Mobile Wallet Sumo wrestlers face off in India

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We are mixing our cultural metaphors here. Yes, Sumo wrestling is from Japan and this post is about mobile payments reaching a tipping point in India. Yet the Sumo analogy fits when we are talking about the mobile payment giants of India such as Paytm, Chillr and Mobikwik. Without regulation, this would be a winner takes (almost) all market based on network effects. However, India has some Tech Smart Regulation called Unified Payments Interface that levels the playing field so that the whole economy benefits. 

Paytm – aggressive growth

There is a a fierce battle for market share in mobile payments in India. This is where the winners emerge and those winners use a mix of aggression and smarts enabled by plenty of capital. We start with Paytm because they were the first Fintech Unicorn in India to hit our radar screen; we expect to see more Fintech Unicorns emerge in India during 2017.

Paytm is a kludgy name that stands for Pay Through Mobile. Who cares about kludgy names if it is so successful? They claim 120 million users, up from 12 million only 2 years ago and having been founded only in 2010. Post demonetization, Paytm was processing more than 7 million transactions per day.

That is phenomenal growth by any standards.

This growth upsets people, including some global players. Paypal accuses Paytm of Trademark infringement. There is also a battle with Uber. Within India we see criticism from rival Mobikwik about what they describe as capital dumping via China.

All those critiques come with being a leader. However, it is possible that, like some people say about Uber, Paytm could be buying a dollar for 99 cents through incentives. This is the norm in market share battles and the prize is big enough, but entrepreneurs have to know when to pivot when capital starts demanding profits. I suspect Alibaba, a big shareholder, takes the long view as does the big Indian shareholder, Tata. However, growth through incentives is a bit like steroids for an athlete – dangerous if you come to rely upon them.

Paytm has become a Payment Bank. The way they present their mobile wallet it is like a current/checking account – you can Add Money, look at your Passbook and Redeem loyalty points.

Then you can pay bills for everyday items. This is where you see the original driver which is paying your mobile operator. You simply enter your number, the Operator, the Amount and whether it is Prepaid or Postpaid. You can choose Fast Forward to pay directly from your Paytm balance. Paying your mobile operator may not seem like a big deal, but this is a mobile leapfrogging story. Indians spend 45% of their incomes on mobile technologies and platforms (vs only 11% in America). because mobile is the main point-of-entry to the Internet (PC penetration is 5% vs 75% for mobile).

Then you can pay for your DTH Satellite TV and Electricity. In a uniquely Indian spin, you can use it to buy Gold.

However, then you see an e-commerce service. In the West we grew used to payments (Visa, Mastercard, Amex, Paypal etc) being different from ecommerce (Amazon, eBay, Uber etc). China and India do it differently. Alibaba is Amazon + Paypal. Paytm is Paypal + Amazon; the placing of the + makes very little difference but the combination is game-changing. It is no coincidence that Alibaba is a big investor in Paytm.

Just after phone recharging and utilities, Paytm offers a lot of services that are part of everyday life in India – movies, bus, flights, trains. Buying these does not entail any supply chain logistics.

To put that in context, that would be like Amazon selling your air flights or train tickets.

Below that you can see a conventional online shopping mall. This could be Amazon or Alibaba or Flipkart. The key is that Paytm is an online shopping mall offered by a payment company.

This would be like Visa or Paypal offering an online shopping mall. This is ecommerce merged with payments. This is likely to be the future of both ecommerce and payments. This may drive mega mergers in America, but it is more likely that the real innovation will come from China, India and Africa (a leapfrogging First the Rest then the West story).

Mobikwik

Mobikwik is another major contender with serious traction and plenty of capital. It looks like a bruising street fight between Paytm and Mobikwik. Literally, the action is on the street as both ventures win by signing up merchants. Merchants can accept more than one – this can be a Visa vs Mastercard story. Or the UPI standard could commoditize the whole Consumer To Merchant (C2M) business; when we use physical cash there is no transaction fee.

Mobikwik is also taking hard shots at Paytm for their ties to China via Alibaba.

“We must be sensitive to companies, especially those that have massive foreign investments,” said Singh. “They can come into the country, dump capital and gain access to data.”

