Fintech Deep Dive - Jar | Fintech Inside - Edition #54 - 13th Feb, 2022
Within 7 short months, Jar has become the GenZ platform of choice for savings. In this edition, I cover Jar's business model and future. Also details on credit cards, Razorpay and more.
Hi Insiders, Osborne here.
Welcome to the 54th edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.
Jar*, a round up savings startups, recently announced raising a large round led by Tiger Global. Launched just seven months ago, the startup has surprised most in the startup ecosystem largely because of its meteoric growth. In this edition of Fintech Inside, I break down what worked for Jar and what it’s future will look like.
There’s also details on RBI potentially opening up India’s credit card market, Razorpay’s global ambitions and all the funding announcements from the past week.
Just last week I complained of nothing material happening in fintech. Clearly, spoke too soon because fintech startups were busy this week! Never again shall I complain for a slow week 😄
Aside: If you’re looking for a no-hype, high signal community for Indian crypto, consider Decentralised by Joel John. There’s also Telegram group that you can join.
Enjoy another week in fintech!
If you’re an early-stage fintech startup founder raising funding, I'd love to speak to you - reach out to me at connect@osborne.vc
🤔 One Big Thought
Fintech Deep Dive: Jar - the daily savings and investing rocket ship
Disclaimer: Jar is a portfolio company of EMVC, the fund I invest with.
Launched only seven months ago, Jar recently announced raising $32mm in a round led by Tiger Global valuing the company at $200mm. The startup has 4+mm registered users, 99% of whom are investing for the first time! 4+mm users within seven months is unheard of. Over the past several months, far too many startup people have asked me what has Jar done that users are flocking to the app. Today's deep dive is about Jar's incredible growth, it's founders, the market and Jar's future.
Wait, what is Jar though? Jar is a daily savings and investments startup for Gen Z. Its eponymous app allows users to automatically save without putting in effort. How? two ways - 1) rounds up users spends and invests it for them everyday. 2) allows users to set a small amount to invest everyday.
How is this different from the other round up investing apps? Jar invests users money in digital gold. Other apps used to invest this money in liquid mutual funds and now in digital gold as well.
Why does investing in digital gold matter? Two reasons: 1) Investing in gold is familiar. Gold has deep-rooted, cultural significance for Indians. We may speak different languages, have different cultures and backgrounds, but every single one of us understands the language of gold. Indian homemakers have more gold reserves than the Indian central bank or even the US. I'm not making this up. 2) No KYC requirements to invest in gold (up to a certain threshold). This is the most important aspect - without KYC requirements, a user can be converted from downloading an app to investing within 45 seconds! This was Jar's biggest advantage. Jar is the "Superhuman" for investing and saving.
With this unique insight, the founders of Jar found their habit forming "wedge" and made sure they doubled down on it.
Most Indian wealth startups target more evolved investors. Even today they have ads that feature middle aged men with the message "mutual funds sahi hai" (mutual funds are good). There’s nothing wrong with that campaign but it leaves out younger investors. There was a huge blue ocean to target the aspirational, first-time-investor Gen Z who's thirst for instant gratification could not be quenched by any existing financial app. Jar filled that void - it gave users an easy way to invest instantly in a familiar asset, without the cognitive load. No more thinking of which fund or stock, what AuM, expense ratios, fund manager, fundamentals - none of that. Just plain ol' gold.
I'll never forget that in one of our early conversations with Nishchay and Misbah, co founders of Jar, I asked them what they considered as risks to their business (such a typical VC!). Without any hesitation, Nishchay replied - "not being able to execute fast enough". At the time I thought - "that's stupid, that's not answer, they're clearly not thinking deep enough about this problem". After all these months, it dawned on me - I am the stupid one. Out execution is their biggest moat. In the time that I've gotten to know them, I've seen that this team is unlike any other - Misbah and Nishchay are execution beasts. They're humble enough to take time and listen to all the gyaan their investors (including I) give them, but they always have an ear on the ground - listening, more importantly, to what their users and data have to say. Other startups can and will copy everything else about Jar, but not this team's drive to always out execute.
