Fintech Inside # 28 - 10th July, 2021 | We're Back!

We're back to regular programming! This edition covers financial products for women, Razorpay's recurring payments interface, PayU acquiring BillDesk, Google Pay doubling down and Zomato Pay

Jul 11, 2021

Hi Insiders, Osborne here.

Welcome to the 28th edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.

Addressing the elephant in the room upfront, thank you for sticking with me throughout these past few months. Given the Covid situation in India, I decided to pause the newsletter. It was tough for me to keep posting in an environment where people and their families around me were suffering. Besides, I felt most people would rather take care of their family than read my newsletter. Thank you to everyone who checked in on me during this time and wrote to me saying they miss this newsletter! I'm very grateful.

That said, tons happened in Fintech since I last published which was difficult for me as well to keep pace with. But I'm back and I've got your back covered here on.

This week, I cover financial products for women, Razorpay's product for recurring payments, BillDesk is in talks to be acquired and Google is doubling down on financial services. Also, Zomato's board approved setting up a subsidiary to apply for a payment aggregator license.

Globally, Booking.com created a fintech unit. WISH was granted an EU Payments license. Here's an overview of Indonesia's Wealthtech market. Sutton Capital released its detailed thesis on Fintech API Infra.

🤔 One Big Thought

Do women really need a separate platform for financial services?

Yes. Without a doubt - yes. Hear me out. But first, some disclaimers:

This post is not a post about feminism or women empowerment. It's about market opportunity and tangible product opportunity.
This post focuses on affluent women. Financial products will be different for women across the wealth spectrum.
This post is an analysis of women's problems and issues when it comes to financial services and products. The post draws from my conversations with several dozen women.
The post is riddled with my bias of Indian culture and Indian financial regulations. I don't know if the same is applicable in other markets.
This post only partly is intended to throw shade at the pink-washing of financial products for women.
Basis, a startup building a financial community and products for women, is a portfolio company of the fund I'm with. I have learned a ton from the founders of Basis and some sections of this post are a paraphrasing of conversations with them.

Traditional financial firms have, for years, attempted to pink-wash existing financial products aimed at women. However, the last mile distribution channels of these firms are geared towards targeting men and therefore adoption among women has been dismal. Further, women are increasingly entering the workforce, earning income and becoming financially independent. But around them, the financial system and their family support systems are still set in the old ways.

Sure, I know you understand this problem and you're probably saying "all this is fine, but why a separate platform for women and what are tangible products that can be designed just for women?"

Why a separate platform: Existing financial firms and fintech startups are not catering to the problems women face when it comes to financial products, and they never will. These firms are "one-size-fits-all" monoliths, designed to focus and serve folks that bring high deposits or large revenues with least effort. They're surprisingly unimaginative in sensing a massive business opportunity around the millions of affluent women. Women also earn less than men, have a higher life expectancy and tend to retire early. Most family support systems tend to dissuade women from being financially independent or from taking financial decisions for the family. The problem runs deeper than what I just mentioned but this is not the post for that. A separate platform that's designed for women (not pink in color), helps to create a support system they can trust and is potentially one of the ways to solve for this problem. Further, financial products can be designed by using the insights from this community. A separate platform for women can be imaginative, innovative and value additive in creating a trust network with specific products for women.

Payments products: Some women get questioned by their families as to how much they're spending on sanitary products, cosmetics, apparel, vacations, home products and more. It's one of the reasons why some women pay cash for sanitary pads when ordered online. There can potentially be card products with privacy-related features for these payments. Moreover, a separate platform can create an entire rewards program with specific partnerships because these purchases are large ticket and so frequent.

Lending products: The earning curve of a woman is drastically different from that of a man due to breaks during child birth, general illnesses or other family demands (women should not be the only one meeting these "family demands", but it just happens). There can be lending products designed to meet these intermediate needs. Moreover, increasingly women are starting businesses - whether from home or otherwise. Business loans can be created for them, without needing a male signatory/nominee.

