Fintech India

June 2016
Preface
Overview majors.

The world is witnessing a major shift in financial services. Technology is A combination of factors is at play. Reduced trust in the global banking
fast changing how we pay, lend, borrow, invest, insure and do a host of system, low interest rates, data flows, analytics and the growth of
financial activities or transactions in our personal as well as business smartphones – all of these have created the enabling conditions for
lives. The large global financial services businesses or institutions which start-ups to attack the traditional financial sector. Backed by venture
handle these activities had till now managed to sidestep the onslaught financing, many of these companies are causing a massive disruption in
of technological tsunami unlike in most other industries. And remained financial services. The bank is being systematically unbundled, and new
intact and unbruised unlike in most other sectors where a new crop of players are attacking every segment of the market. These companies
younger businesses completely transformed the industry landscape. You have improved service levels, reduced costs and dramatically improved
still bank, insure, have your credit card/take mortgage mostly from the the user experience. Term loans in the US are possible within a day,
same set of industry players with whom your mother or grandmother did and one no longer needs to be an HNI for getting personalised
business with. Which is not the case for buying books, searching for investment advisory services. $ 19 Bn poured into the sector in 2015,
information, booking tickets, reserving hotel rooms and the way you which also witnessed several Fintech IPOs. The Economist, rarely given
communicate with other people. Technology led innovations in business to hyperbole, has called it the Fintech revolution.
models and processes had fundamentally changed most businesses in
the last 20 years. Except for a few leviathans like financial service The Indian Context
businesses. Closer home, India seems more than ripe for a Fintech revolution. Just
consider these basic metrics. Until the Jan Dhan initiative, 60%of Indians
Not anymore. were unbanked and 90% of small businesses have no links to formal
financial institutions. Yet 75% of Indians own mobile phones and over
“Silicon Valley is coming” Jamie Dimon, CEO of JP Morgan Chase wrote 25% are expected to have a smart phone by 2017. The penetration of
in his April 2005 letter to his shareholders. “There are hundreds of start- digital banking is an undercurrent that may leave most people surprised
ups with lots of brains and money working on various alternatives to – or shocked. We see the tipping point to be in 2016, when internet
traditional banking.” Technology led companies in the financial services penetration in the country crosses 30%. By 2020, digital transactions are
sector are increasingly offering a serious alternative to traditional likely to account for more than a quarter of transactions in the banking
products and services offered by large financial institutions. Fintech sector. By 2022, digital banking will have more than 50% penetration
companies across the world are offering products and services at much levels. Mobile banking adoption rates are already outpacing web
lesser cost, greater speed, increasing efficiency and more importantly banking.
with a much more “cool” quotient than the large monolith financial
Preface

Jan Dhan Yojana, the financial inclusion initiative of the new Indian rather as the raison d etre like the young start-ups. Innovation, efficiency
Government has resulted in 190 Mn new bank accounts being opened. and disruption are the terms one usually comes across with any
Aadhar, the ambitious national identification number project of the Indian discussion on Fintech companies.
government will soon have 1 Bn people covered facilitating on-line Fintech companies attracted more than US$ 14 Bn of funding in
biometric verification and consequently online enabled KYC and calendar year 2015 and the current estimate is that along with debt
financial transaction possibilities. This two initiatives along with rapidly funding and IPO funding of the larger Fintech companies in United
growing Mobile telephony is expected to create a JAM impetus to States, this number may have touched US$ 25 Bn in 2015. CB Insights,
digitisation and wider inclusive growth – especially amongst the poor a research firm which specialises in Fintech, estimates that the number
hitherto unbanked large mass of citizens - of financial sector growth in of unicorns (private companies with a valuation in excess of US$ 1 Bn)
India. Analysts have pointed that like how most of India bypassed the has touched 36 by the middle of 2015, up from a measly 11 less than an
fixed line telephony penetration and straight away embraced mobile year before. Fintech companies like Lending Club and Square have
telephony, a similar model may be imminent in the Indian financial done successful IPOs in the U.S.
sector. Large part of the population may not ever open a conventional
bank account and straight away use mobile phone to do financial Is Fintech and the new golden dawn they promise for real or is just hype
transactions – whether for payments, lending, borrowing or investing. about “Millennials” pushing their technology habits into the last frontier –
Nandan Nilekani, the technology entrepreneur and the brain and soul financial services? Millennials are the U.S word for the generation born
behind Aadhar goes on to say that the mobile phone will be the bank between 1980 and 2000 and broadly make up one of the largest
account for many Indians and call the current trends as heralding a generations in history, bigger than the baby boom generation. Millennials
“WhatsApp moment in Indian financial services” are investing, lending and sharing money much differently from their
parents assisted by a growing set of tech-driven tools. Host of Fintech
What is Fintech start-ups and the investors backing them are banking on Millennials as a
What exactly is Fintech? Like any new evolving trend, an universal key demographic for their success and many Fintech firms are
definition is hard to come by. However, in general, people talk about leveraging existing technologies – like social networks and mobile
technology led companies that are using technology as a key tool to messaging already popular among young adults – to offer financial
make financial systems more efficient. And while doing so, the start-up products and services.
Fintech companies are more often than not, disrupting incumbent
financial services companies that still look at technology as an enabler

3
Preface

What are the products/services of Fintech firms closer scrutiny from regulators to this segment of Fintech, this sector is
Now, what exactly are the products/services which these new age firms cited as one of the more promising in India as we have one of the largest
are offering which are being seen as so cool and next-generation? In this offline peer to peer lending markets. Business Lending companies act
report, we look at some of the main sub-sectors and try and plot out the as online digital NBFCs and provide loan to small and medium
key themes and outlook for each of them. enterprises. Kabbage and OnDeck are two unicorns in this space. Ecom
Wallets are the digital equivalent of a physical wallet, with preloaded companies are partnering with business lending start-ups, sharing their
money that can be spent on participating online and offline merchants. merchants’ business data and helping the merchants get working capital
While smartphone boom and low penetration of cards is driving wallet financing. In the Indian context, Lendingkart and CapitalFloat both have
adoption in Asia and other emerging markets, it is the technological raised US$ 10 Mn+ in venture funding. Indian growth potential in this
advancements and associated convenience that is driving wallet space is seen as huge given that most small business firms are outside
adoption in mature markets. Paytm, the Indian wallet player recently the purview of normal bank credit facilities.
made news when it raised US$ 675 Mn from Alibaba/Alipay and then Asset Management or robo-advisory firms offer automated algorithmic
subsequently got a payment banking license from the Indian driven personalised investment advisory services to individuals. A
Government. personalised investment portfolio can normally be set up in minutes by
Payments focused players are leveraging the high transaction fees, high providing information about investment goals, risk aversion etc and an
minimum transaction slabs and high cost of owning traditional payment algorithm adjusts the portfolio on an ongoing basis. Wealthfront and
devices to offer innovative and distinctive solutions to both consumers Betterment are two U.S based players who have both US$ 2 Bn+ of
and merchants. For example, Square provides a simple tech-driven assets under management. Personal Finance Management firms
solution to a serious problem of merchants not having a device to swipe provide account aggregation tools that provide individuals with a single
the customer cards at the point of sale. A free mobile phone based card view to manage their wealth, stock portfolio, personal budgets, taxes etc.
reader of Square can be downloaded as an app which can immediately Credit Karma and Yodlee are two U.S based unicorns in this space.
start accepting payments has led the Company see its valuation zoom to Remittances focused Fintech companies are fast changing the industry
US$ 6 Bn. landscape in inter-country money transfer services. They offer faster,
Consumer Lending companies leverage the power of technology to have cheaper and more transparent remittance services than banks, money
online marketplaces that matches borrowers with lenders. Global players transfer operators and informal channels. The cost of traditional
like Lending Club and SOFI have raised US$ 865 Mn and US$ 766 Mn remittance channels remain high and a World Bank study talks about a
respectively. While the recent troubles of Lending Club has brought global average cost of 5%+.

