Fintech- Emerging Opportunities

By Deepak Gupta & Sunil Gulati (Advisor- WEH Ventures)

This is part of our continuing series on sectors of interest to WEH ventures. Our first post in this series was on the content space ( Our next post would be on the commerce sector.

Fintech sector continues to attract investor attention in India- despite some cooling off in the US. In a way, it is natural as India is still a market that needs serious development in this area and the eco-system is seeing the tailwinds from many vectors including digitization and the government. We have seen how the epicenter of this sector over the past 7–8 years has evolved from distribution and consumer aggregation (Policybazaar, bankbazaar) to payments (Paytm) to lending (P2P and others) and the story is by no means done.

Here are some of the areas that we think merit attention:

a. Helping banks get smarter: While India is emerged as an internet economy, it is still emerging from a financial penetration perspective. New banks are able to enter the market and create valuable propositions still on the classic banking model (borrow at less, lend at high) (eg Yes Bank, RBL and the like). Banks are trying to keep apace with innovations to hold on to wallet-share of their customers. For the medium term, banks will still own the bulk of customers for financial services and hence anything that helps them to better segment, analyze, retain and cross-sell to their customers would be interesting. E.g. (CRMNext 2.0?, Easyrewardz, Insense analytics).

b. Opportunities arising from more flows in the formal system/GST: With GST coming on board soon, and the tightening around cash transactions, the formal financial channels are only going to expand and include a larger number of SMBs. We expect to see numerous software, bundled service offerings to enable millions of corporates to enable GST compliance and also optimization. Also as the flows between various sellers and buyers become more auditable and transparent we believe there is an opportunity for plays which impact the cash conversion cycle and working capital costs of SMBs (e.g. Taulia)

c. Lending evolution: The number of players and species in the lending market has grown by leaps and bounds: P2P, payday, instant EMI lending and what not and likewise on the business side. There is innovation in products, customer acquisition, credit process and fulfillment. There is probably place for many players here and various types of marketplaces (a bit like travel aggregators in the hotel/lodging space for example). The debate is open on whether marketplaces can survive without having a lending arm. Our belief is that market places will eventually create more value though for certain niches where products/ credit appetite are limited, an in-house balance sheet may also be required to seed the market. This can be characterized as a thin NBFC rather than a thick one.

We fundamentally believe that the future of Fintech belongs to entities that have the ability to capture data and the mindset to use the data and its insights in creative ways.

WEH Ventures is a newly-minted multi-sector seed stage fund.