and mutual funds. The startup, in a statement, said that the house of brands approach will allow it to stay flexible.

According to the startup, PeepalCo will include three separate brands under its umbrella – CoinSwitch, CoinSwitch Pro – a soon-to-be-launched platform with newer investment classes, and a wealth management division catering to high-net-worth individuals (HNIs). 

The development comes months after it was reported that the startup was planning to launch a stock trading vertical.

Ashish Singhal, cofounder and group CEO of PeepalCo, Govind Soni, cofounder and group CTO of PeepalCo, and Vimal Sagar Tiwari, cofounder and group COO of PeepalCo, will lead the umbrella entity.

CoinSwitch said each of its verticals will have professional management. The leaders of each business segment will have independent operational and financial accountability. Under this restructuring, CoinSwitch appointed Balaji Srihari as the business head of CoinSwitch.

Speaking on the development, Singhal said, “The new structure is designed to unlock the full potential of our organisation and align our resources more effectively. We will focus on capital allocation and work to make sure each business under professional management is executing to its best.”

PeepalCo’s launch comes amid CoinSwitch’s larger plans to pivot into a wealthtech platform.

The crypto platform is planning to apply for a stockbroker’s licence with the Securities and Exchange Board of India (SEBI), while it is said to be in talks with several non-banking financial companies (NBFCs) and banks to offer fixed deposits. 

Earlier this month, the crypto unicorn also launched ‘EARN’, a feature that enables users to accrue passive income on their crypto holdings. Users can lock in their crypto through EARN for validation and get rewards in the form of crypto directly by the blockchain.

In August, CoinSwitch laid off 44 employees as part of a restructuring exercise. The layoffs predominantly impacted the customer support team.

The move towards conventional investment vehicles and to expand offerings is likely a part of the startup’s plans to reduce dependency on cryptocurrency amid regulatory ambiguity and high taxation burden in India. 

The Indian government’s decision to levy a 30% tax on gains from crypto and other virtual digital assets and a 1% TDS on crypto transactions has impacted crypto trading in India. This also led to startups like WeTrade and Pillow shutting operations this year.

Crypto startups in India are also dealing with an increased reporting burden as the government recently mandated each company trading VDAs to register as a reporting entity with the Financial Intelligence Unit – India (FIU-IND).

The post CoinSwitch Launches Umbrella Brand PeepalCo Amid Transition To Wealthtech appeared first on Inc42 Media.

The year was 2017 and four Flipkart executives decided it was time to disrupt the investment tech market. But Lalit Keshre, Harsh Jain, Neeraj Singh and Ishan Bansal had a different view of fintech than most entrepreneurs who jump into this sector. The result was mutual funds distribution platform Groww, where the consumer-first mindset is still paying off.

“We come at problems from a consumer lens because that’s what we know best. Solving problems that customers and consumers face has been our biggest learning at Flipkart,” Jain tells Inc42 at Groww’s HQ in Bengaluru, where nearly 40% of all Indian unicorns have their bases.

But unlike many of its neighbours, Groww has had an optimistic 2023. Jain seems nonplussed when I ask him what it feels like to finally turn profitable as a group. As per him, profits are a byproduct of Groww’s approach to solving the problem.

“We haven’t done anything different, and profitability is just one of our goals. In fact we never had this as a target in our mind that next year we will be profitable. Because we trust that the process of being consumer-first will pay off,” he says, reiterating Groww’s focus on solving consumer problems, which has brought in the results as far as profits are concerned.

Beyond profits, Groww reached another landmark with 6.63 Mn active investors at the end of September 2023, as against Zerodha’s 6.48 Mn. This made the company the biggest discount brokerage by clients in India. For context, Groww had 5.3 Mn active investors at the end of 2022, compared to Zerodha’s 6.3 Mn.

And there’s one more reason why 2023 has been different for Groww — the company’s plans to venture beyond investment tech are becoming clearer and clearer. In other words, Groww too is joining the super app race in some ways, though these are still early days in that regard.

But the blueprint has been laid out — if Groww grew to its current stature on the back of mutual funds and stockbroking, its future could very well be determined by what it took on in 2023.

Firstly, like most other fintech unicorns, Groww jumped onto the lending bandwagon in late 2022, and in 2023, it also entered the tightly contested payments vertical. Effectively, Groww is joining the likes of Paytm, PhonePe, CRED, BharatPe and others in this space, although its lynchpin product remains investment tech.

But as Jain is keen to point out, the approach will be consumer-first. We wanted to understand what that meant for Groww and how the company has leveraged this direction to outgrow long-time competitor Zerodha in some ways.

Our visit to Groww’s headquarters was a part of Inc42’s 2023 In Review series, and we wanted to dive into the fintech unicorn’s journey in 2023 as it prepares for a brave new leg in 2024 with a slew of new products. Here’s what we learnt:

Groww’s Content Stack

At one point during our conversation with executives, Groww is often referred to as a D2C company. The direct-to-consumer model is more commonly used with ecommerce, but even there, the model has become diluted through multiple channels and distribution points.

