Top Innovations and trends

In this report we cover 3 basic pillars of finance-:

1)How India pays
2) How India saves
3) How India lends
In midst of this4) Profit pools of Indian market among these pillars
Then we cover 4) basic building blocks and innovations that enabled the
innovations supporting these pillars/what makes India ahead and how
regulator is playing the catchup game, also cover the software stuff
5) Lastly we cover the innovations we are looking forward to
Tweets, photos, memes, graphs, headlines

A bit of history- India was a cash economy, low ATMs, 4-5 slide history, number of accounts
low, bse/nse, Commodity exchanges, SME IPO, Debt market (mention no marketplaces yet),
gift city –mauritious etc. Talk about new market.
India has best in class regulations- UPI, Settlements, RBI sandbox,
Looking forward: UPI credit, no physical cards, no POS machines- credit card will exist in mobile
Payroll norms (blue collar workers)- compare with US
Make a slide- in US everything is Fintech- Harvard, Apple, : Nifty revenue pool- ~BFSI
contribute half
 How India Pays? Cash still exists but transactions mostly Digital

India Cash usage has been flattish over past 8 years post Demonetization
Cash in circulation has been flattish but velocity/transaction share has reduced with the NPCI led UPI wave
• Rickshaw wala 23 Rs base fare in Mumbai meant a lot of coins still in circulation!
Source:RBI, Bernstein , Nasscom
 ATM withdrawals also muted- cash stagnating
Volume of ATM Transactions over the last decade-
Number of ATMs been flattish ~2lakhs overall over past 5 years

Source: RBI Data

Source: RBI, Bernstein report

 Soundbox uptake-UPI QR code (~20 m+) far
outpacing POS Terminals (7.8m) and ATMs (0.2m)

Soundbox growth Source: Paytm investor relations.

We expect ~ 20m soundbox with Paytm having
>50% share (rest Phonepe, cred)

Source: Livemint
 Digitization of payments :Debit cards are dying,
credit card volumes up but UPI is a Tsunami

Source: The Ken

 UPI driving the wave with 3 payment tech cos ruling

Source: Bernstein, RBI

 Credit Card boom: Rupay, New reward ecosystems winners
Credit card growth to continue driven by low Rupay UPI cards compelling proposition to vendors due to
penetration (India 6% vs ~30% in developed lower MDR (200-300 bps vs 0-100 bps)
markets)- 90 m credit cards , 60 m+ unique users For consumers Rupay has lower benefits vs ~150bps
Existing credit card companies' revenue pools to (rewards+ interestfree credit ) in Visa/Mastercard
shrink Networks (Visa Mastercard Amex ) revenue pools to taper

Only best rewards ecosystem to win the game- credit card

rewards will be replaced by new ecosystem

Source:Bernstein, RBI
 Payment Digitization led by UPI consequences I:
CoD from ~60% => under 30%
Food qcomm- cod from 55-60% to 10%

Ecommerce the COD is reduced from 60% => 25-30%

Credit card and debit card spends (ecomm, qcomm) are

replaced by UPI

Source: ET
 How India Saves ($11 trn Household savings):RE still 50-60%, Gold losing its sheen &
Financialization of savings in vogue (Equity, Bank deposits, PF, Insurance dominate)

Source: RBI, AMFI, Jefferies

 Financialization of savings: SIP - $2B+/m => Net MF AUM $285b+
Incremental DII flows > FPIs. Fintech driving ~1/2 of SIPs

Source: ET, Monarch capital

 Financialization of savings: Where are Indian’s putting
money via digital modes post covid? – RMG, Crypto, Stocks
RMG Pool $2.2 b+: Cricket, Crypto $2.2 b+: Ethereum,
Rummy, Ludo, Poker Bitcoin, Cardano, Solana

Cypto exchanges (wazirx closed) & investment in

crypto startups didn’t take off due to regulations
but investments in top assets did-
19 m crypto investors in India
53% of investment in top 8 coins, followed by 18%
in DeFi
Source: ET, Monarch capital, Livemint
 Financialization of savings: Where are Indian’s putting money via
digital modes post covid? -Retail stock participation in stocks all time high
Accounts openings Zerodha revenues 5x in 3 years, Angel ~4x in 5 years

Source: Mint, BS, 2point2 capital and NSE

 Financialization of savings: Retail stock participation all time
Accounts openings India has No Parallel to 401k,NPS are still small but SIPs

Source: Mint, BS, 2point2 capital and NSE

 Savings innovations- Curie, microsavings – Jar,
gullak, retail stocks- shift to mobile, smallcase
Shifting of user base to broking mobile apps with huge
Micro savings to difference in transaction execution experience
gold/other assets
Curie provides high
yield savings bank
account by investing
deposits in mutual
funds & providing
UPI based debit card
Jar had 5 m
registered users July
2022
While gullak had ~25
lakhs GTV and 1
lakh+ MAU in early
2022

Source: Livemint
 Innovations in distribution of savings/other products
(wealth, insurance)

AUM of INR 4700 cr

Source:
 Distribution innovation : Banking correspondent
=> Fino/Kirana=> Onecode, Onescore

Banking correspondent model replaced by Kirana microentrepreneur becoming a

facilitator for Opening bank account, Payments ( initial key offering)

Apps like onecode become distributor of

financial products of multiple BFSI player
& discretizing distribution via partners

Source: Livemint
 Insurance- New product innovations- Insurance on
rides, travel- Insurance is truly embedded- ride
apps (Uber Ola) OTAs (MMTs, etc)

Source: Livemint
 How India Lends: The shift from informal=> formal lenders => now gaps filled by new age lenders