Insurance products: Of course maternity insurance is the low hanging fruit and most women who want to have children should take it. But who's there to guide women on which is the best cover out there, what's covered what's not. A platform can co-create an insurance product for these needs. Further, job loss protection insurance is another product that can be designed for women. Lastly, women also want to ensure their family has the right health and life insurance, for financial purposes but also to have that sense of "taking care of the family financially". Why should only men enjoy all the tax benefits of paying insurance premiums? :)

Wealth products: Most women will tell you that at some point when they've tried talking to a man about stock investing or mutual funds or wealth in general, they've either been dissed, got yelled at angrily for not knowing anything, outright ignored or some combination of the three. It's not that women are stupid and don't know anything about investing, they think deeper about certain aspects and don't accept things blindly just because their brother, father or husband told them so. Women need trusted, approachable advise and a platform that provides that will be gold. Further, as mentioned, women's financial lives are different from those of men, and therefore need wealth products that can cater to those needs.

There's a lot more detail, nuance and products that I'm skipping here because of lack of space and your time. But you get the point. There's a massive business opportunity that's being ignored by existing financial firms and fintech startups. A lot more thought is needed to integrate the right products and features for this consumer segment since there's no existing platform to copy from or reports to rely on, especially for affluent women. The opportunity of targeting the largest under-served demographic requires intuition, conviction and empathy. This is a hill I'm willing to die on.

If you're thinking about this space as well I'd be happy to chat, brainstorm or even connect you the right folks. You can reply to this newsletter or email me at connect@osborne.vc

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💼 Fintech's Hiring

(something new is brewing here. Stay tuned!)

3️⃣ Fintech Top Three

1️⃣ Razorpay partnered with Mastercard to launch MandateHQ

Earlier this week, Razorpay announced the launch of its recurring payments system - MandateHQ. Razorpay partnered with Mastercard to create "an API-based plug-n-play solution that reduces the go-live time for any card issuing bank that wishes to enable recurring payments for its customers"

Takeaway: With UPI 2.0 taking forever to launch, Razorpay decided to take things in its own hands and create a recurring payment interface. Actually, Razorpay is forced to take things in its own hands because it's competitor BillDesk partnered with VISA to roll out SIHub (Standing Instruction Hub) - its version of a recurring payment interface.

Additionally, this next quarter is pivotal for the payment aggregator (PA) world in India when it comes to recurring payments. Earlier this year, RBI issued a circular mandating that Additional Factor of Authentication (AFA) be made mandatory for all recurring payments transactions below INR 5,000 ($ 68). All stakeholders are required to comply with this directive by 31st September, 2021. A PA without this recurring payments interface will lose this first mover advantage because the cost to switch a recurring payments interface will be high.

2️⃣ PayU India is in talks to acquire Billdesk

Billdesk, the oldest payment gateway in India, is in talks to get acquired by Prosus-owned PayU India. News reports claim that Billdesk will likely be valued at $ 3-4bn. Last-year, there was news that BillDesk would be acquired for $ 2.5bn. In 2018 too, the founders were out to sell. Who knows when this will end.

Takeaway: If this acquisition happens and at that valuation, it will be among the largest Fintech acquisitions/exits in India. Aside from that, it's been a tough couple of years for BillDesk, losing market share to PayU, Paytm and more recently Razorpay. In its heyday's BillDesk commanded over 40% of the Indian digital payments market. It still accounts for 50% of the billing payments in the country.

If the acquisition happens, the old guard of the payments industry will be all but wiped out, leaving India's digital payments companies at less than 12 years (Paytm - 2009, Mobikwik - 2009). CCAvenues (2001), Freecharge (2010), Citrus (2011) have all been acquired leaving BillDesk (2000). This is a significant shift in the fintech industry.

3️⃣ Google to acquire payments company - Pring, in Japan

Google Japan is in talks to acquire Pring, a Tokyo-based digital payments company. The transaction was valued at between $ 180-270mm. Pring has partnered with 50 Japanese banks, 7/11 and over 400 enterprises for digital payments acceptance among other use cases.