Well, but Jar grew in a bull market: Yes, absolutely. Every single wealth product saw massive growth in users in 2021. In fact, in the 30th Edition of Fintech Inside in July, 2021, I wrote about how the 2021 bull market has done more for investor awareness than the mutual fund industry's ad campaign. As of Jun, 2021, unique Indians investing in mutual funds doubled to 24mm between 2017 to 2021. Moreover, total unique mutual fund investors added in the quarter ended Jun, 2021 was 1.2mm whereas those added in all of FY21 (Apr-20 to Mar-21) was 2mm!
Ever since the robo-advisory boom and bust in 2016, the wealth management industry has been about expanding the market - not deepening it. This is clear from the 24mm unique investors. Indians earning more than INR 25,000 ($333) a month are in the top 1% of India. There's not a lot of wealth. SIP's were created to lower that investment barrier, with current minimum investment of INR 100 ($1.3). Compare that to Jar - 4mm users, investing amounts as low as INR 1. Jar is truly expanding this market.
Given the above, my running thesis is - if and when there is a market correction, users might withdraw their investment from every other asset class (scare of losses), except gold. And Jar will continue to grow, even in that bear market. I do not have data to support my thesis so don't take my word for it.
What is the future for Jar? In the CRED deep dive edition, I mentioned how CRED found its wedge in credit card bill payments, in the process gained users trust and is now offering a whole suite of lifestyle products. Jar is similar in that manner - it grew to a large user base, gained users' trust through the instant digital gold offering and will launch a whole suite of high touch financial products over time. The team is deliberate in their roadmap to becoming Gen Z's platform of choice for their wealth needs. Jar is just getting started and I believe we are yet to see the best this team has to offer.
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💼 Work at a Fintech
workatafintech.com: Search from ~180 open positions at 50+ fintech startups in India and South East Asia.
Fleek, a subscription management startup, is hiring engineers and an HR person. Apply here.
Basis*, a startup providing financial products for women, is hiring a product manager. Apply here.
Velocity, a revenue based finance startup, is hiring a software engineer. Apply here.
Work at a Fintech is a community effort by EMVC. If you’re a Fintech who’s hiring I’d like to help. Write to me and I’ll put your requirement here. 2.5K+ people view these open positions.
3️⃣ Fintech Top Three
1️⃣ India's central bank is opening up the credit card market?
RBI, India's central bank, is considering allowing certain non-bank financial companies to become credit card issuers.
Takeaways: India is home to ~69mm credit cards outstanding, to ~30-35mm unique card holders - in a country of 1.3bn people. A big reason for that is credit cards can only be issued by a bank. Everyone that wants to issue a credit card has to have a partner bank and issue a "co-branded" card. Slice*, OneCard, Uni and every other fintech startup and non-bank entities, that issue credit cards has one or more bank partners as "issuing bank". Federal Bank and SBM Bank are mostly likely the "issuing bank" partner to these startups. SBI Card is the only exception in the industry where the credit card is issued by a non-bank, except it comes with the brand and blessing of SBI Bank, India's largest public bank.
Given the above constraints, the news that RBI is considering allowing non-bank financial companies to issue cards is massive. There's been some chatter for some time that RBI is considering a new credit card regulation, but that hasn't happened yet. But if this is true, it will open up the credit card market in India like we've never seen before. It will also foster further innovation in the market - the way Uni has with its Pay 1/3rd card, or Slice* with it's INR 2,000 ($27) credit limit card. It may even open up new use cases that the industry globally hasn't seen before.
Before we get ahead of ourselves though, IMO, RBI will not open up this credit card market market - at least to the larger ecosystem. It might allow just 2-3 very large NBFC's, with low risk tolerance. Remember the digital instant loan micro-bubble of 2019/2020 that kinda burst? RBI is still to trust fintech startups and NBFC's in that sector. It slowed down issuing NBFC licenses altogether since 2020, not sure if they've started that again. Moreover, the RBI would certainly want to avoid 2007's credit card collection agency harassment situation. So, I guess, till then, Indian fintech startups will have no choice but to partner with banks. Thankfully startups like Card91* and Hyperface are building that infrastructure to make it easy for anyone to issue cards.
