FinTech Sector – Dutch Uncles

RBI’s New Fintech Department and Regulations- A Good News for the Indian Fintech?

Shalmoli Sarkar — Fri, 14 Jan 2022 08:57:34 +0000

Demonetisation and contactless payments as a preventive measure in the pandemic has been a fillip to the fintech sector in India especially in digital payments and loans. As of June 2021, India has been home to 16 fintech unicorns, which speaks of its massive growth. The Indian market has also been a breeding ground for investors willing to invest in NFTs and cryptocurrency which is yet unregulated and holds much of a debate regarding it being a safe investment option.

According to a joint report by BCG and FICCI, India’s fintech industry is expected to reach $150-$160 billion by 2025. As the fintech landscape evolves and more players enter to serve various demographics, there is a need for the sector to be regulated especially those offering liquidity services which is the exclusive domain of banks.

RBI’s new fintech department to push innovation

The RBI has set up a separate internal department for fintech on 4th January 2022. This department aims to promote innovation and also identify the challenges and opportunities associated with fintech companies and address them promptly.

All matters related to the facilitation of constructive innovations and incubations in the fintech which might affect the financial sector/ markets and fall under the purview of the bank will be dealt by the internal fintech department including matters of inter-regulatory coordination and internal coordination.

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According to a joint report by BCG and FICCI, India’s fintech industry is expected to reach $150-$160 billion by 2025.

Widening the gates of credit data access for fintech

The RBI has already taken the first step to promote innovation in the Indian fintech companies by allowing them to directly access data from credit information bureau. Earlier access to data from credit information bureau was a privilege that could be enjoyed by specified users and regulated entities like telecom companies, insurance providers, rating agencies, and registered brokers. For assessing the credit profiles of customers, the fintech companies earlier used alternative data from social media footprints and from the bills of telephone and electricity to judge creditworthiness making the process cumbersome. This direct credit data access to millions of Indians will benefit the firms in the below way:

Take better credit decisions.
Several banks collaborate with fintech firms for the disbursal of loans digitally, therefore access to data will help banks make informed decisions while underwriting the credit.
Access to credit data will help these firms to develop tailor-made products for customers that require less documentation and lower interest rates.

New criteria is a challenge

RBI’s decision of widening the doors for data access might benefit a few fintech companies. Only those firms will be eligible to have access to data that are Indian-owned with diversified ownership. It is a major hurdle since the majority of the fintech firms in India are foreign VC/ PE funded and may not match the ownership criteria. The other criteria involves only those fintech firms to be eligible to process information to support regulated lending entities such as banks and financial institutions, whose net worth is Rs 2 crore. The reason to favour Indian-owned companies is to follow local data governance and compliance.

Cybersecurity is mandatory

With increasing data leaks, platform downtimes, and information theft, RBI has mandated the firms to have a certification from CISA ( Cybersecurity and Infrastructure Security Agency) and to have robust data protection in place, since data is the backbone for this industry. It is necessary to develop a strong mechanism to protect data and invest more in such mechanisms to evade cyberattacks in the future and cement people’s beliefs in financial technology processes.

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Tcyhon: Offering Instant Access to Various Fintech Products Within a Click

Shalmoli Sarkar — Mon, 20 Dec 2021 14:42:32 +0000

The word ‘ instant or getting things instantly done within the comfort of a click in the past few years has bowled over people. Latching on to the characteristic to provide something instant and fast soon became the USP of many startups across business verticals that have challenged the archaic business processes of the biggies and have made consumers spoilt for choices. The processes have become instant be it purchasing food and medicines online to procuring raw materials say, for an auto spare parts business.
Apart from the growth of online shopping, India’s fintech ecosystem has grown enormously in the past five years. According to a joint report from FICCI and BCG, 67 percent of the more than 2100 FinTechs in India today were founded in the last five years.
With a myriad of fintech startups on the plate, users become overwhelmed with the abundance of information available on the internet while selecting the appropriate fintech product sufficing their needs.
Precisely, the ecosystem lacks a consolidated platform for accessing all the information about fintech applications on a single screen with benefits listed for the users. Realising a gap here, Harsh Sharma’s Delhi-based startup Tchyon is now looking to change this.

