The Fintech Entrepreneur's Guide: Create Successful Tech Startups with a Robust Tech Stack, Security

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The Fintech Entrepreneur’s Guide

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Create Successful Tech Startups with a Robust Tech Stack, Security, Scalability Plan, and Convincing Investment Pitch

Ashok Mittal

www.bpbonline.com

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Copyright © 2023 BPB Online All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, without the prior written permission of the publisher, except in the case of brief quotations embedded in critical articles or reviews. Every effort has been made in the preparation of this book to ensure the accuracy of the information presented. However, the information contained in this book is sold without warranty, either express or implied. Neither the author, nor BPB Online or its dealers and distributors, will be held liable for any damages caused or alleged to have been caused directly or indirectly by this book. BPB Online has endeavored to provide trademark information about all of the companies and products mentioned in this book by the appropriate use of capitals. However, BPB Online cannot guarantee the accuracy of this information.

First published: 2023 Published by BPB Online WeWork 119 Marylebone Road London NW1 5PU UK | UAE | INDIA | SINGAPORE ISBN 978-93-55512-277

www.bpbonline.com

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Dedicated to My Mother Smt. Sharda Mittal and

My wife Mamta and

My kids Aashima & Aditya and

My Team

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About the Author Ashok Mittal is the Founder and CEO of digital lending NBFC – Prest Loans (www. prestloans.com) Ashok is a seasoned professional having a rich experience of more than 30 years in the Capital and Commodities Market, Banking, Financial Services, and Foreign Exchange. He has been a part of a Harvard Business School executive program called “Managing and Transforming Professional Service Firms.” Ashok is a gold medallist commerce graduate from M.D.S. University, Rajasthan, and has done Masters in Banking Management (MBM) and CAIIB. He was heading the financial services business at reputed organizations in India. He has also had the experience of working with Union Bank of India and UCO Bank. Ashok has been a regular in business media channels for more than a decade now, providing strategic inputs while also having a strong presence & networking with print and electronic business media. He has conducted more than 200 public seminars on various financial services segments. He has been an eminent speaker in many National Seminars of various organizations like Ph.D. Chamber of commerce, FICCI, Assocham, Exchanges and ICFAI, to name a few. He has been on the Jury for the Best Market Analyst Awards conducted by Zee Business for three consecutive years in 2012, 2013, and 2014. Ashok has been awarded by eminent personalities like Mr. Pranab Mukherjee, Mr. Narendra Modi, and Mr. Amit Shah. He is passionate about setting up and expanding businesses from scratch.

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About the Reviewer Dr. Sanjiv Agarwal, M.Com, FCA, FCS, ACIS (UK), PhD, D.Litt, is a Fellow member of the Institute of Chartered Accountants of India (ICAI), the Institute of Company Secretaries of India (ICSI) and the Institute of Chartered Secretaries and Administration, London (UK). He is also a post-graduate in Accountancy and Business Statistics from the University of Rajasthan, Jaipur and has been awarded Doctorate of Philosophy for the title “A Conceptual Approach to Corporate Governance: Preparation for Global Interface” from R.A. Poddar Institute of Management, University of Rajasthan, Jaipur and D.Litt in Corporate Governance. He also holds a Diploma in Corporate Governance (PMQ Course) from the ICSI and is also a qualified Insolvency Professional registered with Insolvency and Bankruptcy Board of India (IBBI). Dr. Agarwal has over thirty-five years of professional experience as a practicing Chartered Accountant with vast exposure to Indirect Taxation including Service Tax, Goods and Services Tax (GST), corporate laws, corporate governance and financial services. He has to his credit a large number of published articles in various professional journals, websites and economic dailies. He has so far authored/ edited more than 35 books on various professional subjects. He is an active participant and speaker/faculty at National and Regional Seminars and Conferences on various professional topics organized by ICAI, ICSI, ICWAI and Apex Chambers. He is also a visiting faculty at various Management Institutes and Banks. The Central Government (now MCA) had nominated him as a member of the Working Group constituted for suggesting changes in Companies Act to implement good Corporate Governance in 200203. He is also actively associated with the Institute of Chartered Accountants of India, The Institute of Company Secretaries of India, various apex level Chambers of Commerce & Industries, various Trade Bodies, and Stock Exchanges.

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Acknowledgement I wish to express my gratitude to a select group of people for their ongoing assistance in helping me write this book. First and foremost, I want to express my gratitude to my mother for her unwavering support and encouragement as I worked on this book and for whatever I have done in my life. Without her blessings, I would never have been able to do new things, including writing this book. I appreciate and thank my wife and kids for the outstanding support throughout. Your support means much to me, and I will always be there when you need me. Knowing you are there for me gives me the foundation to work through this tough time and get to a better place. You kept nagging me to write a book before I retire! I also want to express my gratitude to my team members, especially Sonia Aggarwal, who has worked day and night, helping me finetune the content. The staff at BPB Publications, for their willingness to give me the time I needed to complete this book. The time and effort you put into your remarks are much appreciated. Your suggestions for my book’s formatting and reference style are beneficial.

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Preface In the last many years, I have seen a lot of books on FinTech and have also read some of them. Incidentally, I have found that most books are too technical and difficult to understand. As a matter of fact, many people, especially budding entrepreneurs, who are working in the financial sector or doing some work in technology development, do not understand many terms used in the FinTech world. I thought it would be appropriate to share my knowledge, experience, and understanding of the FinTech segment across the globe, but more relevant to the Indian subcontinent. I have tried to cover a few important points for startup entrepreneurs while they look to build a FinTech entity. When we talk about FinTech, there are many segments or sub-segments that may be related to banking and finance, lending alone, insurance, or various associated services related to financial services. In this book, I have tried to guide people in such a manner that their FinTech should not fail. Also, they should not think they just want to become a unicorn. Whenever they start a FinTech entity, there are three V's V which is a goal for the future of FinTech, which I will explain in this book. I will cover the introduction of FinTech, which will explain various kinds of FinTech segments to cover multiple definitions or terms used in the FinTech world. How has the FinTech evolved over a period of time, which are the key segments while you build a FinTech entity with reference to KYC underwriting rules, servicing to the customers the recovery of the loans or dues, how do you verify various information or authenticate the data or information given to you how to use the next Tech or sandbox provided by government agencies. In the second part, I will also cover the important things to be taken care of from the technology perspective.

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I have also tried to emphasize a critical aspect from a technology perspective so that the platform is robust, strong, secure, and scalable. In the last part, I covered how you pitch your idea, a combination of finance and technology, to prospective investors. Or in other words, what the investors would look at when you pitch them to invest in your Fintech startup. It will also be important to know what kind of investors are there at various stages of a startup. For example, whether the people are seed investors, angel investors, or investors at a good stage. I hope this book will be helpful not only for investors looking to start a FinTech entity, but also for those who are strong in technology and looking to get the financial side of this. This book will also help those running any economic entity but looking to strengthen it using cutting-edge technology. Your feedback would be very important, and I look forward to interacting with all the readers.

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Table of Contents 1. Introduction to Fintech..................................................................... 1 Introduction.................................................................................. 1 Structure........................................................................................ 1 Objectives...................................................................................... 1

Introduction to Fintech............................................................... 2



Definitions related to Fintech..................................................... 3



Technology in financial setups................................................. 15

Conclusion.................................................................................. 19 2. Evolution of Fintech....................................................................... 21 Introduction................................................................................ 21 Structure...................................................................................... 21 Objectives.................................................................................... 22

Evolution of fintech................................................................... 22



Evolution of banking................................................................. 24



Evolution of credit card............................................................ 25



Current technology scenario.................................................... 25



Fintech and technologies........................................................ 30



Artificial intelligence and machine learning......................... 30



Robotic process automation................................................... 30



Data analytics........................................................................ 31

Blockchain.............................................................................. 31

Fintech startups.......................................................................... 32



Financial sector case studies.................................................. 32

Paytm........................................................................................32 BharatPe....................................................................................35 CRED........................................................................................35

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Razorpay....................................................................................37 MobiKwik..................................................................................38



Insurance sector..................................................................... 39

Digit..........................................................................................39 Turtlemint.................................................................................40



Lending space......................................................................... 41



Prest Loans................................................................................41

ZestMoney.................................................................................42 Faircent......................................................................................43 i2iFunding.................................................................................44



Neo banks............................................................................... 46

Jupiter........................................................................................46



Other financial services startups........................................... 47

FamPay......................................................................................47 Zeta............................................................................................48 Zerodha......................................................................................49

Conclusion.................................................................................. 49 References................................................................................... 50 3. Fintech in Lending Space.............................................................. 51 Introduction................................................................................ 51 Structure...................................................................................... 51 Objectives.................................................................................... 52

Understanding various kinds of loans aggregated by fintech companies................................................................. 52



Consumer loans..................................................................... 53



Gold loans.............................................................................. 54



Personal loans........................................................................ 55



Auto loans.............................................................................. 57



Business or MSME loans...................................................... 58

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How to be a real fintech or digital lending institution?....... 61



Customer acquisition or sourcing.......................................... 61



Acquiring the customer digitally..............................................61



Application, website and/or app............................................ 64



Verifying APIs....................................................................... 65



WhatsApp APIs........................................................................67



Credit underwriting.............................................................. 68



Automatic scorecard.............................................................. 69



Variables fields in the scorecard.................................................69



Credit Bureau Integration..................................................... 70



Auto analysis of qualitative parameters................................ 71

Disbursement......................................................................... 76

Loan servicing and monitoring............................................. 79



Collection or recovery............................................................ 81

Legal....................................................................................... 83 Accounting............................................................................ 83

MIS generation...................................................................... 84

Conclusion.................................................................................. 84 4. Building a Secured Tech Stack..................................................... 85 Introduction................................................................................ 85 Structure...................................................................................... 85 Objectives.................................................................................... 86

Technology - An absolute necessity........................................ 86



Technology exposure based on business size and stage...... 87



Use of technology................................................................... 91



Parameters for selecting a tech stack...................................... 92



Tech stack examples............................................................... 95



Technology Stack of INDIFI (India): Lending institution.... 98



Security of a Fintech software.................................................. 99

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Terminology........................................................................... 99

Security system.................................................................... 100



Importance of security.............................................................104



Backup/ data protection solutions....................................... 104



Deployment of software......................................................... 106



Steps in the deployment of software.................................... 106

Preparation..............................................................................106 Testing.....................................................................................107 Deployment.............................................................................107



Maintenance of software........................................................ 107



Various forms of software maintenance..................................108



The software maintenance process..........................................109



Software maintenance techniques and strategies....................110



Case studies of fintech in India...............................................110



Tech platform for Fintech lending institution: LenDenClub..110

Conclusion.................................................................................112 5. The Three Vs of Fintech............................................................... 113 Introduction...............................................................................113 Structure.....................................................................................113 Objectives...................................................................................113

Future of Fintech.......................................................................114

Voice......................................................................................114

Understanding the language...................................................116



Processing the speech..............................................................116



Naturality of language to the conversation or voice or dialogue......................................................................117



Automation of the process flow and language.........................117



Case study of Saarthi.ai...........................................................118



The current state of technology...............................................123

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Challenging language phenomena..........................................125



Bridging the gap......................................................................126

Video.................................................................................... 134

Video as a tool for branding and marketing............................137



Tips for effective fintech videos for branding...........................138

Vernacular........................................................................... 139 Conclusion................................................................................ 140 References................................................................................. 140 6. The Investment Pitch.................................................................... 141 Introduction.............................................................................. 141 Structure.................................................................................... 141 Objectives.................................................................................. 142

The need for a pitch for investments.................................... 142



Recognizing the requirements of various investors........... 143



Making an angel investor pitch............................................. 144



Considerations for right investment pitch........................... 145



Business plan and projections.............................................. 147



Business risks....................................................................... 151



Preparing an executive summary........................................ 152



Revenue model overview of the products/services........... 154



Key competitors/customer options and competitive advantage competitors...................................... 155



Revenue cost metrics........................................................... 156



Prior revenues, current year estimates and next year projections............................................................ 157



Marketing strategy.............................................................. 157



Total funds required and proposed deployment valuation... 158



Establishment/shareholding pattern and external funding/patent by company or founders............... 159



Creating multiple possible scenarios................................... 161

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Follow up with the investors............................................... 161



Handling the term sheet......................................................... 162



Update and inform other potential investors....................... 163



Drafting a term sheet........................................................... 164



Post investment management information system............ 171

Conclusion................................................................................ 175 7. Epilogue.......................................................................................... 177 Introduction.............................................................................. 177 Structure.................................................................................... 177 Objectives.................................................................................. 178

Fintech startups in India: Challenges and opportunities... 179



Fintech: Growth roadmap........................................................182



RBI’s payments vision 2025.................................................... 184



Big push for e-payments..........................................................185



Use of technology....................................................................186



RBI norms for digital lending space........................................188



Summary of RBI recommendations for digital lending..... 190



Customer safety.......................................................................190



Technology and data................................................................191



Legal and regulatory...............................................................191



Key Points of RBI guidelines and the future of fintech...... 191



Role of Fintech in MSME credit............................................. 194

Conclusion................................................................................ 195

Points to remember................................................................. 195

Index......................................................................................... 197-204

Introduction to Fintech

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Chapter 1 Introduction to Fintech Introduction

This chapter includes a description of the term Fintech. We have tried explaining Fintech and various terms and processes related to it. We have also added and described the core technical terminology related to the fintech industry.