4
Preface

The hidden cost is the forex spread – the difference between an inter-
bank currency conversion rate and the rate quoted to you by a bank or Who are the consumers
money transfer company. India which receives about US$ 70 Bn in Is it mainly the tech savvy Millenials the main consumer base of these
remittances annually can save a few billion dollars in costs were Fintech new age Fintech companies ? While a superficial look may suggest so
companies to completely take over the remittance space. Instarem, an and anecdotal information about how robo-advisors are signing up U.S
Australian Fintech company saw its monthly remittance volumes to India citizens on the West Coast at a much faster rate than East Coasters may
cross US$ 2 Mn within few months of start of operations. support such a view, reality is much more complex. Yes, the rich and the
P2P Payments or peer to peer payment companies use cashless educated are indeed driving the growth, but technological
method to send, receive and charge money between peers. Money is advancements are also helping the poor and marginalised access
moved between the linked bank account/card and the P2P payment financial products and services, hitherto unavailable to them either
account, and between P2P accounts. People not on the P2P accounts because no financial institution touch their lives or the entry thresholds
can also be paid by referencing their phone or email details. While are too high.
internationally Facebook has enabled P2P transfers through its For instance in India, if the JAM revolution do take place, the real
messaging app, a bank like HDFC has enabled P2P payments for its beneficiaries of the Fintech revolution would be the poor and
customers by signing up with Chillr, a third party app which recently marginalised as in the new world order, all you need is a mobile phone
raised venture funding from Sequoia Capital. (maybe equipped with an IRIS reader to authenticate identity) to send
Crowd-funding companies offer a platform for equity, debt or even and receive money, buy financial products like insurance and mortgage,
donation funding to enterprises or causes than can be driven by large invest or even raise small loans for your businesses. The mobile phone
number of people paying very small amounts. For the average individual, which you anyway own will become your bank account, your depositary,
such firms provide an opportunity to participate in venture funding your loan provider, your investment manager and much more. Indeed a
without the intermediation of VC funds who have large threshold limits truly inclusive scenario.
and on-going management costs. And globally, the Fintech revolution seem to be widespread cutting
Blockchain has the ability to create distributed ledgers facilitating across continents and cultures. While U.S remains the largest market
decentralized transactions. This has reduced the cost and increased the and the hub of most Fintech companies, the list of Fintech unicorns
speed of transactions exponentially. The emergence of permission-less include young Dutch, Indian, Chinese and along with the usual suspects
platforms enabled by public blockchain has led to the Bitcoin and 700 from the G-7 economies.
other cryptocurrencies that have followed on the coat tails of its success.

5
Preface
What will happen to the large banks and financial institutions players may still hold an advantage in terms of financial muscle,
Is this going to be a traditional David v/s Goliath story ? Will they be the knowledge and trust of the customers, but the impact will depend on how
2020 equivalent of Barnes & Noble who got swamped by Amazon ? Will these large firms will change with the pace of technology. An interesting
those century-old large financial institutions that survived world wars, observation here is that retail businesses, which are more profitable and
financial meltdowns and numerous other challenges to be where they contribute disproportionately to the financial sector’s return on equity, will
are meet their nemesis in these tech savvy start-ups? Even in the odd be most vulnerable to this disruption by Fintech start-ups.
case of some financial tsunami, financial institutions have survived with
regulator/State assistance using the often railed TBTF (Too Big To Fail) Climbing the Slippery Slope of Regulation
arguments. One of the biggest hurdles facing the Fintech industry is regulation by
Most Fintech companies are hyper-specialising in just one aspect/small authorities. Regulatory framework was decided on the basis of how
segment amongst the multitude of products/services offered by a traditional financial institutions operated. Fintech has disrupted the space
conventional Bank. Many analysts have queried whether the unbundling by operating across different financial verticals and as such face a great
of bank services will mean the Bank has to face a multitude of different, deal of ambiguity on which of the plethora of regulatory agencies they
small, agile, tech driven competitors in most of their customer markets. must comply with. The number of regulations that must be complied with
And consequently will it lead to death by thousand cuts rather than being creates a problem for start-ups who are thinly staffed and don’t have the
a straight jab on the face. An interesting graphic doing the rounds is human resources to navigate the regulatory minefield. This becomes a
how a traditional bank is being challenged by its nimble footed Fintech barrier for a start-up to innovate for fear of non-compliance. Alternate
competitors. We attempt a similar graphic for the ICICI, the Indian bank lending and marketplace Fintech models have been the ones to feel the
and show that how for almost all the service/product lines detailed on its worst of the regulatory friction burn. Internal control policies of Fintech
web home-page, there are atleast one or more Fintech competitors. firms have to better sync with the industry regulation standards. Lending
The pertinent question is whether these TBTF institutions are also TBTC Club, one of the biggest success stories of the Fintech revolution, ran
(Too Big To Change) entities and may get swamped by the tech wave. into troubled waters for loans it had sold to an investment bank without
Globally, incumbents in the banking sector are scooping to invest, making disclosures to its borrowers. This led to a moratorium on buying
mentor or otherwise integrate Fintech firms in their portfolio and Lending Club loans, the resignation of the CEO and a drop of 60% in
systems. For instance, Citi group is an investor in Square and share price. Regulators are reacting to the changing need state of the
Betterment, Wells Fargo in Lending Club, Santander and Amex have industry with steps in the right direction. The FDIC, FTC and CFTC have
their own Fintech venture arms etc. Fintech firms have started to adopt issued papers lending clarity on marketplace lending, consumer
collaborative business models instead of competitive and investors have protection and bridging grey areas between traditional institutions and
shown their approval of this approach with increased investments. Fintech companies.

6
Preface
Europe has been more proactive in addressing this with FCA launching simultaneously, the competitive landscape is evolving rapidly. As an
Project Innovate which seeks to identify and resolve barriers to incumbent, should one worry about the tech-forward banks, the well
innovation that Fintech companies face in UK and the EU. funded mobile-first start-up, the e-commerce players entering finance, or
the emerging online financial supermarkets? Correspondingly, should
India has historically had cautious regulations on financial activity and one’s talent agenda be focused on financial professionals, or on
with the advent of Fintech as a sector have been cautiously evolving its engineers and product managers?
policies to tap into the potential while attempting to balance the need for This document is meant to provide a short overview of trends we see in
the right amount of oversight with the need to facilitate new entrants and the Fintech space. It is based on MAPE and MXV’s proprietary
technology to ensure greater availability, choice and most importantly research, projects and advisory relationships in the sector. Hopefully, it
better financial inclusion in the country. The RBI has issued will give you cause for reflection, and insights for how your business, or
differentiated banking licenses and offered “on tap” banking licenses. portfolio, is likely to be impacted. We look forward to a continued
Payment bank licenses and UPI have been heralded as game changers. dialogue as the brave new world of Fintech dawns upon us.
Initial steps to formalise the unregulated P2P lending service providers
may act as a fillip for the sector by ensuring robust credit scoring Jacob Mathew, MAPE Advisory Group
mechanisms and prudential lending norms. The role Fintech plays in Amit Garg, MXV Consulting
personal financial management has also been acknowledged by the
RBI with financial aggregators being recognised and registered as
NBFCs. Apart from the RBI’s initiatives, large banks like SBI have
commissioned a start-up fund for INR 200 Crore. Steps such as this
lend weight for progressive arbitration by regulatory watchdogs for the
Fintech space. While steps taken have been encouraging there is still
much to be done to come up with consistent and business friendly
regulatory approach.