Tchyon : Aiming to offer financial services faster than the speed of light

Inspired by the nature of the hypothetical particle that always travels faster than the light, Harsh Sharma – an MBA graduate from the University of Rochester named his financial discovery platform- Tchyon. Standing true to its name, this venture aims to offer its users give access to the best financial services on its platform at a lightning speed.

While working as a credit analyst in Joust in the United States, Harsh handled the crucial function of writing underwriting models for businesses. While working there he realised the long trail of paperwork and documents that made it cumbersome for businesses and individuals to seek credit cards or open a bank account. Such archaic processes in the digital era are a major disappointment for the users to gain confidence with the financial product.

The drive to start his venture came into fruition during the pandemic when he moved to India and found himself in the middle of digitalising his father’s business.

In the process of digitalising the business, he witnessed that opening a bank account and setting up payment gateways would require to fill documents such as MoA ( Memorandum of Association), AoA ( Articles of Association), etc which seemed a daunting task. Harsh wanted to address this problem and thought that instant access to financial services digitally should be as easy as ordering food online just within the click of a button.

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According to a joint report from FICCI and BCG, 67 percent of the more than 2100 Fintechs in India today were founded in the last five years.

Recommending the best fintech applications to the user

In general, if we ask anyone about the last fintech application on their phone, it is likely that it must have been referred by a friend, social media platforms, relatives, or other acquaintances. Tchyon here wants to replicate the offline recommendation of fintech applications online and guide a user to help them understand and suggest the best financial product that matches their use cases. With the pros and cons of all financial products displayed on the platform, it creates transparency, aiding the user to make an informed decision.
The beauty of this platform lies in tailoring the onboarding process where the user will undergo a single KYC process to understand a user’s needs.
Let us say, for instance, the user wants to avail services of insurance and credit card only, Tchyon then suggests certain fintech platforms and services that allow the users to avail the services with a simple email id or mobile number through the platform.
It provides a plug-and-play model, where the user will undergo a quick verification process and can instantly set up a digital wallet or begin investing instantly in crypto trading platforms such as Coin DCX or online trading platforms like-5Paisa, Zerodha, etc.
Under one roof the platform has merchant partners for several needs of users such as crypto, neobank, cards, bonds, alternate investment, P2P lending, mutual funds, personal finance, stocks.

How the small businesses will benefit?

The digitisation of various functions in businesses especially finance has been brought to the forefront by the pandemic. Indian MSMEs are riddled with several challenges related to cash flows, setting payment gateways, payroll, and logistics but are not aware of solutions that can minimise these frictions in business operations. The business owners being alien to technology become overwhelmed with the information available with the simple google search.

Tchyon helps to diagnose the problems by asking a certain set of questions regarding the challenges faced in their routine business operations and suggesting the best products.

Collection- A curated collection of financial products

The purpose of the collection feature is to enable people instantly. Looking at the concerns mentioned by a business or any individual the platform’s ‘Collection’ feature will curate a basket of appropriate financial products and services that will effectively address their problems. Once convinced with the solutions provided the businesses decide to go ahead with a simple onboarding process of ‘ Click here ’, upload the necessary documents verified by Tchyon, and sent to the fintech merchant company that Tchyon has partnered with.

Let us say a logistics business is facing challenges with the digitisation of payments, the collection feature will develop a basket of payment gateway services such as-Razorpay or Paytm mentioning the necessary documentation required for easy onboarding process and usage.

Through the platform’s Onboarding-as-a-Service API users are instantly able to signup for the services, thereby helping merchant partners to convert prospects quickly to users and save sufficient time.

With the conventional approach, if to open a payment gateway, the users need to fill and submit bulky documents such as AoA and MoA which is cumbersome.

