Ajit Deshmukh has over 25 years of management and leadership experience. He has been associated with Equirus in leading the technology space and has played a leadership role in cross border Mergers and Acquisitions (M&A) and fund raising for technology companies in the IT industry & Investment Banking industry. He also heads the digital practice where we work with new age tech driven startups on their seed, growth capital, and M&A requirements. Prior to joining Equirus he was the founder of Wizarth Advisors, a boutique investment banking firm that offered financial advisory service to cross border M&A transactions. Mr. Deshmukh has been working with founders of IT companies and CEOs of High growth companies in their Inorganic Initiatives.
India currently, exists in the sweet spot of demand and supply for Fintech Enabling factors. A conducive policy environment and the presence of a sizeable talent pool means Start-ups are rushing to solve specific problems whether its customer acquisition of old financial products like insurance, lending, payment instruments or new age personal finance products like BNPL, AI/ML based investment strategies etc. On the other side increasing penetration of smartphone, internet and covid accelerated digital literacy has meant growing demand and acceptability for availing financial services online.
In a country as large and as under penetrated as India, tech is the only logical solution for economically targeting and servicing customers. While the long-term use-case of tech enabled finance is undeniable recent events have knocked the wind out of the India Fintech story’s sails.
We broadly categorize Fintechs as Money movers, managers , lenders and lastly definers (crypto, blockchain and other alternate asset classes). Each of these have unique acquisition and profitability changes. We see the following trends developing in :
- Money Movers : In Mar’22 India clocked in 5.4 bn UPI transactions worth INR 9.6 Tn. However, Indian payment companies still struggle to be profitable despite of the high volume. In more developed economies, financial services companies make money on payments, as the transaction margins are high and interest rates low. India is a different market, the margins in Indian retail market are wafer thin and with government’s digital agenda push; MDR will keep trending downwards. Payment companies will thus continue be customer aggregators and find alternate ways to monetize this base through lending or cohort analytics
- Money Managers : The wealth management industry is undergoing a monumental shift due to changing demographics, the influx of new generation potential investors, transitional global scenarios, and most importantly the rampant digitalisation. This industry is extremely competitive and commoditized, and customers are highly demanding, as their needs constantly evolve. Technology has been a key differentiator that has enabled the broking sector to consistently deliver value for investors. For these new age investment platforms, it is not just about rendering a service to the customer, but also about enabling the customer to make informed decisions. Everyone wants a platform that is simple, intuitive, and easy to use. These money management platforms have helped bring in a lot of first investors into the investing fold. We will continue to see wealth management platforms build an ecosystem around investing to improve customer stickiness
- Money lenders : We will see a lot of the money movers migrate to the lending ecosystem to monetize their customer base. With regulators keeping a keen eye out on the segment. We will see more Platform & NBFC partnerships in the lending space where the lending risk will lie on the books of the NBFC whereas the platform will be responsible for sourcing and running advanced analytics on cohorts to facilitate underwriting
- Money definers : India will now join a handful of nations to launch its own blockchain currency. This has huge implications for finance overall and underscores India’s pre-eminence in digitised finance. The central government is also launching a digital rupee to make the transactions more efficient, and the Reserve Bank of India will implement it to reduce the people’s dependency on cash. India is now a step closer to become one of the few countries who have made regulations related to the digital currency and adopt blockchain technology and integrate it with the economy. Immediately, the CBC means leveraging the benefits of blockchain, lower opex, and faster settlements. We need to wait for full details to understand all implications. However, the taxation of virtual assets is now clearly defined hinting that government understands that the next wave of profits will come from this segment