The Pattern #43: On innovation, government and FinTechs in perfect lockstep

Mayank Jain   /    Head - Marketing and Content    /    2023-01-13

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    Hello everyone, 

    Welcome to the 43rd edition of The Pattern, a weekly newsletter where we unwrap and untangle the latest rumblings from the world of finance, economy, and technology. This has been a week with a lot of activity that deserves to be put in context so let’s begin. 

    Institutional rails are a gift that keeps on giving

    There’s nothing like institutional support to legitimize and fast-track the innovation and vision of FinTechs. And India’s vibrant government-backed infrastructural rails like UPI, OCEN, ONDC, and the Account Aggregator framework enable countless players and use cases to flourish.

    The Account Aggregator network is growing tighter. PB Finance, the parent company of PolicyBazaar, has received in-principle approval for its Account Aggregator license – becoming just the ninth entity to do so.

    With its vast network of insurance providers, the addition of PB Finance will further enhance the Account Aggregator ecosystem, and this could herald the entry of more insurance brokers as well as insurance firms to the ecosystem, adding to the mix of credit and investment information providers. 

    In the spirit of exploring new applications, UPI will also extend its services to NRIs. It will support international mobile numbers linked to non-resident external (NRE) or non-resident ordinary (NRO) bank accounts. So far, NRI users of UPI had to keep their Indian phone numbers activated and incur high international roaming charges.

    In 2022, India received $100 billion in remittances from abroad, but the number is projected to fall to 2% in 2023 due to inflation and an economic downturn. Let’s see if UPI’s signature ease of transacting will affect the number and frequency of international remittances. 

    India’s superapp march experiences teething pains

    The ‘coffee-to-cars’ conglomerate Tata Group rolled out its superapp Tata Neu– one of India’s first – last year. But bundling its sprawling and diverse businesses under one e-commerce platform has proved a challenging task. Modeled after China’s Alipay and WeChat, it could meet only 50% of its sales target for 2022.

    Despite its rocky start, I believe that Tata Neu has a bright future ahead. Simply because building a superapp for makes business sense for the conglomerate. Why? Because consolidation of all businesses is more economical than building separate apps for each.

    Moreover, it gives the company an advantage by closing the loop on its customer data, which enables it to cross-sell and up-sell products from other categories.

    More importantly, superapps are potentially excellent anchors for financial products. The closed-loop data ecosystem also allows them to sell, up-sell and cross-sell contextual financial products. My colleague Shamolie explored this in greater detail soon after the Tata Neu app’s launch last year. Read it here:

    Decoding super apps and the Neu digital economy gambit

    Competition in the superapp space is going to get exciting this year as some of the biggest conglomerates seek to build the ‘Ferrari of the digital world.”

    I’ll be watching this closely.

    In pursuit of a lending license...

    … FinTechs will go miles, literally.

    PhonePe is shifting base from business-friendly Singapore to back home in Bengaluru. And, it’s happy to pay a whopping $1 billion in taxes to the Indian government as a result of the move. How does it plan to absorb this massive setback?

    It seems that digital lending may be its means and end. The UPI top dog has acquired ZestMoney to foray into lending – entering a lucrative business that serves a $270 billion market in India. However, now that the RBI is focusing its scanner on digital lending, and ZestMoney’s 17 million-strong user base is in India, PhonePe’s homecoming may be explained.

    Men of action

    (Live Mint)

    Last week, I wrote about how banks are experiencing a skewed credit-deposit ratio – credit demand is outpacing deposit growth. Where the weighted average deposit rates rose by 55 basis points during the same period when the RBI increased the repo rate by 225 bps. 

    Pictured above: Around 200 banks of Indian Bank took matters into their own hands when they assembled at Mumbai’s Marine Drive on Jan 6 to promote deposit schemes. 

    Between the digits 6.6:In its latest Global Economic Prospects report, the World Bank predicts India’s growth will slow down to 6.6% in FY 24

    70%: The number of women-owned businesses whose financing needs go unmet. Women entrepreneurs run 20% of India’s MSME enterprises, employ 10% of its workforce and contribute 3.09% of industrial output.

    INR 2600 Cr: The Cabinet has approved an INR 2,600 Cr Scheme To Incentivise RuPay, UPI-BHIM Transactions

    4: According to the RBI’s Financial Stability Report, while public sector banks reported a growth rate of around 5% YoY or lower, private banks expanded at a pace that was more than 4X higher.

    Reading List:

    1. The Fintech Effect 2022 - An annual fintech industry report

    2. Dynamic rules: The business rule engine solution for multi-lender stacks

    3. What women entrepreneurs need to shine in the MSME sector?

    4. Financialising the economy

    5. The Implications of ChatGPT and AI Models on Fintech and Banking

    6. OCEN: A digital transformation of credit systems?

    Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to never miss any of our updates. 

    Cheers, 

    Mayank

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