Originally posted on Dalal Street Investment Journal
It takes an ecosystem
The truth of the old saying that necessity is the mother of invention is driving the efforts of many of the entrepreneurs who are leading India’s Fintech sector during the Covid-19 crisis. Throughout the country, Fintechs are going the extra mile to leverage their expertise in service of the community – and they have put people ahead of profits with the full support of venture capital (VC) investors on their boards.
In these heartbreaking times, this is simply the right thing to do for any company that can. But Fintech’s social contribution also reflects the sector’s growing maturity and its importance to the financial system.
Investors step up
Across India’s 2,000+ Fintech start-ups, project schedules were disrupted and deliverables delayed during the pandemic, even as digital adoption as a whole surged. Entrepreneurs naturally turned to their VC investors for advice and support. For most VCs – who often face pressure to generate returns for their own investors – it was clear that team and customer safety for their portfolio companies had to come first, even if that meant higher costs and lower revenues for a time. Fintechs and their investors faced these unprecedented challenges together, and their partnerships often matured as a result.
With short-term growth pressure relieved to some extent, fintechs decided to go further than simply ensuring the safety of their people and customers. Many employees volunteered their time to assist non-profits and religious organisations in local communities. Leadership teams found innovative ways to adapt their offerings or re-purpose their technologies to help ease the hardships caused by the pandemic.
Affordplan, a Flourish portfolio company that helps low- and middle-income people better manage their planned healthcare expenses is making its technology available to connect people with medical resources via helpdesks in each of the six cities where it operates. These teams help people find ambulances, blood plasma, hospital beds, medicines, doctors’ consultations, home nurses and home ICU kits. Affordplan offers this service for free.
Kaleidofin, another one of our portfolio companies, matches Indians with tailored financial solutions via its mobile app. During the pandemic, though, millions of people lost work and were forced to fall back on their life savings to pay medical bills. Kaleidofin responded by a building a free feature into its protection plans to help customers make loan repayments when they are short of cash.
A deepening ecosystem
The VC investor -entrepreneur relationship evolved during this crisis due to both an increasingly mature funding ecosystem as well as Indians’ rapid adoption of digital finance, which accelerated during the pandemic.
According to Bain, VC investments in Indian Fintech grew from $1.1 billion in 2019 to $1.2 billion in 2020, even amid the disruption caused by Covid-19. We expect to see robust investment activity continue this year because the structural shift towards digitization in retail financial services is only gathering momentum. Take payments, the fundamental building block of Fintech, for example: the number of transactions executed on the United Payments Interface rose from Rs436 crore in January last year to Rs4,764 crore in December.
Amid the greatest crisis in living memory, India’s Fintechs are stepping up to serve the communities for which they perform an increasingly important function. The maturing partnership between VC investors and the entrepreneurs they support bodes well for the future of financial services – one where technology has the potential to bring easy-to-use offerings to far more customers and at lower costs than the traditional bricks-and-mortar banking system.
 https://www.bain.com/insights/india-venture-capital-report-2021/ Excludes Paytm’s $1 billion funding.