The Indian financial landscape has witnessed a lot many changes over the last few years. The drive to turn India into a cashless country has brought about a wave of start-ups in the financial technology space and the tide has been strong. Fintech start-ups have been emerging to solve both the consumers and merchants' problems.
But while their rollercoaster ride has only been going up so far, thanks to demonetisation and GST, it isn't long before the downhill begins. With the cluster of fintech start-ups all around the country, it has also made the sector crowded and noisy.
There have also been reports of fintech start-ups shutting down. Finomena, a small ticket lending platform for college students that was even backed by investors like Matrix recently shut down because of lack of funds. This came as a surprise to many as the segment that they were catering to is slated to have a market size of around $50-60 billion.
Entrepreneur India takes a look at the different aspects that face the threat of complete shutdown or death due to mergers.
Over the last few years, the numbers of e-wallet start-ups have increased substantially. With the boost from demonetisation, many more have hopped on the bandwagon. Reports in the media have suggested that the market size of the e-wallet industry is even slated to grow to a whopping Rs 30,000 crore by 2021-22.
While the opportunity lies in the sector, there's not space for too many to grow. In fact, investors are already disinterested with a start-up that's just another "e-wallet". In an earlier interview with Entrepreneur India, Sreekanth Perepu, Investment Director, Hyderabad Angels, had said, "Standalone Prepaid wallet companies, which hold on to customers through cashback are making losses as there is not enough margin in the payment business for the wallets."
With the presence of big players like PayTM and Mobikwik, and the smaller ones like Freecharge and Chillr residing with banks like Axis Bank and HDFC Bank, it makes it difficult for others to make their mark in the area.
Small Ticket Lending to go away in a Big Way
The shutting down of Finomena has woken up the others in the ecosystem. A promising startup in the lending space failed to make the mark due to lack of funds. Startups that cater specifically to small ticket loans, will soon find less players. With the lack of security and growing risks of fraud coupled with the threat from alternative lending payment start-ups that also cater to small tickets, it's difficult for start-ups to survive on their own.
Market to find no buyers
With the need for digital cash growing, there has been a sudden spurt of marketplaces for loans or loan aggregators. However, what restricts the segment is the trust factor. With more and more banks coming up with their own personalised apps which offer loans at lower interest rates, aggregators will soon have to struggle to find bigger benefits to offer. The e-commerce business too in itself has been faltering, questioning the liability of these loan aggregators.
No Insurance on Insurtech?
While the Insurance industry is touted to be one of the biggest players, the problem lies in the fact that its penetration in India is very low. Insurance is still an industry that requires human understanding. Rahul Mohata, COO, 121policy.com, had said, "Insurance sector is yet to evolve in the country, currently less than 4 per cent of the population are covered. Even the largest insurance company in India won't have more than 2,000 branches all over India. The challenge lies in the fact that insurance requires the selling of the concept."
So, while insurance companies are developing technologies that will lead to an app that sells insurance with no human intervention, the sector still has a long way to go.
Robot reality: a truth?
For banks, infrastructural changes have been an aspect that hardware fintech start-ups are looking into. The concept of robots taking over the service segment is a possibility; however the elimination of the human aspect again brings in doubts in the consumer's mind. Budgetary restrictions too are a big factor behind the slow development of the same.
Difficult to sustain stock funds
Equity funding, while has taken off in India, it still finds not many takers because raising an equity fund is not a simple task. The start-ups that offer equity funding have a tough time to convincing consumers about the sustainability of their product. This lack of trust makes it difficult for consumers to put in their hard earned money on a stock. The same also requires a lot of back and forth which normally requires advise and backing of an experienced professionals, which apps fail to offer.
Bitcoin developments are going a bit too soon?
Cryptocurrency is the new big fad in the financial technology space. But the development of the same is a long way from reality. It's still a long time before bitcoins are accessible to the common man. Talking about the acceptance of bitcoin in India, Sathvik Vishwanath, CEO, Unocoin had said, "It's up to the people how do they categorize it. One doesn't know about technological inventions. There could be an approval from the end of government on it soon as well."
The other start-ups in the area are Zebpay, Conisecure and Search Trade but with government regulations awaited, the future of bitcoin is still shaky in India. An official statement by the government of India had also stated that the use of virtual currencies like Bitcoins is not authorised by RBI and could result in breach of anti-money laundering provisions.