Fintech Companies - MUST READ

Happy Weekend everyone!

Today I am back with another weekly update for the Fintech Companies.

Covering updates in the regulatory or economic side of the Fintech market for Indian companies.

If you run a Fintech Company in India.

Or you plan on expanding your Fintech Company in India.

Then this becomes important for you.

Here are the main things that happened in the last week.

A) Emerging Trends

1) Shriram Finance Ventures into Digital Payments

Strategic Expansion:

• Shriram Finance, a leading NBFC, is seeking RBI approval to become a Payment System Operator under the Payments and Settlement Systems Act, 2007, to launch mobile wallets, prepaid cards, and FASTag services, per BFSI and Developing Telecoms.

• Aims to offer secure, cashless solutions, targeting tier 2 and tier 3 cities, leveraging its Shriram One app, which supports BBPS and UPI transactions.

Market Positioning:

• Builds on its consumer finance and insurance expertise, with partnerships like PhonePe Lending for unsecured business loans to merchants.

• Faces competition from PhonePe and Google Pay, which dominate 85% of UPI transactions, while Amazon Pay holds 0.6%.

Why It’s Significant:

• Enhances financial inclusion in underserved regions, aligning with India’s digital payment surge.

• Positions Shriram as a formidable fintech contender, leveraging its extensive rural network.

2) Paytm Nears Profitability with Strong Q4 FY25

Financial Performance:

• Paytm’s Q4 FY25 revenue grew 5% to ₹1,911 Cr, with losses narrowed to ₹23 Cr and EBITDA before ESOP at ₹81 Cr, driven by cost efficiencies and financial services growth, per ANI News.

• Annual revenue fell to ₹6,900 Cr due to early-year disruptions, but merchant loan disbursements hit ₹4,315 Cr, with 50% to repeat borrowers.

Operational Highlights:

• Expanded merchant device network by 8 lakh to 1.24 Cr, with GMV at ₹5.1 lakh Cr and 7.2 Cr monthly transacting users.

• CEO Vijay Shekhar Sharma surrendered 2.1 Cr ESOPs to reduce future costs, boosting profitability prospects.

Why It’s Significant:

• Signals Paytm’s recovery and resilience in a competitive UPI market, with RBI approval to onboard new users.

• Strengthens its position as a leader in merchant lending and payment devices.

3) QED Investors Targets $300M for India, APAC Fintech

Investment Plan:

• US VC firm QED Investors plans to deploy $250-300M from its $925M 2023 fund in early and growth-stage fintech startups in India and APAC, per Economic Times.

• Focuses on embedded finance and AI-driven finance, with past investments in Jupiter, OneCard, and Upswing, totaling $220M in Asia over five years.

Market Outlook:

• India expected to attract the lion’s share, with $3-20M for early-stage and $20-50M for growth-stage firms, buoyed by strong IPO markets.

• Sees opportunities in consumer-facing apps using unique data for underwriting, per Sandeep Patil.

Why It’s Significant:

• Fuels India’s fintech boom, supporting innovative startups in a high-growth market.

• Enhances global investor confidence in India’s public markets and fintech potential.

4) Surfin’s Quiet Rise in Alternative Lending

Business Milestone:

• Founded in 2017, Surfin surpassed $150M in revenue by 2023, with 50% annual growth and $9M net profit, per Tech in Asia.

• Raised $39M in 2024, including $12.5M from Insignia Ventures, to expand microlending, credit cards, and mutual fund platforms.

AI-Driven Model:

• Operates in 10 countries, using proprietary AI to assess credit scores via personal and social data, targeting underbanked populations.

• Facilitates loan investments via Mintos, showcasing strong financials under Kuai Kuai Belt and Road Holdings.

Why It’s Significant:

• Demonstrates the power of alternative credit scoring to serve unbanked markets globally.

• Highlights a low-profile yet high-impact player in the fintech lending space.

5) Cashfree Payments Boosts Global Reach with 140+ Currencies

Platform Upgrade:

• Cashfree Payments now supports 140+ currencies on its international payment gateway, a first for an Indian fintech, enabling one-time and recurring transactions, per Business Standard.

• Expects 30% business growth for Indian merchants by offering localized checkout via Pay Native, settling in INR.

Market Context:

• Authorized by RBI as a payment aggregator for domestic and cross-border payments, processing $80B annually for 800,000 businesses like Swiggy and Zepto.

• Addresses currency conversion friction as India’s e-commerce exports aim for $200B by 2026.

Why It’s Significant:

• Empowers Indian merchants to tap global markets with seamless payment solutions.