Structure

In this chapter, we shall cover the following topics: • Introduction to Fintech • Definitions related to Fintech • Technologies in Fintech

Objectives

After reading this chapter, we will be able to increase the reader’s understanding of the term “Financial Technology.” There are various

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terms used for describing a fintech setup that is not so easy to understand. This chapter would also simplify the same for our readers.

Introduction to Fintech

The term ‘Fintech,’ the short form of the phrase “Financial Technology,” denotes the industry that comprises companies that use technology for the efficient delivery of financial services. It is an emerging service in the 21st century and has gained momentum in the last 7-10 years. It also shows huge potential for the next 2-3 decades. The new start-up companies (Fintechs) are trying to replace the traditional transaction system with  new,  effective methods  by applying  technology in  financial sectors  for banking, mobile payments or payment gateways system, credit cards, all kinds of loans, money transfers, insurance, wealth management, and also for asset management. Each of these activities are very exhaustive and detailed. In this book, the focus will be on lending (loans). Fintech can be defined in several ways. The Bali FinTech Agenda, FSB, and others broadly define fintech as “advances in technology that have the potential to transform the provision of financial services, spurring the development of new business models, applications, processes, and products.” Some more examples of technology applied to financial transactions are peer-to-peer lending, peer-to-peer payment technology, digital wallets, Blockchain, mobile banking, cryptocurrencies, and so on. Refer to Figure 1.1 for this:

Figure 1.1: Digital Wallets, Blockchain, and cryptocurrency

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These aim to bring further benefits and achieve high efficiency for financial transactions. Generally, the objective of Fintech is to improve efficiency in processes for better customer experience and customer service without compromising on regulatory compliance. Another aim of fintech is to reduce costs incurred for all activities and pass on the cost-benefit to the customers. Before we go deeper into other chapters and understand how to build a strong, viable, feasible, and profitable fintech, it is important to understand the technical aspects of the fintech industry. This will help: • Processes, functions, and technology are used to fill the current academic literature gap regarding financial technology (Fintech) companies. • To provide a conceptual overview of the Fintechs and adoption of Fintech among digitally active consumers by the start-ups. Digitally active consumers are the people who have access to the internet and use various platforms, websites, and mobile applications for doing multiple transactions. This will also help financial services professionals who are unaware of the terms being used in building technology platforms. • To identify professionals who motivate and support the adoption of financial technologies and find barriers and challenges for adopting financial technologies in various fields. These are some of the common terms used and are not exhaustive or complete. Further, the meanings mentioned here are not legal terms. They are discussed here for general understanding, which will be helpful when you enter into an agreement with the vendors, and service providers or hear from various people related to the industry. Fintech is an ever-evolving sector. New terms are being discovered on a regular basis; hence you need to keep yourself updated.

Definitions related to Fintech

These are specific definitions related to Fintech that you need to keep in mind: • Application: Application means a software that receives, uses, displays, and manages Customer Data, the information

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supplied via the API Service or otherwise. The Application may be a ‘web’ application, a ‘mobile’ application, or ‘both.’ The application may be built or developed in-house or externally through service provider vendors. The application is also called an ‘Enterprise’ version which resides on the local system of the company. • SaaS: Software as a Service; companies that provide a readyto-use Application known as Software as a Service (SaaS). In such cases, the Application is not owned by the company, and it only has the right to use the software developed by a third party. • API: Application Programming Interface (API) is a kind of bridge that enables two different software applications to communicate with each other easily. In other words, it can be said that APIs are a set of protocols that allows the creation of multiple applications that access information, data, and features of additional applications or systems in a limited way. This happens to the extent it is permitted, in a secure manner, keeping the security of the other software application. It is used to fetch data or information from one Application to another. The APIs can be used by way of pulling the data or pushing the data. The most commonly used word is also ‘calling’ the APIs. This is how APIs look: o POST/restApi/login: API to login

o GET/restApi/forgotPassword: Call it when the user forgets their password o GET/api/guest/restPublic/checkUniqueEmail: API to check username’s uniqueness o POST/api/v1/verify/sendOtp: API to send OTP

o POST/api/v1/verify/phone: API to verify number via OTP o POST/borrower/borrowerDetail: details

Get

borrower

o POST/loanApplication/details: API to get loan details o POST/accept/termsAndConditions: API to accept terms and condition

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o POST/admin/showHolidays: API to get all holidays o POST/admin/borrowerList: API to fetch borrower list o POST/admin/transactions: API to fetch transactions of a user Perhaps more than 100 APIs are being created in each Application to make it convenient to connect and communicate with various other Applications. • KYC: KYC is an acronym for Know your client/customer. It is the proof required for identifying and verifying the clients. Generally, KYC includes Proof of Identity and Proof of address through legally acceptable documents. In India, the commonly accepted documents are PAN issued by the Income tax department, Aadhar issued by UIDAI, driving license, Voter ID card, and so on. The KYC is required to check persons’ physical availability and for Anti-Money Laundering (AML) purposes. All the regulators insist on proper KYC for all kinds of financial transactions. Various vendors (tech entities) offer online verification of KYC documents. Some KYC documents are shown in Figure 1.2:

Figure 1.2: Know Your Customer (KYC) documents

• Algorithms: Algorithms are a combination of multiple instructions for solving a problem, setting up a rule, arriving at a complex calculation, or accomplishing a task in a particular manner. All computerized devices use various

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kinds of algorithms to perform their functions. Algorithms are created to set various rules and calculations in predefined formulae. The purpose of preparing and having Algorithms is to reduce the time a particular task takes to do it manually compared to doing it on computers. In lending, a few examples are setting up rules for approval of loans based on pre-set criteria such as: o minimum credit bureau score, o minimum and maximum age limit of the borrower, o Loan amounts are based on transactions in the bank statement, and so on; it could also be a combination. • Artificial intelligence: A most commonly used term in the Fintech world, AI generally refers to the stimulation of human knowledge, experience, and intelligence in computer software systems which includes objectives such as learning, remembering from past experience, logical reasoning, and user perception. It is similar to remembering certain things from the past and using them in the future by a rule. • Angel Investor: Generally a private investor, who can be an individual, a group of people, an entity created by likeminded people, or a small size fund that want to provide financial support to small start-ups or entrepreneurs in exchange for ownership in the form of equity holding in the company. Some Angel Investment platforms also offer investing services. • InsureTech: Inspired by the term fintech, which covers all the financial services, the insurance sector start-ups or companies using extensive technology to modernize and improve the insurance business have started using this term. Similarly, other companies use the word ‘tech’ succeeding to their respective sector to reflect the use of technology in their business. • ICO: Initial Coin Offering or a token sale. It is the process or event in which funds are raised for a new cryptocurrency venture, and contributors receive tokens in return. • Bank account statement: It refers to the original document issued by the applicant’s bank. Generally, the statement

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downloaded from the bank’s website in PDF format is preferred. The statement is sought for a specific period showing all the debit and credit entries. An account statement can be seen in Figure 1.3:

Figure 1.3: Account statement

• Big data: As the name suggests, it means a very large quantum of data that organizations deal with on a daily basis. These data may be related to customers, their financial or nonfinancial behavior, and so on. While there is no specification given to the quantum of data, the format of data, or the quality of data, it can be analyzed to help businesses with insights about their business in a structured manner by organizing the data, which allows the organizations in the decisionmaking process related to planning and strategy. The data may often come from multiple sources, different formats, and mostly in raw format or unstructured manner. Big data can be structured easily when it is in numeric format. It is quantifiable in a style that can be easily formatted and stored by changing it from an unstructured to a structured format. • Machine Learning (ML): ML is very similar to an area of Artificial Intelligence (AI) with a philosophy and concept that a computer software program can learn, accept and adapt to new information and data, and analyze it very fast without any intervention from a human. Machine Learning can be adopted and applied in various areas like travel services, insurance, lending, e-commerce, investing, fraud detection, advertising, medical services, and many more

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products. Companies use various tools of ML to improve the customer experience and business efficiency. • Biometrics: It is a method of using digital security systems that works on biological or physiological attributes like thumb impression, facial recognition, eye retina, body gestures, voice pattern, and so on, that are physically unique to an individual. Biometrics can prove their identity to prevent data breaches such as hacking of credit and debit cards or unauthorized log-ins to any system, unauthorized entry in buildings, attendance marking, and so on. This also reduces dependence on traditional methods like passwords or PIN codes that are more prone to hacking or may be stolen. • Cyber security: One of the most common and important terms used by all Fintech players, regulators, and users. It refers to the protection or safety of internet-connected systems, including software, hardware, sensitive information, and data, from hacking and cyberattacks. Some key measures to keep systems secured are password protection, disk encryption, two-factor (2F) authentication, and so on. There are various tools used by Fintech companies to ensure cyber security. • Delivery date: This means the date on which the Application or the API Service is enabled by the vendor or service provider in accordance with published specifications in its stage environment. It is important to have not only the ‘delivery date’ in the agreement but also the penalty clauses in the case of delay in the delivery date. • Electronic signature: An e-sign or digital signature system is used to execute or sign documents or agreements. It saves time to physically sign the documents, especially when multiple parties are required to sign. Various agencies offer e-sign facility either by OTP (one-time password) on mobile or email or both; e-sign capturing pictures, location through access or UIDAI Aadhar linked mobile phone and so on. A digital signature process and functioning can be seen in Figure 1.4.

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Figure 1.4: Digital Signature - Process and functioning

• Encryption: A method that secures information or data using a complex algorithm, password, or a token or key. It translates data or information using an algorithm that turns plain text unreadable. When authorized users need to read the data, they may decrypt it using a binary key. Encryption is useful for individuals and companies to protect sensitive information from hacking. For example, websites that transmit credit card and bank account numbers should always encrypt this information to prevent the hacking of private information.  There are terms like 64-bit, 128bit, and 256-bit encryption, which refer to concealing plain text data using an AES key length of 64 or 128, or 256 bits. 128-bit AES encryption uses 10 transformation rounds to convert plain text into cipher text. The higher the bits, the more complicated and safer it is.  AES 256 encryption is the strongest and most robust encryption standard that is commercially available today. While we can confidently say that AES 256-bit encryption is harder to crack than AES 128bit encryption, it is believed that AES 128-bit encryption has never been reported to be broken till now. So as a practice, most Fintech companies use 128-bit encryption, while small start-ups even use 64-bit encryption. • AES: The Advanced Encryption Standard (AES) was initially known as Rijndael. Worldwide it is one of the most secure and popular encryption algorithms available. The symmetric-key block algorithm is the Fintech industry standard to encrypt and decrypt important, sensitive, or classified information and data.

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• Feedback data means the data relating to the performance of Fintech’s customers assessed using services. In the case of a lending business, it may broadly consist of the following: o User ID, loan amount, tenure, decision (application approved/rejected), and date of the decision o Default eligible flag, default flag o Types of default: DPD on each of 1st to the last payment o Anonymized credit bureau scrub of the customer • Integrated service: This means the service provided through the integration of the API service and the application pursuant to the production schedule. • Integrated service pages: This means all pages on which the Integrated Service is displayed or made available for use by customers. • Mobile wallet: This virtual wallet stores the payment card information on a mobile device. It is an easy and convenient method for the user to make in-store payments. The wallet can also be used by merchants listed with the mobile wallet service provider for convenience. Some of the Mobile Wallet examples are Paytm, GPay, Amazon Pay, BharatPe, RuPay, PhonePe and so on. Many companies have their in-built mobile wallets, like OLA Money. • P2P Lending: Peer to Peer (P2P) lending mechanism is a process that helps individuals obtain loans or financial assistance directly from other individuals who want to invest money in lending without the need for a financial institution like Bank or NBFC. It is also known as crowd-lending. In India, P2P lending companies are called ‘NBFC - P2P’. They are regulated by the Reserve Bank of India (RBI) and are subjected to certain regulations in terms of loan ticket size, loan tenure, maximum lending limit, maximum borrowing limit and so on. Refer to Figure 1.5 to see a few P2P lending partners:

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Figure 1.5: P2P Lending Partners

• Robo advice: Financial advice given through the use of computer algorithms. Robo-advisors, also known as online investment managers, typically invest. Wealth management firms use this technology, experience, and analysis to develop forecasting tools. It helps in creating algorithms for auto investment rules based on investor clients’ risk profiles. • Venture capital: It is the Financial support or investment that investors provide to start-up companies and small firms that have moved past the stage of angel investment and are thought to be in a development phase with promising prospects for the foreseeable future. It generally comes from family offices, Senior level CXOs, High Net worth Investors (HNIs), investment banks, and other financial institutions or companies that find synergy with their business. Generally, the venture capital investment comes after the Angel investment round when the company would have started operations. • 3D secure: 3D secure is a process with three domain (3D) structures connecting the merchant page with the issuer and the acquirer. The purpose of a 3D secure network is to prevent fraudulent or fake transactions, mainly on e-commerce websites. 3D is a security system created for payments to be done by the customers where they enter the OTP received through the merchant in a secure page to validate their identity and complete the transaction. • Account Information Service Provider (AISP): A popular term in Fintech and Open Banking industry; AISP means

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providing customer account information and data, with the customer’s consent, to a third-party software system. AISPs help customers reduce manual work by pre-filling information for easy and faster access to their financial data and information for speedy approval of loans and other credit facilities offered by financial institutions. • Acquiring bank/Acquirer: Acquiring bank is a financial institution that acts as a linkage between the merchants and issuing banks. The acquiring bank’s infrastructure and finances can be used by merchants to process card transactions quickly. • API Banking: The latest in Fintech is API banking which follows a set of regulated protocols, tools, or routines. These provide access to banking services by a financial or thirdparty institution via APIs. These banks offer secured and restricted access to their central bank system to third-party systems to carry out functions. This allows banks to acquire customers and provide services to a more extensive network otherwise not connected with the Bank. • Bank Identification Number (BIN): Most cards, whether debit, credit or prepaid, are generally of 12 or 16 digits. BIN is the first 6, 8 or 12 numbers present on these cards providing basic issuer details. This is used to identify the details of the card issuer and help merchants validate transactions using these prepaid/debit/ credit cards. • PPI Card: In India, RBI has permitted certain institutions to issue Pre Paid Instruments, say cards, to avail various credit services offered by banks, NBFCs and other financial institutions. RBI provides separate licenses for the issuance of PPI cards. • E-wallet: The term is used for a system or electronic device which securely stores various data and information of the users, like payment information and passwords for making various payment methods. These e-wallets have a specific software-based secured system that enables users to purchase from e-commerce websites or easily perform other financial services-related transactions like investment, borrowing and so on. For example, M2P’s forex cards can hold up to 24 currencies, allowing customers to make payments easily.