The Outlook
The conditions are ripe. Across segments, there are new companies
emerging. What may today appear like a couple of pin-pricks in the
financial services landscape, have the potential to cause massive
disruption. With the process of disruption and re-creation happening

7
Contents

The Emerging Annexure :

A Fintech TheIndia
India
Story Trends and Segment
Revolution Story
Opportunities Primers

8
 The World is witnessing a massive shift in financial services

Insurance Payments Remittance Loans Investments

Technology
The role of technology
in financial services
had been limited to
₹
facilitating the internal
operations of financial
institutions and
Institution Fintech
customer interactions ₹
with the bank, with the
financial institutions Due to the rise of the digitized,
retaining their central • Access to internet
on-demand economy, Fintech
role. Institution • Penetration of mobiles Technology has opened up direct linkages
• Trust in technology
between customers, and
• Personalization of
between the customer and the
solutions
service provider, increasing
• Speed of delivery
accessibility and inclusion, and
• Reduced cost
putting the customer in the
• Open architecture
drivers seat
Customers Customers
Traditional Model Innovation

Fintech is the innovative use of technology to upend traditional business models and the banking experience
It puts the focus back on the customer by unbundling and aggregating financial products by segment, allowing 24x7 access, reducing the complexity
and ambiguity of the traditional banking experience
For the financial services provider, data, analytics and technology are used to reduce costs and increase market share by accessing untapped
segments

9
What Fintech is Not

Share trading, whether initiated

by phone, internet or in person

Consumer loans provided in retail

stores for purchase of white
goods

POS card processing solutions

from banks with high fixed cost
and high transaction requirements

Transferring money through

NEFT/RTGS requiring knowledge of
the payee’s bank account details

Internet banking and net banking

solutions from banks

Credit rating services targeted at

financial institutions

Core banking solutions, either as

custom IT services or products,
sold to banks

10
How Fintech companies have changed the landscape

Untapped Markets Crashing Costs Disintermediation Intermediation

 Transformed SME lending by  Matches a remittance  Reduces intermediation of  Wallets have allowed
creatively assessing credit transaction to a reverse financial incumbents by consumers to consolidate
risk and providing loans in transaction on the same route opening direct channels multiple solutions into one
record time and settles locally, avoiding between borrowers and
international transfer charges investors
 Payment intermediaries have
improved the under-banked’s
access to financial services

 Acquired small investors by  Bitcoin disintegrates the role

reducing minimum investment of banks by using shared
levels technology that validates
transactions network-wide

Source: Literature Review; MXV research

11
Several cities have emerged as Fintech hubs

London Stockholm

Dublin Berlin

Silicon NY
Valley Tel Aviv

Hong Kong
Mumbai
Bangalore

Singapore

Established hubs

Emerging hubs
Sydney
Intensity of funding activity
Jan 2010- Jun 2015

- +

Source: KPMG; IC Dowson and William Garrity Associates

12
Globally, Fintech saw $22 Bn in funding in 2015
US accounted for nearly 70% of the Total
Global Fintech Funding  Tech giants Google and Intel have
Avg. been the major Fintech investors in
Deal $5.7 $5.5 $4.9 $5.9 $16.5 $22.7 the US.
Size
(Mn)  Most active VCs in the US were
14,592
Nyca Partners, Blockchain Capital
12,044 2,765 and RRE Ventures
3772  Ticket size of deals continued to
increase while seed/angel stage
1,278 funding made up a third of the total
879
4,020
14,800  Banks such as Citibank, Goldman
2,370 2,742
1,824 192 9,887 Sachs, Morgan Stanley, etc. are
323 434
103 1,644 77 149 1,852 369 399 2,020 3,394 investing through Fintech labs and
2010 2011 2012 2013 2014 2015 incubators, and sometimes directly.
Their investments are primarily in
US Investments APAC Investments Rest of the World Investments areas of asset management and
payments.

Fintech Funding in the US

 Traditional banks are under attack,
12% with core services like payments
1% and lending receiving the most
28% 29% 1%
4% funding.
3%
 Square, launched to address the
Deal Volumes Investments ecosystem of mobile payments,
493 $9,887 Mn 54% has received funding from
3%
3% Goldman Sachs, Citi Ventures and
25% JP Morgan, and has gone public
9% 16%
this year.
12%

Payments Lending Markets Wealth Management Risk & Security Insurance Other

Source: Accenture; Literature Review

13
In Asia, China is witnessing a similar wave
Sector Overview Fintech Activity

 Fintech investment in the Asia Pacific was $880 Mn in 2014 and is

expected to be over $3.5 Bn by the end of 2015, led by China
Alibaba raised $25 Bn in 2014 in
 P2P Lending and Payments sectors are fast developing the largest global IPO
 mPOS turnover was valued at $7 Bn in 2014
Alipay transacted 3 times more
 Mobile payments grew by over 130%, accounting for 1.6% of all
than PayPal and Square put
electronic payments in value and 13.6% of all electronic payments by together in mobile payments in
volume of transactions 2013 with 300 Mn registered
 Chinese government has announced the launch of a $6.5 Bn venture users
firm to invest in seed-stage tech start-ups and to promote technology Ant Financial launched Zhao Cai
and market integration Bao, an online marketplace for
consumers and SMEs to access
Major Funding Events (Mn) loans directly from investors

130 Rival Tencent offers P2P

transfers through WeChat which
100 is installed on 90% of phones in
China
100 2015
80 First Chinese online only bank –
WeBank launched by Tencent in
50 April 2015

485 Trailing the success of Yuebao in

207 selling investment funds, Baidu,
NetEase, Tencent and Sina,
160 2014 have followed suit

84
Xiaomi begins public beta testing
65 of online money market fund that
enables users to earn interest on
their Xiaomi wallet balance
Source: Life.SREDA
14
New entrants are being seen in every segment
Services Equity/Debt Financial Management

Crowdfunding Personal Finance

Remittances Insurance
Management

Business Lending

Credit Scoring
Payments Wallets

Credit Cards and Loans

Asset Management

P2P Payments
Consumer Lending

Source: Company reports; MXV research

15
Contents

The Emerging Annexure :

A Fintech TheIndia
India
Story Trends and Segment
Revolution Story
Opportunities Primers

16
Financial services penetration is still very low in India
Cards outstanding in India (#Mn)

602
43% of bank accounts
dormant

1226
1045 699 Mn bank accounts
903 2012 19 314
810 799 are held by 287 Mn
735
Active account holders

2013 19 373
FY10 FY11 FY12 FY13 FY14 FY15

Penetration of cash and other banking services

2014 20 500
100%
86%
79%
2015 23 643
50%
40%
22% 27%
18% 14% 11% 6% 2016 25 661
4%

Have a debit Received Received Paid utility bills Saved at a FI Borrowed from
card wage in wage in cash using cash FI 0 200 400 600 800 1000
account
Credit Card Debit Card
World India