Chillr

Chillr has a different strategy to Paytm and Mobikwik. They don’t go after the Consumer To Merchant (C2M) market (apart from the ubiquitous phone recharging), but stay focused on Consumer To Consumer (C2C) payments.

Their lead investor is Sequoia Capital. Their massive win was Whatsapp and the assumption of many has been that Whatsapp will monetize through C2C payments, so this will be interesting to watch.

Chillr are getting distribution through partnerships with Banks. All transactions on Chillr are initiated directly from the users’ bank accounts and authenticated by a secure PIN provided by their banks.

Examples of Bank partners include HDFC and Federal Bank.

OxigenWallet

OxigenWallet competes with Paytm and Mobikwik. Like Paytm, they have received in-principle approval from the Reserve Bank of India to operate under the Bharat Bill Payment System (BBPS), which will allow people to pay utility bills from anywhere at any time.

Oxigen expects BBPS to help more than double the company’s wallet user base to 50 million by December next year.

UPI Commoditizing the payment layer for the banked

The bad news about Mobile wallets is that if network effects rule – and they usually do – we might miss the credit card networks as we end up dealing with one or two behemoths that control cash, credit and e-commerce. The alternative scenario is that we all have mobile wallets that work with every other mobile wallet (just like physical wallets). That will be good for consumers, but it will force mobile wallet ventures to add value elsewhere.

There is a lot at stake in the geeky subject of mobile wallet interoperability.

So the Reserve Bank of India (RBI) was farsighted when they launched the Unified Payment Interface (UPI) in April 2016.

In the scenario where one or two behemoths rule, our wallets will be determined by our mobile phone operating system. Merchants will accept both Apple and Android/Google like they accept Visa & Mastercard today.

That scenario is unlikely in India, thanks to UPI. We believe that India leads the way on this Tech Smart Regulation front and other countries will follow.

Dominance by Apple and Android/Google is also unlikely because the other Global Big Techs – Facebook and Amazon in GAFA and BAT (Baidu Alibaba TenCent) – won’t sit still for dominance over something as critical as payments. Neither will Visa & MasterCard and the banks.

India does not want payments & ecommerce dominated by a few global players. India is sensitive to “digital colonialism”. They don’t want their digital life – which now has such a huge impact on the economy – controlled by companies based in America or China (i.e. GAFA and BAT).

There is as yet no GAFA or BAT equivalent acronym for India. We have had various incarnations of acronyms for the outsourcing giants such as SWITCH Satyam Wipro Infosys TCS HCL. However, the new Digital India behemoths are companies like Flipkart, Paytm, Snapdeal and Mobikwik. Somebody who is good with crossword puzzles will put them into an acronym.

The point of lumping Flipkart, Paytm, Snapdeal and Mobikwik into one category is that payments and ecommerce is converging, thanks to Alibaba.

How Alibaba changed the game

The lazy way to describe Alibaba was the “Amazon of China”. However, it would be more accurate to describe them as the Amazon + eBay + PayPal of China. It is not just that Jack Ma is hugely ambitious – he clearly is – but also that digitization erodes barriers between previously distinct categories. Payments and e-commerce are inextricably linked. Actually, to really describe Alibaba’s ambition, you would have to talk about the Amazon + eBay + PayPal of the world. In that game, India is the arena. The Indian government understands this and has been tech savvy and proactive.

This merging of payments and e-commerce has already played out in India.

An early mobile wallet pioneer was FreeCharge, which started out, like Paytm, enabling you to recharge any prepaid mobile phone, postpaid mobile, electricity bill payments, DTH and data card in India. Paytm moved into e-commerce and then Snapdeal Acquired FreeCharge in April 2015.

Moving upstream post UPI

If the payment layer is commoditised, which is what consumers want, mobile wallet ventures need to move upstream to become either banks or e-commerce portals or both.

Paytm has already become one of the 11 new licensed Payment Banks and a quick look at their site reveals an e-commerce portal.

UPI is about bank payments and millions Indians are still unbanked (233 million as per a PwC India report). Plus, cash is still king & queen. Yet India’s 150 million smartphone users is expected to grow to 500 million in the next few years.

Upasana Taku, co-founder of MobiKwik, which has 30 million wallet users cites Reserve Bank of India data showing mobile wallet growth to be four times more than mobile banking.