But in the case of Groww, the approach extends to how the company thinks about new products and verticals.

Another senior executive at Groww tells us that the company’s key strength has been able to convince even on-the-fence customers that investing is not rocket science. The content-to-commerce chain is something D2C brands have tried to leverage for growth. But in the case of Groww, this extends to handholding customers through tough financial decisions via content and allowing them to take charge of their investments in a transparent manner.

The first step is not treating new investors any differently than existing customers except when it comes to content. The end goal for both cohorts of users is the same, Jain reminds us, which is to manage their money better.

Often, discount brokerages get stuck in their positioning around casual or serious investors, and this tends to make it harder for the platform to grow unless the market matures. For Groww, content and its educational initiatives have been the great leveller.

“There’s no such thing as a casual investor. If someone earns INR 15K a month and invests INR 500, they are making a very serious financial decision. So content is critical to help them make the right choice,” the executive mentioned above adds.

Unlike new investors, those who are already familiar with the market and investment strategies need a different degree of assistance from a content POV. There’s also a focus on localisation of content through regional language videos that simplify strategies for new investors.

Localised content is a key pillar for Groww, as we will see, because this ties into the company’s larger plans around lending and other verticals.

Yet, there’s a governance aspect to the content being produced as well, which guards the company against the temptation to bombard new users with content just to drive growth. While many rival investment tech platforms have brought in influencers to bolster content, Groww does it all in-house.

Influencer-led investment marketing has earned a bad reputation in recent months, and Groww does not want to go into this model. On YouTube, it has nearly 2.15 Mn subscribers, compared to Zerodha, which has less than 600,000 followers. Groww launched its YouTube channel in 2017, compared to Zerodha’s 2014 launch.

Instead of relying on other investment experts, Groww prefers a DIY approach when it comes to users Influencer-led investment content has brought trouble for platforms such as Vauld and others in the past, and even market regulator SEBI is cracking down on unauthorised selling.

“We don’t even give our business teams targets to increase transactions, so asking someone like an influencer is out of the question. Again, we wanted to focus on solving for the consumers which influencer-led marketing does not do,” adds cofounder Jain.

Jain believes that not chasing growth has brought the growth that Groww has seen in the past year. “If you do right by the customers, they will stick with you, and eventually each user becomes more profitable. We won’t change this philosophy just for growth.”

In 2021, Groww saw its valuation jump from $250 Mn to $3 Bn+ thanks to massive funding rounds and backing from the likes of Tiger Global, Lone Pine Capital, and many others. The company has since then expanded its lineup of investment tech products, as highlighted above, and added more pieces in 2022-23.

From A Lending Play…

It’s hard to hide from the competition in the fintech space. One way or the other, you will cross paths.

The great fintech convergence is one of the more enduring themes of the past year, as individual apps turned to platforms. Groww is also a platform in many ways, but key leaders in the company believe the difference is in the way it has approached this transition.

Thoughtful product expansion has been the hallmark of CRED in 2023, while massive deployment of capital and resources has been the playbook for PhonePe. Groww has taken customer-first to a different level. And for the company, this is a key USP because it creates a long-term trust bridge between the platform and its users.

“For many days in the past year, our founders have been on the ground and talking to customers directly. We had roadshows to meet some of our most active investors in Tier 2 and Tier 3 towns, where we saw that our customers have deeper problems and a trust in Groww,” says another key member of the Groww platform.

The trust comes from the fact that Groww has helped these individuals see returns on their wealth. Users know that Groww is a legitimate partner and therefore they are more likely to turn to the company for other services.

Based on the feedback from the users on the ground, Groww added lending as the first piece of the platform beyond investments. It had also acquired an NBFC licence through Groww Creditserv Technologies in late 2022 for its first real attempt into lending, and by mid-2023, it had also ventured into UPI payments.

…To Joining The UPI Race

Let’s get one thing clear — UPI is not exactly a novel product by any means and can be expensive to maintain at scale despite its low revenue contribution given the current zero MDR regime.

Even market leader PhonePe struggles to monetise UPI and has to turn to non-payments revenue for growth. But UPI is a glue in the fintech ecosystem and every app realises that UPI can be a top funnel to gain more users.

Groww ranked 28th among all UPI apps in October 2023, facilitating 5.89 Mn transactions totalling INR 3,354 Cr in value. As such, it has a long way to catch up with PhonePe, Google Pay, Paytm and CRED, which are the top four UPI apps in India.

While other companies spend to drive usage, Groww is looking at UPI as a nice-to-have and not as a core focus area. UPI only adds to the trust element of a platform.

Sources close to the company told Inc42 that Groww is also working on a payments gateway business, which is being used to reconcile transactions made by investors on its app. It’s very likely that the company will offer it to other businesses to recoup the investment towards building this product. But Groww did not comment on the plans to enter the enterprise fintech space.

What Can Groww Count On?

Trust is a fundamental building block for any platform, says a founding partner at a Bengaluru-based early stage VC firm. The partner, who primarily looks at fintech investments, believes that fintech platforms need to become walled gardens and there are various ways in which companies are doing this.