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• Embedded credit: Embedded credit or Embedded Finance involves using a familiar interface or a customer facing nonfinancial platform that allows the customer to apply, acquire, approve, disburse and make payments of loans or line of credit products within the platform without using a thirdparty site providing credit or payment services. Customers can access and use the credit facility within the mobile app offered by the service provider or the platform. • Embedded lending: Embedded lending is similar to ‘embedded credit’ as it integrates “Lending-as-a-Feature” in digital platforms like e-commerce websites, payment applications (like Paytm, Amazon Pay, BharatPe and so on), B2B platforms or any other platforms providing financial services including investing and wealth management (Like CRED) and so on. These Companies work closely with Fintech companies to offer credit as an in-app experience to increase the Life Time Value (LTV) of customers and enhance the order value. Embedded Lending or embedded financing feature allows companies to integrate their systems in the back end while improving the customer experience and customer service. • EMV chip: This new feature is introduced by Europay, MasterCard, and Visa; hence the short form is called EMV. EMV is a tiny computer chip wherein the customer needs to dip the credit or debit card inside the machine instead of the old swipe card machine. The EMV chip is considered more secure as a unique transaction code is generated for every dip made in the card. This helps in reducing or preventing fraudulent transactions. • FinTech Sandbox: This is another most used feature while creating any Fintech platform. FinTech or API sandbox is a regulated environment for innovators to test their products in real time. Sandbox helps reduce systemic risks before entering the market and facilitates Fintechs to create better services and products. The Sandbox is also known as a testing server. It can be of two types; one provided by government agencies for the entire ecosystem to test and work on it like GST Sandbox offered by the Government of India; and two, provided by the software development companies to its users to test the systems before implementation.

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• Payment gateway: A payment gateway is similar to the “3D Secure” software system., which acts as an interface between the merchants’ website and the acquirer to validate and accept debit, credit card, digital wallet or internet banking transactions that a customer makes for purchase on the website. The payment gateway technology validates the card details provided by ensuring sufficient funds are in the card. The getaway also enables merchants to get paid for the purchase. The workflow of the payment gateway is given in Figure 1.6:

Figure 1.6: Payment Gateway

• Payment Switch: In the transaction process there are multiple entities involved. Payment Switch is an independent tool that communicates with these entities in the transaction process. The payment switch facilitates the processing of real-time payments without any hassles smoothly by connecting the merchant’s gateway with a suitable processor.

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• PCI DSS: PCI DSS stands for Payment Card Industry Data Security Standard that protects sensitive information and data of the consumers’ on various websites and applications, mainly as a part of Fintech. PCI DSS is applicable in storing, processing and transmitting the cardholder data for organizations, whether transparent or encrypted. • Block Chain: The world’s leading software platform that first emerged as the system underpinning bitcoin. Blockchain is also known as distributed ledger technology (DLT). Instead of a central authority, blockchains hold the shared record of information by maintaining and updating it through a network of computers. It is protected and secured by advanced cryptography. • Tokenization: Tokenization is a process that replaces cardholder information and data with a random string of characters called Tokens. The purpose of tokenization is to help the merchants on the internet and networks; move sensitive data and information of the customers without the hovering threat of payments fraud or identity theft of the customer using the card.

Technology in financial setups

Technology can lower operational costs too. It could be in customer acquisition or customer servicing. It also increases the speed of execution regarding decision-making transparency in terms and conditions of the company’s products and services. It also impacts the security of systems for the company and personal information of the customers. It is effective in the availability of more tailored and customized financial services. Here, financial services can be banking, insurance, investment management, or other related services. The steps along the financial service lifecycle include account opening, customer due diligence, KYC document and bank statement verification, authenticating transactions in bank statements. It may also include transactions with other service providers like electricity, telephone, mobile, gas connection, and so on, which can be simplified by digitizing documents, data, and processes. This includes automating other product-specific processes,

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like determining creditworthiness. The process of digitalization can be seen in Figure 1.7:

Figure 1.7: Digitization of documents

Fintech provides a low marginal cost per account or per transaction rate. High scale efficiencies can also be considered in Fintech operations. Fintech enhance transparency in the offerings made to the customers and reduces information asymmetries since digital processes generate a data trail, which can help understand customer expectations, improve products and services, manage and mitigate risks, and promote regulatory compliance. The use of technology in finance has a long history as banks have adopted it, private financing organizations like NBFCs and so on. Since finance involves high-value activities, using the latest technologies, whether the finest scales to weigh gold pieces or the fastest communication methods of the day, has been preferred, from Rothschild’s carrier pigeons to Reuter’s telegraph. Digital technology made its way into finance as the second major application of electronic computers after the military worldwide. During the 1950s to 1970s, the first wave of financial technology saw mainframe computer systems become a part of the back office in large banks and then gradually the middle and front offices of most prominent financial institutions globally. The late 1960s through the 1980s saw the emergence of digital technology companies dedicated to serving financial institutions, including core banking system providers like FIS and Fiserv in international markets and then companies like Infosys, Wipro and TCs in India and payments networks like Mastercard and SWIFT. The adoption of computer systems in banking got a lot of limelight during the “Y2K” problem.

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For those who are new to the term “Y2K”, to explain this in simple words, computers were using date format as DDMMYY (only the last two digits of the year were used, like 82 for the year 1982, 94 for the year 1994 and so on) without realizing that what shall be done when the year will be 2000 (we shall need to use YY as 00!). Upon releasing this, the entire financial services players rushed to change their systems to change the year format from YY to YYYY to avoid any issues later. The years 2000 to 2003 witnessed a huge growth in internet services though later it also got called the dot com bubble as the technology companies got beaten up in the stock market and crashed in valuation. However, it paved the way for the use of the internet and technology in financial services in a big way. The current wave of fintech innovation is marked by the technology companies increasingly interacting directly with customers and becoming financial services providers, moving from B2B services to B2C services. This wave works by breaking services and offering new product combinations straight to individuals and business users by utilizing the more sophisticated technology in the hands of increasingly smart customers and changes in business models. Extensive use of APIs, Artificial Intelligence (AI), Machine Learning (ML), Distributed Ledgers (DL) and blockchain has changed the way financial services are offered to customers. Using these cutting-edge technology tools has resulted in disruptive changes to the financial market in terms of the pace of technological advances, who is providing financial services, and how consumers use those services and interact with providers. The customer experience is a deciding factor in using financial services, primarily driven by previously mentioned technical tools. Digital transformation means reshaping the market outcomes of the financial services industry. Fintech supports the economy’s growth by strengthening economic development, inclusion, and efficiency by providing the financial services required for the digital economy to flourish. The Indian government has taken a huge step by introducing various instruments for the financial inclusion of the poor in banking services. The authorities will need to shape regulatory and supervisory approaches to harness these opportunities while ensuring that core policy objectives, such as stability, integrity, consumer protection, and competition, continue to be met as the digital transformation of the financial sector continues.

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Digital finance has enabled providers to leapfrog legacy channels and products, particularly in Emerging Markets and Developing Economies (EMDEs), especially in South East Asian countries, including India. Financial markets have seen the entry of standalone consumer fintech firms, new B2B services, B2C services, D2C services and big tech firms offering diversified products and services. Incumbents have also embraced technology as a strategic priority to improve their products, lower costs, and compete. COVID-19 increased digitization across many sectors, including finance, as businesses and individuals adapted to social distancing and hygiene protocols and sought efficient and effective ways to connect remotely to government and business service providers. Thus, the pandemic reinforced what was already a clear trend of rapid technological advances by reshaping the economic and financial landscape globally. The digital payment services offered by ‘WhatsApp’ is the latest innovation that has changed the entire payment system; similarly, Amazon’s payment services have made the customer experience very different and easy. This book seeks a lot of support and views from policymakers about the outlook on new financial services instruments like Crypto Currencies; however, it also responds to increasing demand from policymakers for guidance regarding their actions on economic sector transformation. It explores how fintech is reshaping the structure of financial services, the implications of fintech in key product areas and for different customer segments, and potential regulatory responses. Some of the key questions guided these explorations: • Fintech firms can impact financial inclusion in the country, especially in underdeveloped or developing economies. • The most critical likely market outcomes in terms of o Types of financial services providers, o Types of business models, products, and services, o Market structure, and o Infrastructures in the financial sector in Emerging Markets and Developing Economies (EMDEs) over the next five to ten years? • What policy responses might shape or change these outcomes in support of policy objectives and priorities, given the sub-

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standard infrastructure conditions and other constraints related to literacy and so on? • Regulations of new financial instruments like Crypto Currencies and crypto exchanges. A detailed discussion of the preceding points shall help grow the Fintech industry in India and worldwide.

Conclusion

In the following chapters of this book, specific technologies are addressed wherever relevant. The overall focus, however, is on the evolution of the Fintech industry, market trends, and how to build a robust Fintech, especially in the lending space. The digital transformation of finance in this fast-changing world will be touched upon with a focus on the challenges and opportunities in the Fintech segment. The regulatory implications will be discussed in the context of rapidly digitizing economies rather than on specific technologies that may have currency today but can get superseded tomorrow. For that reason, this book starts its analysis with the basics of Fintech, key terms used, and key drivers of change on the technology side. We have linked these to the underlying economics of financial intermediation: the economic frictions, financing in various segments that gave rise to intermediaries, and the economic forces that shaped their scope and scale.

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Chapter 2 Evolution of Fintech Introduction

In this chapter, we shall examine the development of Fintech over the years and how it has altered the environment for various businesses, industries, and consumers. It will also examine how Fintech develops, evolves, and grows and what it means for different organizations and people.

Structure

In this chapter, we will learn the following topics: • Evolution of fintech • Evolution of banking • Evolution of credit card • Current technology scenario • Fintech startups

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Objectives

This chapter will enable readers to understand how technology has been introduced in the banking sector, especially the lending sector. Also, the readers will be aware of various fintech start-ups that have technologically evolved over time.

Evolution of fintech

When we talk about the evolution of fintech, it is similar to the evolution of man. This picture, created using innovation, describes how human beings have evolved, yet, no specific date can be described as the beginning of fintech. It started with small initiatives, kept improving from time to time based on the needs of users, and has reached the stage where we see it today. Figure 2.1 is an illustration of the evolution of humans:

Figure 2.1: Evolution of human

Even when we look at the current stage of fintech, it often looks like we have reached the peak of technology usage in financial services. However, we should not be surprised to see new products, technologies, and innovative methods of doing financial transactions in the next 5-10 years. It is tough to create or explain the exact stepwise evolution as many innovations go undocumented or unnoticed due to some users’ needs. Recent years have seen a tremendous evolution in the fintech industry, which is expected to continue forever. A solid and evolving Fintech presence is crucial for financial services organizations and all kinds of institutions since financial technologies have emerged as

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one of the most significant areas of our lives, creating an impact in the lives of people, whether they are in services or business. Let’s begin by looking at how Fintech got its start. “Financial Technology,” also known as “Fintech,” refers to the numerous technologies, software, tools, systems, and so on that various financial institutions utilize to provide services to their clients. These financial institutes may be in Banking, insurance, lending, wealth management, or any other segment. The tools being utilized by these organizations include a variety of approaches, algorithms, simple or complex calculations, rules, and methodologies, as one might expect, but a layman may think of its working. If we try to trace the origin of Fintech, we shall find that Fintech has existed in some capacity or other since the first wave of financial globalization in the middle of the 19th century. The first experience of a new innovative product was with the introduction of Credit cards, which were introduced in the 1950s. Having a small card with some codes written on the backend and getting account information transmitted through technology or online transactions was perhaps the beginning of doing a financial transaction using technology. While people were getting adjusted to Credit Cards, it was expanding; just ten years later, ATMs revolutionized how bank customers withdrew cash from the bank. There was no token system or queue for withdrawing or depositing the money in the bank. The entire bank statement and transaction update were available by use of technology. The technology that banks employ to operate their ATMs has changed over time, and we have seen this firsthand. The machines for cash withdrawal now also provides cash deposit. ATMs are used to take bank statements and give a few other essential services. The recent technology upgrade uses ATMs without the card (cardless cash withdrawal facility) and new chip-based cards. In the 1970s and 1980s, Fintech companies started creating innovative tools and techniques for handling and storing customer data. This became a catalyst for numerous subsequent significant innovations now commonplace in the credit card and ATM space. New features and facilities were created, thus improving the customer experience. The reach of credit cards and ATMs was minimal due to limited access to technology globally, especially in India. The fintech industry experienced a tremendous revolution due to the rapid growth of the internet in the 1990s. Some of the key examples of innovations were:

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• Electronic payment systems: The payments are made using Telex and the SWIFT system. • Web-based business models: New businesses were created that operated using only the technology platform without any physical offices. • Web-based shopping: Ordering products and services using an internet facility • Portable or Moveable banking: The banks started providing their services at locations where they did not have a physical presence. • Bank digitalization: Banks started moving from paper documents to digital methods of transactions. The next significant phase started during 1995 – 2005, also known as the ‘internet bubble’, when technology stocks zoomed. The development of online trading and banking systems during the 1990s changed how individuals engaged with their money. Stock trading, which was running through brokers through their physical offices and telephone calls moved online, where people could trade stocks through computers. It was also the time when mobile phone usage started in a big way, though it was costly. In the initial mobile phone stages, the incoming calls were also chargeable. With the emergence of mobile banking, payments using internet services, and other significant technologies in the 2000s, Fintech saw continued expansion. Fintech has advanced significantly in a short span of time and does not appear to be slowing down. Whatever was developed 10 years earlier started changing in 5 years, and later, the same technology started changing in 2 years.