The on-ramp to financial services for the unbanked will clearly be mobile wallets. The future maybe less about adding a mobile layer to banking than adding a banking layer to mobile. India is where this will play out first.

UPI also makes mobile wallets work better, because it works quicker than the Immediate Payment Service (IMPS) that banks use for instant money transfers. UPI will make it faster to get cash to  merchants and to load cash into consumer wallets.

Who will be the Alibaba of India?

In China we talk of the Google of China, the Facebook of China, the Amazon of China and so on.

In India, the Google of India is Google, the Facebook of India is Facebook, the Amazon of India is – maybe Flipkart and maybe Amazon and maybe Alibaba.

Flipkart understood that Cash On Delivery (COD) was essential in India. You could not simply replicate Amazon in India. Flipkart grew huge by innovating on the logistics front.

However, what happens when that cash at the door is a guy with a mobile phone and a mobile wallet? That is where the race to get consumers to sign up for a mobile wallet is so key. The mobile wallet is the key to the e-commerce universe.

You can see why Alibaba invested in Paytm and why Mobikwik is playing the made in India card (i.e saying that Paytm is too close to China).

It is a sign of the changing times in the Asian Century that we ask who will be the Alibaba of India?

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Mobile Microinsurance in India

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Consider these numbers to see the scale of the opportunity for mobile Microinsurance. In a developed market like the UK, 80% have some kind of Insurance. That goes down to 10% in India and 2.5% in Africa. It is pretty clear where the blue ocean market is.

These millions of new insurance customers won’t buy the legacy insurance products. The new products will need to be a) mobile end to end (i.e. not a mobile front end that requires you to use a laptop/desktop to complete a process) and b) available in very small amounts for very low cost (“microinsurance”). Whether these new mobile Microinsurance products are delivered by Insurtech entrepreneurs or agile established carriers remains to be seen.

Like Microfinance, Microinsurance is key to the transition from subsistence farming to a middle class life. One uninsured disaster and families face financial ruin. An insured borrower is also a better credit risk, so the two markets are connected.

Insurance Comparison Sites 

Sometimes, the simplest innovation wins. In India we see a lot of comparison sites. This makes sense in market such as India, where lots of consumers are buying insurance for the first time. Compison sites also have a proven revenue model.

Examples include:

Policy Bazaar

My Insurance Club

Compare Policy

Policy Bachat

However, these comparison sites assume that the insurance product fits market needs and just need to be marketed, discovered & compared. The existing Insurance products meet the needs of those who are already in the urban middle class. This is a big growth market, but still small compared to the millions emerging from subsistence farming into the lower rungs of a middle class life (what we will call the “aspirant middle”). That market needs some innovation at the product level, not just at the marketing level. For that we need to look at Mobile Microinsurance. But first, the one product they need most – crop insurance.

Crop Insurance – the government approach

Crop insurance is what the aspirant middle needs most. One bad harvest leads to ruin. So, it is no surprise that the Indian Government is proactive on this front. In February 2016, they launched the Pradhan Mantri Fasal Bima Yojana (Prime Minister’s Crop Insurance Scheme). The premiums will be fixed, depending on the type of crop. The Indian Government clearly don’t want a repeat of rapacious loan terms from some of the Microfinance players.

Crop Insurance – the private sector approach

Crop Insurance could use some of that Blockchain & big data magic that we see brewing in startups. Something as simple as flood insurance is no longer simple, now that climate change forces a rethink on existing models. We have looked at big data ventures going after this market such as Meteo and Praedicat and then we looked at how blockchain is being used for catastrophe swaps.

So, there is plenty of innovation help for any insurance companies that want to offer crop insurance at those Government-fixed rates. It is likely that meeting those Government-fixed rates and turning a profit will need an entirely new generation of insurance, with innovation front to back. For that we turn to mobile microinsurance

An idea whose time has finally come

Mobile insurance is nothing new. It emerged in India way back in 1997, when telecom operators launched mobile based insurance (dubbed “mInsurance”). This has not been a great success story. Often an idea is simply ahead of the market reality. In this case, the market needed mass penetration of mobile – tick in the box for that today. It also needs new entrants, not just Telecom operators which have to date not been as successful as they could have been at leveraging their network and customer base and billing relationship into a big position at the application layer.