Source: RBI, World Bank; MAPE Analysis; CRISIL

17
India is set for a Fintech revolution
Internet will reach more than half of all Indians by 2020

J Pradhan Mantri
A Aadhaar
M Mobile
JAM strategy is Jan Dhan Yojana
driving financial
inclusion
Currently covers 70% With more mobile
Launched in August connections than bank
of the population;
2014, 200 Mn bank
extended for pension, accounts, it provides a
accounts have been
provident fund and bridge to the
opened till Feb 2016
Jan Dhan Yojana underbanked

2012 2014 2016F 2018F 2020F

Active internet users (Mn) 156 305 447 620 806

Internet penetration in
India

46% 59%
24% 34%
13%

Mobile phone penetration

in India (Mn)
982 1,022 1,063
944
Smartphone 865
subscription
413 552
Total mobile 269
subscription 80 140

Source: World Bank; IAMAI; TRAI; ComScore; Morgan Stanley; MXV Analysis; MAPE research
18
 Government encouragement of Fintech Sector

Facilitating Growth Financial Incentives

 Start-up India initiative launched by the Government of India in • New startups will have a provision for 100% deduction of
2016 will provide funding support through a $1.5 Bn fund of funds taxes on profit for three out of first five years
 SBI opened a INR 200 Crore fund for Fintech start-ups in a bid to • Long term capital gains (LTCG) tax for unlisted companies
collaborate and modernize its banking operations is now applicable for 24 months instead of 36 months
 Startups will get support from the government for their patents • Removal of LTCG tax on sale of residential properties
filing, trademark and other design work when proceeds are invested in specified startup fund
 Improved mobile connectivity through better infrastructure is • 80% rebates on the patent costs will incentivise innovation
expected to boost mobile usage and thus expand the user pool for amongst start-ups
technology startups as a whole including Fintech • Tax exemption for investment above fair market value has
been proposed to encourage seed investment
• Merchants with more than half of their transactions done
digitally could get tax rebate or 1-2% VAT reduction

Nascent Regulatory Acceptance

• The RBI has taken a cautious stance on developing the Fintech space keeping in mind legal and consumer protection issues
 Payments, lending and security have received the most attention for regulatory enablement
 Unified Payment Interface has been introduced to provide a single architecture to integrate all electronic payments, and should change the
landscape and scale of digital payments in India
 11 licenses for payment banks have been granted in 2015, and they should amplify the progress towards digital transaction
 RBI consultation paper on P2P lending proposes to formalize the space by defining P2P platforms as NBFC, while requiring improved
assessment of both the lender and borrower
 Startup India Action Plan allows self certification to register as a startup, which cuts red-tape and compliance regulatory charges
 Providing legal guidance in fast-tracking the patent process will help startups build IP-focused innovations
 MCA has rolled out a portal along with an app to reduce procedural load on ventures which are usually stretched for resources

Source: Government of India, KPMG, Deloitte, Literature review

19
Digital Banking is rising dramatically
Penetration levels to cross 40% by 2020
Penetration of Digital Banking (%)

50%

45% UK China
77% Germany 57%
50%
40% Japan
83%
USA India
35% 75% 18%
Smartphones to
30% exceed number of
active bank
account holders
25%

Internet penetration to cross

20% 30%: generally a tipping
point for mass adoption of
digital banking
15%

10%
Mobile transactions gains
momentum: 2x transactions
5% and 3x value over previous
year

0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year

Source: RBI; Literature Review; MXV Analysis

20
 Most banks are seeing significant increases in mobile banking..
But their wallets have witnessed the most explosive growth

m-Banking Volume Aug 14-Jul 15 m-Banking Value Aug 14-Jul 15

25 80
70
20 60
Millions

INR BIllion
15 50
40
10 30
20
5
10
- 0

Axis HDFC ICICI Kotak SBI Axis HDFC ICICI Kotak SBI

m-Wallet m-Banking
• While mobile banking transactions have
tripled in the two years till 2014-15, going
Value (Bn) 82 from 53 Mn to 172 Mn transactions per
year, m-wallets have grown 7x in the same
29 period, going from 33 Mn to 256 Mn
10 172 transactions per year
• Some estimates suggest that value of m-
95 255 wallet transactions may grow 50x between
Volume (Mn)
2014 and 2020
53 108
33 • The Bharat Bill Payment System in the RBI
pipeline offers offering interoperable and
2012-13 2013-14 2014-15
accessible bill payment service, enabling
1035 multiple payment modes, including wallets.
60 224 Such nationwide initiatives are expected to
further amplify adoption of alternative
payment systems.
Source: RBI; MXV Analysis
21
While some areas are in early stages of adoption, others have already gained
wide acceptance

Awareness Early adoption Rapid growth Maturity

Wallets

General insurance Remittances

Payments
Business
Crowdfunding Lending Asset management

Credit cards and

Consumer loans
lending Life Insurance

Note: Relative positions are illustrative, and not to scale

Source: MXV Research

22
Most of these provide continued long-term growth opportunities
Market structure 2014-2020

- 2014
Wallets
- 2020
Growth Rates (2014-2020) (%)

Loans

Loans
Insurance
Insurance

MFs
MFs

Category Penetration (2014, 2020)

Size of bubbles indicates market size

Source: MXV Analysis

23
Online financial services* to be a Rs.15,000 Crore market by 2020

Opportunity Size of Online Financial Services (Rs. Cr)

Wallets Insurance Loans Mutual Funds Others

5,793
4,597
2,837
1,890
181

179 484 205 45

150

CAGR 79% 46% 49% 32% 26%

Over 14x the 2014 Market Opportunity

CAGR (2014-20) 32%

Market size represented by net revenue accrued to service providers and not the gross value of Total Total
transactions
15,299 2020 1,063 2014

*Not including payments, share trading and remittances

Source: MXV Analysis
24
Like other countries, Indian Fintech companies are emerging across
segments
Services Equity/Debt Financial Management

Crowdfunding Personal Finance

Remittances Insurance
Management

Business Lending

Credit Scoring
Payments Wallets

Credit Cards and Loans

Asset Management

P2P Payments
Consumer Lending

Source: Company reports; MXV research

25
Since 2014, about $1.3 Bn has been invested in Fintech India
Funding
Total Investment in
Segment Company Investors Amount Series Date
Segment ($ Mn)
($ Mn)

Fintellix (formerly
Analytics Undisclosed $ 15 Series C May-15 $ 15
iCreate)

BankerBay HNI $2 Seed Jun-15

Asset Management ScripBox Accel $2 Series A Aug-15 $ 15

FundsIndia Faering Capital $ 11 Series C Jun-15

SAIF Partners, Sequoia Capital $ 13 Series A Feb-15

Business Lending Capital Float $ 38
Creation Investments Capital, Aspada $ 25 Series B May-16

Undisc. Seed Oct-15

FairCent Aarin Capital Partners, JM Financial
$4 Series A May-16
Consumer Lending $6

Early Salary Ashok Agarwal (Transcorp Group) $1.5 Seed Nov-15

Amazon India, Fidelity Growth

BankBazaar $ 60 Series C Jul-15
Partners, Mousse Partners
Credit Cards and
BestDealFinance Kalaari Capital $3 Series A Sep-15 $ 65
Loans

CreditMantri IDG Ventures $2 Series A Jun-15

Forex Fxkart HNI $2 Seed Mar-15 $2

CoverFox Accel, SAIF Partners $ 12 Series B Apr-15

Insurance $ 52
PremjiInvest, Tiger Global, Ribbit
PolicyBazaar $ 40 Series D Apr-15
Capital

Source: World Bank; IAMAI; TRAI; ComScore; Morgan Stanley; MXV Analysis; MAPE research
26
Since 2014, about $1.3 Bn has been invested in Fintech India contd..
Funding
Total Investment in
Segment Company Investors Amount Series Date
Segment ($ Mn)
($ Mn)