Paytm has the deep brand value, CRED has cutting-edge product and design, PhonePe has the scale — for Groww, this is replaced to some degree by the trust from its customer base.

On the lending side, the company has looked at consumer durable loans at the points of sale as well as merchant loans to begin with, but according to sources close to the leadership, there are plans for home loans, personal loans and other credit products.

But the company’s plans are not just restricted to lending. Reports in the past year indicated that Groww is also looking at a co-branded credit card and there was even some speculation earlier about a tie-up with Federal Bank for a neobanking play. These are very much on the cards as well.

Interestingly, Zerodha, Groww’s chief rival on the investment tech side, is also eyeing a banking licence, as per reports. A banking licence is being considered a critical advantage in the discount broking space for speed of executing transactions. As more and more companies look to automate processes for a quicker turnaround time on transactions, having an in-house bank would be a massive competitive edge.

So Groww’s primary objective with its content stack is to inform — and that was also the objective with meeting people on the ground. It’s not about bringing new users, but building trust and visibility with the brand.

If digital-first new-age brands do it through retail channels, Groww does it with roadshows.

Rethinking Asset Management 

Groww’s NBFC licence keeps the door open for a larger banking play in the future, but another critical factor is the new asset management business.

Earlier this year, Groww completed the acquisition of Indiabulls’ AMC licence, a process that began in 2021. For Groww, the AMC licence is critical from a revenue point of view as AMCs typically charge a management fee based on the asset percentage, while brokerages generally charge per trade or offer flat-fee accounts. But for Jain, the opportunity is not about revenue but actually changing the trust equation.

Once again, Groww links the product expansion to consumer-first thinking. The consumer does not want the business to ask for money to solve the problem. The consumer wants to see the value of the brand, and needs to trust the brand to solve the problem.

“There is a lack of trust in the industry because products are not very simple. Customers or new investors need a very simple report. They want to know how to invest. They ask, ‘How do I get the money back? Where is it invested? Is it invested with the right philosophy? Are people taking too much risk or are they very conservative?’ We have the opportunity to create that level of transparency with our AMC and that level of governance,” Jain said.

As per him, Groww’s approach to content and solving the problems faced by consumers easily extends to other categories such as insurance. In other words, it’s not just the AMC space or the investment space that is fraught with bad information.

Sources at Groww talk about insurance as one of these areas and how it has remained a mystery product for certain categories. “Think about life insurance. It is the most critical product for long-term financial planning, but it’s the least understood product and it’s the most mis-sold product. There’s the need to demystify this in the right way and no one is doing that yet,” one source close to the management says.

Groww’s Super App Moment 

Once again, content is the answer for Groww because the questions the company is asking itself are the questions that the consumer has. Even if content does not always translate into monetisable users, there’s a strong belief that investment tech, mutual funds or even fintech as a whole is not a winner-take-all market. Growing the base of eventual users only helps the ecosystem.

Groww might be more suitable for one kind of consumer, because it has a deep consumer insight. But there will always be room for other companies, just like a healthy economy has multiple banks competing.

Despite having higher active user numbers, Groww trails Zerodha in terms of revenue. Nithin Kamath-led Zerodha reported INR 6,875 Cr in revenue and a net profit of INR 2,900 Cr in FY23. In contrast, Groww reported a net profit of INR 449 Cr in FY23 on an operating revenue base of INR 1,277 Cr.

The gap is evidently wide, but comparisons with Zerodha are perhaps misrepresentative of Groww’s place in the fintech ecosystem. Or, at least, will be if the company is able to press the accelerator on its larger plans.

Indeed, the comparisons then will be made with the likes of Paytm or PhonePe, and it will be interesting to see where each of these fintech ‘super apps’ stand a year from now. Will their product diversity stand the test of time?

In some ways, Groww has been lucky so far that the company’s products have been well timed with the market growth and the push for investments in India from policymakers. Plus, digital investment platforms grew by leaps and bounds during the Covid pandemic aka one of the biggest bull runs in India.

Even though the past few years have brought in some correction, Groww believes in taking a broader decade-long view. The aspirations of modern Indians are already growing and this is also an important time to help Indians grow in the right manner.

The cofounder believes that just like Groww got ‘lucky’ in the past few years with its core business, it has the good fortune to be building new products for this new India. Incidentally, this is also the best time to prove any thesis around super app platforms as the consumer base is maturing.

And Groww says it knows consumers well — will this be its trump card?

The post Groww’s ‘Super App’ Year: Going D2C To Win The Fintech Race appeared first on Inc42 Media.

Lending tech startup Indifi on Monday (December 11) announced the appointment of the former Axis Bank president, Sangram Singh, as its new CEO.

As part of his new role, Singh will oversee the growth of the core Indifi franchise and spearhead functions such as product, distribution, partnerships, technology, risk, and treasury. 

In a statement, Indifi said that it will leverage Singh’s extensive banking and fintech expertise to fuel the startup’s next phase of growth. His appointment is also expected to enable the lending tech company to navigate emerging dynamics in the MSME sector and leverage the potential of digital finance for small businesses.