BIMA – Mobile Microinsurance but not in India

India has the ingredients to be a leader in Mobile Microinsurance, yet so far the action seems to be elsewhere. BIMA Mobile comes from Sweden, has an office in London and operates in many markets including nearby ones such as Pakistan, Sri Lanka and Bangladesh – but not yet India.

BIMA bridges the gap between Telecom operators and Insurance companies.

Given the scale of the market and the digital infrastructure being laid down by the Modi Government, one can expect to see BIMA come to India soon. Whether it will be new Carriers or old Carriers who the partner with remains to be seen.

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Indifi & the rise of the Indian SME lending matchmaker

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As someone who has been in the B2B lending game for just on a year, there is one thing that has become evident to me. It’s not the lending that’s hard, it’s the deciding whether to lend or not that creates the biggest headaches.

For those of you who are a bit longer in the credit assessment tooth than me, this wide-eyed observation will hardly come as a surprise. It’s why fintech startups are so keen to impress on the sophisticated investor the ‘dynamic credit assessment technology’, ‘data driven underwriting model’, and ‘automated decision making’ features of their businesses.

Assessing a SME online and in just a few minutes – the new attention span of would be borrowers thanks to companies like Iwoca and PayPal – compounds the challenge of lending to the small business sector even further. It’s possible to do but also complicated, potentially expensive and high risk. And with margins already slim, wouldn’t it be great to outsource that to someone who can do it better, and for less?

Indifi, one of the latest lending matchmakers to emerge out of the Indian subcontinent, seems to want to help lenders to do exactly that. And it was that promise that looks to have helped the company recently raise $10 million, with former ebay founder Pierre Omidyar a notable backer of the startup.

By partnering with supply chain businesses in the travel, ecommerce and hospitality sector, Indifi allows SMEs affiliated with those chains to apply for working capital loans of between 1 lakh rupees and 50 lakh rupees (~US$1500 to US$70,000).

To assess the business, Indifi accesses proprietary SME data from supply chain platforms, which it then uses to assess and match the business to one of its partner lenders. The startup’s recent tie up with hotel booking platform Djubo is an example of the model in action.

Companies like Indifi herald a new way for businesses to be ‘understood’ by would be lenders. Instead of being put through a rudimentary matching wizard online (like many online brokers are guilty of doing), Inidfi can use the right data to make the right lending decision, delivering insights about complex business models to lenders and reducing the risk all round. The ‘trust me, we know what a healthy hospitality business looks like’ is a strong draw card for a lender looking to diversify its lending book in a safe way, without building in-house knowledge.

Business models are changing far more rapidly than what they did ten, even five years ago. Banks are struggling to keep up while basic fintech lenders who take the one-size fits all approach will no doubt find themselves in a similar position soon.

My bet is that companies like Indifi, or ApplePie Capital, who offer franchise financing, will establish foot holds in quality, well understood niche markets. The learnings they establish here will help underpin expansion.

The only question left is the ethical one. Can a business with no direct exposure to a loan create problems in a lending ecosystem? One would hope the symbiotic nature of the partnerships created would mean the answer to this one is a no. But we are in new territory every month in the world of alternative finance, and anything could happen. And that is, after all, what makes the fintech sector so fascinating.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Reflections on last year’s WealthTech predictions

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Evaluating our predictions in wealth management from last year with a correct, incorrect, nothing material happened.

