“I think getting a regulatory clarity might make your task tougher because it adds governance and governance cost and it may make your task longer. But I think it provides a nice runway for you to scale and become a scalable platform,” Mridul Arora, partner at Elevation Capital, said.
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His comment comes at a time when fintech startups are grappling with recent regulatory actions by the Reserve Bank of India, including the crackdown on Paytm Payments Bank and the central bank’s directive to Visa and Mastercard to restrict card-based commercial payments made by companies.
Vaas Bhaskar, a principal at Elevation Capital, said, “While I think there might have been short term pains here and there, overall, if you see most of the directions, it’s becoming more clear what a regulated entity can do and what a fintech can do.”
Further, discussing emerging sectors within the current landscape, Bhaskar said fintech startups specialising in specific verticals and crafting a suite of tailored financial products for niche user segments are gaining momentum and drawing interest from investors.
“We are starting to see a set of companies who are re-bundling the banks by bringing a bunch of financial services together for a niche. It cannot be a very large segment. It could be 1, 2, or 3 million people but build out a suite of products and services, financial services and sometimes you layer in commerce and some other things. Those are very interesting models,” he said.
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“There are at least 10-15 of these verticals, sizable businesses could be built. Those could exhibit a ‘winner take most’ characteristic,” he added, citing examples like Skydo, a cross-border payments platform, and Jodo, an academic-focused fintech startup, both in Elevation Capital’s portfolio.Jodo, facilitating academic expense management for students and digitizing collection processes for schools, offers multiple payment options while carving its niche in the segment. Similarly, Skydo, initially focused on cross-border payments, has expanded its services to different customer segments, offering financing options and treasury services.
“It is a rainbow cake; you will have to do 5, 7, 8 different things, and that is when the customers really become sticky, and the economics make sense,” said Arora.