The Pattern #6: Of unknown FinTechs, aggressive brands and RBI’s love for adventure

Mayank Jain   /    Head - Marketing and Content    /    2022-04-22


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    A little-known FinTech from Nagpur recently shot into the limelight when it was awarded the ‘best service provider’ at the VIA & Solar Vidarbha Udyog Gaurav Awards, hosted by the Vidarbha Industries Association in the city. Figment Global Solutions Private Limited was conferred the honor for its tax compliance solutions used by the likes of SBI, Indian Bank, PNB and around two dozen regional rural banks. Big names like Tata and Mercedes-Benz are also in the company’s pipeline.

    To what do they owe their success? A keen insight and a knack for problem solving. 

    Older returns processing systems were time-consuming and inept. So much so, that back in 2015, public sector units like SBI and LIC were subject to hefty TDS demands by the IT department - not due to non-payment, but due to filing errors. Figment solved this problem with a clever combination of taxation intelligence and technology to create a centralized, error-free solution.

    They’re part of a growing trend that’s seeing technology driven companies (including FinTechs) move away from launching consumer product-based offerings to building workflow-based solutions for businesses.

    So they’re not running the rat race of building a B2C product and spending thousands of dollars acquiring customers (check out this blog by my colleague Shamolie on how to stave off high acquisition costs).

    Instead, they’re identifying glaring gaps in specific niches and delivering solutions that fix them, relying on the efficacy of their workflows and strong proposition to get them business customers simply through word-of-mouth.

    Take Vyapar, for example. They honed in on a major challenge faced by MSMEs in India, more specifically, in their accounting process. Bills are still created on paper and accounts are tracked in physical ledger books of ‘bahi khatas’. Needless to say, this is both inefficient and error-prone.

    Vyapar thus created a simple workflow for billing, inventory, and accounting. With it, businesses can create GST bills in online and offline modes in a few steps, track inventory based on batch number, expiry date, manufacturing date, and maintain cash flows by tracking payments.

    Vyapar isn’t alone, there are many startups catering to vertical niches in just the tax filing and return preparation space. On the other side, there are payroll and HR tech companies such as Razorpay OpFin working to ease the burden of compensation, benefits and compliance. There are at least a dozen B2B FinTech platforms out there in every niche and hence, covering every need of a company from capital to compliance. 

    This is an interesting space and clearly points towards the old adage that goes: “If you want to be famous, start a B2C company but if you want to make money, solve a business problem.” 

    While consumer product focused FinTechs have raised massive funding and reached stunning valuations, profitability has eluded them. On the other hand, B2B FinTechs that offer tech-driven workflow based solutions could find it easier to turn a profit given their low customer acquisition costs and higher transaction values. Could we see more FinTechs moving away from the consumer play to build for businesses? I think so. And so does veteran banker KV Kamath who said that Fintechs seem to have lost their edge and must now focus on turning profits. 

    "In the entire FinTech, digitech piece, there is a challenge that's very visible; there is a discord between the value that is being created versus the valuation expectation," Kamath said. "When you move from the private market to the public market, and you are unable to show sustained growth, you can't count the eyeballs you have to show the bottom line. If you tell me I don't know when I will make money, the investor doesn't want to deal with you at all,” said KV Kamath, former chief of BRICS bank, Infosys and ICICI Bank. 

    Whether the wave of platforms and niche solutions picks up remains to be seen, but the signs for a PaaS era in Fintech are there for all to see.

    On to other news, the Reserve Bank of India has warmed up to the idea of NBFCs issuing cards - well, somewhat. According to the regulatory body, to do this, an NBFC will need a certificate of registration, apart from specific permission to enter into this business. All this, if they have a minimum net owned fund of INR 100 crore, the RBI said. Interesting time for all the FinTechs and their background NBFCs to venture into the credit space with one more arrow in their arsenal. 

    Just last week I wrote about the RBI’s recommendation of digital banking units (DBUs) and how they contradict the Niti Aayog’s proposal for digital banking licenses. While RBI’s warming up to NBFCs issuing credit cards can be read as a move towards digital banks, it remains to be seen just how many different licensed and unlicensed financial services models we’ll end up with when the dust settles. 

    I can’t possibly end this newsletter without talking about my recent favorite subject - D2C brands. According to reports, ITC is set to acquire a 10% stake in Blupin Technologies, parent of D2C brand Mylo. This comes after their first foray into the D2C space in 2021, when they bought a 16% stake in online-first mother and babycare brand, Mother Sparsh. Their latest acquisition strengthens their presence in the D2C space, and more specifically, in the mother and babycare segment.

    Taken from:

    My colleague Chitwan wrote an insightful piece on why legacy brands are scrambling to get a piece of the D2C pie, as they should. After all, it’s a USD 100 Bn opportunity. Read more about it here.

    Before I go, on the occasion of Earth Day, don’t miss our CEO Rajat’s piece on the unlikely relationship between banks and the climate crisis.

    That’s all from me this week, folks. As always, leaving a few recommendations here for your reading pleasure.

    • My colleague Anna’s piece on sachetized loans for financial empowerment

    • This Financial Express piece on agri-tech and food security

    • Our Content Specialist Aparna’s take on India’s Agristack

    • The latest on the Tesla-Twitter saga

    • RBI’s advice to the cement industry 

    See you next week! Cheers, Mayank

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