  • Regulators will innovate; SingaporeUKandAustralia, seem to be the most likely frontrunners. Correct but stronger and more global than predicted.
  • Regulatory risk for Fintechs will increase in 2016; Regulating Innovationis in the 2016 Fintech constellation. Correct (new charters) and will continue.
  • “Doing nothing is not Safe any more”(The Icarus deception). Correct (more collabs) and will continue.
  • Fintechs will be confronted with the reality that in some verticals, they simply have to become another arm of the “monster” they set out to replace. Correct 100%; we saw more collaborations and more funding to ventures with collaborations potential.
  • Central Banks have been the least involved stakeholders in the Financial transformation underway. In 2016, they will publicly join in some lite way, as their ties with regulators tighten and citizens become even more mobileSingapore and India, seem already leading the way. Correct and this will continue.
  • More Supranationals, like the Financial Innovation Now(FIN), will be born. Correct (e.g. Google, Facebook, Microsoft, Amazon and IBM formed Partnership on AI) but the impact of these coalitions is yet to be seen.
  • Micro multinationalswill become more common from launch as scaling geographically but also into adjacent product/services will be vital. Not that strong a trend; scaling didn’t accelerate significantly due to the tough political and macro environment.
  • The Freeway for stock tradingwill become busier. Robinhood is leading the way to free online brokerage of stocks and ETFs. Online asset managers, investment advisors, social trading platforms will start integrating free brokerage into their offering. Correct (the Robinhood Baidu summer partnership).
  • % of DIY investorswill increase; % of passive investors will remain stable; Alpha robo-advisory will be the focus instead of Beta robo-advisory. The new norm for fees will be around 50bps, and 12bps respectively (e.g. Quantopian is one leading example the DIY space; Motif Investing in the Alpha advisory space). Nothing really happened (i.e. no significant increase in DIY or major switch to alpha etc). Fintech didn’t manage to penetrate in 2016 these long engrained behavioral patterns.
  • Picks and shovels & Home Depot style stores for wealth management B2B solutions, will open everywhere. We will see growth in this space as part of the scaling up sprint process (e.g. SigFigis one example; and Investcloud is another type). Correct; B2B was the name of the game in 2016 in the US and Asia (Future Advisor; Bambu).
  • More Buy side and Sell side bridgeswill be built in 2016, to solve liquidity and market making problems that will become more acute (e.g. Algomi is one leader in this space). Incorrect prediction for the bond market. Relevant more in asset management; Goldman is leading the way and there is a long way to go.
  • Conventional wealth managers will shift from experimenting with incremental innovation (PA consulting reportsthat roughly 2/3s of financial services globally focus on incremental innovation rather than radical) to a more strategic adaptation of the new business practices. Didn’t happen; wealth managers remain the big laggards.
  • IT firms wanting to move into Digital Wealth management, will become aggressive in their offering even though it may cannibalize their existing offering (e.g. Why Salesforce chose Wealth Management as first vertical market). Didn’t happen; we only saw microservices added.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

Why India is the country to watch in Fintech

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Sure, we are all watching China, but to win in dynamic markets you need to be both right and contrarian and it is accepted wisdom that China is the country to watch in Fintech. It is, but because fewer people see India as the country to watch, we decided to spend a week shining a light on Fintech in India. While many of our readers will be celebrating Christmas or Hannukha we reach out to those who did their celebrating at Diwali or Ramadan. 

What is happening in India does not only impact the fastest growing large economy in the world – that is a big deal – it also impacts how Fintech develops around the world.

India finally has all 5 Aces

20 years ago, after spending a few years living and working in India I wrote this article. (It is no longer available where it was originally published, so I reproduced it on my personal blog).

My thesis at that time (in 1997) was that India had only one ace – low cost labor – and faced Western Competitors with 5 aces:

1. A large domestic market

2. Access to intellectual capital

3. Reliable, low cost telecommunications

4. A culture that rewards innovation and risk taking

5. A well-developed venture capital industry

In short, India in 1997 had a tough road ahead.

10 years later – in 2007 – I reviewed these 5 aces in an article on ReadWrite and concluded that India was doing a lot better. At that time, the biggest problem was risk aversion because a well-paid job in an outsourcing company looked like a better option than doing a startup.

Yet, as is usual, things take longer than we think (but the eventual change is also bigger than anybody forecasts). For the last 10 years, India as an innovation hub was far more promise than reality. Yet now, as we slide into 2017, it looks like India as an innovation hub is in great shape and that Fintech is where that innovation will happen first.

How the Fintech India story developed on Daily Fintech

When the Fintech City Tour first went to India two years ago January 2015, I found some innovation but missed the big story.

Only a few days later, the big story appeared in India’s first Fintech Unicorn – Paytm.

In May I dug into why Paytm was getting so much traction in mobile payments.

In September, I looked at the mobile payments battle in India as it relates to Uber.

Later in September came the really big news about the 11 new banking licenses.