Evolution of banking

It is well known that the first printed cheque was issued in 1762; perhaps that was the beginning of using technology in financial transactions. It took almost a hundred years for national-level banking acts to be passed and make banking a regular economic activity in the US. The use of cheques increased during 1890 - 1915 as the design of cheques also kept improving, gradually getting more security features. The technology to use Magnetic Ink Character Recognition (MICR) got developed, making the reading of cheques by machines easier. Somewhere in 1969, in India, the banks were

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nationalized (changing the ownership from private companies to taking them under government control). In the US, some banks started with cash machines to withdraw cash; by 1994-95, the use of cash machines (now called Automatic Teller Machine (ATM)) increased significantly. At this time, the first internet banking also started in the US, as did internet usage. The year 2007 brought the next level of change in banking when Apple started mobile phones (iPhone) and offered banking through them instead of computers. By 2010-2013 the penetration of mobile banking increased globally, and the number of people using mobile banking increased exponentially.

Evolution of credit card

It isn’t easy to picture a time before the convenience of the contemporary credit card. However, throughout a large portion of human history, systems of credit—in which one party loans money or resources to another party without expecting quick repayment—were managed orally or recorded in some ledger. See Figure 2.2 for the same:

Figure 2.2: Evolution of Credit Card [1]

Current technology scenario

The quick rise of Fintech has altered the banking industry’s business environment and prompted the need for more creative solutions.

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Due to these recent trends, banks must expand FinTech investment, reevaluate service distribution channels, particularly business-toconsumer models, and further standardize back-office operations. The growth of Fintech is perceived as a threat to traditional banking by some members of the financial services sector. Others think that because FinTech offers more flexibility, better functionality in some areas, and the consolidation of services, it has evolved into a challenge that may be transformed into an opportunity. Modern financial technologies are undergoing drastic changes impacting the whole sector’s infrastructure. Increased automation, openness, and customer focus are among these improvements. Within these online platforms, there is an increased number of transactions based on exchanging goods or using cryptocurrencies. A brand-new way of exchanging money without human interference between machines has become universally accepted. On the one hand, these processes increase the potential for addressing requirements, but on the other, they also introduce new dangers and threats. The financial services sector’s quick adoption of Fintech in 2018 helped it become a powerful theme that has continued into 2019. The areas of digital payments and money transfers, financial software and automation, and alternative lending and funding platforms have seen the most development. The key technologies that gave impetus to the rapid development of FinTech are technologies of artificial intelligence, processing large volumes of data, and new analytical tools such as Blockchain and API. See Figure 2.3 for the same:

Figure 2.3: Technical development in fintech sector

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FinTech is more pervasive than ever nowadays. It has become an essential aspect of our lives with the introduction of electronic payments, mobile wallets, and others. As was already noted, businesses are making significant investments in Fintech as they become more aware of its significance. Fintech is now vital to many companies and is no longer used just for banks and other financial organizations. In the Banking and Finance segment, cost barriers have been lowered through technological advancement addition of new products and services, facilitating the entry of more new players. Investment in physical access points like branches, ATMs, or agents is unnecessary for new entrants as they use more technology and tools. Even though “phygital” (hybrids of physical and digital infrastructure) are still necessary to serve customers (bitcoin ATMs were made available to holders of crypto-assets), providers without physical networks can now partner with others to provide those services wherever necessary; thanks to improved interoperability and the simplicity of outsourcing arrangements. A few agents, branches, and ATM networks can serve the market without a supplier building, but physical networks need scale. The current wave of innovation in Fintech is characterized by the entry of start-ups (fintech enterprises) on the one hand and the giant incumbent technology organizations like Apple, Google, Meta, and so on. on the other. Given the strong venture capital interest, the former is frequently well-resourced. Still, they lack the advantage of an existing customer base and often use aggressive techniques to take market share away from incumbents on particular items. The latter group benefits from already having a client base and income sources, which they may use to scale quickly and incorporate financial services into their current goods and services. Varied entry types might entail significantly different implications for market structure and financial regulation, competition, and consumer protection laws. In the Indian context, if we take the example of Paytm, many other payment gateway companies or platforms started operations; however, they could not reach the level where Paytm was. Some of them got acquired by more prominent players in the same segment. Niche vendors can attract an interested clientele and offer customized goods and services. A low-cost provider can enter the market with relative ease from an economic perspective eliminating numerous fixed costs and decreasing variable and switching costs, even though

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they still need to build a solid reputation. Prices are more resistant to change than risks and economic factors, nevertheless. Credit, liquidity, markets, and operations risks can be diminished or shifted but not entirely removed. Since interconnectedness and the decomposition of services add additional linkages to each product chain and user interface, the attack surface for cybercriminals has grown. There is always a debate on which fintech platforms to be used by various users. While some advocated that a single platform should offer all the products related to Financial Services, on the other hand, a section of people feels that each fintech platform should be exclusive to one kind of product or service. Your company philosophy will determine whether you should compete on a broad platform or in a specific niche. In the Fintech Market Participants Survey, respondents were asked whether they expected retail and SME clients to utilize several providers without a core relationship or to have a single core financial relationship. 16% of respondents predicted that customers would have a core relationship with a marketplace or platform provider, while 36% predicted that customers would utilize numerous providers without having a primary one. These diversified views may depend on the economic literacy and need of particular demography. Technology advancements have impacted every industry, but the financial services sector has been particularly hard hit. Behind the scenes, many facets of finance had already been digitized; for instance, most global payment flows were already computer to computer through the internet. The results of this technological wave are the unbundling of financial goods, restructuring the value chains that generate and deliver financial products and services, and introducing new providers. The initial effects were the disaggregation and atomization at the product level and the possibility of a significantly more fragmented financial services sector at the provider level. However, as explained below, traditional economic forces that shape industry structure, such as economies of scale and scope, search costs, and transaction frictions, remain relevant, albeit in different forms. They are causing a re-bundling of services and a potential acceleration of sector concentration, which counteracts the tendency toward fragmentation. Another good illustration of diversification being created in the financial services segment by an Indian fintech is Zerodha. It started as a discount brokerage firm by providing extremely good technology

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for executing trades and has grown to a unicorn and diversified in various other segments within financial services. As per the experts, as stated above, the recent 65 years proved to be the golden era for the development of the fintech industry. • 1920s: The introduction of transactional cards • 1960s: The introduction of credit cards • 1967: Barclays introduced the world’s first ATM in 1967 • 1990s: The advent of the internet • 1999: PayPal became the first electronic payment system or digital wallet • 2009: Cryptocurrency-Bitcoin- the digital currency was launched The introduction of the Blockchain and bitcoins was just the beginning. To cater the needs of the dynamic and competitive marketplace of the 21st century, the focus shifted to delivering personalized solutions and user-friendly platforms driven by agile, DevOps, automation, AI/ML, blockchain, cloud, and other emerging technologies. Therefore, global leaders emphasize awareness of the Fintech trends to stay ahead of the competition. See Figure 2.4 to understand it:

Figure 2.4: Advancement in fintech services and products

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Fintech and technologies

Fintech has integrated many forms of technology with Finance to develop fast-processing analytical software. The technologies adopted include artificial intelligence, machine learning, robotic process automation, data analytics, and blockchain, which have played a vital role in the evolution of finance. We have discussed the key definitions of the Fintech segment in the previous chapter, few of them are being briefed again as they are more relevant in today’s world.

Artificial intelligence and machine learning

Artificial intelligence (AI) is the replication of human intelligence functions by machines, particularly computer systems. Expert systems, natural language processing, speech recognition, and machine vision are some examples of specific AI applications. An application of AI called machine learning allows systems to gain knowledge from their past performance without having to be specifically programmed. Machine learning aims to create computer programs that can access data and use it to acquire knowledge. These two technologies have profoundly changed the financial sector. They have enabled fintech firms to create pathways for datadriven marketing and predictive behavioral analytics. These tools are extremely useful in wealth management to encourage people to save more money; in the lending space to understand the borrower’s behavior after availing the credit facility; to predict the investment pattern in the stock market, and so on. Additionally, this might aid regulatory compliance, credit rating, and fraud detection.

Robotic process automation

Robotic process automation, sometimes known as automated customer service technology, is used by the fintech industry in almost all segments. With the help of this technology, financial institutions’ robots can process repetitive and complex, manual operations. Robots do the management of statistics, data collection, and transaction management. They are also in charge of marketing and communication with all stakeholders. This technology aid

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Fintech companies in managing staffing and all other expenses as well. The robotic process saves time, cost and reduces the chances of human error.

Data analytics

Fintech companies mine huge datasets for information about customer spending patterns, financial behavior, and repayment track in the case of loans and investing behavior; data is extremely useful when analyzed for a particular segment. With mathematical algorithms and these insights, marketing plans and fraud-detection systems are developed, which are essential nowadays.

Blockchain

Blockchain is a decentralized system comprising of public ledgers dispersed among many locations and records all transactions. To put it simply, this is a method for the group to be openly informed of all the data, information, and behavior so that they can make the financial choice based on the client’s data and information. The transactions are secured by an impenetrable code that makes them safe and guards against hackers and fraudulent transactions. Blockchain’s privacy and security features make it a crucial component of fintech. Future developments in the interaction between AI and Fintech will strengthen it and make operational costs more favorable. As an illustration, entrepreneurs are developing solutions that can aid investors in gathering crucial data, analyzing it, and producing insightful market reports for wiser investment choices. For the most effective underwriting choices and credit assessment procedures, several institutions are using systems with AI. In addition to these technologies, the list also includes blockchain technology, smart contacts, RPA, agile, and so on. These innovations prioritize the client, shorten the time to market, use the Minimal Viable Product (MVP) power, eliminate the past, and get markets and workforces ready for the future. While these tech solutions are revolutionizing the financial ecosystem, it is crucial to acknowledge their impact on global organizations. With hundreds of start-ups being founded each year globally, India is at the forefront of the fintech sector’s explosive growth. India will

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be a hub for fintech due to its rapidly developing fintech companies and user-friendly culture with low cost and supportive government initiatives. India will become a top economy in the Fintech sector as things are just getting started, and there is a tone of fresh innovations and improvements on the horizon.

Fintech startups

As we are going to learn more about the Fintech ecosystem subsequently, with a focus on -lending, it is essential to know about some well-known Fintech start-ups, their technology, and their long-term vision. This will also help any new entrepreneurs prepare themselves better. Here is a brief about some Fintech startups operating in various sectors, be it insurance, lending, payment gateway, wealth management, and so on.

Financial sector case studies

We will now discuss in detail a few financial fintech startups:

Paytm Paytm is a platform for mobile payments and money management and is a renowned Fintech company. It provides an applicationbased platform to pay installments, schedule travel, book hotels and tickets, reserve rooms, buy gold, buy gifts, and so on. The following figure shows the logo of Paytm:

Figure 2.5: Logo of Paytm

Paytm has evolved into an Indian juggernaut that manages various banking services, credit cards, advances, a protection-focused speculation platform, shared assets, and so on. Paytm Mall is an extended service provided by Paytm for online shopping for various items, including clothing, accessories, hardware, toys, and culinary items. Numerous services, including Paytm wallet, cater to almost 100 million registered users.