New age lenders- targeting NTC customers &

Moneylenders(unorganized Banks and NBFCs
riskier segments via Digital lending
segment-particularly in rural -Regulated Environment -Innovative model
and sub-urban areas) -Wide range of services -Ease of access
-Informal lender NBFC have less stringent -Use of data analytics
-High Interest Rates regulation & higher risk and AI
-Easy to access appetite
Corporate

BNPL Personal Loans

Gold Loans

NBFC came to existence by catering to a niche segment and

capturing un catered whitespaces with better service elements, Most innovations in Digital lending including BNPL , PPI cards ,
same is the case with new age lenders FLDG didn’t work due to flaws in model economics as well as RBI
/regulatory reasons
 Innovations in Lending- BNPL
Financial struggle due to Small amount & Short tenor
Indian players have ~INR 10-20k worth of credit
• Concept is well spread worldwide with Swedish players like Klarna lines with ~30 day tenor and ~10m active users
having >1 m MAU , $150 avg amount/customer , 40 day tenor, $23
ARPU per user
• Credit equation= SPREAD (NII)*AMOUNT*TENOR – NPA
• Despite obvious benefits to accelerate commerce , BNPL lenders
struggled due to short tenor, small amount of loan and high input costs

Old guard – Bajaj

Finance still doing
fine due to lower
input cost of
capital which new
age BNPL players
lack

Source: Ken, Captable

 Innovations in Lending- BNPL
BNPL is not truly embedded (operational struggle)- need to get credit line pre-approved

Source: Ken, Captable

 Innovations in Lending- BNPL cards or
PPI cards backed with a credit line to mimic credit card
• Regulations/RBI restrictions in mid 2022 led to
reduced limits and friction in product
• Slice combined PPI card which can be used to spend money deposited in PPI
account just like debit card linked with bank account + a credit line via NBFC
which can be drawn when needed
• PPI card MDR economics + credit Line drawn which can be converted in EMI
installments mimiced Credit card which can be issued by only banks.
• These were directed at NTC young borrowers and led to huge volume
pickup in 2021 as banks were not catering to this segment

Source: Ken
 Innovations in Lending- Fluid product interface to track spends/rewards
and co-branding + credit card management software to navigate regulatory hurdles

a clean interface Both card options provided minimal rewards/cashbacks/perks

but appealed to respective audience – Young new to credit
(Slice), Premium no frills metal card customer (Onecard)

Onecard gives banks -technology to

manage credit cards covering all things
from onboarding to handling bill
payments.

Source: Ken
 Innovations in Lending- Loan against Financial assets (MFs, Shares,
Insurance, deposits)
Instant credit line possible due to
e-lien creation APIs made available
by bodies including depositories
(NSDL, CDSL) & RTAs (CAMS,
Kfintech)

Source: Ken
 Innovations in Lending- Microfinance, embedded finance/lending

Embedded finance- Any B2C app having large

customer base exploring lending and ad
monetization as profitability drivers

These apps cross sell credit Fintech platform to

lender model ( Flipkart lead gen solve)

Make a slide- in US everything is Fintech-

Harvard, Apple

Source: Ken
 Overviewing Journey of Payments, Savings & borrowings
: We get 5 key profit pools in Indian Fintech

1. Lending (Digital lending)-

$100b+
This is primary reason why all
consumer facing apps are vying
for NBFC licences to get access
to the largest pool of
monetization

Source: Livemint
 Overviewing Journey of Payments, Savings & borrowings
: We get 5 key profit pools in Indian Fintech
2. Broking $3b+
3. Cross border payments- ($3b+)
$350 b SME /MSME cross border exports+ ~$30b in Freelance/SME IT (ex
big IT players) * 100-500bps+ of spread = $10b of potential revenue pools
Paypal India revenues ~$100m

4. Distribution and manufacturing

of financial products

5. Fintech Infra SaaS ($1b+ revenue pool)- LOS players (

Lentra $30m revenue), LMS , collections
Perfios ($50 m revenues), CCMS players – Zeta ($100m+),
MPL ($30 m+)

Source: Livemint
 No friction of fees for anything: In a strange mix of
Govt push as well as market competition, we have
no fees for: ATM cash withdrawal, money transfer
within India, savings accounts, -- make a list

• Compare fee in ATMs (US vs India)

• Compare fee in other payment methods – Venmo ,
Cashapp vs UPI (US vs India)
• NEFT/RTGS fee (US vs India)
• Delivery in exchanges INR 20+ Taxes vs NYSE

Source: Livemint
 Enablers of Fintech ecosystem making Indian
Banks way ahead of Global peers just touch below
in market cap terms
• Mention the enablers (ekyc, enach, esign, aadhar) and
how India’s cost is lowest in the world
• Opening an account low cost ($25 – Sruthi’s article),
cheque book, atm withdrawal fee comparison and how

Source: Livemint
 Enablers of Fintech ecosystem

Source: Livemint
 Infra players
Private Nationalized

Source: Livemint
 Regulator quashing Lending innovations – FLDG,
PPI cards etc as it wants only Banks/NBFC to lend
• Regulation paying catchup to innovation-
Smallcase

Source:
 Looking forward to- Mention what is innovation
here?Account Aggregator and OCEN pulls spiking

• Onboarding/KYC automation
• Distribution of financial products- Loans, Insurance, MFs
• Embedded finance and improving workflows for higher
penetration of consumer financial products
• Consumer credit increase $xx b=>$yy b and MF etc flows
increased to $xx b

Source: Livemint
Source: Livemint
 Alternate data bases for underwriting: AA
(GST)+ LSP+ Underwriting module+ Collection

Source: The Ken

 Appendix dump

Source: The Ken

 Credit and debit card

Source: The Ken

Source: The Ken
 Cash in circulation increased post demon=>
can’t claim digital economy

Source: The Ken