Meanwhile, Alok Mittal will continue to serve as the managing director and cofounder of the company. Mittal, along with cofounder Siddharth Mahanot, will continue to helm product and segment expansion in the secured lending and transaction-based financing segments.

“… I am excited to be part of this journey with Alok and Siddharth and look forward to introducing innovative solutions for our business partners and customers and exploring new horizons that contribute significantly to the development of India’s online lending landscape,” the new Indifi CEO said. 

Commenting on his appointment, Mittal added, “… the strategic move to bring Sangram on board aims to capitalise on the compelling opportunity for scaling Indifi’s core business and introducing innovative credit products. With a focus on scaling multifold over the next five years, Sangram’s seasoned expertise, honed through leading larger businesses, is poised to be a catalyst in elevating Indifi’s growth trajectory.”

Curiously, this is Singh’s second stint at Indifi. Back in 2019, he was appointed as the president of the fintech startup but left the company a year later. 

An alumnus of the Indian Institute of Management, Calcutta and Malaviya National Institute of Technology, Jaipur, Singh has more than 23 years of experience under his belt. 

He has previously served as the president of Axis Bank’s commercial banking group and the MD and CEO of Freecharge. He has also worked with Citibank and GE Capital. 

Founded in 2015 by Mittal, Siddharth Mahanot and Sudeep Sahi, Indifi is a lending tech startup that enables debt-financing for small businesses. Leveraging its tech stack, the startup aims to streamline credit flow for MSMEs and improve the speed and convenience of the loan process. Sahi quit the company in 2017 and currently helms a payroll management company, Skuad, as its founder.

Even as funding winter pummels its peers in the lending tech space and the overall fintech sector, the startup minted its maiden net profit of INR 5.1 Cr in FY23 compared to a loss of INR 32.8 Cr in FY22. Meanwhile, revenue from operations surged more than 2X to INR 198 Cr in the year ended March 2023 from INR 96 Cr in the year-ago period. 

Backed by the likes of ICICI Ventures, British International Investment, and Omidyar Network, Gurugram-based Indifi last raised $35 Mn as part of its Series E funding round in June this year. It has secured more than $120 Mn since its inception.

Mittal recently told Inc42 that the company plans to maintain its growth momentum well into FY24 as well. 

The post Indifi Ropes In Ex-Axis Bank Prez Sangram Singh As Its New CEO appeared first on Inc42 Media.

Retail giant Walmart said its digital payments subsidiary PhonePe has reached a total payment value (TPV) of $1.3 Tn, equating with some of the largest fintech firms in the US market.

“PhonePe is doing an amount of – the equivalent in their business is TPV, Total Payment Volume versus GMV in our business. They are doing roughly $1.3 Tn in Total Payment Volume. And that is at the same scale as the largest fintech players in the US. Like, to put that in context. That have market caps there, in some cases, north of $100 Bn,” John David Rainey, chief financial officer of Walmart said while speaking at Morgan Stanley Global Consumer and Retail Conference.

PhonePe was reportedly planning for an initial public offering (IPO) in 2024-2025. The fintech platform also secured an additional $200 Mn in primary capital from Walmart at a pre-money valuation of $12 Bn in March this year.

While Walmart also has ecommerce giant Flipkart in its portfolio, Rainey said both entities are contemplating a potential path towards an IPO or going public in the future.

“And as they inch towards that, you’ll likely see improvements in profitability as well. And so, part of the improvement in our P&L is the reduction of losses in their P&L as we consolidate, and both of them have executed very well and I have got a high degree of confidence in their ability to continue to do so,” he added further.

Earlier this year, Flipkart Group CEO Kalyan Krishnamurthy said that the company would look at multiple geographies, including India, for its public issue, said to be in the range of $60-70 Bn.

Flipkart India, the business-to-business (B2B) arm of Flipkart, saw its standalone net loss balloon over 42% to INR 4,845.7 Cr in the financial year 2022-23 (FY23) from INR 3,404.3 Cr in the previous fiscal year. The company’s B2B arm saw its operating revenue increase a mere 9.7% to INR 55,923.9 Cr.

Meanwhile, PhonePe recorded a revenue of INR 2,914 Cr in the financial year ended March 31, 2023, an increase of almost 77% from INR 1,646 Cr in FY22. The startup, in a statement, attributed the increase in revenue to growth in money transfers, mobile recharges and bill payments.

The platform has been diversifying its product offerings through many new launches. It also launched the Indus Appstore Developer Platform for Android app developers to take on giants Apple and Google. PhonePe also announced its foray into the merchant lending space as well.

The post PhonePe Among Top Fintech Firms With $1.3 Tn Total Payment Value: Walmart CFO appeared first on Inc42 Media.

CRED doesn’t do labels — ask the company to name its key leaders, and there’s no straight answer. The refrain time and again is about functional teams and high ownership across the ranks.

But I wasn’t at the company’s new second office in Bengaluru to discuss official designations. Instead, we wanted to dive into the year that went by with the leadership. And I couldn’t help but notice an airier, more open version of the company which is otherwise quite guarded.