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One97 Communications, the parent company of Paytm, was founded in 2000 by Vijay Shekhar Sharma with a loan of Rs 8 lakh. In 2010, he launched the Noida-based Paytm as a platform for prepaid cell phones and, DTH (direct-to-home) recharges. But he transformed Paytm from those early roots into India’s most valuable financial start-up in less than ten years. The Paytm Wallet was one of India’s most popular digital wallets after its inception in 2014. The following few years saw Paytm grow its user base and enter the e-commerce space by enabling online shopping and ticketing. After the government’s shocking ban on high-value currency notes intensified digital payments in 2016, their use surged. The business became the first payment app in the nation to achieve 100 million downloads in 2017. As of March 1, 2021, Paytm had 1.2 billion monthly transactions and more than 150 million active users. After Paytm led the way in digital payments in the nation, the industry quickly took off as Amazon, Google, WhatsApp, and Walmart’s Phone Pe all introduced their payment services in an effort to partake in the lucrative market, which EY predicts will reach over $95.29 trillion by the end of March 2025. [2] Let us look at the technology being used by Paytm for its website and mobile application. W3Techs provides information about the usage of various types of technologies on the web by conducting various surveys. As per https://w3techs.com/, some technology tools are discussed here for a basic understanding. • Current technology scenario • Content Management Systems (CMS) uses WordPress for inner pages, an open-source blog publishing, and a PHP and MySQL-based content management system. • Gatsby, another open-source static website generator based on React and GraphQL, is used on subdomains. • Java Script is a server-side programming language (lightweight, object-oriented, cross-platform scripting language), and PHP (a well-known common scripting language for creating websites) is used for inner pages. Some static pages are created using static files by using offline tools. The internal pages in a client-side programming language

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are also prepared using JavaScript and JavaScript Library jQury 3.5.1. It may be noted that many new companies may use newer versions as well. • The web servers have used Node.js and Nginx. • A server-side JavaScript environment called Node.js creates network applications like web servers. An open-source, lightweight web server is called Nginx (pronounced “engine X”). • The web hosting providers are: o Amazon, the most commonly known and used US-based e-commerce and cloud computing service provider. o WP Engine, which provides managed WordPress hosting is used in inner pages o Netlify, is used on subdomains that offer hosting for web applications and static websites. • SSL Certificate is used from DigiCert and IdenTrust. • Traffic Analysis tools are used through Google Analytics, along with that other Google tools are used for advertising networks and tag managers. The company also used all the other tools offered by social media companies like Twitter, Facebook, Pinterest, and so on. The Paytm payment gateway can be integrated using ReactJS with a few easy steps as offered by Paytm. • The user, who wants to integrate with Paytm, can create a Paytm developer account • The user can then collect the API keys offered by Paytm for integration • Then, the user needs to create a ReactJS application • Add the scripts to the Index • Logic and UI: Paytm payment integration process flow to be done • The last step is to import the Paytm button in the APP being created by the user • Paytm payment gateway integration completed.

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BharatPe BharatPe was founded in 2018 to assist Indian merchants in growing their companies and adopting digital payments. BharatPe was the first to create an interoperable QR code that could take payments from more than 150 UPI applications with no transaction costs. The following figure shows the logo of BharatPe:

Figure 2.6: Logo of BharatPe

BharatPe makes money by giving merchants unsecured loans. Merchants can apply for loans up to Rs. 7 lakh with no processing costs or collateral. BharatPe announced BharatSwipe, a card payment acceptance machine, in H2 2020. It is the third-largest participant in the private POS market, with plans to expand its distribution. In August 2021, BharatPe teamed with LenDenClub to develop a 12 percent Club app, marking the company’s first step into consumer lending. Twelve percent Club is a peer-to-peer lending platform that allows users to invest and earn up to 12% yearly interest or borrow at a low rate. [3] It is interesting to note that the technology used by BharatPe is not very different from what is used by Paytm concerning the Content management system, server-side programming languages, clientside programming languages, CSS framework, web servers, web server providers, data centers, DNS, e-mail servers, content delivery networks, traffic analysis, character encoding, and so on. The basic structure on the back end seems quite similar, while the user experience may differ.

CRED Cred was founded in 2018 to provide a platform for high-credit-worth individuals to manage their credit bills and earn rewards for paying them on time. Cred is noted for its innovative client acquisition

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strategies, such as “Indiranagar Ka Gunda” during the last IPL season. The following figure shows the logo of Cred:

Figure 2.7: Logo of Cred

Cred claims that by giving a complete analysis of their credit card bill spending and delivering timely bill payment reminder notifications, they can enhance their consumers’ credit scores. • Cred RentPay: Members may use the CRED app to pay monthly recurring rent and receive CRED coins in exchange. • Cred Stash offers quick credit loans with customizable periods and low-interest rates. • Cred E-commerce is a store within the Cred app to find specially chosen items. • Cred Pay is a service that allows you to pay with your credit card. This service, launched in collaboration with Razorpay and Visa, will enable consumers to make payments on partner sites using CRED coins. The content management system used on the subdomain is supported by WordPress using PHP and MySQL. The server-side programming language is created using PHP, while the client-side programming language is based on JavaScript. It has also used JavaScript within the web pages. Interestingly, for traffic analysis, it uses Google Analytics and Mixpanel, and WordPress Jetpack. The site elements are important to note as a change from other payment gateway companies. It uses the following: • External CSS: In a different Cascading Style Sheets (CSS) file, external cascading style sheets specify stylistic guidelines. • CSS is embedded in web pages that specify a set of styling guidelines for a particular element. • Inline CSS: Using the style attribute, inline Cascading Style Sheets provide style rules directly within an (X)HTML element.

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• File compression algorithm GNU zip (Gzip) is used to compress files. • Along with other standard SSL certifications, it has employed Brotli Compression, Strong ETag, and HTTP Strict Transport Security (HSTS).

Razorpay

Razorpay, a Bangalore-based company, specializes in meeting the payment demands of startups and businesses. Razorpay makes it simple for merchants to take payments from and send them to their dealers. Shashank Kumar and Harshil Mathur launched it in 2014. The following figure shows the logo of Razorpay:

Figure 2.8: Logo of Razorpay

As it enables an online business to collect, process, and distribute digital payments through various mechanisms such as debit cards, credit cards, net banking, UPI, and prepaid digital wallets, its service is used by thousands of customers. It is among Bangalore’s largest fintech firms.[4] “Banks typically provide their APIs to payment platforms. They then create a second layer and integrate with banks. So, they all appear to be alike. With Razorpay, however, we had the opportunity to design the product first while leaving bank connectivity as a mystery. We talked about what our customers want and what the retailers want. We responded to these and developed our product.” - Harshil Mathur, CEO, and Co-founder, Razorpay

In 2017, the RazorPay platform introduced Razorpay Route, Razorpay Smart Collect, Razorpay Subscriptions, and Razorpay Invoices as its four new offerings. These products make an effort to manage operations, including cash flows, money disbursement, automating NEFT and bank wires, as well as the collecting of recurring payments. Razorpay Capital, a further subsidiary of the platform, is a lending platform that supports businesses with on-the-spot loans to help them address their cash flow difficulties.

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RazorpayX, an API banking platform powered by AI, is yet another standout innovation of the platform. This tool provides organizations with a fully functional current account that they may use to automate payroll, bank transfers, sharing invoices, and other financial tasks. RazorpayX payouts are a platform product that allows businesses to disburse payments from vendor and customer payouts to employee salaries efficiently and promptly. As reported by Your Story, the platform charges about 0.25 - 0.5 percent fees for each subscription collection transaction that takes place via their gateway. Through the set-up of version 2.0, the platform has prompted multiple revenue streams heading ahead. The company charges as much as two percent on every transaction carried out via its payment gateway. The platform set up its corporate credit card in 2019 and aims to expand to include newer businesses and corporates.[5]

MobiKwik

Bipin Preet Singh and Upasana Taku started the Indian fintech business MobiKwik in 2009. Its main office is in Gurugram. Mobile and online payments, phone and DTH recharges, mobile transfers, online shopping, and much more are all available through MobiKwik, a supplier of digital wallet services. The following figure shows the logo of MobiKwik:

Figure 2.9: Logo of MobiKwik

Users can keep up to INR 50,000 in a MobiKwik wallet, which they can use to make purchases online, pay bills, and recharge their mobile phones. Their customers may buy bus tickets using the cash pickup option and pay in part for the tickets using the partial payment feature. Sequoia Capital, NET1, and GMO Venture Partners are a few investors in MobiKwik. Following demonetization, MobiKwik now offers free wallet-to-bank account transfers. Before demonetization, they used to charge 4% for those who weren’t KYC compliant and 1% for those who were. In India, they have more

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than 100 million members, and more are constantly added. Users who are not KYC compliant can transfer between 1000 and 20,000 rupees to their bank account. However, you can keep up to INR 100,000 in your MobiKwik wallet once your KYC is complete.

Insurance sector

The insurance sector is disrupted by the growth of fintech, shifting customer behavior, and cutting-edge technologies. Additionally, with innovations like risk-free underwriting, on-the-spot purchasing, activation, and claims processing, Insurtechs and tech companies continue to alter the client experience.

Digit

In September 2017, the Insurance Regulatory and Development Authority (IRDA) granted regulatory clearance to Digit Insurance, formed in 2016 by Kamesh Goyal. The following figure shows the logo of Digit:

Figure 2.10: Logo of Digit

Digit’s digital-first strategy promises to make the insurance purchase and claim procedure easier. Motor, life, jewelry, and travel delay insurance are some of the most popular Digit insurance products. According to the company’s transparency report, it has 17 million subscribers as of March 2021, with motor insurance the most profitable, followed by health and accident insurance. The claim completion rate was 96 percent during the epidemic, which lasted from April 20 to March 21. After becoming the first Unicorn of 2021, Digit Insurance raised $200 million at a valuation of $3.5 billion in July 2021. [6] The business model of DIGIT is simplified to sell insurance products online where the customers can buy any of its products, be it health insurance, life insurance, motor insurance, or travel insurance in an effortless and transparent manner directly from the company without the involvement of any broker, thus saving cost. It used AI

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and ML to weed out fraudulent claims, thus keeping the claim time significantly less and the claim ratio very high. Its fraud management system uses data analytics to identify suspicious claims. The server-side and client-side management are based on Java and JavaScript, and it has also used JQery. Its web server is Apache HTTP open-source Apache server. It uses Google Analytics, Microsoft UET, and Adobe Analytics for traffic analysis. For site elements, it has used External CSS, Embedded CSS, Inline CSS, Gzip, and Strong ETag. More details on the technology used by Digit can also be found at https://w3techs.com/sites/info/godigit.com.

Turtlemint Dhirendra Mahyavanshi and Anand Prabhudesai created Turtlemint in 2015. Turtlemint is an online marketplace where people can compare and buy insurance at the lowest possible price. It provides digital solutions to insurance advisers to make personalized insurance product recommendations. Advisors may use the application to market various insurance products through a single site. Courses on a variety of items are also available using the platform. The following figure shows the logo of Turtlemint:

Figure 2.11: Logo of Turtlemint

According to the business site, Turtlemint has sold over 30 lakh policies and provided services to around 1.5 lakh active insurance advisers. With a penetration rate of 16,000+ pin codes out of the 19,000 pin codes in India, more than 1.5 million clients, and onboarding of almost 80% of insurers, Turtlemint has produced more than 1,20,000 micro-entrepreneurs. Turtlemint is India’s largest PoSP insurtech platform, with a year-onyear growth rate of 110 percent. It offers a feature to compare various insurance products being offered by other insurance companies as well.

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As per an article in https://www.expresscomputer.in, the areas of value addition by turtle mint include: • Assisting advisers in providing their clients with customized suggestions by considering their specific needs. • Creating a thorough online training curriculum for insurance advisors. The program provides more than 70 courses for sales skills, personality development, certification for insurance advisors, and podcasts. • Assisting the adviser in expanding their business by giving them access to the full range of tools and data they need to excel as insurance advisors. Additionally, the Turtlemint-Pro App offers pertinent data and details on lead management and distributes marketing materials like flyers, posters, one’s own profile, and so on. All their technological endeavors have been powered by cloud computing (AWS). They can easily combine all their technical activities and solutions thanks to their efficiency and agility. AWS has successfully met its expanding needs in its entirety. Additionally, the team is very effective, and the AWS interface is very user-friendly. Therefore, AWS best satisfies its infrastructure, services, and interface requirements.[7]

Lending space

Lending and borrowing procedures are becoming simpler and faster. Loans are now available to practically everyone in the country due to the growing acceptance of digital financing. The country’s lending market has expanded significantly because of this high accessibility.

Prest Loans Prest Loans is a new-age FinTech NBFC, providing all kinds of loans to support and encourage businesses; these loans may be in the form of working capital finance to small businesses, Micro, Small and Medium Enterprises (MSME) units, e-commerce vendors, invoice financing, inventory funding and so on. Recently, Prest Loans has

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stepped into the electric vehicle loan segment. The following figure shows the logo of Prest Loans:

Figure 2.12: Logo of Prest Loans

The company’s vision is to assist its stakeholders in growth through customized financing solutions and support the ‘financial inclusion initiative’ for the MSME sector in India. Prest loans offer small business loans, including unsecured and short and long-term secured business loans. Prest Loans caters to the first ‘M’ in the MSME segment, that is, the Microbusiness segment, and offers loans to the MSME Sector, that is, shopkeepers, retailers, and wholesalers who have no banking habits and do not maintain proper financial documents due to the nature of their business.

