GFF: FinTech's defining moment

Dear Readers,

Mumbai has been transformed into the epicentre of the FinTech world this week, as it is hosting the Global FinTech Festival (GFF) at the Jio Convention Centre in the central business district of Bandra-Kurla Complex. The BKC area is bustling with an influx of attendees, from global speakers to regulators, founders, and industry leaders. The atmosphere is electric, with cafes and restaurants overrun by professionals sporting GFF lanyards.

A shift in FinTech trends

The FinTech trends are changing and the GFF reflects it. The era of "tourism entrepreneurship"—where companies rushed into the market driven by fear of missing out (FOMO)—is fading. Investors are increasingly focusing on profitability rather than just growth metrics like Gross Merchandise Value (GMV) and customer acquisition. This pivot is resulting in a more discerning investment landscape where financial viability is paramount.

In response, many established FinTech firms are setting their sights beyond national borders, particularly targeting the Global South. Companies such as Pine Labs and Razorpay have already made significant strides into Southeast Asia, reflecting a strategic move to expand their reach and leverage international opportunities. The Indian government is also keen to share its Digital Public Infrastructure (DPI) with the Global South, enhancing global financial connectivity.

As Dammu Ravi, Secretary (Economic Relations), Ministry of External Affairs said at the Global FinTech Festival 2024, the global South agenda should be a priority. "We are working hard to push our industry towards this region, addressing structural issues and helping these nations build their own DPI,” Ravi said, adding that India also is working with global authorities like IMF, and the World Bank to set standards for digital payments, blockchain among others.

The funding winter for Indian FinTechs is getting over as the BCG report released at the GFF showed. FinTech funding for Indian firms has stabilised at $7-$10 billion per quarter, reflecting steady investment inflows. India is now the world's third-largest FinTech hub, with Indian FinTechs raising $25 billion in 2023. This sector is projected to grow by 35-40% by 2030. But companies have set sights on higher peaks. A significant 86% of FinTechs believe that achieving higher scale is essential for their path to profitability, according to the consulting firm.

The real challenge: profitability

Despite the excitement and rapid development within the FinTech space, significant challenges remain. Profitability is at the forefront of concerns, with investors becoming more cautious and selective. The era of regulatory arbitrage, where companies exploited regulatory gaps, is waning. Regulators are now more vigilant, and the competitive landscape is evolving rapidly.

NPCI is innovating at a pace that keeps FinTechs on their toes, stressing the need for these companies to continuously adapt and stay ahead. The focus is shifting from mere valuation to creating tangible value. The pressing question for many FinTechs is whether they can build sustainable and profitable businesses or if they will rely excessively on investor capital.

FinTech: The path forward

The future of FinTech is fraught with both opportunities and challenges. As companies navigate this complex terrain, they must focus on creating real value rather than just chasing valuations. Are FinTechs genuinely addressing financial inclusion, insurance penetration, and pension concerns, or are they simply replicating traditional financial models?

To thrive, FinTechs need to identify niche areas where they can make a significant impact and reduce customer acquisition costs. Building long-lasting companies that deliver meaningful value will be crucial for their success. While events like the GFF play a vital role in bringing together great minds and fostering innovation, the real test will be in whether FinTechs can translate these discussions into actionable strategies that create lasting value in the financial ecosystem.

FinTech: What next?

The regulators will have to also look at the rationale behind the regulations. Sopnendu Mohanty of the Monetary Authority of Singapore made an interesting statement, do you want to regulate the knife or the outcome of the knife? So it's time FinTechs sharpen their metal. Earlier Rajeshwar Rao, deputy governor of RBI, had said, if you walk and quack like a duck, we will treat you like a duck.

The GFF has facilitated a magnificent event. Thousands of people from various cities including different geographies came over. Despite traffic hurdles and long queues they were navigating through crowds for networking and attending sessions. From early-stage investors to growth capital seekers and payment to lending, people from different strata were absorbing the flavour of FinTechs.

When I was leaving the venue on Thursday night, I saw SPG commandos taking over the venue as Prime Minister Narendra Modi will deliver a special address at GFF on the last day and the festival will end. The whole world of FinTechs will return home with tired legs, shoe bites, crumpled jackets, free goodies, kits and dozens of visiting cards and selfies. Now what they will have is a few more contacts in their phonebooks... But how many contacts will actually materialise and convert into respected businesses will determine the future of the FinTechs... The future of FinTechs is a big hope. Within a short span of time a few hundred thousand people found solace in innovating finance which has been the biggest problem for centuries.... Let's hope they will be successful.

We have covered many interviews and written articles about the important developments at GFF. While we will publish the video interviews very soon, you can click here to read the articles.

As usual, I am adding here the top 5 stories of the week, trust you will find them meaningful.

1) Compliance should become the low hum in the background of FinTechs, says Madhabi Puri Buch

2) Banking will be more of a knowledge industry than service industry: Dinesh Khara

3) RBI Guv Shaktikanta Das sets five priorities for India@100

4) 'Finternet' is a new approach to global finance: Nandan Nilekani, says it's a movement

5) RBI Guv announces Unified Lending Interface, India’s new 'Jam Trinity' of Digital Finance

Happy Reading.

Amol Dethe,

Editor,

ETBFSI.