Financial news

Listed FinTech companies today are not profitable, those who have raised billions of dollars, and are unicorns are recording losses. Considering the geopolitical tensions, investors are not pouring-in money with the same speed which they have been doing earlier.

Considering this background, the questions that remain — Will FinTechs be sustainable? How will they become profitable? How will the sector shape up?

In an exclusive interaction with ETBFSI, industry stalwarts said that ‘Me too’ fintechs will soon cease to exist and budding fintechs or existing ones with newer business models, newer experiences will take over. They asserted that many startups and early stage companies will shut down in the coming future.

Prasanna Lohar, CEO, Block Stack highlighted the quantity of fintechs is huge (in terms of players) but quality is comparatively less. However, he expects the Fintechs to become smarter.

“In a nutshell, Fintechs will become smarter but they will look into the fact that they shouldn’t look as a ‘Me too’ kind of entity and provide a new kind of a fintech experience,” he said.

“Our economy is already based on lending, insurance and so on. So going ahead it can ride on a different kind of orbit like data platforms, Banking as a Service (BaaS) platform, tokenisation platform which at present is not at all there in India. The new business models will be adopted by existing fintechs and also budding fintechs,” he further added.

Prasanna believes that today’s fintechs will become traditional fintechs but the ones based on newer models will come with a larger view.

He also said that FinTechs will have opportunity to scale and become big companies going ahead, giving sustainable experiences to banks.

Rajesh Raju, MD, Kalaari Capital believes that entrepreneurs and investors will always chase value and that’s not going to change in future.

“I believe that a mature ecosystem should always focus on value creation rather than valuation. A word of caution to entrepreneurs — if you want to be a fintech company and a lender for example, as a lender then you need to think how using technology you can do better than banks and nbfcs, but your core skill should be lending, not technology. So you better be a lender, better be a good risk manager,” he said.

“I think going ahead, fintechs can create payment stacks, lending stacks, insurance stacks, etc but also be clear as to what they are — a core product or technologist and then use the skillset,” he further added.

Speaking on how he envisions FinTechs in the future, Sanjib Jha, CEO & ED, Coverstack, Coverfox Group highlighted four trends that the FinTech sector will witness going ahead.

“Four things will happen very clearly in the sector — Firstly, a lot of startups and early stage companies will shut down because they may not have reinvented themselves, they’re still living in the aura of money is available and it’ll come. Secondly, there will be downrounds, good business will have downrounds,” he said.

Sanjib further adds, ” Third thing that will happen is that there will be good M&A opportunities, good businesses will eventually marry each other and fourthly, all three regulators will start recognising technology as a separate subset of the business itself. They did it for payments bank, small finance bank so they will do in this case too, it’s inevitable.”

These are the excerpts from the virtual live discussion attended by Kalaari Capital’s Managing Director, Rajesh Raju; CEO and ED at Coverstack Sanjib Jha; and Prasana Lohar, CEO at Block Stack, moderated by Amol Dethe, Editor, ETBFSI.

The session was a precursor to the upcoming event, ETBFSI FinNext Summit.

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