ZestMoney The largest and most rapidly expanding AI-driven EMI finance platform in India is ZestMoney. Due to a lack of credit history, more than 300 million households now do not have access to credit cards or other formal financing choices. The fintech startup has created a platform that can significantly improve their lives. This is the top platform for the disbursal of automated small-ticket loans since it was built with cutting-edge technology, including a fully digital, automatic back end with an AI-based machine learning decision engine. The following figure shows the logo of ZestMoney:

Figure 2.13: Logo of ZestMoney

ZestMoney uses 50 technology products and services, including HTML5, Google Analytics, and jQuery, according to G2 Stack. ZestMoney is actively using 101 technologies for its website, according to BuiltWith. These include Viewport Meta, iPhone / Mobile Compatible, and SPF.

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In the last few years, ZestMoney has designed many insights based on Artificial Intelligence (AI). The largest and most rapidly expanding AI-driven EMI finance platform in India is ZestMoney. Due to a lack of credit history, more than 300 million households now do not have access to credit cards or other formal financing choices. The fintech startup has created a platform that can significantly improve their lives. This is the top platform for the disbursal of automated smallticket loans since it was built with cutting-edge technology, including a fully digital, automated back-end with an AI-based machine learning decision engine. [8]

Faircent

Faircent is a Peer to Peer (P2P) lending platform where borrowers and lenders can interact with each other to negotiate the terms of the loan agreement, including the rate and tenure of the loan disbursement. The revenue model is to earn fees from the lenders and the borrowers on a successful transaction. The following figure shows the logo of Faircent:

Figure 2.14: Logo of Faircent

Faircent is India’s first P2P lending platform to be granted a Certificate of Registration (CoR) by RBI as an NBFC-P2P. Technology is used to streamline the procedure and lower costs. As a result, they give borrowers a chance to fund their needs at reasonable rates and aid lenders in obtaining the highest return on their investment. Once a person is interested in registering, they go through a thorough verification process in accordance with the KYC standards established by various agencies. As a result, all the financial and personal information relating to lenders and borrowers visible on Faircent has been confirmed. Visitors to Faircent can sign up as lenders or borrowers depending on their needs. All the registered borrowers and lenders with Faircent undergo a thorough verification procedure based on the personal, financial, and professional information given. According to each borrower’s profile, an automatic system recommends the loan term, loan amount, and interest rate based on

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how well the borrower will be able to repay the loan. To support the borrower’s needs, lenders can submit offers, which are accepted. As a result, borrowers and lenders can contribute to a percentage of a borrower’s overall loan requirement. The borrower and the lender sign a formal contract once they have come to an understanding. The loan amount is subsequently deposited to the borrower’s account, and throughout the agreedupon period, the borrower pays periodic EMI installments. Repayment can be tracked using their own account on the internet through an online, automated approach. The entire process can be made fair, transparent, and speedy thanks to Faircent’s technologydriven platform. [9]

i2iFunding P2P lending, commonly referred to as peer-to-peer lending, is a financial innovation that brings together verified borrowers asking for unsecured personal loans and investors aiming to increase the return on their investments. Investors can view all the information about the borrowers before lending them money because verified borrowers are published on the P2P lending platform. Lending modest sums to numerous borrowers allow investors to diversify their holdings. The following figure shows the logo of i2iFunding:

Figure 2.15: Logo of i2iFunding

Globally, peer-to-peer lending has already shown to be a wildly effective alternative finance model. P2P lending is rapidly gaining ground in India and is steadily developing into one of the investors’ most alluring investment options. RBI has previously acknowledged this innovation and developed laws for the industry.

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i2iFunding is India’s best and most trusted peer-to-peer lending platform, which started operation in Oct 2015. Peer to Peer lending (P2P lending) connects investors who lend money online with verified borrowers seeking to get affordable Peer to Peer (P2P) Loans. i2iFunding is a Reserve Bank of India (RBI) registered Non-Banking Financial Company – P2P Lending Platform (NBFC-P2P). i2iFunding has a well-defined Credit Assessment Process that ensures a 360-degree assessment of the borrower’s credit profile. They have created an automated internal credit evaluation model that uses real-time, integrated data analysis from sources like social media, mobile, CIBIL reports, bank account statements, and so on. Their credit model analyses borrowers’ profiles based on thousands of data points and more than 100 criteria. The in-house credit evaluation team assesses the credit risk of each borrower and classifies the loan proposal in the suitable i2i Risk Category from A-F. • A is the category with the strongest credit profile, and • F being the weakest Along with the risk category, i2iFunding also recommends an interest rate for each loan:

Figure 2.16: Loan process at i2iFunding

The Technology platform is developed using JavaScript, JQuery, and Bootstrap on client-side programming languages. The web server used is Apache HTTP open-source server. Interestingly it has used

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Ubuntu (Linux) operating system. [10] The Sitemap of i2iFunding can be seen in the following figure:

Figure 2.17: The site map of i2ifunding.com [11]

Neo banks

Despite their relatively recent debut into the more expansive FinTech market, Neo Banks have significantly changed and grown globally and in India. The concept of Neo banks has evolved as they set themselves apart from online banking services and shifted their focus from being just focused on digital banking to delivering an exceptional customer experience.

Jupiter Jupiter is a Neo bank, or a digital banking business, that provides its customers with various digital retail banking services, allowing them to open and manage their bank accounts from the convenience of their homes. Jupiter also combines special tools for its consumers to keep track of their wealth, provides real-time spending breakdowns and insights, and aids them with practical savings accounts so they may put money aside for purchases. Additionally, each of these can be managed in real-time. The company does not deduct shady fees as many banks do. Additionally, there is no requirement for minimum balance maintenance on Jupiter bank accounts. The money on your Jupiter account can also be readily withdrawn from nearby ATMs. Jupiter is regarded as one of the UPI-based payment apps with the fastest processing times. The following figure shows the logo of

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Jupiter:

Figure 2.18: Logo of Jupiter

It is a digital banking firm that provides a wide range of fascinating amenities to support and satiate the expanding needs of Indians of all ages. This company’s business concept is loosely modeled on the digital, mobile-only bank in the UK. Jupiter presently offers four products to help customers save money, properly manage their savings, and earn rewards. Federal Bank, NPCI, and VISA are the company’s top three banking partners in terms of volume. [12]

Other financial services startups

Startups challenge established players in the finance sector by increasing financial inclusion and utilizing technology to reduce overhead.

FamPay The first Neo Bank in India designed just for teenagers, and their families are called FamPay. Teens can use cards, P2P, and UPI without a bank account to make payments with FamPay. Payments are convenient and enjoyable for GenZ since parents may send money safely to their children at any time, or place. The following figure shows the logo of FamPay:

Figure 2.19: Logo of FamPay

Recko helps FamPay overcome three significant problems by providing these solutions: • First, because FamPay uses a T+2-day settlement cycle, it’s critical to understand if their PG partner’s payments are

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delayed. They will follow up with the payment partner if there is a delay in the settlement to find out why. • Second, examining FamPay’s charges is crucial because customers need to know how much has been charged to them in accordance with their contract. • The volume would come in third. This is done to gauge how proficient they are with money. For instance, if any money is settled in their wallet, FamPay must receive it. Finding out how many transactions FamPay conducts each day is another important consideration to determine whether their volumes have risen or fallen. The reconciliation for the entire day is fully visible to FamPay. Their operational effectiveness has been enhanced by 80%–85% compared to the prior procedure. In addition, if settlements have not been made or overcharged, FamPay also detects delays or disparities with their PG. Prior to performing reconciliation, it would have taken more time, which would have left them with less time to analyze any other gaps, making it difficult to find this. [13]

Zeta Zeta uses cutting-edge technology to assist banks and other financial institutions in providing their clients with next-generation financial services. Leading banks and fintech firms are among the company’s clientele. The following figure shows the logo of Zeta:

Figure 2.20: Logo of zeta

Zeta employs “Fusion.” Fusion is a Platform-as-a-Service (PaaS) built specifically for the fintech industry that gives fintech organizations the ability to develop and manage financial products for various use cases. Fusion allows fintech businesses to seamlessly connect their platforms with banks, payment networks, card printers, and other services to provide fantastic customer experiences. Zeta uses a B2B2C business model to sell its tech-based products to banks and fintech companies while acting as a technology service

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provider. Zeta bills banks based on the volume of transactions or customers they get; no exact cost information is given. [14]

Zerodha Zerodha, a Bengaluru, Karnataka-based broker, is the first discount broker in India and is responsible for a revolution in the broking house sector. Zerodha is the largest and one of India’s best brokers for stocks. Zerodha is a growing and leading marketplace with its technology and latest features. They treat customer satisfaction as a priority. The following figure shows the logo of Zerodha:

Figure 2.21: Logo of Zerodha

Zerodha offers both PC and mobile clients on its primary Kite platform. They provide a Pi downloadable platform for advanced algorithms and analysis. All these things helped them stand out from the competition. Like all other discount brokers, Zerodha also plays on a low brokerage high turnover model. They charge very nominally as a brokerage for trader’s transactions. It leads to high transaction turnover. As a result of collecting many small fees from many clients, Zerodha generates a healthy quantity of revenue. Compared to some of the best fullservice brokers, they operate cheaply for Zerodha. It uses an online framework for operations, keeping costs down. [15]

Conclusion

By the time you complete reading this in the book, there will be a few more Fintech companies in the world that will have come up with new products, services, and innovative ideas. We have intentionally not covered Cryptocurrencies, Crypto exchanges that are quite popular, and expanding operations globally. However, due to various regulatory concerns and high volatility in that segment, I thought it appropriate to keep it pending for some other time. We shall continue focusing on the lending segment within the Fintech space.

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In the next chapter, the loan sector will be the sole area of the industry we concentrate on, which includes all kinds of loans; gold, personal, consumer, and business or MSME loan. Other names for this include lines of credit or any other type of credit facility offered by FinTech players.

References

[1] Credit: https://www.thebalance.com/history-of-creditcards-4766953 [2] Credit: Fintech Industry in India | History | Growth | Future (startuptalky.com) [3] Credit: https://www.inventiva.co.in/business/corporate/ top-20-fintech/ [4] Credit: Top 50 Leading Fintech Startups in India 2022 (startuptalky.com) [5] https://www.analyticssteps.com/blogs/success-storyrazorpay {6} Credit: https://inc42.com/features/digit-insurance-drhpipo-decoded/ [7] Credit: https://indiaai.gov.in/startup/zestmoney [8] Credit: https://yourstory.com/2022/05/turning-pointinsurtech-helping-insurance-agents-go-digital/amp [9] Credit: https://admin.faircent.com/how-faircent-works [10] Credit: https://www.i2ifunding.com/credit-assessmentmethodology [11] Credit: https://www.i2ifunding.com/sitemap [12] Credit: https://www.startuptalky.com/jupiter-successstory/#Jupiter_Jupiter_-_Business_Model [13] Credit: https://www.recko.io/case-study/fampay/ [14] Credit: https://startuptalky.com/zeta-success-story/ [15] Credit: https://newsface.co/zerodha-case-study/?doing_ wp_cron=1657721243.7131569385528564453125

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Chapter 3 Fintech in Lending Space Introduction

In the earlier chapters, we discussed the basics of Fintech, how the fintech industry has grown in the last many years, and the key definitions used in the fintech industry. There are many verticals when we talk about Fintech industries like lending, insurance, wealth management, and so on. In this chapter, we shall focus only on one industry segment, the lending industry. This may also be called a loan, line of credit, or any other kind of credit facility provided by the fintech players.

Structure

This chapter discusses the following topics: • Understanding various kinds of loans o Consumer loans o Gold loans

o Personal loans

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o Auto loans

o Business loans or MSME loans • How to be a real Fintech or digital lending institution? o Customer acquisition

o Application, website, and/or app o Verification APIs

o Credit underwriting

o Automatic scorecard

o Credit Bureau Integration

o Auto-analysis of Qualitative parameters o Disbursement

o Loan servicing and monitoring o Collection or recovery o Legal

o Accounting

o MIS generation

Objectives

With the help of details added on various setups and technological processes, the readers can understand the structure of building a fintech in the lending space. With the help of examples, it would be easy to understand the process in a simplified manner.

Understanding various kinds of loans aggregated by fintech companies

A fintech in the lending space may cater to various kinds of requirements, which can be broadly categorized as follows: • Consumer loans • Gold loans

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• Personal loans • Auto loans • Business or MSME loans (MSME stands for Micro, Small, and Medium Enterprise) Let us understand these loans briefly from a Fintech point of view and how the credit facilities are approved or provided by them. Please refer to the following figure:

Figure 3.1: Types of Loans

Consumer loans

Consumers generally apply these loans to purchase consumer durables like television, fridge, washing machine, mobile phone, and so on. Mobile phone purchasing is one of the largest industries in India since these phones are purchased over the counter. The time frame to approve a loan is very short. Hence, the decision to provide credit is taken based on the credit Bureau history of the borrower and their KYC. The consumers may offer no financial statement, data, or documents as the ticket size is minimal. Basic KYC verification and credit Bureau history are used for providing consumer loans. In India, Bajaj Finance and home credit finance are two significant examples of companies providing consumer loans using technology. Generally, these loans are provided by a tie-up with the manufacturers or the retail stores and sold as interest-free loans. In most cases, the manufacturer or the dealer bears the interest cost, also known

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as interest subvention. Hence, for the consumer, it is a quick loan without any hassle or providing too many documents. At the same time, it is also very attractive for the consumer as they do not need to pay any interest on these loans.

