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During a fintech panel at TiEcon today, ZestMoney CEO Lizzie Chapman outlined three levers that could either harm or supercharge the Indian consumer finance ecosystem, if approached wisely.
“What can be a lever can (also) be a threat. An obvious one that dominated a lot of conversation recently is regulation,” said Chapman. “The power of the regulator to supercharge our industry is immense and we saw that with things like video KYC. But it can also create uncertainty not just in the eyes of the founders but also consumers.”
“Last year, I think we released six different types of KYCs which led to a lot of confusion. We used to joke that the RBI was releasing more than our product team because they had guidelines coming out every month which actually was sad because it meant customer confusion. And, only the bigger or medium-sized fintechs could do that type of release cycle. A lot of small guys struggled and didn’t survive.”
Brace for the Economy
“I think people underestimate the vulnerability that they have to withstand a number of forces. It’s the easiest thing to give money out; the hardest is to know when to stop lending. The best banks in the world do that majestically. A lot of people who got addicted to growth last year felt some pain (this year) so I think going forward, founders that can be brave enough to say I’m not going to lend anything this month will be (those) in business.
“Then I think the third one that can be a force for good or can quickly wipe you out is access to capital. A very wise person said to me last year, ‘You think in a lending business that you’re going to die of cancer which is like your credit risk, it creeps up on you and suddenly you’re in a lot of pain. But actually most people die of a heart attack and that’s just liquidity going overnight. You wake up and you don’t have money to lend’. And again, a lot of the best lenders in the world have faced that precipice (and survived) so those that have access to reliable, sustainable, affordable capital will be the winners.
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Top Unicorns In The World
Venture capitalists make a living out of backing the right horse. The corporate racecourse is filled with examples of colts that went on to win big, in part due to funding from well-heeled backers who bought into the early promise. Think Facebook, Spotify, or Alibaba.
According to a report by the machine intelligence platform CB Insights, there were 411 unicorns as of January 2019, of which the lion’s share were registered in the United States and China.