Massive pressure on fintech to innovate, says Nasscom
As the government and industries come together to push start-ups into prominence across the country there is a visible focus on fintech companies with many getting a larger share of the investment pie. Nasscom’s 2017 incubator and accelerator report shows that four out of six major industry incubator-accelerator partnerships have partial focus on fintech services.
“Quantifiable objectives in fintech start-ups are more measurable. The number of customers acquired, number of retail branches or number of efficiencies delivered, cost per transaction lowered etc. are easier to show (in fintech) compared to other sectors,” said K S Vishwanathan, Nasscom vicepresident for industry initiatives and head of its 10,000 start-ups programme. He adds that while there is no differentiation between sectors as long as the idea is viable, fintech is currently booming simply due to its measurability.
A recent McKinsey report noted a similar trend with most finances going to fintech startups, followed closely by clean technology. “Forty-five to 50 per cent of IT services outsourcing to India comes from the BFSI (banking, financial services and insurance) space. That is the segment that is seeing maximum disruption and looking for change. The pressure on the country as a whole to innovate in fintech is immense,” Vishwanathan added.
Nasscom’s view on start-ups is simple: If a proposal looks profitable it will receive investments irrespective of what area it is servicing. Historically, design-driven manufacturing has not been a forte of Indian businesses even though there have been exceptions. Time and again over the past decade, financial services have proved their credibility, be it in form of an RBL Bank or YES Bank or a Bandhan. This was possible due to successful bankers who switched to financial services.
Fintech companies, in the form of payment facilitators, small lenders and NBFCs, are flooding the startup ecosystem and changing how Indians have viewed loans and expenses since generations. Vishwanathan added that the rapidly changing customer profile in financial services requires technological support driving fintech. “To understand the business model you require the first generation of successful entrepreneurs who can invest here. In the next five years, all sectors will have such talent (as business matures),” he added.
Does India need more homegrown venture capitalists (VC) to woo companies away from the shadow of an Alibaba, Tencent or Sequoia? “Money has no colour. A VC is a VC irrespective of where the funding comes from. Today the top 25 VCs from Silicon Valley have a presence in India. Every year at least 10 international VCs are establishing their footprint here. India is a major market for investments and will continue to be so,” said Vishwanathan. He added that with a 30 per cent growth in the number of accelerators setting shop in India only meant better opportunities for start-ups here.
India houses a little more than 140 accelerators and incubators for start-ups, compared to 2,400 and 1,500 respectively across China and the US, says the Nasscom report. On the bright side, more than half of these are located in tier-II and tier-III cities and have a massive technology focus.
Most finances are going to fintech start-ups, followed closely by clean technology, a recent McKinsey report noted