After all, 2023 is a big year for CRED — it’s about the coming-of-age for the company’s products and embracing the platform life and proving that financially too, it is on the right track. With new products that could add significant revenue momentum, CRED is answering many who had questioned its business model for years. This year was also about showing that building patiently and slowly has its rewards.

With its new office, the Kunal Shah-led startup has now bookended an entire block on Indiranagar’s 100-foot road, creating what can only be described as the CRED bubble.

The CRED bubble is, of course, not a bad thing. It’s largely indicative of Shah’s outsized influence on the Indian tech ecosystem. Naturally, most people associate CRED with its founder — the only designation that cannot be hidden.

Having completed five years in 2023, CRED is finally opening up, even though it’s awkward about it.

As part of Inc42’s wrap-up of 2023, we dove deep into the year gone by for CRED and unearthed some insights from how the startup builds its products, its relatively slow-burn approach and the questions about profitability.

‘CRED’s Broad Canvas’

For CRED, the benchmark is not Paytm or PhonePe or any other fintech app, it’s Apple and Mercedes — no surprises there (more on this later). It’s the one thing that perhaps sets the startup apart from the horde of competitors in the rapidly growing fintech space.

Every company is gearing up to become an all-in-one fintech app, but CRED claims to have taken a deliberate approach, without compromising on the product ethos — deeply thought-out features, high-quality design assets and UX, and products that fit into CRED’s customer persona model, which make sense for the platform.

“Kunal had a very crisp vision of what the opportunity is, which is that the trustworthy and credit-worthy user base in India deserves better, and can be served in a unique way. That was the broad canvas and that canvas is still the same today,” says the company spokesperson, adding that the primary challenge for CRED from a product vision point of view is choosing what to do next.

Choosing what to do next is not something most startups have the luxury of. In CRED’s case, that’s largely due to the capital raised by the company that allows it to take its time, but it also goes deeper than that. Shah’s reputation as a founder who has seen a big exit also brings a lot of time to grow.

The company has raised over $1 Bn over 10 rounds in five years, so it’s not lacking capital. But it’s also about knowing what pieces of the puzzle will actually fit next to each other.

“You really cannot do step seven, unless you do step one through six. And then you may imagine I want to do step 27 also, but you don’t get the right to do that until you sort of actively build the layers and things adjacent to it,” the spokesperson said.

‘Is This A Delta-4 Experience?’

So when did CRED choose to go into something like vehicle management with CRED Garage, which came out of the blue, but fits like a glove within the platform. After the launch, it seems like a very obviously CRED product, but how did the company arrive at that point?

For the company, it goes back to the underlying thesis of building for the ecosystem of people who are high-trust, which is based on an objective metric called a credit score. In some ways, this cohort represents the cream of the overall Indian fintech TAM. Essentially, the very premium layer comprises the 100 Mn Indians who own a credit card.

“So when we look at the problem statements that they have in their life where we can potentially make a difference. That’s the starting point of how we think about all products, not just Garage. There are some products which we aspire to make, but until we have a unique insight that fits this persona, we’re not gonna go build it.”

The origin point for Garage was more than a year before the launch when the CRED team was ideating on developing a product linked to FasTAG electronic toll payments. By itself, the product would have been just another FasTAG service like Paytm or PhonePe, but the idea was to flesh it out more fully.

Another decisive question that CRED asks itself in the process of product development: ‘can we create a Delta 4 experience’, based on the theory put forward by Shah. Put simply, Shah claims, “Once the user experiences a significantly better way of using a product, there is no way he or she is going back to the old way of doing things.”

The company claims a product like Garage doesn’t exist anywhere in the world, and it’s similar to how CRED changed credit card bill payments, which seems like an afterthought today, but it was also a unique product at the time. In the first three weeks, CRED Garage claims to have hit 1 Mn vehicles registered.

Building backward from the customer persona, CRED is looking to intersect with the digital commerce and lifestyle journey of its users. Besides, the company is also eyeing investment tech vertical as the next area of growth.

Garage is also unique in the sense that CRED did not acquire any companies to build this product, as it has done on the lending side with the acquisitions of CreditVidya in 2022 or Spenny in 2023 or even the likes of Happay in 2021.

While these acquisitions are key for CRED’s grander plans in the investment tech and lending space, Garage remains a wholly unique proposition.

What’s not unique is CRED’s UPI play, but even here the company banked on building for the customer persona, which has paid off in a big way.

‘Why’s Yours Black And Why’s Mine White?’

For years, fintech meant payments and payments meant UPI. Startups built user bases through UPI and now realise they need services for revenue, something which UPI does not contribute towards.

In October 2022, when CRED launched UPI payments, we wondered whether it was too late to enter the game. But since the launch, the company has managed to climb up the UPI rankings and is the fourth-most used UPI app in the country today.

The launch of UPI has been critical for CRED to drive engagement among its users and it’s also one of the places where we can see the product philosophy pay off. “It was an important piece in the puzzle as it ties the various verticals together and you can see the impact in terms of the financials and the growth,” says a Bengaluru-based founding partner at an early-stage VC firm that has invested in several fintech startups.