Ezetap Social Capital $ 23 Series C Aug-15

QuikWallet (LivQuik) Snow Leopard Technology Ventures $1 Seed Jul-15

mPoS $ 51
ToneTag Reliance Capital $1 Aug-15
Falcon Edge Capital, Ola Cabs, Meru
Mswipe $ 25 Series C Jul-15
Capital, Axis Bank
P2P Payments Chillr Sequoia Capital $6 Series A Oct-15 $6
$18 Apr-16
Alibaba Capital Investors, ANT $500 Sep-15
Paytm Financial, Ratan Tata, Snow Leopard
Ventures $135 Apr-15
$65 Mar-15

FreeCharge Tybourne, Valiant Capital Partners $ 80 Series C Feb-15

Payments $ 964
Catamaran Ventures, New India
Innoviti $5 Jul-15
Investment Corporation
Momoe
IDG Ventures India, Jungle Ventures $1 Seed Feb-15
Technologies
BillDesk General Atlantic $150 Mar-16
NumberMall SRI Capital $ 10 Seed Jan-15

OneAssist Consumer Assurant Solutions, Sequoia Capital,

Security $7 Aug-15 $7
Solutions Lightspeed Venture Partners

SME Lending Lendingkart Saama Capital, Mayfield Fund $ 10 Series A Jul-15 $ 10

Citrus Ascent Capital, Sequoia Capital $ 25 Series C Oct-15
Wallets TreeLine Asia, GMO Ventures $50 Series C May-16 $ 50
MobiKwik
Tree Line Asia $ 25 Series B Apr-15
Source: World Bank; IAMAI; TRAI; ComScore; Morgan Stanley; MXV Analysis; MAPE research
27
Contents

The Emerging Annexure :

A Fintech TheIndia
India
Story Trends and Segment
Revolution Story
Opportunities Primers

28
Key Trends in Fintech
In the following pages, we have summarised 4 key trends as follows..

Bill
payments

Payments
Credit CONVERGENCE
products
Loans Insurance
Asset Meeting of E-Commerce
management Insurance and Fintech
₹
Investments Payments
COLLABORATION
• E-commerce is boosting
Fintech by creating demand
Traditional institutions for lending and payment
partnering with Fintech start-ups. Meanwhile,
Remittance AGGLOMERATION companies Fintech companies are
entering the e-commerce
space and vice versa
Creation of online financial • Fintech companies offer a
EROSION supermarkets cost effective way to scale up
their businesses through
partnership
Unbundling of bank • Early Fintech leaders are
services using their strength in one
segment to expand into allied
services
• Fintech start-ups are
replacing individual services
within the retail and
commercial segments of
traditional financial
institutions.

29
 CONVER

Erosion AGGLOM
ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

Fintech solutions are attacking services traditionally offered by banks N

Illustrative home page of ICICI Bank website

 Banks have traditionally been

the sole provider of an
umbrella of financial services
such as deposits, loans,
insurance, investments, etc.,
and have largely resisted
disruption. However, bank
processes have now become
cumbersome and entangled.

 In the past 20 years, there has

been a significant increase in
our digital footprint. Using
analytical tools, Fintech start-
ups are able to mine this data
for focussed opportunities to
offer simplified, customized,
intuitive solutions, through
mobile and other personal
channels.

 This customer-centric
approach is more often
attractive than the traditional
banking experience.

30
 CONVER

Erosion AGGLOM
ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

The challenge for incumbents N

Fintech solutions Cost of customer Lifetime value War for Talent Loss of high value
preferred by the new acquisition opportunities customers
generation

•Preference is shifting •Early stage Fintech •With the shift towards •Growth phase of •It is more likely for high
from physical stores & start-ups require large Fintech, incumbents will Fintech provides an value customers to be
human interaction to investments for see a decrease in the interesting opportunity tech-savvy, thus
digital businesses customer acquisition to lifetime value of for people looking to preferring faster
achieve scale, deterring customers unless innovate and make interaction and results
traditional institutions traditional banking effective changes to made possible by
from entering the models are reinvented financial services Fintech solutions
segment directly

31
 CONVER

Agglomeration: Alipay AGGLOM

ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

Traction in a segment can lead to a network of connected solutions N

2004 2013 2014 2015

• Alipay - Third party payment • Zhong An - China’s first online • Zhao Cai Bao & Sesame • Mybank - Launched by Alibaba
solution launched by Alibaba in insurance seller credit - Open platform for and Ant Financial with capital
the Chinese market • Yu’e Bao - Money market fund investment solutions & credit base of $646 Mn targeting small
enabling users to invest wallet rating system to unlock credit borrowers
balance flow to smaller players
• Alipay wallets - Online &
offline application with over 190
Mn active users
• Ant Credit - Offers micro loans
to SMEs and online
entrepreneurs

Processed $150 Bn mobile Settled transactions of $788 Bn in IPO planned in

payments in 2013 (54% of its total year ended Jun’14 2016/17
transaction volume)

Zhong An Yu’e Bao

Asset
Payments Insurance Wallets
Management

Zhao Cai Bao Ant Credit Sesame Credit Digital Bank

Crowd-
Lending Analytics Digital Bank
funding

Part of Ant Financial services Co-owned by Jack Ma

Source: MAPE research

32
 CONVER

Agglomeration: PayPal AGGLOM

ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

Traction in a segment can lead to a network of connected solutions N

Transactional credit Payment gateway Mobile wallet

US internet payment provider to over 9000 acquired for $800 Mn partnered with
giant scaled by online US merchants, and its subsidiary Subway, Harris
combining with expanded overseas P2P payments Teeter, Capital One
money transfer and renamed company Venmo etc. acquired for $280
company X.com PayPal Credit added to portfolio Mn

1998 2002 2008 2013 2014 2015

IPO and acquisition Competition from Moved $228 Bn in 26 Listed online money
by eBay for $1.3 Bn Google Wallet and currencies transfer tech
Square ‘s technology company acquired for
met by acquisition of $890 Mn
credit card capture
app

Spin off from eBay

Source: MAPE research

33
 CONVER

Agglomeration: Paytm AGGLOM

ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

Traction in a segment can lead to a network of connected solutions N

1 Uber partners with 3

Paytm for accepting Plans to roll out its Raises
payments under RBI hyperlocal business $680 Mn
guidelines from
Launched as a Alibaba
recharge portal for
Expanded into a
prepaid services – Launched Paytm RBI grants payment
mobile marketplace
mobile & DTH Cash Wallet bank license to Paytm.
with e-commerce
expected to launch in
2010

2014
boom Expands
2016
into the
hyperlocal
market by
investing in
Jugnoo,
LogiNext
2012

2015
and Little
Offered payment Taps into the P2P
gateway solution – payment space with
Paytm Payments P2P funds transfer

Bought title
sponsorship
rights for
Tied-up with Capital BCCI games
Float to provide SME till 2019
loans

2 4

Source: MXV research

34
 CONVER

Collaboration AGGLOM
ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

Traditional financial institutions partnering with Fintech companies N

Benefits of Fintech to Traditional Institutions Decision time for financial institutions

 Productivity improvements both to front and back office

operations
 Reach and engagement with customers much more; Options
likely to yield greater transactions
 Greater flexibility to roll out and distribute products; ability
Partner/
to build ecosystems around their products Compete using Build own
acquire existing
traditional proprietary
 Ability to decrease go-to-market time and increased operations technology
Fintech
ability to get focused products for specific consumers provider