Gold loans

These loans are opted by many people who are unable to get any credit facility or loan due to lack of income proof, or poor credit history. This loan is also taken by people who need finance for a short time, who need the money immediately to meet some emergency. They avail the loan facility by pledging their gold. Other than the banks, some traditional lending companies provide loans against gold. The major NBFCs are Manappuram Finance and Muthoot Finance. However, new age tech-driven gold loan Fintech companies like India Gold and Rupeek have made space in this space by offering customized, tech-driven solutions to the people seeking gold loans. The process and key features of gold loan Fintech companies are: • Mobile app-based process, customers download the app on their mobile and apply for a loan. The customer can choose the date, time, and venue for the gold loan representative to visit. • The movement of executives visiting the gold loan borrower is tracked by the technology built by gold loan fintech companies, like how food delivery companies do it.  The customer knows when the executive will arrive to pick up the gold. The company can also track when the executive returns with the gold delivery to the bank or the company’s office to deposit the gold. • The process of assessing the gold in terms of quality and weight is also tracked online through the mobile application. • During this time, the credit manager verifies the data and information of the borrower and approves the loan once the gold information is uploaded in the mobile app. • The customer gets a notification on the mobile application. They accept the terms and conditions of the loan agreement and sign the contract digitally.

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• The fintech company transfers the funds for the loan amount to the customer’s account through the “Escrow account” mechanism, as most Fintechs tie up with a bank or an NBFC to provide finance against gold. While from the lender’s point of view, Gold is a safe asset to hypothecate and is generally considered liquid in case of a steep price fall, sometimes liquidity may be an issue. There are quality issues sometimes when the lender needs to sell the gold in the open market. The valuation of Gold in India is driven by international prices (in USD) and local demand and supply situations. Figure 3.2 shows the gold loan disbursement process:

Figure 3.2: Flow Chart of Gold Loan disbursement process

Personal loans

These are the loans applied for and availed by people who are primarily salaried or self-employed. The requirement of a loan may be to meet any sudden or unexpected expenses or sometimes planned

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expenses. Many fintech aggregators are facilitating personal loans in a grand manner in India. Personal loans are categorized into various segments based on loan amount and loan tenure: • Ultra-small loans for ultra-short duration: Say Rs 500 to Rs 5,000 loan for 15 to 90 days. The entire amount is repaid on maturity. In the case of salaried customers, they are also known as ‘payday loans’ and are payable from the immediate next salary amount. • Small ticket loan for shorter duration: Say Rs 5,000 to Rs 50,000 loan for 90 to 180 days. These loans generally may be repaid in 3 to 6 installments. • Regular Personal Loans (PL): These are standard personal loans approved based on the borrower’s income, which is derived from the salary sheet, income tax return, or any other documentary proof. Generally, the loan amount for such loans may vary in the range of rupees 2 lakh to 10 lakh. For these loans, assessment is done based on bank statements, income tax returns, and salary details. The credit decision can be taken quickly for all loans under personal loans because most of the required data is in digital format. A fintech entity can analyze the entire data within minutes. The whole process of customer acquisition, verification of data and information, approval of the loan, and disbursement of the loan is done in just a few minutes. While the banks and NBFCs do this directly through their mobile application, some fintech companies do the processing, but on the backend, the ultimate funding is done by a bank or an NBFC. The fintech Entity integrates API with the lending institution to smoothen and fasten the process.

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The process flow of the personal loan can be seen in Figure 3.3:

Figure 3.3: Flow Chart of Process of Personal loan disbursement

Auto loans

The application process for auto loans is relatively similar to that for personal loans; however, because the vehicle is an asset that is hypothecated to the lenders, the emphasis is more on that asset in this category, which is the vehicle. The borrower’s income is taken into consideration easily. The Auto loans may cover the following: • Two-wheeler (2W) loans are given for used and new bikes/ scooters • Three-wheeler (3W) loans for used and new auto rickshaws • Four-wheeler (4W) loans are for buses, trucks, cargo/ goodscarrying vehicles, and new transport vehicles • Electric vehicle loans: While these also can be 2W, 3W, and 4W loans, the category is defined separately, and the Fintech players in this industry are also separate. o 2 wheelers or e-Bikes o 3 wheelers

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 E-rickshaw – passenger  E-rickshaw – cargo/ loader lower category (L3)  E-rickshaw – cargo/ loader higher category (L5) o 4 wheelers: trucks and buses Most of the driver cum owners who buy vehicles for commercial purposes, especially electric vehicles, do not have sufficient data or financial statements; hence the process adopted by the auto fintech companies is a little different, which is illustrated in the following figure:

Figure 3.4: Process of auto loan disbursement

Business or MSME loans

The products offered by these fintech players may be B2B (Business to Business or wholesale segment), B2C (Business to Consumer or Retail), or D2C (Direct to the consumer or directly from Manufacturer to the Consumer) products. Within this space, the products offered are:  Working capital finance: The credit facility is given in the form of term loans. These term loans may be secured by taking some collateral or unsecured loans, which are given based on the borrower’s cash flow. The cash flow is assessed based on the bank statement provided by the loan applicant,

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where the companies can track the purchase and sale transactions. This is also supported by GST returns or other financial documents and statements.  Line of credit: One of the most used products by fintech players is channel financing or dealer financing, based on a relationship created with the larger corporation, which may be an FMCG company or a manufacturer. The credit facility is provided to the vendors of larger Corporates or suppliers. In the case of channel financing, the line of credit or credit facility is provided to the manufacturers’ dealers. The product offered to the dealers is also called or understood as a B2B line of credit or credit facility. The Process flow for business loans is similar to personal loans; however, the significant difference is an assessment of income. In the case of business loans, there is no salary slip available. In such cases, the evaluation is based on other financial documents like an income tax return, GST return, and in some cases, from the business’s cash flow.  The technological intervention in MSME process flow can be seen in Figure 3.5:

Figure 3.5: Flow Chart of Technological Intervention in MSME Process Flow

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The credit underwriting process flow for MSME loans is shown in the following figure:

Figure 3.6: MSME Underwriting Process of Prest Loans

Some of the key Fintech lenders in the MSME space, along with their products, can be seen in the following figure:

Figure 3.7: MSME Finance Landscape – Lenders comparison

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How to be a real fintech or digital lending institution? The key ingredients of building a lending fintech are: • Customer acquisition or sourcing • Application, website, and/or app • Verifying APIs • Credit Underwriting • Automatic scorecard • Credit Bureau Integration • Auto analysis of Qualitative parameters • Disbursement of loan • Servicing and Monitoring • Collection • Legal • Accounting • MIS generation

Customer acquisition or sourcing

The first and most important question for any fintech is how to acquire clients. There are various methods or sources through which a fintech acquires its customers; some are given here for better understanding. The customer acquisition process may differ for each lending institution depending on their product, the area in which they operate, the customer profile, and so on. It would be difficult to explain the process of every e-product and type of business; hence I have tried to explain the process for a small business loan for MSME-focused lending fintech. While this is explained and focused on a business loan, the customer acquisition process by a fintech remains the same.

Acquiring the customer digitally • Mobile application

Most of the fintech entities servicing retail customers in any segment would need to develop an excellent Android

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mobile App (detailed features are listed separately). People should be able to download and apply for the loan through a mobile application. This is the most commonly used method of acquiring customers. A Startup may develop only the Android app as the low economic status borrower generally does not use iPhones; hence iOS application can be developed at a later stage. The advantage of a mobile applications is that it can capture a lot of information and data from the prospective customer in the backend. • Website

People should be able to directly go to a website to apply for the loan by registering themselves or with a social media login (Facebook or Gmail) on the website. This is useful for locations where people may not have smartphones to download an application. Nowadays, mobile-friendly websites can capture the required data or information.

• Digital Marketing

Digital or online marketing is a powerful tool that has emerged recently for customer acquisition. Digital marketing can be done through email, Facebook, text messages with a link for smartphones, authorize, and WhatsApp. These will have links to take the user to a website or to download mobile apps and then apply for a loan. Lot of Fintech entities are also using QR code technology to provide and to get information from the customers. While digital marketing is a great tool, the company should be careful about customer data protection,  data privacy and spamming. Digital marketing is very cost effective even if the success rate is quite low in percentage terms.

• Online agents

Many companies like ‘India Lends,’ BankBazaar, Loan Adda, Paisa Bazaar, and so on, are Direct selling agents (DSAs). They gather information on their portal or mobile application. The lender (NBFC or Bank) can tie up with them and have API integration so that all the information and documents directly come to the lender and get integrated with their loan management software for further processing. This is one of the most important sources for lead generation

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and conversion. This integration must be very flexible and smooth for better services. • Corporate tie-up

Tie up with large and medium size corporations like E-commerce platforms (Amazon, Snapdeal, Flipkart, Nykaa, and so on); Food delivery platforms (Zomato, Swiggy, or large restaurant chains, and so on); Auto Tech platforms (Droom, Cars24, Cardekho, and so on); B2B platforms (Moglix, IndiaMart, Udaan and so on.); Travel platforms (MakeMyTrip, ClearTrip, EaseMyTrip and so on); Hotel and stay (Oyo and so on), and grocery aggregators (shop kirana) can help acquire customers. While the previously mentioned platforms are enormous and commonly known to people, a Fintech lender can get a better deal with the focus on 2nd/ 3rd layered platforms to fund their customers/ dealers. The data shall directly come to the lender’s platform and get analyzed for credit purposes. The advantage of doing corporate tie-up is that a lot of data is already available with these platforms, which are verified, authenticated, and analyzed by the platform itself. Hence, it can be trusted. The cost of customer acquisition by this method comes down drastically, and the scalability of the business is significantly higher.

• Co-lending lead generation

An MSME focused NBFC can also tie up with other banks or larger NBFCs to generate business for co-lending. Different lenders have different lending criteria; hence the software should be able to support such different parameters. The lending can be done both ways where, on one hand, smaller NBFCs can generate leads for you, and on the other hand, you can generate leads for larger lending institutions. All the leads generated should be stored in one place with status. Whatever is incomplete, rejected (in other words – not sanctioned/ funded), or not eligible should be followed up on later. The sales team should automatically get reminder messages to complete applications, eligibility, or other marketing messages as needed. The sales team should also get some notification with a lag of 3 months or all unconverted leads for follow-up. Using the Data most effectively – is the key to success.

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Application, website and/or app

Application login through Gmail, social media, and so on allows the user to seamlessly log in to the mobile application for the website without creating any new login credentials. At the same time, this also provides authenticity to the Fintech about the profile of the loan applicant.

Document upload

The mobile application or website must have a feature to upload the essential documents by the applicant, while the document list may differ for each segment of the customers. The standard documents are KYC documents and some financial information/documents. The platform should not only allow uploading these documents but also have back-end integration to verify the authenticity of the documents uploaded.

OCR Technology for documents uploaded

Optical Character Recognition (OCR) Technology is critical in today’s world. In my view, it is important to give a very comfortable journey to the users so that they need to type minimum information manually, and the technology platform should be able to read the data from the documents provided and create the text. This text is used to fill up the application form automatically. The essential documents required for any loan application to be processed are: • Aadhar – upload and Auto Verification (possible through API) • PAN – upload – auto read and Verification (possible through API) • Bank Statement and cheque – Verification From the preceding three documents, you can read the name of the applicant, father’s name, date of birth, full address along with area code, and all the bank details like Bank name, bank branch name, account number, account holder name, IFSC code, and so on. A good OCR technology can automatically read all the information and fill it up in the application form of the lending institution. For verification and authentication of the information in the documents, the Fintech can develop its own software and subscribe to various

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services, or do an API integration with a service provider who can provide such services. Other Documents where OCR technology can be used could be a Voter ID card, Driving License, Income Tax Return (ITR), and so on.

Verifying APIs

One of the reputed organizations providing API services in India is Karza Technologies Pvt Ltd which is suitable for all lending businesses. A tentative list of various APIs offered to providers is given as follows. The list of APIs is just a sample, and this is not an exhaustive list: Common APIs required for all kinds of loans are mentioned in the following table: APIs for KYC, Identity, and Address Verification PAN Status Check (PAN + DOB + Name + Duplicate Check) PAN Card Authentication (Number to Name Fetch) Aadhaar Number Verification PAN Aadhaar Link Verification Driving License Authentication and details fetch Voter ID Authentication and details fetch Udyog Aadhaar Number Authentication Shop and Establishment Authentication PNG Connection Authentication Electricity Bill Authentication Professional Membership Verification and details fetch (ICAI, ICSI, ICWAI, MCI) KYC OCR (PAN, Aadhaar, Voter ID, DL, and Passport), Includes Aadhaar Masking IFSC Code Details  Table 3.1: List of APIs

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The key APIs required for Auto Loans are mentioned in the following table: APIs for Vehicle Asset Authentication Vehicle RC Authentication – Basic Details Vahan Complete Details Fetch (no masked data) Table 3.2: APIs for Auto Loans

The key APIs required for Business and MSME Loans can be understood from Table 3.3: APIs for GST Verification GSTIN Identification basis PAN GSTIN Authentication, including contact, names of uthorized signatories, turnover slab and principal product line GST Comprehensive Report Download [ID-PWD or OTP] GST Report Consolidation [per unique combination] GST Return PDF Upload and Tamper Check (per pdf) Eway Bill Verification  Table 3.3: APIs for Business and MSME Loans

Key APIs required for personal loans and business loans are mentioned in Table 3.4: APIs for INCOME TAX RETURN authentication ITR-V Authentication (PAN + Acknowledgement) Return Status Check ITR Challan Verification (amount verification) Table 3.4: APIs for Personal Loans and Business Loans

Key APIs required for SME loans to corporate customers are shown in the following table:

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APIs – MCA OR ROC DATA Company Search by Name MCA Master Data Fetch MCA Signatories Data Retrieval Table 3.5: APIs for SME loans

Key APIs required for personal loans to salaried people are: APIs for EMPLOYMENT VERIFICATION Employee Name Lookup and Employee Stability Check for given Employer UAN Lookup basis Mobile Form 16 Verification Quarterly Credit of TDS Verification – Form 16 Quarterly EPF Employment Search (Name + Mobile) ESIC authentication Email Authentication  Table 3.6: APIs for Personal Loans

WhatsApp APIs The latest in Fintech is linking the entire customer journey with WhatsApp, wherein the customer can apply for a loan, provide required documents, avail the loan, and make payments using WhatsApp messenger services. The companies need to avail API services of WhatsApp for this purpose. SMS – text and email notifications Fintech usually sends text messages, emails, and WhatsApp notifications (wherever available) for all the critical steps in the customers’ journey. For example, application received, eligibility confirmation whether the customer is eligible for the loan, initial approval or rejection, loan sanctioned, loan disbursed, EMI due, and so on.

