Fintech Inside #35 - 29th Aug, 2021 | Creators
Creator Economy + Fintech: what's the opportunity? Added details on RBI's new umbrella entity for payments, Indonesian digital banking rules and US investing.
Hi Insiders, Osborne here.
Welcome to the 34th edition of Fintech Inside. Fintech Inside is the front page of Fintech in emerging markets.
Ever wondered what's the fintech opportunity in the burgeoning creator economy? I'm keen to learn more about this sector and today's post overs a few of my learnings.
Small business digitisation fintech startups were back in the news - Khatabook* raised $ 100mm, Bazaar (Pakistan) raised $ 30mm and mKhata (Pakistan) raised an undisclosed amount.
Indonesia’s central bank introduced new rules and regulations for digital banks. Paytm forged a mega partnership with HDFC Bank and will soon launch products across payments, credit, insurance and wealth.
10 fintech startups raised a total of $ 194mm (4 undisclosed rounds) and 12 new fintech products were launched.
Aside: India got its fourth company crossing $ 100bn in market cap. There's TCS, Reliance, HDFC Bank and now Infosys.
Please enjoy all the details in today’s edition. If you feel Fintech Inside brings you value, please share it with your friends (and maybe suggest they subscribe too).
If you’re an early-stage fintech startup founder raising equity or debt, I may be able to help - reach out to connect@osborne.vc
🤔 One Big Thought
Creator Economy + Fintech: what's the opportunity?
People have been following their passions for decades and building businesses out of it. In the past, "following one's passion" was frowned upon and was tough to scale. Over the past two years, work from home gave people that extra time to create and follow one's passion while having that day job. Moreover, platforms like Youtube, Instagram, Shopify, Dukaan and more allowed these creators to build their own following and thus distribution.
Connecting the dots now, it seems as if all the platforms and innovations in the past have led to this point we're in, making a compelling case for the future of work and the creator economy. At no other point in history, has it been easier to create, build one's 1,000 true fans and make a living off one's creations.
The creator economy is all too new for us all. The very definition of a "job" is changing and we're living through that change. Most Indian parents have always pushed their children to become engineers or doctors. This is a paradigm shift not just for our parents but also us, younger folks.
Who are these Indian creators? This one shocked me. India's creators are coming from the most unusual places. Carry Minati, a gamer, has 31mm subscribers on Youtube, averaging 30-40mm views per video. Amit Badhana, who makes sketches and music videos, has 23.4mm subscribers on Youtube and averages 10-20mm views per video. Subscriber bases are not small here. Instagram creator Jannat Zubair Rahmani, a TV celebrity not a Bollywood nor cricket celebrity, has 33mm followers and average 5-7mm views per Reel. The thing about Indian creators is that these are Tier 2 and 3 folks who grew up with only a smartphone. There's real wealth in their families for the first time. Carry Minati earns $66K per month from Youtube alone! They are great at creating but not necessarily great are being entrepreneurs or running a business.
Where are creators creating? Indians spend on average 6 hours on their devices, half of it spent streaming video. Platforms like Youtube democratised video consumption in India but required effort and an elaborate set up to create. Then came TikTok and dramatically lowered the barrier for anyone who wanted to create a quick video. The tools were then copied by Instagram who's Reels has now replaced TikTok. India's creators are largely video creators because of these platforms. Youtube is among the only one's who shares ad revenues with creators and so creators have started coming up with their own ways to increase income: brand sponsorship, product placement, advertising, merchandise and more.
What are the platforms catering to creators? Creator economy is just starting out in India so there are no startups that are meaningfully catering to creators just yet. Even the few startups that are around cater to US creators. A framework that I use to think of creator startups is "Platforms" or "Tools". Platforms enable creators to create and or distribute for example, Youtube, Instagram, Dukaan, Sharechat and more. Tools enable creators to be more productive by managing communities, managing finances and more. There could be more frameworks but I'm still evolving my thought as I come across more startups. Interestingly, talent management agencies are doubling up as creator management agencies. Larger creators are contracting these agencies to manage the business and finance side of things for them. Another area where the internet is not cutting out the middle entity.
What's the fintech opportunity in the creator stack? Not all creators want to deal with the business or finance side of creating but they want to make a living for the hard work involved. In fact, ask a creator if they even know how to make an invoice - most get anxious. Moreover banking services are almost entirely shut out for creators because they don't have a fixed monthly income. India's underwriting capabilities for credit is still not evolved. Creators, as with any business, have very real expenses upfront while income is delayed resulting in a 30-60 day working capital cycle. Fintech tools enabling income consolidation, invoicing, accounting, taxation and more is where the opportunity lies in building for creators. Financial products around banking, credit, payments, insurance and most importantly wealth management is a bigger opportunity for India's creators.
Additional reading/listening: Recommended listing to excellent episode (3 hrs) by Amit at SeenUnseen in conversation with Roshan Abbas about the creator economy. Roshan paints pictures as he speaks, occasionally in Hindi, and is a great storyteller who I could listen to for hours. Also, Li Jin's blog is a goldmine.
I know very little about the creator economy but I'm very excited about the opportunity that this burgeoning sector presents. If you're thinking of building or are building for creators, I'd like to speak to you. Please email me or find me on any social platform with the handle @os7borne
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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.
Clinikk*, a healthcare subscription startup, is hiring for 3 positions across Sales, Product Management and Engineering. Apply here.
Zeta, a banking as a service startup, is hiring a Solutions Architect. Apply here.