Upon sending the documents the businesses can begin improving the operations from the next day.

The revenue model

Tchyon does not charge from its users but charges a certain amount from its merchants. Moreover, the platform being a marketplace also earns revenues from advertising.

The road ahead for Tchyon

For the next couple of years, Harsh aims to create a myriad of financial offerings for its consumer by partnering with more fintech merchants. Next, it wants to help businesses to identify their problems to offer quick solutions to provide instant gratification. Third, it has plans to launch virtual accounts that could be used for investing in the stock market, cryptos, or any other asset class. Fourth, it plans to provide credit for both consumers and businesses.

Lastly, talking about India’s fintech landscape, Harsh is quite bullish about the sector picking up growth since India is a populous country with varied interests and unique demands, and to cater to them several fintech platforms are launching propositions that can benefit consumers in a great manner, just all it requires is a consolidated platform that helps them make an informed decision regarding the fintech platform suiting their needs and free Indians from the archaic documentation processes and ease the fintech adoption.

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The Emerging Segment Of Recurring Payments, Who Is Taking The Biggest Slice?

Aakash Sharma — Thu, 26 Aug 2021 08:30:09 +0000

In recent months, fintech unicorn Razorpay and payment technology giant Mastercard have launched Mandate HQ, a secure interface for recurring payments. This has come after the Reserve Bank of India (RBI) put out a directive regarding an electronic authorization processing framework for online transactions to promote the secure adoption of digital payments.

RazorPay and Mastercard have developed advanced solutions to facilitate the processing of recurring payments, an area that has emerged blazingly after the central bank’s intervention in such transactions.

What are recurring payments?

The recurring payment is a payment model in which customers allow merchants to periodically and automatically withdraw funds from their accounts for the goods and services they offer. Recurring payments include bills for utility, cell phones, credit cards, hosting fees, Internet Service Provider (ISP) fees, etc.

Recent RBI rules regarding recurring payments

The Reserve Bank of India (RBI) has published a framework for processing electronic payment orders in recurring online transactions. Under the new rules, RBI requires AFA (Additional Factor of Authentication) for all recurring transactions involving debit cards, unified payment interface (UPI), credit cards, or other prepaid payment methods for under Rs 5,000 transactions.

Under the new rules, banks must inform customers in advance that recurring payments are due and complete the transaction after customer approval. This rule may apply to monthly subscription fees for several OTT-streaming platforms, including Netflix, Amazon Prime, and Disney+Hotstar, among others.

Mandate HQ by Razorpay and Mastercard

MandateHQ is a comprehensive platform that helps banks manage the end-to-end mandate lifecycle of orders, including creating, viewing, updating, cancelling, processing and suspending orders and their depreciation. Mandate HQ is a white label product that allows end-users to view and manage the history of all pending orders and all recurring transactions.

In addition, the Mandate HQ platform helps banks activate 24-hour prepaid email, SMS and WhatsApp notifications and provides the end-user with a portal for managing card authorizations.

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Razorpay’s Mandate HQ is an API-based plug-in solution that cuts commission times for any card-issuing bank that wants to allow its customers to make recurring payments.

The Mandate HQ solution can be fully integrated into any bank in 7 days instead of other solutions that generally take several weeks. In addition to its partnership with Mastercard, ReservePay is also working with three banks and is in talks with more than 20 banks to integrate this technology into their existing payment infrastructure.

Industry estimates – what can others learn?

Industry experts estimate that the total market opportunity for recurring payments in India will be between $280 million and $336 million in the coming years. With the integration of the new subscription-based business model, recurring payments have tripled over the past two years with an annual growth rate of 40%.

Industries such as OTT platforms (primarily regional), advertising technology, food technology, health technology and the economy, in general, are the biggest beneficiaries of this change. In general, customers can have multiple guarantees for different transaction prices. Start-ups and young entrepreneurs entering the industry can work in these areas under the central bank’s guidance to benefit a wide range of customers and thus strengthen their business.

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