A few months ago, I looked into the critical plank in the Fintech revolution in India – Aardhaar, digital ID at scale.

For more on the infrastructure behind this Fintech revolution we turn to one of its architects – Nandan Nilekani.

Three reasons you should pay attention to Nandan Nilekani

1 He was a cofounder of Infosys in 1981. Their current market cap is over $30 billion and they did not take a dime of VC money to get there.

2 He led the Aadhaar initiative. This is biometrics based digital ID at massive scale – over 1 billion issued in 5.5 years, making it the fastest digital service growth in history. (Android hit 1 billion in 5.8 years; WhatsApp took 7 years.) Think of the impact on financial inclusion; this is transformative for millions of people.

3 He led the Finacle business at Infosys. This is the least well known part of his story. Finacle is a core banking software product; it was unusual at that time for an outsourcing business to get in the product game. Finacle is significant as part of this story because this background makes Nandan Nilekani so well qualified to understand the Fintech revolution in India today. (I had the good fortune to meet him about 20 years ago during my Misys core banking days).

You can hear Nandan Nilekani describe Fintech is India’s WhatsApp moment in this 30 min talk.

 

5 enablers for the Fintech revolution in India

– Aadhaar. Already described above. It is hard to overstate the importance of this. Without this, all the other enablers would only impact the urban middle class. Aardhaar really brings the power of digital to 1 billion people. It is an incredible achievement combining vision, tech smarts and drive.

– Mobile leapfrogging. There are 900 million mobile connections and Indians spend 45% of their incomes on mobile technologies and platforms (Americans only spend 11%), because mobile is the main point-of-entry to the Internet (PC penetration is 5% vs 75% for mobile).

– Immediate Payment Service (IMPS). This is a real-time inter-bank payment system through mobile phones that is a) net payment (unlike RTGS) and b) works 24/7. It was launched by the National Payments Corporation of India (non-profit, Government funded) in 2010.

– Payment Bank licenses. This enables entrepreneurs to deliver regulated payment services without becoming deposit taking banks.

– Unified Payments Interface. This enables Mobile wallet interoperability (read this post for why this is so critical).

This shows how positive change can come from the right mix of public policy, new technology and entrepreneurial drive.

Demonetization is the Fintech moment for India

All this was already driving rapid change, but then the turbocharger kicked in a few weeks ago when the Modi government declared the 500 and 1,000 Rupee notes to be no longer legal tender. This action was labeled “demonetization”

Sopnendu Mohanty of the Monetary Authority of Singapore (MAS) called Demonetization the “Fintech moment for India” in an interview in The Hindu Business Line.

“The Indian fintech story is different. The Indian government has a massive problem with an opaque, cash-based economy that has dominated the country for decades. With the majority of its citizens lacking access to formal banking services, India had nothing to lose by encouraging out-of-the-box innovation that would seem insane to the U.S. financial services establishment.”

Demonetisation applied a turbocharger to the already rapid acceleration of mobile money in India. According to Hindustan Times, Paytm transactions exceed combined usage of credit and debit cards in India. Paytm is seizing the day with a new ad targeting demonetization that has ignited controversy (read, free media).

Thanks to Unified Payments Interface (UPI) delivering mobile wallet interoperability, this is not a winner takes all market. Paytm is doing very well but they have plenty of competitors and UPI creates a level playing field. UPI is an example of Tech Smart Regulation. In this post on PSD2, we defined the 3 levels of regulatory maturity:

  • # 1. Paper. Created in haste by politicians and lawyers after a crisis. Result = lawyers get rich. Examples: Sarbanes Oxley & Dodd Frank.
  • # 2. Great Idea. Using a disruptive tech without implementation help. Result = uncertainty. Example: SEC Mandate for XBRL.
  • # 3. Tech Smart Regulation. Using a disruptive tech with implementation help. Result: level playing field that drives innovation. Examples: PSD2 and UPI.

Demonetization certainly creates a lot of short term pain and damage to the economy and has drawn a lot of criticism. There is a lively debate on this thread on the Fintech Genome.   Prathamesh Godbole from Mumbai expressed the negative view on demonetization very well:

“A big chunk of business is done in cash largely because its frictionless, and not necessarily to avoid taxes. This has been hit quite badly. Uber, Ola and other startups with deep pockets still process most of their customer payments in cash. On average, cab drivers, shops and small business owners I’ve spoken to said their business has dropped by 40-50% with no rebound even after a month.