Strata, an Indian commercial real estate investment platform, is hiring a Senior Backend Developer. Apply here.
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 RBI paused its plans to grant approvals for India's payments infrastructure
RBI (India's central bank) has reportedly put its payment network plans on hold. It's been claimed that RBI put this on hold because it hasn't formed a view on data privacy, security and localisation involving foreign entity consortiums.
In Feb, 2020, RBI released its plans for New Umbrella Entities for Payments to reduce NPCI's (quasi-regulatory body for payments) monopoly on India's retail payments infrastructure. 30th March, 2021 was the last date for consortiums to apply. Six consortiums applied (I've covered the consortiums in the 27th Edition) including those from Google, Facebook, TATA, Paytm and more. Now those plans seem stalled.
Takeaways: RBI was expected to grant those licenses by Sept/Oct this year. This reported after-thought regarding data security and localisation from RBI is surprising to me. RBI has been slapping Mastercard, Whatsapp and many others on the wrist to comply with these norms and has been more strict about compliance only more recently. NPCI today is a huge monopoly which is still keeping its payment systems (UPI and others) low cost.
RBI recently changed the payment data storage norms prohibiting any firm, that is not a payment aggregator, from storing customer card data. Realising the expected disruption to business, a flurry of entities are knocking on RBI's door to apply for payment aggregator licenses. These disruptions to India's seamless payment systems, which provide the user with options, will only further increase NPCI's monopoly with UPI.
2️⃣ Indonesia's banking regulator sharpened its digital banking regulations
OJK, Indonesia's banking regulator, introduced new rules and regulations for digital banking. The rules are mainly intended to speed up digital transformation of incumbent banks. Three main rules introduced: at least one physical head office, leverage safe digital technologies with adequate risk management and have a Board of Directors that are competent with digital technologies (under the Fit and Proper criteria). OJK also enhanced the minimum paid up capital required: for new digital full banks minimum capital required is $ ~692mm and for incumbent banks converting to digital full banks minimum capital required is $ ~69mm.
Takeaways: Isn't the $ 700mm minimum capital requirement really high? That number is almost three times higher than the previous requirement per OJK. It's a huge barrier to entry for any new digital banking startup. For comparison, the minimum capital requirement for new licenses in Singapore is at $ 1.1bn, Taiwan at $ 327mm, Hong Kong at $ 40mm, Malaysia at $25mm, Philippines at $ 20mm and India at $68mm. But it seems the Indonesian regulator, OJK, here doesn't want new entities to launch from the ground up. It seems to want consolidation and conversion to digital banking possibly via acquisition by tech companies, as per its statement. The minimum capital requirement for incumbent bank to convert to digital full bank is only $ 69mm.
OJK's update is important in the Indian context as RBI is reportedly considering its own digital full banking and digital intermediary framework (as covered in Edition #13 and Edition #29). Covid has pushed central banks to rethink their physical branch network requirement and this is a new paradigm for them. For such a core infrastructure, RBI will want to learn what's working and what's not in other emerging markets. India, to my knowledge, is the only major country in South and South East Asia without a digital banking license regime yet. We're all looking at you, RBI, no pressure.
If you're interested, here's a great (slightly dated) comparison of digital banking regulations in South East Asia by Deloitte.
3️⃣ Indians and our fascination with the US stock market
INDMoney launched Super Saver Account, a US account for Indians to transfer money to invest in US stocks. Winvesta, a cross border banking and wealth startup, raised an undisclosed amount.
Takeaways: Us Indians are an increasingly global consumer. Rising income levels is fueling our drive to travel global, buy global products and geographically diversify our investment portfolio. Geographic portfolio diversification is a very recent phenomenon driven largely by the narrative to own stocks in products one uses and participate in a high return stock market like US. That narrative seems to be working but US stock investing is cumbersome and expensive (as covered in Edition #33).
INDMoney was always positioned as a wealth management app (I use it too and love it) with simple dashboard view of one's entire financial life. It launched US stocks investing sometime back and seems to have found its "wedge". With the launch of this Super Saver Account, INDMoney is looking to further deepen that wedge. It's obviously not alone, Vested and Winvesta are targeting the same customers and already have their own banking partnerships to enable the same product. Then there's also the National Stock Exchange who's building a similar platform (as covered in Edition #33).
If you'd like to learn more about this sector from an India perspective, here's a very detailed conversation with Viram Shah, founder of Vested on the TransFin podcast.
🎁 Bonus: Round up of regulatory approvals, bans and actions in India and SEA
SEBI (Indian securities regulator): Bajaj Finserv received approval to set up an AMC. SEBI (securities regulator) and NSE (Indian stock exchange) banned brokerages from selling digital gold. Introduced modalities for implementation of the framework for Accredited Investors. Approved implementation of blockchain for non-convertible debentures. Banned Kotak Mahindra AMC from launching new fixed maturity plan (FMP) schemes for the next six months.
RBI (Indian central bank): PhonePe received an in-principle approval to operate as an Account Aggregator. Expanded the scope of permitted devices for payment tokenisation to include laptops, desktops, smartwatches, IOT devices and more.
SEA: Philippine Department of Finance released a statement that users of Axie Infinity will have to pay income taxes on "trade of pets". MarCoPay, a Philippine e-money app for seafarers, received its e-money license to operate in Philippines.
Takeaways: No takeaways here, make what you want of these. Thought it was important to highlight.
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. You can also find our US, Global and European coverage.
🏷️ Notable Nuggets
👋🏾 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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