Sky is the limit for fintech

The fintech sector in India has off recent weathered many a storm. From the liquidity crunch in the non-banking finance companies (NBFC) space to the issue of a regulatory sandbox for the beta-testing of new products, start-ups have been trying to overcome the multiple challenges.

However, start-ups appear to be witnessing some light at the end of this dark tunnel. Fintech ventures are now considering aggressive expansion, especially in the overseas markets. Currently, India has over 2,707 fintech start-ups, of which over 1,300 of them are said to have cropped up between 2015 and 2018, according to data by Zone Start-ups and fintech insights platform Medici.

Experts say funding has been smooth for the sector so far and it's time to look abroad. As per Tracxn data, the sector collectively raised $1.5 billion last year across 175 deals. This year, as per DataLabs, fintech is likely to raise a cumulative $2.36 billion, of which it has already raised $1.01 billion in the first half of 2019.

"India is a $5billion huge and complex market and will always be our heartland. However, now that we have built our platform here, we see launching in other countries as a big opportunity. In our case, it is pretty straightforward to go live overseas, as that is the way we have designed our product," says Jonathan Bill, founder and CEO, CreditMate, a digital lending start-up in which Paytm has infused funds.

The decacorn Paytm, valued at over $10 billion, has a certain global presence in markets like Canada and Japan. Other fintech players are now considering making similar moves.

According to Vinay Bagri, co-founder and CEO of NiYO, the primary attractions for overseas markets remain the ability to translate the learnings related to understanding the customer profile, needs, avenues for monetisation and scale quickly in markets which offer similar market potential and has similar sets of inefficiencies or customer pain points that the start-ups are trying to solve.

"Moreover, Indian fintechs have achieved significant scale and maturity of business models and have robust tie-ups and partnerships with banks and financial institutions. Thus, they have an upper hand in terms of experience and setting up practices overseas as compared to their counterparts from other emerging markets,'' adds Bagri. NiYO, which provides digital banking solutions for salaried employees across various sectors, has raised $35 million in a latest round led by Horizons Ventures and Tencent Holdings.

Experts say international expansion carries several benefits. "It goes a long way in enabling fintechs to justify their valuation, as it helps prove their ability to expand into other markets. It opens up the doors for collaboration with large multinational organisations, generate newer revenue streams and tap into the talent pools from other markets," adds Bagri.

According to Saurya Prakash Sinha, CEO and co-founder of Recko, which recently raised $1 million in funding from Prime Venture Partners, start-ups should go after a large market, build an amazing team, product and then execute with full force. "Yes, the Indian market is large and Recko is absolutely focused on winning in this market - having said that we have an opportunity to build a global company as the problems faced are similar and we have an early-mover advantage, hence our global expansion plans.'' Recko enables artificial intelligence (AI) powered reconciliation of digital transactions.

For overseas expansion, Bill feels South East Asia, especially Indonesia and neighbouring economies are a good bet since they have similar problems to solve.

Countries like Singapore, Vietnam, Thailand, Malaysia, Philippines are also good. "These economies have a similar set of business opportunities arising out of inefficiencies in traditional banking systems. NiYo is actively looking to expand into markets such as Singapore and Vietnam," says Bagri.

Another fintech Obopay is looking towards markets in Africa and towards Mexico. They have a strategic $15 million pact with Banque Atlantique in Africa which is a bank that facilitates digital banking platforms, and another pact with Mexico-based fintech GoRed.

Says Shailendra Naidu, CEO of Obopay, "Present in four out of the top five mobile money markets across the globe and having powered over 11% of the global mobile money transactions with zero fraud cases, we have carved a successful growth story. Our tie-up with GoRed is in sync with our global expansion plans which will strengthen its presence in important geographies."

Even while many fintechs are looking towards developing economies, Recko, which raised additional capital recently, now wants to tap developed markets like the USA.

Experts say overseas markets will grow to become key growth and revenue drivers for fintech start-ups in the years to come. Bagri says they envisage at least 10-15% of their revenues to come from international markets in the near-term and this percentage will increase to 25-30% over a three to five year horizon.