Unlike other players of its ilk, CRED decided to take a gradual approach to UPI, launching nearly half a decade after the likes of PhonePe or Paytm or Google Pay. And it helps that perhaps people want to try new apps for UPI because there is no cost involved with switching apps.

“The paucity of rewards on other apps after five long years meant CRED had the opportunity to offer rewards and syphon off users. Users ant rewards and delight, and CRED offers both in spades,” the spokesperson added.

We asked CRED team what led to this quick success for CRED UPI, and the answer was — people use different signals for different transactions.

Someone with multiple credit cards will likely pull out the fanciest one in the right company, and the same could be said about CRED’s UPI play. “There’s the factor of ‘Why’s yours black and why’s mine white?’ We also focussed on speed, safety and privacy. We have the fastest QR scanner today and we have fraud protection measures, which is basic but no other app has done that,” the spokesperson said.

The UPI product has been key in converting the user base from low-frequency actions for credit card payments to high-frequency actions like daily small-ticket purchases. And indeed, Garage or CRED Escapes (travel) or the CRED Store are all part of this effort to push up engagement among the most active users.

‘Building Like Apple Or Mercedes’

Products by themselves don’t matter of course. It’s about how they move the revenue needle. For CRED, the FY23 performance is seen as a turning point, but there’s an even more meaningful outcome that the company had been chasing for — higher engagement from its users.

The startup reported a total revenue of INR 1,484 Cr in FY23, a 251.6% increase from INR 422 Cr in the previous fiscal year. On the other hand, losses grew marginally at 5% to INR 1,347 Cr, thanks to expenses growing to INR 2,831.9 Cr from INR 1,702 Cr.

On the engagement side, an average CRED monthly transacting user (MTU) now opens the app more than 20 times a month, which the company claims is one of the best in the industry.

One-third of the credit card bill payments by value were done on CRED, we were told and on a unit economics level, CRED spent INR 2 to earn every single rupee from operations.

That’s a major improvement from INR 4.3 it spent last year to earn a rupee of operating income. So, there have been some measurable improvements for CRED in the past 12-16 months, and new products are very clearly a part of it.

For CRED, financial prudence is not new, and in fact, the company claims to be CM1 positive for seven quarters now and CM2 positive for five quarters (as of December 2023). These are of course the fundamentals that indicate the right trajectory from a unit economics point of view. And these metrics will be sacrosanct — or in other words, they won’t be sacrificed for growth.

As for EBITDA breakeven, for CRED and many other companies at a similar stage, it’s a choice. The company is likely to invest in growth if there are products worth chasing.

The company also claims to be ahead on its plan for EBITDA breakeven, without stating any timelines for when that might be announced. Perhaps, it’s the company’s shyness for labels that’s once again surfacing here.

But even the likes of Google and Amazon faced questions on profitability and their business models before they went public. Until the larger vision and the business fundamentals became clearer. CRED is not in a hurry to claim profitability.

The analogy we were given is of Apple or Mercedes. The best companies in the world take their time because they are pushing the envelope on products. Whether that be a car or a smartphone or laptop or indeed a fintech app. These titans of industry have earned the right to garner the largest share of profits or goodwill among customers.

Of course, success is a factor of the work and not just patience. For the company, the key will be to fight, perform and deliver every day; becoming less and less quiet about the progress. And then perhaps CRED might not shy away from labels as much.

Update | 11th Dec, 9:40 IST

Some parts of the story have been edited for clarity.

The post Five Years In The Making: CRED’s Year Of Vindication appeared first on Inc42 Media.

Just when Paytm seemed to be on track to hit profitability, there’s another speed bump. And this time around, Paytm doesn’t just have to slow down but also swerve to avoid a crash.

This week’s withdrawal of the company’s low-ticket Postpaid feature or buy-now-pay-later (BNPL) service has created a difficult situation, as this was one of the key success factors for Paytm’s profitability in the past few quarters.

And while Paytm has denied that this is the end of BNPL on the app, it’s looking increasingly like that given that the new focus is higher ticket loan sizes.

The BNPL loan book had become a critical monthly recurring revenue for Paytm and the changes could derail Paytm’s run towards profits. But before we look at that, let’s take a detour into the top stories of the week from our newsroom:

• ZestMoney’s Last Days: ZestMoney is shutting down after a torrid time this year. But what happened at the fintech startup that was flying high at one time? Here’s a look at the last few days of ZestMoney.
• Year Of Shutdowns: More than 15 startups had to shut shop this year after being pushed to the brink by tough market conditions — Pillow and FrontRow were some of the big names that bit the dust in 2023
• Layoffs At Simplilearn: Inc42’s exclusive report on how Blackstone-owned edtech giant Simplilearn has laid off 200 employees citing performance reason, which employees allege is not the full picture

Paytm Postpaid’s New Avatar

First, let’s understand the sequence of events leading up to the changes at Paytm. In late November, many users reported on Twitter about being frozen out of Paytm Postpaid.