Collaborative v/s Competitive Fintech

Investments ($ Bn) Compete v/s Collaborate Decision for Fintech
20  Fintech companies that competed with financial
institutions have made substantial inroads targeting less
15 profitable segments by delivering better customer
10.16 experience.
10  Most competitive Fintech companies end up being
7.98 acquired by banks
5  Collaboration has been seen as a win-win game with
8.26
Fintech companies in the lending, capital markets and
3.37 insurance sectors seeing huge synergies in partnering
0
with incumbents
2014 2015
 Level of investments into collaborative Fintech
Collaborative Competitive companies has outpaced those into competitive ones in
the last year

Source: Accenture, CB Insights

35
 CONVER

Convergence AGGLOM
ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

E-Commerce and Fintech are coming together N

Payments
E-com players
Lending Start-
ups

Suppliers Consumers
Lending Start-
ups

Financial Services Companies

E-commerce boom is helping drive Fintech adoption:

 E-commerce platforms share detailed earning estimates and transaction flows of their merchants, making it easier for SME lending firms to provide
loans to the latter
 Digital payment platforms are getting a boost from partnerships with e-commerce platforms
 Online consumer lending is gaining ground by providing credit at the time of purchase

Source: MXV research

36
 CONVER

Convergence AGGLOM
ERATION
COLLAB
ORATIO
N
GENCE

EROSIO

E-Commerce and Fintech are coming together N

1. The e-commerce company forecasts

consumer demand and places an order with
Consumers the supplier
1 2. The e-commerce company provides
relevant supplier data to the SME lending
company
2
E-commerce SME Lending 3. The supplier approaches the SME lending
Company Start-up company as it offers better loans, and is
referred by the e-commerce company
4 4. The lender uses the data provided by the e-
3 commerce company to evaluate the supplier
5 risk, and provides the loan
Suppliers
5. Using this loan, the supplier can now meet
the order

Digital Wallets Consumers 1. Consumers can pay for purchases through

digital wallets
2. E-commerce companies are partnering with
1 2
retail lenders to offer consumers financing
options
3. E-commerce companies are also offering
pay-after-delivery options - like Huabei in
E-commerce Lending Start-
China where consumers can pay for
Company up
purchases a month after delivery

Source: MXV research

37
Incumbents have made several investments in Fintech companies

 Globally, incumbents in the banking sector are scooping the opportunity to invest, mentor or otherwise integrate Fintech in their portfolio and systems
 Partnerships are undertaken as a means to overcome the slow technology transition of legacy institutions
 For instance, Citi acquiring Payquik and integrated its remittance platform, Quikremit, into its portfolio

Accelerator Internal groups

Citi Santander with dedicated Innovation
Ventures Inno- funding and
Norwest Spaces
ventures
Ventures personnel to
work on specific
technology
Acquisition projects
$100Mn

Allocated for
global investment
BBVA Barclays Amex
in retail & capital HSBC
Ventures accelerator Ventures
markets financial
services
technology firms

$200 Mn $100 Mn $100 Mn

38
This is just the beginning..

India is ripe for a

 Fintech market is forecasted to touch $2.4 Bn by 2020 from the current $1.2 Bn
Fintech revolution

 50% penetration of digital banking by 2022; more than a quarter of banking transactions to be digital by 2020

 Continued governmental push for financial inclusion. Low cost inclusion will required the adoption of technology
driven models

 Increased access can take the transaction value from $33 Bn in 2016 to $73 Bn in 2020 growing at a CAGR of 22%

Environment for Fintech

 Fintech start-ups in India are moving into every segment
start-ups improving

 Adoption of technology and trends by the industry is positioning India as a ripe market for Fintech start-ups

 $1.6 Bn Startup India initiative launched by the government in 2016 followed by SBI’s $30 Mn fund

 Success in any one segment can enable a player to enter other segments and create an online financial
supermarket. There is already some evidence of this

Collaboration over
competition is an  While individual start-ups may appear tiny compared to the institutions, they are also nimble, tech-savvy and well
emerging theme funded - with a different profit horizon. Traditional institutions like SBI are partnering with start-ups to increase their
reach at a much lower cost

 Recent announcement of UPI by the RBI means that banks and NBFCs will see a huge amount of growth from the
online and mobile space and reliable startups will be vital in making this transition

Source: KPMG; VCCEdge

39
Contents

The Emerging Annexure :

A Fintech TheIndia
India
Story Trends and Segment
Revolution Story
Opportunities Primers

40
Wallets
 The digital equivalent of a physical wallet, with preloaded money that can be spent at participating online and offline
merchants
 In India, prepaid wallets can be:
 Closed wallets, for transacting with a single associated merchant
 Semi Closed wallets, usable at multiple merchant establishments
 Open Wallets which can be used for payments and cash withdrawals

Global India

 Smartphone boom and low penetration of cards is India Opportunity Funding Events in India
driving wallet adoption in Asia
 The low penetration of banking  Paytm
 In mature markets, advancements such as NFC ˗ Raised $675 Mn from Alibaba
in India coupled with high
provide convenience that will translate to higher along with Alipay in Sept. 2015
mobile phone usage provides
transaction volumes ˗ Valued at roughly $4 Bn
an opportunity for wallets
 Wallet integration with payment and PoS systems  MobiKwik
˗ Can provide additional
is increasing efficiency, and customer reach
solutions such as ˗ Raised $50 Mn in Series C led by
 Joint venture between mobile payment system and remittances Tree Line Asia in May 2016
mobile carriers that use NFC ˗ Total funding of $80 Mn
˗ Provides backbone for  BillDesk raised $150 Mn from General
a larger Fintech and e- Atlantic in March 2016
commerce play
 Banks, telecom service
 Mobile wallet integrated with Apple providers and start-ups are
Watch, raised $24 Mn up to Series Start-ups Bank Wallets Telecom Wallets
providing wallet solutions
A
 User acquisition is costly,
 Combines mobile payments and a which will lead to consolidation
wallet to pay at enabled stores, in the segment, or providers
$16.7 Mn funding received focusing on niches

 Platform to enable any app to

become a wallet, raised $12 Mn
in Series B in 2013

41
Payments

 Being disrupted by solutions such as P2P payments, mobile wallets, mobile check deposits, mobile PoS devices and
proximity solutions like NFC
 Digital currency is changing payments and settlements with greater speed and lower fees
 Pre-paid cards act like debit cards without checking accounts

Global India

 Innovation in payments coming from telecoms, card India Opportunity Funding Events in India
companies, technology companies and banks
 High transaction fees , high  FreeCharge
˗ Retail companies in the US have combined ˗ Raised $80 Mn in Series C led by
minimum transaction slabs and
to develop a merchant owned mobile Valiant Capital Management
cost of traditional payment
payment system ˗ Total funding of $116.5 Mn
devices are driving adoption of  Innoviti
˗ Banks are innovating with lower cost new payment technologies ˗ Raised $5 Mn from Catamaran
solutions like mobile check deposits
 Mobile wallet and telecom Ventures and others in July 2015
 Banks collaborating to use blockchain technology, companies entering the ˗ Total funding of $6.6 Mn
transforming financial transaction processing payment bank space  Momoe
˗ Raised $1.2 Mn in seed funding
 Mobile recharges, ecommerce,  Citrus
restaurants, tax services and ˗ Raised $25mn in Series-C from
 Started as mobile based payments utility payments are sectors Ascent and Sequoia in Oct-15
solutions provider, expanded into that drive growth
other areas raised $590 Mn; IPO in
2015