• Strengthens India’s position in cross-border e-commerce amid growing digital trade.

6) PayNet’s Fintech Hub Spurs Malaysian Innovation

Hub Launch:

• PayNet launched Malaysia’s first Fintech Hub to accelerate startup growth with funding, mentorship, and partnerships, per Asia Business Outlook.

• Offers RM1M in credits, RM600,000 in services, and up to RM3M in cloud support, with top startups joining Imperial College London’s Catalyst program.

Strategic Vision:

• Aims to keep Malaysia competitive in AI-driven fintech, per CEO Farhan Ahmad, with AWS partnership for cloud infrastructure and a Fintech Innovation Sandbox.

• Provides 450+ hours of mentorship and investor connections for local entrepreneurs.

Why It’s Significant:

• Fosters a vibrant fintech ecosystem in Malaysia, with potential regional impact.

• Highlights global trends in fintech accelerators, supporting AI and payment innovations.

B) Economic Highlights

1) FinBox’s Sentinel AI Streamlines Digital Lending

Platform Introduction:

• FinBox launched Sentinel AI, a conversational AI platform processing 50M monthly lending decisions, facilitating thousands of crores in disbursals, per Express Computer.

• Unifies credit decisioning across channels like super-apps and agents, addressing fraud, risk, and compliance challenges.

Market Impact:

• Tackles fragmentation as NBFCs manage 12+ channels (up from 3 in 2019), with India’s digital lending market projected to hit $1.3T by 2030.

• Reduces policy deployment time from weeks to minutes, enhancing efficiency and RBI compliance, per CEO Rajat Deshpande.

Why It’s Important:

• Simplifies complex lending operations, boosting scalability for banks and NBFCs.

• Aligns with RBI’s digital lending guidelines, ensuring transparency and risk management.

2) PhonePe Upgrades SmartSpeaker for Offline Merchants

Device Enhancements:

• PhonePe’s next-gen SmartSpeaker, launched May 2025, features 4G connectivity, 75-minute charging, and 7-day standby battery, per NewsBytes and X posts.

• Supports 21 languages, celebrity voice options, and real-time audio alerts for payments, ideal for noisy environments.

Merchant Benefits:

• Locally manufactured to meet merchant needs, it drives financial inclusion for offline businesses, per Yuvraj Singh Shekhawat.

• Builds on the 2022 model’s success, enhancing reliability and speed for digital transactions.

Why It’s Important:

• Empowers small merchants with seamless payment solutions, boosting India’s digital economy.

• Reinforces PhonePe’s leadership in UPI, with 37% of India’s 13B monthly transactions.

C) Business Developments

1) World Fintech Summit 2025 Day 1: Bengaluru’s Fintech Leadership

Event Overview:

• The World Fintech Summit 2025 kicked off on May 5 in Bengaluru, hosted by Elets Technomedia with Karnataka’s IT & BT Department and KDEM, featuring keynotes, panels, and a stakeholder meet with Minister Priyank Kharge, per BFSI.

• Launched a Special Souvenir Edition of The Banking & Finance Post, spotlighting Karnataka’s 1,700+ fintech startups, including 12+ unicorns.  

Key Insights:

• Sanjeev Kumar Gupta (KDEM) and Rahul Sharanappa Sankanur (KITS) emphasized Bengaluru as India’s fintech capital, with a $145B sector valuation in 2025, projected to hit $550B by 2030 (30.55% CAGR).

• Kharge’s session with Razorpay’s Harshil Mathur and Accel’s Prashanth Prakash highlighted regulation as a trust foundation and the need for digital infrastructure in tier 2 and rural areas.  

Why It’s Notable:

• Positions Bengaluru as a global fintech hub, fostering inclusive innovation.

• Drives strategic partnerships to democratize financial services across India.  

2) World Fintech Summit Day 2: India’s DPI and Global Impact

Session Highlights:

• Day 2 on May 6 featured discussions on Aadhaar’s role in DPI, cybersecurity, and wealthtech, with leaders like Sanjeev Yadav (UIDAI) and Sumnesh Joshi (Ministry of Communications), per BFSI.

• Aadhaar’s minimalistic, secure design powers India’s digital transformation, inspiring global replication, while SBI’s Joseph Selvaraj emphasized sandbox-enabled fintech collaboration.  

Panel Focus:

• Topics included talent skilling (e.g., Finbox’s Rajat Deshpande), cybersecurity threats (KPMG’s Shreya Khanna), global innovation alliances (TiE’s Madanmohan Rao), and wealthtech opportunities (IIFL’s Mehekka Oberoi).