Then reports emerged this week about Paytm halting Postpaid operations, which the company denied after a swift press conference. Finally, in a call with investors and shareholders, Paytm said it is not halting Postpaid, but recalibrating the portfolio origination of less than INR 50,000.

It claimed to have taken this call on the back of recent macro development and regulatory guidance, in line with its focus on driving a healthy portfolio. “While we’ll continue to do postpaid, and it may not be the same growth level that we were doing earlier, it will be significantly lower than what we were doing earlier, but it will be a product that will continue,” the fintech major told investors.

Given the recent RBI directives to banks and NBFCs to increase the risk weights — the amount of cash banks need to reserve to service risky loans — which has forced the banks and NBFCs to reassess their portfolio. As a result, agreements with the likes of Paytm which offer small ticket loans are being reassessed.

One Delhi NCR-based fintech founder says even banks and NBFCs need to show improved profitability and these small loans do not contribute to their bottom line significantly.

What Postpaid Means To Paytm

Losing the key low ticket size segment of Postpaid is a blow to the company’s financials. While it has admitted that future growth will be slow, the company would also be wary of value erosion due to any slowdown in its lending business.

Paytm has posted staggering growth in the lending vertical in the last quarter i.e. Q2 FY24, where disbursals increased to 1.32 Cr loans (44% higher YoY) and the total loan amount to INR 16,211 Cr (122% higher YoY).

But how much of that is from Postpaid and what can we expect come next quarter?

The Postpaid vertical has historically contributed the biggest to its lending business in terms of value. In Q2, Paytm disbursed Postpaid loans worth INR 9,010 Cr, which is 12% higher than what the company did in Q1. Interestingly, loans under INR 50,000 made up to 75% of the total disbursements, and this entire chunk is more or less out of the picture.

Even if we assume some overall growth for Postpaid in Q3 FY24 (December 2023), Paytm is looking at significantly lower revenue on the lending side.

The nature of Postpaid meant that a lot of Paytm’s young users without credit cards were using the BNPL credit line like a credit card. Postpaid also had wide acceptability in the offline merchant space, making it more attractive than the likes of LazyPay and others which offered a similar feature.

Paytm’s Value Tied To Lending 

For Paytm, the decision to defocus from the low ticket size means that it will likely lose out on the traction it sees from users due to Postpaid usage. It’s a double blow along with the revenue, and one which has decimated Paytm’s stock.

After a rally throughout most of the last few months, Paytm’s market cap tumbled from INR 55,256 Cr to INR 41,373 Cr in a week, a fall of 25%.

Brokerage Motilal Oswal believes Paytm’s loan disbursement run rate is expected to decrease from INR 6,000 Cr per month to about INR 4,500 Cr. “Paytm adds an average 3.5 Lakh to 4 Lakh customers every quarter, which is now expected to come down by 50%,” the firm claimed.

Similarly JM Financial noted that Paytm’s FY24 estimated loss before tax is likely to increase by 11% as a result of the changes.

BNPL’s Time Running Out 

But of course, BNPL was never a reliable ship. The segment has had its share of worries for a long time. Plus, this particular Paytm episode highlights the weakness of relying on a base of low-value loans.

Analysts expect several other companies to also focus more sharply on higher loan tickets where a higher standard of risk assessment and diligence is needed, rather than the blitzscaling of BNPL startups and the associated irresponsible lending.

“BNPL was always a sticky wicket and it’s no surprise when you see that with each RBI intervention, the segment sees great pain. And even the valuation bubble is now burst, so the time is for responsible lending and not spraying capital around,” said one Delhi NCR-based fintech founder.

BNPL startups such as Simpl and Slice which had models similar to Postpaid’s credit lines have pivoted to other models since then, and even Lazypay introduced personal loans to hedge against any slowdown in BNPL.

Speaking to Inc42, Kissht/RING founder Ranvir Singh added that lending by itself is too big and too ingrained into the economy to slow down. What we might see is better governance standards in lending operations. Kissht claims to have an average ticket size of INR 1.1 Lakh.

“Though risk weights for unsecured loans have increased, there is an elevated interest from lenders and co-lending partners to disburse loans greater than INR 50,000. This will further usher an era of more responsible lending where credit worthy customers will continue to be served adequately,” Singh said.

Can Paytm Refocus?

For Paytm, the answer lies in adding more partners for its personal and merchant loans, where it will be looking to make up most of the lost Postpaid revenue. These areas are typically more lucrative for revenue and long-term profits, but building a large loan book requires a lot of legwork.

In the initial days, Paytm is likely to have to spend heavily on customer acquisition and even then it will need to keep a high bar for disbursing loans. Shifting focus to larger ticket loans is not without challenges, given that besides higher risk weights, there is the FLDG component, where partner financial institutions are likely to ask digital lenders to put up collateral.

Lending might continue growing as a whole, but Paytm will have to fight harder for its share of the pie.