 Online payment system, raised

$280 Mn from Amex, Visa, and
others

 Payments platform facilitates rent

transactions & donations, raised
$113 Mn in 2015

42
Consumer Lending

 Online marketplaces are offering platforms matching borrowers with investors

 Revenue is from processing fees paid by the borrowers and a share of the interest income of the investors
 Market growth is due to lower interest rates, simplification and hastening of the lending process. In some markets, there is
the opportunity to expand the credit market itself

Global India

 Ecommerce companies are providing consumer India Opportunity Funding Events in India
financing services e.g.: Huabei in China
 High growth potential as India  Faircent
 Emergence of on-demand market places, where ˗ Raised $250 K at a valuation of $8
has one of the highest offline
borrowers can be funded in real-time Mn in June 2015 from M&S
P2P lending markets in the
 Expansion of lending players into other products world Partners
such as mortgages
 Consumer lending is getting a ˗ Raised $4 Mn in Series A funding
 Recent troubles in 2016 with Lending Club with boost from e-commerce. E.g.: from Aarin Partners and JM
regards to loans sold to an investment bank has led Snapdeal now offers financial Financials in May 2016
to closer scrutiny of this segment of Fintech products on its platform after  IndiaLends
acquiring majority in ˗ Pre-Series A funding in July 2015
RupeePower
 With better regulation and
 Online credit marketplace, total access of credit reports,
funding of $1.2 Bn, IPO in December lenders can make better
2014 raised $865 Mn investment decisions and
borrowers can build their credit
 Student loan refinancing, lent $4 Bn
rating
in 4 years, raised $766 Mn to date,
including $400 Mn debt financing

 Online P2P lending platform, raised

$355 Mn from high profile VC & PE
investors

43
Business Lending

 Online financial platforms that act as digital NBFC’s and provide loan financing to SME’s
 Ecommerce companies have partnered with business lending start-ups, sharing their merchants’ business data, helping them
acquire finance for working capital
 This is the mainstay of most start-ups in this field

Global India

 Banks reduced SME lending after 2008, creating India Opportunity Funding Events in India
an opportunity for disruptive players
 With India’s booming  CapitalFloat
 Ecommerce companies can develop accurate ˗ Raised $13 Mn in Series A led by
ecommerce market, more
financial projections for their merchants, enabling SAIF partners and Sequoia in
businesses will seek workising
better and faster loan decisions February 2015
capital to scale quickly ˗ Raised $25 Mn in Series B led by
˗ Less than 10% of existing investors in May-16
SME’s can access ˗ Total funding of $41 Mn
finance from banking  Lendingkart
institutions ˗ Raised $32 Mn in Series B from
Bertelsmann and Darrin Capital in
˗ Ecommerce majors Jun-16to take total fund raise to
are tying up with $42mn
lending start-ups, for  Neogrowth
 Automated lending for small example Flipkart had ˗ Raised $35mn in Jul-16 from IIFL and
businesses, funding received $465 tied up with Capital Accion to take its total funding to
Mn Float and Lendingkart $47mn

 Listed company, platform for loan

financing to SMEs, IPO in
December 2014 raised $200 Mn,
valued at $1.3 Bn
 Online platform providing advances
against invoices, has raised $107
Mn up to Series C

Source: Ministry of Micro Small and Medium Enterprises

44
Asset Management

 Automated and semi-automated investment service firms that use algorithms to optimize investment returns
 Cost of these services are quite low compared to an investment manager
 A personalized portfolio can normally be set up in minutes by providing information about investment goals, risk appetite
 An algorithm adjusts the portfolio on an ongoing basis

Global India

 Large, renowned brokerage firms are starting to India Opportunity Funding Events in India
offer robo-advisory services to keep up with start-
ups  Penetration of investment  FundsIndia
instruments is still very low in ˗ Raised $11 Mn in Series C led by
 Ecommerce companies have launched money Faering Capital in June 2015
India
market funds, distributed on their platform/wallets  Scripbox
 Solutions are integrating
 Small clients are being tapped by lowering the ˗ Raised $2.5 Mn in Series A led by
accurate, actual tracking of
minimum holding size Accel Partners and other angel
performance of offline assets
 Start-ups are attractive, targeting niche segments such as gold, jewellery, and investors in August 2015
such as Silicon Valley customers real estate  MyUniverse
˗ IFC invested $10 Mn in Aditya
 Retention is high, but capturing Birla Money in September 2014
users requires investment in
marketing
 Automated investment service with
AUM of $2Bn in 3 years, funding
received $129 Mn

 Offers personalized financial advice,

raised $105 Mn, AUM $2.5 Bn

 Analyses personal investments,

raised $15 Mn

45
Personal Finance

 Account aggregation tools that provide individuals with a single view to manage their wealth, stock portfolio, personal
budgets, taxes, etc.
 Financial data displayed on a dashboard
 Provides tools to assist savings to a set target, or managing and using the most cost effective credit card
 Automatically segregates spends into consumption categories like – food, clothing, rent, etc.

Global India

 PFMs are pivoting towards personal wealth India Opportunity Funding Events in India
platform
 Tracking personal  MoneyView
 Wearables are being used to help make real-time ˗ Raised $8.5 Mn from Tiger Global,
expenses by reading SMS
spend decisions Accel India and Ribbit Capital in
received from banks and billing
 Offer multiple credit scores for comparison to merchants to streamline and April 2015
detect errors in scoring automate financial information
 Change from purchases is rounded up and  Tax saving planning and bill
invested into a portfolio e.g.: Acorns payment services offers an
entry point for personal finance

 Online platform to monitor & evaluate

credit scores, raised $ 365 Mn

 Provider of personal debt

management and refinance tools,
raised $35 Mn to date

 Listed company offering financial

applications for PFM, acquired by
Envestnet for $590 Mn in August
2015

46
Remittances

 Faster, secure, cheaper and more transparent than remittance via banks, money transfer operators and informal channels
 Transfer is initiated via digital device and received by bank deposit, cash pickup, mobile money or mobile recharge
 Customers are generally charged a flat fee per transaction, with no hidden costs

Global India

 Mobile remittance technology adding messaging India Opportunity Funding Events in India
features
 As India received the most  In Oct-15, Wildcard acquired Great Indian
 Giving senders control of the transfer by cash-to- Retail for $254mn
remittances in 27 of the past
goods service like paying for phone bills or  Eko, which has raised $6mn in funding
30 years, there is a large
medication from Creation Investments, expanded to
opportunity for both
 Incumbents are exploring partnerships with digital international and domestic offer international remittances for the first
currency start-ups remittances time to Nepal
 Telecom carrier partnership enable remittance  High volume opportunity with
through top-up recharges unbanked, replacing informal
 Incumbents are competing by lowering rates on channels with lower transfer
key US-India and UK-India routes fees and time
 Provider of inter-country consumer  RBI making it possible for
money transfer services, raised $15 Mn funds receipt regardless of
in May-16 from Viber owner Rakuten bank account
taking its fundraise to $47mn
 P2P transfer service targeting foreign
students and global businesses, raised
$26mn from Baillie Gifford in May-16,
taking its valuation to $1.1bn
 Online cross border money transfer
service for migrants and expats, raised
$45mn in debt financing in Feb-16
taking its total fund raise to $148 Mn

47
Insurance
 Insurance is a sector ripe for disruption but has been slower to innovate; the last year reversed that with a number of
companies attacking that space
 Sub-segments of disruption are
 Insurance aggregation- online platforms providing quotes from a range of providers
 Negotiation – collective negotiation for groups with unique needs
 SaaS tools for brokers

