Startup Street: Seven Startups That Will Impact India’s Fintech Ecosystem

This week on Startup Street, we have key insights and predictions by consultancy firm The Digital Fifth on how India’s fintech ecosystem will shape up in the coming years and startups that will have a lasting effect. American-Indian venture capitalist MR Rangaswami points out two key issues faced by the country’s startups; and the launch of Enable Startup Track Acceleration programme by the Punjab government at the Progressive Punjab Investors Summit 2019, with an aim to foster entrepreneurship and innovation in the state. Here’s what went on.

Predictions For India’s Fintech Ecosystem

India’s fintech ecosystem has consolidated over the last five years, especially after the entry of Google Pay—which is now the largest UPI platform by transaction value with Rs 49,700-crore worth transactions recorded in just April.

With larger players like Google taking control of the market, startups with wallet services are seeing depleted business and new players will find it much more difficult to enter the market, said a report by The Digital Fifth.

The report makes some key predictions for India's fintech startups and their ecosystem:

On the business-to-business side, payment gateway startups will increase focus on the issuance side (where they share issuance fees with banks) and start offering other financial products like lending, to make their business more viable, the report said. Startups such as RazorPay and Pine Labs are already doing that.

The wave of neo-banks seen in 2019 will only grow with more than 10 well-funded startups entering the market in the next few years to tap different sectors of the market, the report predicted.

Older startups such as Pine Labs, Ezetap, Paytm, Zeta and PolicyBazaar have reached maturity and are gearing up for international markets while the Indian market has seen the entry of international players such as Payoneer, TransferWise etc. “Indian B2B market is particularly ripe as banking community is now exposed to value of fintechs within India and has seen international startups in events across the world,” the report said. “We will see entry of nearly 20 to 30 startups and many of them would become successful with localisation of products as well as pricing.”

As the startup ecosystem goes through its maturity phase in payments, lending and wealth segments, many successful startups which are not overvalued would get acquired by financial institutions, the report said.

The report highlighted seven “unique” startups that it expects will be the game changers in India’s fintech ecosystem.

Setu

Launched in 2018, Setu is an API infrastructure startup that enables other startups to pick and choose a set of APIs to build fintech solutions. “Setu has an early mover advantage in providing new-age API infrastructure to build financial products,” the report said.

OKCredit

A Bengaluru-based fintech startup that provides a mobile app designed for small merchants to keep track of their receivables and payables.

Open

The startup is a neo-bank platform that combines everything from banking to invoicing and automated bookkeeping in one place.

Recko

Recko has built a SaaS-based product to track the complete transaction life cycle.

Gramcover

Gramcover is a digital insurance platform company providing affordable insurance solutions to the low- and middle-income farmers in the country.

Perpule

Perpule is a retail technology company providing India’s first self checkout enabler and self-ordering solution for offline stores, food outlets, malls and cafeterias. The company has also launched a point-of-sale billing solution called UltraPOS.

Credolab

Singapore-based Credolab is in the B2B business of selling its credit scoring tool that uses mobile phone metadata to help financial institutions with the underwriting of loans and credit cards.

The Two Key Issues For India’s Startup Ecosystem

India needs to address issues like liquidity and exits to propel its startup culture to the next level, a top Indian-American venture capitalist from the Silicon Valley said in an interview to newswire Press Trust of India.

MR Rangaswami, a philanthropist and a mentor to a large number of startups, said India was on the “right track”.

Rangaswami said there were only 1,800 startups in India in 2010, but in 2019 there were 40,000. “So, when you look at where we started and where we’ve come, it’s pretty phenomenal. I couldn’t believe it. I checked the numbers as defined by the government of India. It was only 1,800 (a decade ago),” he said, adding that India now has an ecosystem to do this. “India now has 25 unicorns.”

Referring to the issue of angel tax, which has been a big impediment for venture capitalists to invest in startups, Rangaswami said the government looks to have ironed out most of it, but not all of them. “Most of the issues have been ironed out. But that was a big impediment, because people would raise money and then they would suddenly get an income tax notice. It’s a big issue for startups, but it looks like most of the initiatives there have been fixed,” he said.

Now India needs IPOs and acquisitions so that more capital gets freed up for the next set of companies, Rangaswami said, adding that at least two Indian startups - Dhruva and Freshworks - are now headed for IPOs.

Punjab Launches Programme For Startups

Punjab Chief Minister Amarinder Singh on Friday launched Enable Startup Track Acceleration programme at the Progressive Punjab Investors Summit 2019 to foster entrepreneurship and innovation in the state.

ESTAC is a series of startup acceleration programmes created through a strategic partnership between the state government and Atal Incubation Centre at the Indian School of Business, Mohali.

The programme focuses on supporting technology-led, scalable and investible growth-stage startups in areas of government-enabled and private sector-driven businesses, the state government said in a statement.

The first of the series of ESTAC programme focuses on agri-tech startups, while the subsequent ones will relate to e-mobility, grain procurement, electric metering and other agricultural innovations.

It will be a six-month programme commencing from March 1, 2020. 10 selected startups will be given the opportunity to participate in the ESTAC programme and secure pilot projects with the government of Punjab.

With inputs from PTI.