2️⃣ Razorpay's global ambitions
Razorpay acquired Curlec, a Malaysian recurring payments startup, for $19mm. This is Razorpay's first acquisition internationally but more importantly this is Razorpay's first step to expanding globally - starting with Southeast Asia. In Razorpay's words - "At Razorpay, we believe that with our experience of operating in a market as diverse as India, we’re ready to solve these problems globally."
Takeaways: Impressive move, Razorpay. Zac and Steve, co-founders of Curlec, are exceptional. Curlec is a recurring payments platform in Malaysia. As far as I know, Curlec has partnered and integrated with large Malaysian banks - tough task in any country. This acquisition therefore gives Razorpay a head start in SEA and a bunch of heavy lifting solved for.
What's more interesting is Razorpay's choice of Malaysia for expansion. IMO, this is the smartest move - Malaysia's payments market is not as competitive as other's in the region, Indonesia is fairly competitive and would not have allowed Razorpay an easy entry there, Malaysia is also a big e-commerce market - $21bn in 2021 (per Razorpay), it's a market with higher GDP/capita and many more. It will allow Razorpay to build a brand and then expand to other markets in the region.
Razorpay also joins Open (SMB banking), Zeta (banking infrastructure) and Pine Labs (payments) in Southeast Asia. Anmol (tweet below) thinks Razorpay will beat Stripe in SEA. I agree with him for all other markets in SEA except Indonesia.
3️⃣ Fund raise announcements and acquisitions round up
10 Indian startups raised $547.5mm (including the massive $450mm by Polygon), and 2 raised undisclosed amounts. 8 Asian startups raised $266.8mm. There was a lot of news and updates this past week. Head on over to This Week in Fintech Asia, another newsletter I author, to catch up on the latest.
Takeaways: In last week's edition I complained that fintech startup news was dying down. Guess I spoke too soon! In India, startups across wealth, crypto, SMB finance, consumer finance and insurance announced raising funds. Obviously Polygon's fund raise announcement was huge! Polygon is not technically in fintech but thought it's important to highlight because Polygon is the world's largest Ethereum scaling company. It boasts of 7,000+ decentralised apps (dApps), including DeFi projects of Aave, Curve, Sushiswap and more, used by 1+mm users. This news is also important as it helps India make its mark in the world's crypto stage. Globally there are only 18+K crypto developers and hopefully Indian developers will lead its growth.
Startups that raised funding include: SMB finance - Mintifi, U GRO Capital and Karbon Card, Wealth - Wealthy*, GoalTeller and Dvara SmartGold, Insurance - Nova Benefits, Crypto - Polygon, Mudrex and Colexion, and in Consumer Finance - Nira and LegalPay. Not to forget, acquisitions by Razorpay and Pine Labs.
Southeast Asian startups were not too far behind. Very large amounts were raised by startups in countries that aren't known to have depth - maybe this is that inflection point needed. Philippine neo bank Tonik raised $131mm from Japan's Mizuho Bank. PDAX, a Philippine digital asset exchange raised $50mm. The more interesting thing to note is the fintech infrastructure being built. Two startups - Brick in Indonesia and IIMMPACT in Malaysia raised $8mm and $2mm respectively. Fintech infra is still nascent in SEA and it's great to see startups building here.
🌏 International
Looking for the news digest? Read all the week’s fintech news and updates in India and SEA over at This Week in Fintech - India and SEA Edition.
🏷️ Other Notable Nuggets
🎵 Song on loop
Fintech updates can get boring, so here's an earworm from this week: Lifestyle by Jason Derulo feat. Adam Levine (Spotify / Youtube). I don't listen to a lot of popular music, but this one's got a good foot tappin' beat. Enjoy the weekend!
👋🏾 That's all Folks
If you’ve made it this far - thanks! As always, you can always reach me at connect@osborne.vc. I’d genuinely appreciate any and all feedback. If you liked what you read, please consider sharing or subscribing.
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See you in the next edition.
Not to discourage jar but the point for investing in mutual fund is to move people saving from gold and FD. By just investing in gold,the savings may not even beat inflation.