Global India

 Collective bargaining for individuals with similar India Opportunity Funding Events in India
requirements and evolution towards insurance
companies bidding for such groups  Indian insurance regulator has  PolicyBazaar
capped the fee for insurance ˗ Raised $40 Mn in Series D from
 IoT devices are enabling providers to understand PremjiInvest and others in April
leads initiated online, forcing
risk better and service customers with better deals 2015
changes in model, towards
˗ Usage-based-insurance that leverage becoming money ˗ Total funding of $69.6 Mn
wearables to provide better costs/prices supermarkets - selling multiple  CoverFox
products like loans, credit ˗ Raised $12 Mn in Series B from
cards, etc. existing investors Accel Partners
and SAIF Partners in April 2015

 Social Insurance start-up that

enables users to find best fit
insurance policies at lower cost

 Online business agent for small and

micro businesses

48
Crowdfunding
 Way of raising money for a project by which a large number of people contribute a small amount each, as:
 Donation
 Reward
 Equity exchange
 If the target collection is reached a service fee, or a percentage of the total collection is charged
 Additionally, these platforms act as a testing ground for the product’s market

Global India

 Markets getting more segmented with separate India Opportunity Funding Events in India
platforms for real estate, creative projects, funds for
a cause, etc.  Crowd-funding already  Wishberry
provides an alternative funding ˗ Raised $650 K in seed funding in
 Debt funding, as a variant of P2B funding, is also January 2015
channel for events, campaigns
present for crowd funding of small business  Ketto
and films in India
 Retail market places will allow funds pooling for ˗ Raised $700 K in July 2015
single item-high value buys

 Online crowdfunding platform,

raised $67 Mn

 Global crowdfunding platform,

raised $56 Mn
 Crowdfunding platform for small
businesses to raise debt finance,
raised $3.4 Mn as seed fund
 Crowdsourcing platform for
creative projects, raised $10 Mn
in venture capital

49
P2P Payments

 Cashless method to send, receive and charge money between peers

 Money is moved between the linked bank account/card and the P2P payment account, and between P2P accounts
 People not on the P2P network can also be paid by referencing their phone or email, but they have to sign up to access the
money
 This is usually free for customers, but businesses are charged

Global India

 Increased security through anonymity for one-time India Opportunity Funding Events in India
payments
 RBI guidelines for P2P  Chillr
 Consumers can make direct purchases from ˗ Raised $6 Mn in Series A led by
lending, protecting the lender
advertisers on social media Sequoia Capital in October 2015
and requiring registration
 Tech companies getting into the P2P payments ˗ Total funding of $6.5 Mn
 Increased convenience and
space with device integration
security for daily transactions  iKaaz
 Banks providing free P2P service within a fixed of several under banked –high ˗ Raised seed investment in 2014
weekly limit potential markets and launched Mowa earlier this
 Businesses can reimburse or provide rebates to year
 Adoption can be increased by
customers through this network
˗ Linking directly to bank
account eliminating
 P2P transfers enabled through card fees
Facebook messaging app ˗ Improving security
benefits
 PayPal subsidiary enabling P2P
payments, raised $1.3Mn

 P2P transfer through Snapchat,

powered by Square Cash,
Snapcash currently active in US only

50
 Blockchain
 Blockchain are distributed databases that can be used to initiate and verify transactions and records without recourse to a
central authority
 The system operates on a peer-to-peer basis and promises to eliminate the need for a central authority to clear transactions
thereby reducing costs and increasing transaction speeds
 Payments has been the immediate beneficiary of blockchain and could disrupt cross border remittances which are currently
slow and expensive
 Given the nascent stage of the technology, institutions while accepting the importance of it, have been slower to adopt with a
lack of understanding being seen as an impediment
Global India
Opportunity Overview Industry Acceptance & Threats India Opportunity
 Potential to reduce banking industry’s operational  Governance and regulatory acceptance will be  Blockchain / Bitcoin startups are
and infrastructure cost by up to $15-20 Bn per year required for broad acceptance of blockchain starting to emerge with early movers
 like Zebpay and Coinsecure recently
 Global investment in blockchain is expected to R3CEV, with a global consortium of 45 financial
companies, is developing a distributed ledger raising Series A funds.
increase 4x by 2019, highlighting the importance it
could play in financial services technologies for the global financial markets  RBI is studying blockchain, and will set
up a committee to study use of
 Decentralized permissionless platforms based on  The Hyperledger Project is a collaborative effort to
address important features for a cross-industry blockchain to reduce paper currency
blockchain, such as ledgers, will replace
centralized systems open standard for distributed ledgers  Axis Bank has declared intent to use
 blockchain for high volume corporate
 Immediate opportunities include ledgers for Current issues include speed and efficiency cost of
blockchain networks, and cost of integration with transactions in trade finance and forex
clearing and settlement of global transactions, such
as transnational payments legacy applications

Global Investments in Blockchain firms ($ Mn)

500
390
400 300
300
180
200 100
70
100 31
0
2014 2015 2016(e) 2017(e) 2018(e) 2019(e)

Source: KPMG, Accenture, Morgan Stanley Global Insights, Santander, PwC, Literature review
51
About MXV Consulting & MAPE Advisory Group

 MXV Consulting (www.mxv.in) is a strategy and  MAPE was founded in 2001 by ex DSP Merrill Lynch
management consulting firm based out of Bangalore in senior bankers as an investment bank focused on M&A
India. Our focus is on building sustainable competitive advisory and Private Equity fund raising
advantage for our clients and helping them become industry
leaders  MAPE has an excellent deal track record having
successfully closed over 150 transactions, across
 We have the experience of working across multiple sectors, totaling to a deal size of over US$ 5 Bn (approx.)
industries and functional areas - enabling us to bring in
fresh ideas and a strategic perspective to every  MAPE is present across 3 cities:
engagement. Our insights are backed up by a rigorous
˗ Mumbai
process of analysis and solution development. This ensures
that our recommendations are well researched, practical ˗ Bangalore
and tailored to an organisation’s requirements. In many ˗ Chennai
instances, we also take on the role of implementation
managers  MAPE has been consistently ranked amongst the top 10
investment banks in the country (per Bloomberg league
 Our clientele includes leaders across various industries. We tables) for the last 13 years (CY2002 – CY2014) and was
believe in long term relationships with our clients, and have awarded the Boutique Investment Bank Of The Year
worked on multiple engagements with most of them Award at the India M&A Atlas Awards 2012

 MXV has worked on more than a 150 assignments till date.  Leading clients who have closed signficant M&A / PE
Our clients are global in nature – including India, the US, transactions include Tata Sons, Dr. Reddy’s Labs,
Middle East, Europe and Asia Pacific Goldman Sachs, Godrej Consumer, Blackstone Group,
Mahindra, Wipro, Café Coffee Day, CRISIL, Star Health
Insurance, Glenmark Pharmaceuticals and Jyothy Labs
 In 2014, MXV Consulting was listed among the most
amongst others
promising business consultants in India

52
Authors of this report For further discussion, please contact
MXV Consulting MAPE Group Amit Garg Jacob Mathew
Bangalore Bangalore
Amit Garg Jacob Mathew
[email protected] [email protected]
Dhritiman Borkakoti Saloni Jain
Havisha Reddy Prabodh DP Shalabh Agrawal Saloni Jain
New Delhi Mumbai
[email protected] [email protected]
Kim Bingham Prabodh DP
New York Bangalore
[email protected] [email protected]