Mainstream Fintech: Many Underserved Segments

The 8th Blume Day held on 28th Feb, 2019, saw a fascinating discussion amongst the panel comprising Blume’s fintech portfolio. The panel comprised Puneet Gupta of Kaleidofin, Sampad Swain of Instamojo, Rajan Bajaj of Slicepay and Dhirendra Mahyavanshi of Turtlemint, and was moderated by Jitendra Gupta of PayU. Karthik Reddy, Managing Partner, Blume Ventures, introduced and moderated the panel for the first 5 minutes as Jitendra was delayed due to traffic.

We had set this panel up to generate an engaging discussion to understand if there are segments in the whole fintech landscape that are presently underserved.

Karthik Reddy started the discussion by describing the evolution of the term fintech. Traditionally, fintech, he mentioned meant the players who served the BFSI segments with their IT solutions – in some senses like Blume’s present portfolio members Kuliza, IDfy and Tookitaki. However, ‘fintech’ today means “financial services on steroids using digital infrastructure”.

From the panel discussion, we have highlighted four key discussion points that emerged underpinning the case for why there will be more fintech startups as well as more opportunities for these startups, tapping currently underserved segments.

Existence of White Spaces

Sampad, the founder of Instamojo, set out to address the needs of MSME (Micro Small & Medium Enterprises) Entrepreneurs. During the journey, instead of encountering the cliched, 45-year old, male entrepreneur leading a manufacturing enterprise, he saw that the median customer for Instamojo was a 28 year old female working from home in a tier 2/3/4 town! Typically, she was a first generation businesswoman seeing great demand for her product, who needed various tools to support her business. This completely changed Sampad’s view of his customer, and what he thought of as the MSME entrepreneur. Following this discovery, Sampad spends all his time trying to enable these micro entrepreneurs, a previously untouched white space, grow their business – be it payments, setting up channels for doing commerce like websites or even lending.

Underpenetrated Markets

Puneet Gupta of Kaleidofin outlined how not even a single company has been able to solve this problem of giving financial advice for the 800mn low income people of India. The cost of acquisition is high. Also, the behavioural nudges towards savings, investments and insurance is not easy to do because of the thin margins for savings and the volatility in cash flows. Kaleidofin had to figure out a unique ‘tech-and-touch’ model that ensured a low-cost acquisition model and enabled the right behavioral nudges. Finding out this particular model was in itself a challenging task. Given this complexity of the problem, no single large company has been able to solve this problem for the segment.

Product Innovation and Variety

Rajan Bajaj of Slicepay mentioned that even though everyone is trying to get into lending, he is not worried about competition. There are many segments in lending across various risk and income classes, each with its own unique challenges and opportunities. With so much opportunity he feels there is ample space for Slicepay to create a large digital lending play in the market. To enable this, SlicePay has shifted from being an aggregator of lending to a lender themselves. To support this strategy, they have secured an NBFC (Non-Banking Financial Company) license, which helps him access funds at a lower cost of capital, thereby helping him offer loans at lower rates, and also enhances his ability to serve a wider base of customers.

New Opportunities led by Regulatory Changes

Dhirendra Mahyavanshi of Turtlemint, launched in a market which had a powerful incumbent, Policybazaar. He counts 2 major factors that contributed to Turtlemint’s growth. The first was a regulatory policy change that allowed even a less educated Class X graduate become an agent. The second was the Turtlemint product that helped this agent choose the best insurance policy for the customer. Both these factors fed into each other and helped him grow Turtlemint at a great pace, requiring only a sixth of the capital needed, and only half the time the market leader took, to reach where the market leader was when they started.