• Claude Smadja discussed digital sovereignty’s role in data governance and technological independence.  

Why It’s Notable:

• Showcases India’s DPI as a global benchmark, driving inclusive fintech growth.

• Addresses critical challenges like cybersecurity and talent for a sustainable ecosystem.  

3) Cashfree Payments Introduces AI-Driven MCP Module

Technology Rollout:

• Cashfree Payments launched a beta MCP module integrating LLMs with APIs to automate payments, payouts, and KYC verification, reducing tasks like payment link generation to seconds, per Business Standard.

• Tested with models like Claude, Gemini, and Grok, it’s live for merchants, with no commercialization yet, per SVP Nitin Pulyani.  

Market Impact:

• Enhances efficiency across Cashfree’s core products, joining Razorpay as early adopters of MCP technology.

• Targets merchants of all sizes, boosting operational speed and scalability.  

Why It’s Notable:

• Streamlines merchant processes, reinforcing Cashfree’s leadership in payment solutions.

• Signals AI’s growing role in fintech automation, with potential for broader adoption.  

D) Regulatory Insights

1) RBI Issues Cyber Attack Alert for Banks, NBFCs

Advisory Details:

• RBI warned banks and NBFCs of potential Pakistan-origin cyberattacks aiming to disrupt financial infrastructure, per Economic Times.

• Directed 24/7 monitoring, enhanced intrusion detection, and stress-tested Business Continuity Plans, with inputs from CERT-In and the Ministry of Home Affairs.  

Industry Response:

• Financial institutions reported increased suspicious traffic but neutralized threats, with ongoing reporting to authorities.

• Focus on protecting data centers, core banking systems, and payment infrastructure.  

Why It’s Important:

• Safeguards India’s financial stability amid rising cyber threats.

• Reinforces proactive cybersecurity measures across the BFSI sector.  

2) RBI’s Digital Lending Directions 2025

Framework Overview:

• Issued on May 8, 2025, the RBI’s Digital Lending Directions consolidate guidelines to enhance transparency and borrower protection, per RBI website.

• Key features include a public directory of registered lending apps and mandatory disclosure of loan offers from multiple lenders by aggregators.

Core Provisions:

• Mandates direct loan disbursals, a cooling-off period, and strict data privacy rules, prohibiting apps from accessing sensitive mobile data without consent.

• Requires formal agreements with Lending Service Providers and standardized data collection to prevent over-indebtness, per Freo’s Kunal Varma.  

Why It’s Important:

• Cleans up the digital lending ecosystem, curbing predatory practices and fraud.

• Builds consumer trust, fostering sustainable growth in a $1.3T market by 2030.  

3) RBI Relaxes FPI Corporate Debt Investment Rules

Policy Update:

• RBI removed short-term investment and concentration limits for Foreign Portfolio Investors in corporate debt securities via the General Route, effective immediately, per RBI website.

• Aims to ease FPI investments, boosting foreign capital inflow into Indian markets.  

Context:

• Aligns with RBI’s broader efforts to liberalize financial markets while maintaining stability.

• Expected to enhance liquidity in corporate debt markets, supporting economic growth.  

Why It’s Important:

• Encourages global investment, strengthening India’s corporate debt ecosystem.

• Reflects RBI’s balanced approach to liberalization and market oversight.

4) RBI Standardizes Regulation Formulation Process

New Framework:

• RBI introduced a Framework for Formulation of Regulations, requiring draft publication, public comments (minimum 21 days), and a response statement, per RBI website.

• Mandates periodic reviews to update or repeal regulations based on surveillance and global best practices.

Implementation:

• Applies to all RBI directions, guidelines, and policies, ensuring transparency and stakeholder engagement.

• Aims to reduce redundancies and align regulations with evolving market needs.  

Why It’s Important:

• Enhances regulatory transparency, fostering industry trust and compliance.

• Supports a dynamic fintech ecosystem by adapting rules to technological advancements.  

I hope this was useful to you guys working in the Fintech Space.

The fintech space is everchanging, so staying up to date with information will help you make smart decisions for your business.

Again, If I see any notable changes or updates on the Fintech Side during the week, that can help Fintech Companies, I will compile them.

And then share them on the weekends!

Btw - I run a legal firm that's a one-stop solution for Fintech Companies in India.

Whether you are starting out in India, or expanding to the Indian market, DM 💬 me if you need legal help with:

1) Business Registration

2) Contract Drafting or Review

3) Compliance

4) Answering any legal questions

See you tomorrow with another Newsletter now.