The measure may be well intentioned, but it’s been pushed prematurely. Based on govt numbers, it is going to take anywhere from another 5-10 months to restore the currency supply. Personally, I’ve not seen much change in attitudes towards digital payments- small businesses have started accepting cards/mobile payments but will drop it the moment card companies charge a transaction fee. For now, most card processors and wallet companies have waived off fees.”

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Disruptive change does not happen in a linear fashion. It happens in short explosive bursts after long periods when nothing seems to happen. Fintech in India is going through one of those short explosive bursts of change.

Durinh the rest of the week we stayed with India:

Wednesday = SME Lending

Thursday = Mobile Micro insurance

Friday = Mobile Wallets

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Wrap of Week #51: Daily Fintech week of 2017 predictions

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A thematic week on Fintech trends in all the areas that we track. Ahead of the New year that will be exciting and complex, we dedicated the entire week to general Fintech trends, to WealthTech and Consumer Banking predictions, to Small Business and InsurTech forecasts.

Enjoy the holiday season.

The Fintech Genome

Join the conversations on the Fintech Genome.

Here is a sample of the latest ones.

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The Daily Fintech Top 10 Consumer Fintech Predictions for 2017

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#1 Challenger Banks challenged

Big banks getting traction with their digital only services make investors nervous about the thesis that being digital only is enough to create sustainable competitive advantage. A few challenger banks (aka neobanks or full stack Fintech) will do well based on great execution (Nubank in Brazil is an example), but we will see high profile blowups as many fail to get follow-on financing.

#2 Bitcoin-first payment moves from Darknet to Clearnet

Bitcoin got early traction for illegal online transactions, made (in)famous by Silk Road. This got media attention and confirms the old saying that, “there is no such thing as bad press”. In 2017, we will see more of the transition to Clearnet, legal transactions where Bitcoin is not just one more payment option, but is the primary payment option (Bitcoin-first payment), as it is on the Darknet. This will happen first with micromultinationals (who cannot afford expensive multicurrency solutions), selling digital services (no charge backs needed) to customers who are already comfortable with Bitcoin.

#3 Mobile cash tipping point in India

Mobile payment was already getting a lot of traction in India, but demonetization just gave that a huge boost. It is still early days, with paper being at least 95% of transactions, but this can change fast once we hit the tipping point which we expect in 2017.

#4 Bank licenses become easier globally

This is already happening in America and Switzerland. The question is who will want to be licensed? Many companies will prefer to stay as Tech that enables Fin. But TechFin – tech driven financial services – is the end result of the Great Convergence between Tech and Fin that started in 2016. Consumers get comfort from a regulated entity. So we expect a big take up of these easer licenses.

#5 Rebundling on top of PSD2

This started in Europe in 2016 and will pick up steam in 2017 and we may see similar regulation in America and Asia.

#6 Cross selling in the spotlight

Wells Fargo proves a) that good cross selling is a grear driver of growth and b) bad cross selling (fake accounts) can destroy value very fast.

#7 Branch closures reach tipping point

We will see this first in high cost countries such as Switzerland and urban centers with both high costs and a large millennial population. This will reach a tipping point as consumers and merchants grow accustomed to doing their daily business without having a bank in the neighborhood.

#8 Refugee banking starts to emerge

From a conceptual dream a few years ago, we will see entrepreneurs, banks and regulators grapple with both the challenges and the opportunities of doing this right.

#9 Next generation ATMs

This is a consequence of branch closures reaching a tipping point. Banks will offer next generation ATMs that can do a lot more than deliver cash. They will be real Teller Machines and not just Cash Machines. This will be a transitional phase to a cashless society, but a transitional phases are critical and usually last longer than futurists think.

#10 New guards against cyber thieves

Keeping money safe from Butch Cassidy and the Sundance Kid was the original job description of a banker. As the thieves now use hacking scripts more than guns, the job description changes, but the objective remains the same. The key driver for change is convenient multi-factor authentication via FIDO Alliance.

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