Fintech Companies - MUST READ

Regulatory Updates, Economic Trends, and Business Development in India

Author

Akhil Mishra
December 28, 2024

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.

The Move: U.S. payments technology firm Fiserv announced plans to acquire Canadian fintech Payfare, known for its services tailored to gig-economy workers.

Strategic Importance: The acquisition strengthens Fiserv’s foothold in the growing digital banking sector for freelancers and gig workers.

Financial Scope: While Fiserv has not disclosed the deal's financial terms, Payfare’s market value stood at CAD 101.24 million (approximately USD 70.3 million) as of last week.

Timeline: The transaction is expected to close in the first half of 2025.

Humble Beginnings: Co-founders Harshil Mathur and Shashank Kumar started Razorpay in a Bengaluru flat in 2014.

Current Scale: Razorpay now processes USD 180 billion annually and targets USD 1 trillion in payments. It supports 80 of India’s top 100 unicorns.

Employee-Centric Policies: To mark its decade-long journey, the company extended ESOPs worth ₹1 lakh to all employees, highlighting its commitment to talent retention.

Looking Ahead: An Indian IPO is on the horizon, solidifying Razorpay’s growth trajectory in the fintech space.

Challenges and Progress: Over 64% of India’s population resides in rural areas, often without easy access to banking services.

Innovative Solutions:

  • Digital wallets, USSD-based banking, and Aadhaar-Enabled Payment Systems (AEPS) are transforming financial access.

  • UPI transactions surged by 118% in rural areas in 2023, reflecting increased digital adoption.

Rural Lending Revolution: Fintech platforms use algorithm-driven models to provide loans to underserved communities, bypassing the need for traditional credit histories.

The Donation: Co-founders Sameer Nigam and Rahul Chari of PhonePe pledged $1 million to Mumbai’s Sardar Patel Institute of Technology (SPIT).

Impact: Funds will enhance the institute’s infrastructure, foster innovation, and encourage entrepreneurial ventures among students.

Recognition: The co-founders were honored with Distinguished Alumni Awards for their transformative contributions to India’s fintech landscape.

Strategic Acquisition: Aurionpro acquired Paris-based consulting firm Fenixys for €10 million.

Why It Matters:

  • The deal bolsters Aurionpro’s capabilities in capital markets and banking technology solutions.

  • Fenixys’ expertise in MUREX services and enterprise architecture aligns with Aurionpro’s strategy to deepen relationships with European financial institutions.

Future Synergies: The partnership will integrate Fenixys’ domain expertise with Aurionpro’s technological solutions to better serve global banking clients.

B) Economic Highlights

Ruling Highlights: The Delhi High Court issued an injunction against AGF Finlease India, prohibiting the use of the name ‘PhonePey Loan’ for digital lending services.

Reasoning: The court found the name deceptively similar to Walmart-owned PhonePe, which could confuse consumers.

Next Steps: Social media platforms and domain providers have been directed to take down infringing content.

Innovation Spotlight: MobiKwik’s Pocket UPI allows users to make UPI transactions via its wallet without linking bank accounts.

Market Position: The innovation has catapulted MobiKwik’s market share to 24%, making it India’s largest wallet provider.

Growth Trajectory: Since launching Pocket UPI in early 2024, the company’s wallet user base has grown fivefold.

What’s New: Karnataka State Road Transport Corporation (KSRTC) introduced UPI-based digital payment systems for ticket purchases in Kodagu district.

Benefits:

  • Resolves issues of cash payments and change disputes.

  • Enhances passenger convenience with QR code-enabled payments.

Network Limitations: In areas with poor connectivity, cash payments remain an option, ensuring inclusivity.

C) Business Developments

Digital Overhaul: CIO Sony A highlights the bank's "Indulge, Nudge, and Purge" strategy as the cornerstone of its digital evolution.

Key Highlights:

  • Indulge: Makes digital platforms intuitive for self-service.

  • Nudge: Encourages digital adoption with branch staff assistance.

  • Purge: Automates and removes outdated processes to enhance efficiency.

Impact: Today, 98% of transactions at South Indian Bank are conducted digitally, while branches focus on customer support and cross-selling.

Future Vision: While India’s unique cash reliance keeps physical branches relevant, the bank continues balancing between trust-building face-to-face interactions and its push for digital-first solutions.

High-Level Talks: Prime Minister Narendra Modi and Amir Sheikh Meshal Al-Ahmad Al-Jaber Al-Sabah of Kuwait announced a Strategic Partnership, deepening ties in pharmaceuticals, IT, fintech, infrastructure, and security.

Significance:

  • Reaffirmed the strong historical and cultural ties between the nations.

  • Recognized India’s contributions to Kuwait’s Vision 2035 initiatives.

Community Impact: Modi thanked Kuwait for supporting the 1+ million Indian diaspora and invited the Amir to visit India, emphasizing continued collaboration in the Gulf region.

D) Regulatory Insights

Overview: RBI has introduced stricter reporting norms for transactions in gold derivatives, effective February 1, 2025.

Key Guidelines:

  • Banks must report OTC transactions in gold derivatives domestically, internationally, and within IFSCs to the Clearing Corporation of India Ltd (CCIL).

  • Retroactive reporting from April 15, 2024, is mandated for all matured and outstanding transactions.

  • A quarterly reporting framework has been established for gold derivative trades at exchanges.

Impact: This aims to ensure transparency and mitigate risks in gold derivative markets while aligning with global best practices.

What’s New: Full-KYC Prepaid Payment Instruments (PPIs) will now be accessible through third-party UPI applications, widening their usability.

Benefits:

  • Users can conduct UPI transactions seamlessly via third-party apps, enhancing convenience and promoting digital payments.

  • Supports regulatory goals of fostering interoperability across payment systems.

Implementation: These changes follow an amendment to the Master Directions on Prepaid Payment Instruments (MD-PPIs).

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.

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