Coverage by Bhat Dittakavi of Variance.AI on “Fintech Panel Session” at T-HUB on 5th Dec 2016
Panel Members
Siddharth from Razorpay
Vikram Bose from HSBC
Moderator: Ajay Jain
Siddharth from Razorpay
UPI is a wallet that gets you 4-5% cash back every month. Thought behind NPCI was to cause dent in the wallet market. Wallet companies are run by MNCs. You can’t replace them overnight. PPI (Prepaid Payment Instruments) license scenario is 40 licensees now. We only know 6 names and others are dead. Within those 6, consolidation will happens Ultimately UPI and one more will be left.
Q) Where do you see potential? Wallet or UPI?
Siddharth: Wallet. 230 million cards issued on RuPay. 99% of them are never opened as they are given to Jan Dhan account holders. Once they use, government goes to Visa and Master cards.
Q) How do you see third party apps integrating with UPI?
Siddharth: Government will force them to integrate.
Razorpay is 2 years old. Till 8th of November 250 out of our 30000 transactions are from UPI. As of last night, 11% of 42000 daily transactions are from UPI. Massive pressure on wallet charges. They will come down. Facility of getting a virtual interest to current account is on cards. Charges are same as having a debit card machine. In v2, charges will be lower than debit card charges.
Ajay Jain: Current account is something government is aware without which they can’t beat PayTM. Razorplay is Y combinatorial startup!
Q) P2P lending is a massive opportunity to emerging India. Personal loan from a bank gets cumbersome. Quick small loans of say Rs.5000 is a massive opportunity in India. Why is P2P lending an opportunity?
Hardly any penetration in creation of wealth as savings is predominant. This helps their money exposed to create wealth through lending: Macro-economic GDP value. Borrower side, banks make it complicated. P2P that worked with US may not work in India. Be focused on Indian social factor of “low trust” factor. Give loans to knowns or acquaintances.
How selective are you in picking the right individuals?
What is selection criteria?
Repeat customer percentage?
Cash is the context that works in India. Our concerns are with RBI.
Q) Do you see challenge in terms of KYC information?
India Stack is coming. It helps.
Q) 200 investors in one secularized loan and what if there is a default? How do you handle NPA? Securitisation? Will it work in India?
P2P will be unsecured lending. Not sure whether it ever gets securitized. The only way to do this right through proper credit rating system.
Q) What is your opinion on community segment based lending? Conversion of unorganised to organised?
Cooperative banks do it within Maheswari community. There is  some kind of social securitisation. Scalability depends on geography and beyond. Selective lending is better than community based lending.
Vikram: If the profiling of the borrower happens based on return track record, this gets better. If credit rating is not shared across the lenders, we can’t do much. Put some scores from different agencies. As long as the score is visible, hiding the history, we are still Ok.
Return on Loan depends on 1) Intent 2) Ability
Your model must address both.
RBI guideline is sealed. Most fintechs evolved in USA.
Siddharth: Have we done our home work right? In India, not too many Fintech focused on B2B. Look at failure rate of B2C? No focus on B2B.
In India, we ignore the B2B. Not much innovation in Fintech B2B. Compliance and AML space, how do I get into HSBC? 
Vikram: How have you assessed my needs as a bank? How do you know? If big bank uses in-house product, why do they use you? Check with the big bank what the real pain point is. Lots of startups don’t go beyond an year or two. Get the idea vetted by the market first. Why foodtech as a market failed? Was that actually food plus tech? Don’t go for HSBC. Go to small banks as Sandbox. Take the working model to big banks after proof.
Siddharth: One of the reasons Razorpay (YC2015) could do good now is I could arrange meetings with Flipkart but we started with Startups first then only recently we signed deal with big customers. MasterCard backed up but we waited to go to flipkart.
“POC combined with Validation that demonstrates the value” is the key.
Attendee: Entry barriers in B2B is higher so B2C is easier. Trust factor is also the key.
Q) Social innovation Fintech we tried in HSBC. We open the social challenges to wider audience. We use it to foster. More banks are thinking to get the challenges to the startup world. We don’t know how to do typical ideation. What is the customer journey?
Siddhart: coming up with a problem statement is a challenge. B2B Fintech needs insider knowledge that startups don’t understand. Grey hair is needed. Grey hair is the key. Banks also don’t know all about AML. Add value. Are you after a domain or aggregation? Every month we call an industry veteran. Guest was Nitin Kamat of Zirodha. He said, he was share Dalal and hence couldn’t get married. Now it is a Fintech company.
Attendee: In B2B, no one tells the problem. We changed or product 6 times in 2.5 years. Continuous fail-fast fail-forward. 
Attendee: B2B means you bleed less: controlled costing. Keep scaling. (Syncapps for hotel industry -we serve 8% of hotel industry). Make my trip and goibibo are classifieds. We connect to the inventories of the hotels that hotels never understood. Percentage was their advantage before and subscription is to their advantage now.
B2B success or failure not overnight.
Regulatory framework impacting rural startups
Vikram: Fintech attracts regulation. It has to have MOA, board minutes, service taxes, demonstrate the source, money coming is accounted for and so on. Keep books in order. There is a cost to compliance. Don’t underestimate it. If you are lending, there is legal liability. It is not about just the regulation compliance but also about legal liability. KYC: Do you know this space? Transaction monitoring models are difficult. Big banks have challenges as regulatory market for each vertical are different and difficult. China has nothing in writing! Yet, you have to know. How do you interpret the regulation and how do you comply? No shortcuts at all. Get proper legal view. Be a sales Rep by yourself. Be compliant. Don’t mess with system.
Q) Dealing with SEBI?
Vikram: Ask your banker to connect you with their legal advisory. Find out who is lawyer in this space, not CA.

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