2023 In Review: Recapping The Highs And Lows 

As 2023 draws to a close, it’s time to reminisce about everything — from the key deals to breakthroughs from trends to controversies in the Indian tech & startup ecosystem. Like every year, Inc42 launched 2023 In Review in late November and throughout the past few weeks, we have captured the year through snapshots and analyses.

This week, we looked back at the startups that turned profitable in FY23 and set off on a new trajectory. Plus, our roundup of the sport stars and athletes that turned investors, as well as those who continued to back new-age ventures. And while 2023 was not a massive year for IPOs, some startups managed to buck the trend and go public despite tough market conditions.

Bookmark this page to see what we have in store!

Sunday Roundup: Tech Stocks, Startup Funding & More

• Slow Year For Funding: With the year about to close, Indian startup funding is likely to just breach the $9 Bn mark. Between December 4 and 9, startups raked in $85 Mn across 18 deals
• OpenAI’s India Plans: Sam Altman-led OpenAI is reportedly partnering with former Twitter India head Rishi Jaitly to help facilitate talks with the Indian government about AI policy

• SoftBank Sells Zomato: SoftBank offloaded 9.35 Cr shares of foodtech giant Zomato this week in an INR 1,127 Cr block deal, most likely completely exiting its position
• Another Boost For UPI: The RBI has proposed increasing the INR 1 Lakh limit for UPI payments to hospitals and educational institutions to INR 5 Lakh per transaction among other changes

That’s all for this week folks. We’ll be back next week with another roundup as we close the curtains on 2023.

Don’t forget to stay tuned to our social media channels during this time of the year. Join Inc42 on Instagram, X/Twitter and LinkedIn for the latest news as it happens.

The post Paytm’s Lost Postpaid Magic appeared first on Inc42 Media.

Nithin and Nikhil Kamath-led stock broking platform Zerodha’s net profit rose 37% to INR 2,908.9 Cr in the financial year 2022-23 (FY23) from INR 2,120.3 Cr in the previous fiscal year as the business continued seeing strong growth. 

Zerodha, founded in 2010 by the Kamath brothers, is a bootstrapped discount brokerage that allows users to trade in stocks and invest in mutual funds. The Bengaluru-based invest tech startup generates revenue from brokerage sales, user onboarding collections, and the sale of its premium tech products such as Kite Connect API.

Its operating revenue grew 37% to INR 6,832.8 Cr in FY23 from INR 4,977.3 Cr in the previous year. Of this, fees and commission charges accounted for 84% at INR 5,727.2 Cr. In FY22, Zerodha earned INR 4,128.9 Cr from fees and commission charges. 

Including other income, the bootstrapped unicorn’s total income zoomed 38% to INR 6,877.1 Cr during the year under review from INR 4,993.6 Cr in the previous fiscal year. 

Where Did Zerodha Spend?

In line with the growth in its topline, Zerodha’s total expenses rose 38% to INR 2,992.7 Cr in FY23 from INR 2,165.1 Cr in the previous fiscal year. 

Fees And Commission Expenses: As a brokerage, fees and commission account for the largest chunk of expenses for Zerodha. In FY23, these expenses stood at INR 2,223.4 Cr, accounting for nearly 75% of the total expenses. This number stood at INR 1,581.1 Cr in FY22.

Employee Benefit Expenses: Zerodha’s employee costs shot up 36% to INR 623.2 Cr in FY23 from INR 459 Cr in FY22. Interestingly, the startup spent a whopping INR 235.8 Cr on ESOP expenses during the year under review as against INR 77.5 Cr in FY22.

On a unit economic basis, Zerodha earned INR 2.3 in operating revenue in FY23 for every rupee of expense.

Earlier, while disclosing some parts of the financial statements for FY23, Zerodha cofounder and CEO Nithin Kamath attributed the growing increase in futures and options trading for the growth in the startup’s topline and bottomline.

“There’s still phenomenal interest in the markets, especially in futures and options. This has been the primary reason for the increase in revenue and profitability over the last three years. We continued to see phenomenal growth even in FY 22/23. That said, the business has plateaued in terms of revenue and profitability this financial year until now,” Kamath said.

Zerodha competes against the likes of Groww and Upstox, which are helping millennials enter the stock market with a user-friendly app interface with easy one-tap creation of free demat accounts. 

Kamath claimed that Zerodha is the only broker in the country to charge an account opening fee of INR 200 and hinted that the company has no plans to change this.

Later, squashing all speculations about valuation, Kamath said that the startup has been valuing itself at INR 30,000 Cr, or about $3.6 Bn, for all buybacks.

Zerodha’s rival Groww also turned profitable in FY23. Billionbrains Garage Private Limited, the parent entity of Groww, reported a net profit of INR 448.7 Cr in FY23 as against a net loss of a whopping INR 239 Cr in the previous fiscal year. 

Meanwhile, Groww surpassed Zerodha in terms of active investors at the end of September 2023. As per the National Stock Exchange (NSE) data, Groww had 6.63 Mn active investors at the end of September 2023 as against Zerodha’s 6.48 Mn.

The post Zerodha Made INR 2.3 In Revenue For Every Rupee Spent In FY23 appeared first on Inc42 Media.