Takeaway: Google is doubling down on digital payments and how! Along with US, India, Singapore and now Japan, Google is aggressive in its Google Pay roll out globally. Digital payments is only 20% of total payments in Japan, lowest in the region, and the Japanese government has a stated goal of raising that number to 40% by 2025. If the acquisition goes through, Google Pay would compete with Softbank and Paytm-owned PayPay and Rakuten's payment app.

In India, this week Google Pay announced a partnership with FlexiLoans, an SMB lender. Google Pay intends to provide 50,000 of its merchants with loans to meet a credit gap. Google is clearly going all in on Fintech.

🇮🇳 India

- 📰 Market Updates:

Axis Bank signed a cloud computing deal with AWS for digital transformation. Amazon Pay ICICI Bank credit card crossed two million cardholders.

Angel Broking's Annual Report on India's stock broking industry. PayU India is in talks to acquire BillDesk for $ 4bn. Chinese nationals on Paytm's board stepped down ahead of Paytm's IPO.

India’s outward remittances fell by $ 6bn in FY21. NIIT Institute and Axis Bank launched a Digital Banking Academy.

Zomato's board approved setting up a subsidiary to apply for a payment aggregator license. The mutual fund industry added 1.2mm unique investors in Q1 FY22 compared to 2mm in all of FY21.

- 🚀 Product Launches:

Paytm launched Postpaid Mini to provide small ticket instant loans. PhonePe partnered with Flipkart to digitise cash-on-delivery payments.

Razorpay partnered with Mastercard to launch MandateHQ - a recurring payments solution. ZebPay, cryptocurrency exchange, launched ZebPay Earn that will pay users interest on their cryptocurrency deposits.

GooglePay partnered with FlexiLoans to offer instant digital loans to GooglePay's merchants. ScripBox partnered with Stockal to enable direct investing in US equities.

- 📝 Regulatory Updates:

SEBI: Likely to reduce the minimum subscription amount of REIT's and InvIT's to INR 10-15K from INR 100K for REIT's and INR 50K for InvIT's.

RBI: Penalised SBI, 13 other banks for non-adherence to NBFC lending rules. Issued advisory to banks to prepare for transition from LIBOR.

- 💰 Funding Announcements:

Fund Raises: PineLabs(Payments, $ 600mm). Dvara E-Registry (Agri-fintech, undisclosed). Kredent Infoedge (e-Learning, $ 1.5mm)

Exits: SMFG to acquire 74% of Fullterton India for $ 2bn. Nium to acquire Wirecard India's forex unit. ClearTax acquired YbanQ for less than $ 5mm.

🌏 Asia

- 📰 Market Updates:

Thailand SEC filed a criminal complaint against Binance. Indonesian E-Wallet OVO launched its first shariah-compliant digital investment offering.

Tiki, one of Vietnam's largest ecommerce platforms, forayed into Fintech by offering health insurance in partnership with AIA Vietnam. Singapore Management University launched an advanced full certificate programme in insurtech.

Pine Labs partnered with Atome to offer BNPL services in Malaysia. Thai insurers suspended COVID policy sales due to specious claims. Endowus crossed SGD 1bn in assets, plans for Hong Kong expansion.

Google to roll out payments services in Japan. Central Banks of Singapore and France partnered for new CBDC experiment. South East Asia is the world's fastest-growing mobile wallet market.

Netbank, Philippine BaaS platform, launched credit services with Investree.

- 💰 Funding Announcements:

Fund Raises: bolttech (Singapore, $ 180mm). Endowus (Singapore, undisclosed). AND Global (Singapore, payments wallet, $ 15.3 mm). MoneyMatch (Malaysia, cross border payments, $ 4.4mm)

Acquisitions: Google acquired Pring (Japan, Payments) for $ 180-270mm.

👋🏾 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.