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Co-Applicant(s) for Guarantor(s)

Many companies also ask for a co-applicant or guarantor of the loans, especially when the loan is unsecured, or the loan amount is substantially higher. Documents upload, verification, and so on must be done for the coapplicant and/or Guarantor (spouse/ parent/ child) of the loan. The website/ mobile App shall be integrated/ synchronized with the entire software system on a live basis. It will be secure with a user ID and Password. Users can see the application status and then the loan status on a live basis to track their payments and dues amounts. The applicant’s (the borrower’s) user experience should be seamless, straightforward to apply form, and should require the least amount of paperwork and information possible.

Credit underwriting

Underwriting is the most crucial task for a lending fintech. While traditional banks have a standard method of granting credit facilities based on financial documents provided by the borrower, fintech entities try to assess the ability to pay and the intention to pay through an alternative method. Generally, this alternative method is understanding the customer profile based on certain pre-set parameters like understanding their personal information, social information through digital footprints, use of phone, actions on various social media platforms, analyzing the financial and non-financial text messages, understanding the mobile applications installed on the mobile phone, understanding the call behavior in terms of calls made, calls received, calls missed, duration of the call and so on. The primary difference between Fintech and traditional lending institutions is the underwriting. Traditional lending institutions give very high weightage to credit Bureau scores, also known as CIBIL. In contrast, Fintech gives higher weightage to the alternative scorecard, which lowers the weightage of the credit Bureau score. The customized alternate scorecard decides the loan amount, interest rate, and loan.

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Automatic scorecard

• Different kinds of scorecards for various products: As mentioned previously, the scorecards are customized differently for each product based on the profile of the customer and the segment in which the company operates. For example, the scorecard for a personal loan would differ from that for auto or business loans. • Dynamic nature of questions with artificial intelligence: The scorecard has to be dynamic using machine learning and artificial intelligence based on the responses received on the questions created in the scorecard. The questions and their answers need to be revised from time to time by analyzing the portfolio. • Flexibility to make changes on a regular basis: There has to be flexibility created in the scorecard mechanism, calculations, and algorithm so that it remains very dynamic, and the users should not be able to predict the score created by the scorecard. The weightage of various parameters also may be changed on a regular basis based on the performance of the portfolio.

Variables fields in the scorecard The number of questions and fields created in the scorecard should have more unique queries and variable values. You must be able to add queries to our questions, delete them, remove them, and change the value of responses.

Social scoring

While India’s digital footprint is not very high, the social scoring can be based on Facebook, LinkedIn, Instagram, Twitter, and other social media platforms. This tool is effective for ultra-small amounts of personal loans. But it may not be beneficial for business loans for large amounts of loans. The credit decision on the loan amount or interest rate can also be taken based on the mobile phone data (contacts, calls, no of/ kind of apps downloaded, and so on), which can be parameters to arrive at the risk profile of the customer.

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Benchmarking of score card with other companies

This is one factor that every Fintech must take care of while making its scorecard. It has to be benchmarked and should be as per industry standards. You cannot be highly conservative or liberal while making the scorecard algorithm. Benchmarking the risk parameters used in the segment you operate is essential.

Auto FI and FCU requests

Field investigation (FI) and Financial Control Unit (FCU) are two important processes run by most lending institutions, even if they use the technology extensively. These processes are preferred, especially by companies doing business loans where the digital footprint is low and the loan ticket size is large. FI means sending an independent third-party vendor in person to the residence, business place, or workplace of the loan applicant. The FI agency verifies basic details for the applicant and checks if the person is staying and working at the place they have mentioned. They also confirm it from the neighborhood and submit the report along with pictures. FCU means a third-party vendor who independently checks other financial documents submitted by the applicant. These documents may be bank statements, income tax returns, and so on. The agency confirms that the bank statement is correct and the bank account is active.  Similarly, it also ensures that the other financial documents submitted by the applicant are genuine. There may be multiple vendors providing this service to the fintech company. So, while building the Tech platform, it should have the feature to request generation for FI, and FCU reports to the vendors. The request must be sent randomly if there are multiple vendors to avoid any preferential results.

Credit Bureau Integration

Credit Bureau analysis is another key ingredient while creating the landing platform. There are four credit Bureau agencies in India, namely

• TransUnion Credit Information Bureau (India) Limited or CIBIL • Equifax

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• CRIF High Mark • Experian These agencies provide API integration facilities with your software system so you can automatically pick up certain information from their reports and run tools to analyze the data provided by them. The Tech platform should not only be able to send the request to these credit agencies but also pick up the data and take it to the alternate scorecard to arrive at a final scorecard for the customer. Some of the examples of information that can be fetched from these bureaus are: • The overall credit score • Total loan outstanding • Loans overdue with 30 days or 60 days, or 90 days • Amounts written off • Number of running loans • Number of inquiries done in the last one month or a specified period Credit bureau score and other information are checked to analyze the applicant’s ‘ability to pay’ and ‘intention to pay.’ It is not just about the scores. If there are overdue of smaller amounts for genuine reasons, the underwriter may ignore them. However, if there are loans written off, this may be a cause for concern. Similarly, too many inquiries in a month reflect the customer’s desperation. A lending fintech would build its rule engine based on these parameters.

Auto analysis of qualitative parameters

The qualitative parameters mean the non-financial parameters related to the person’s personal and social behavior. This can be captured from the social media activities of an application installed on the mobile phone. In the case of field investigation or FIR, the same can be charged by observing various activities of the applicant. The scorecard should include data on all the personal and social information and provide a particular score based on the activity’s importance. It is important to automate this process and not provide discretion to these parameters because different credit managers may consider social behavior differently.

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Integration with the third party for fraud detection

In addition to the credit bureau and KYC verification, other service providers provide analyses for underwriting and fraud detection. This is to provide customer behavior with other lenders for any fraudulent activity or legal cases faced by the customers. The Tech platform built should also explore API integration with such vendors for better underwriting. Various agencies and tools provide an early signal of possible fraud risk, and Fintech can get those by API integration from these agencies or service providers. For example, there may be duplicate PAN in one person’s name, duplicate property papers or multiple addresses in credit bureau reports, and so on.

Scoring of PD report separately by the credit team

PD stands for Personal Discussion. This is applicable when the credit manager is visiting the residence for the borrower’s business premises, especially for large ticket and business loans. The idea is to provide a customer profile separately, assess the risk, and create a score for the personal discussion (PD) report given by the credit manager. The report issued by the credit manager might be different from the data and information captured by the system digitally.

Scoring of FI – home and business

As stated, and explained earlier,  the field investigation report also should be included in the credit score. The observations mentioned in the report may be standardized with the scope provided to them. This may not be applicable for small-ticket personal loans where a lot of other information is available digitally.

Scoring of sales visit report

In most business loans or MSME loans, initially, the salesperson visits the customer where the customer acquisition may not be completely digital or through a mobile application. In such cases, some of the questions should be mandatory and given weightage in the scorecard. It is essential to compare the visit report of the salesperson, the field Investigation Agency and the credit manager. If there are any discrepancies or differences for mismatch, it should be verified.

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ROI matrix – risk-based interest rate

As explained earlier, the scorecard created by taking various variables will reflect the customer profile. Based on this, the lending institution can decide the rate of interest to be charged to the customer. As the score goes up, it would reflect a lower risk for the customer; hence the formula would be, ‘higher the score, lower would be the rate of interest, and lower the score, higher the risk profile hence, higher the rate of interest.’ An illustrative scorecard with the rate of interest shown in the following table: BUSINESS LOAN - UNSECURED/ Personal Loans Sr. No

Amount

Up to 2 Lakh

Abv 2 o 5L Abv 5 up to 10 L Above 10 L

1

976-1000

11.50%

11.00%

10.50%

10.00%

2

951-975

12.00%

11.50%

11.00%

10.50%

3

926-950

12.50%

12.00%

11.50%

11.00%

4

901-925

13.00%

12.50%

12.00%

11.50%

5

876-900

13.50%

13.00%

12.50%

12.00%

6

851-875

14.00%

13.50%

13.00%

12.50%

7

826-850

14.50%

14.00%

13.50%

13.00%

8

801-825

15.00%

14.50%

14.00%

13.50%

9

776-800

15.50%

15.00%

14.50%

14.00%

10

751-775

16.00%

15.50%

15.00%

14.50%

11

726-750

16.50%

16.00%

15.50%

15.00%

12

701-725

17.00%

16.50%

16.00%

15.50%

13

676-700

17.50%

17.00%

16.50%

16.00%

14

651-675

18.00%

17.50%

17.00%

16.50%

15

626-650

18.50%

18.00%

17.50%

17.00%

16

601-625

19.00%

18.50%

18.00%

17.50%

17

576-600

19.50%

19.00%

18.50%

18.00%

18

551-575

20.00%

19.50%

19.00%

18.50%

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19

526-550

20.50%

20.00%

19.50%

19.00%

20

501-525

21.00%

20.50%

20.00%

19.50%

21

below 500

Reject

Reject

Reject

Reject

Table 3.7: Scorecard with RoI

Tenure matrix – risk-based loan tenure

The loan tenure metrics work similar to the rate of interest matrix. To decide the loan tenure, there are two views: • One school of thought says that if the customer’s risk profile is higher, which means the customer is prone to higher risks, the loan tenure should be lower. The idea behind this thought is that you should be able to recover the loan as soon as possible and should not take the risk of longer loan tenure. • The Other thought is that if the customer risk profile is on the higher side, which means the profile is not so strong, then the loan tenure should be kept higher so that the repayment is done over a period of time and keeping his monthly liability that is equated monthly installments (EMI) at the lower side which would not hold very high obligation on the borrower and the borrower shall be able to pay the loan quickly based on his cash flow. The lender chooses the method based on its internal policy and philosophy. Here is an illustration of one matrix given for the loan tenure to be given to the customer considering the first view wherein the loan tenure is higher for the customer who has a higher credit score: Loan Tenure Matrix (Tenure in Months) - High score High tenure Up to 2 Above 2 - 3 Above 3 - 5 Above 5 - 10 Above 10 Lakhs Lakhs Lakhs Lakhs Lakhs

Sr. No

Amount

1

Above 900

30

33

36

39

42

2

801- 900

27

30

33

36

39

3

701- 800

24

27

30

33

36

4

601- 700

21

24

27

30

33

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5

501-600

18

21

24

27

30

6

below 500

Reject

Reject

Reject

Reject

Reject

Table 3.8: Loan Tenure illustration

Here is an illustration of the matrix given for the loan tenure to be given to the customer considering the second view wherein the loan tenure is higher for the customer who has a lower credit score: Loan Tenure Matrix (Tenure in Months)  Sr. No

Amount

Up to 2 Lakhs

Above 2 - 3 Above 3 - 5 Above 5 Lakhs Lakhs 10 Lakhs

Above 10 Lakhs

1

Above 900

12

24

24

24

30

2

801- 900

15

27

27

27

33

3

701- 800

18

30

30

30

36

4

601- 700

18

30

30

30

36

5

501-600

18

30

30

30

36

6

below 500

Reject

Reject

Reject

Reject

Reject

Table 3.9: Illustration of loan tenure

Amount matrix – loan amount basis

The amount matrix on the loan amount basis requires the following: • Multiples of ITR, • Credit summation for 12 months, • Average Bank Balance in last 12 months (ABB) • Turnover as declared by the applicant • Turnover as assessed by the credit manager • Use of Industry margin Loan to Value (LTV) of property wherever applicable.

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This can also be understood from the following table: Loan amount Matrix for Business Loans Basis

Amount

     5,00,000      Income as per ITR 5,00,000     Last 12 months’ credit summation in Bank 10,00,000        Average Bank Balance (last 6 months) 27,000 Applicant request

Least of all the above

 

Multiplier 1.00 0.75 0.40 15.00  

         

Eligible Amt 5,00,000 3,75,000 4,00,000 4,05,000 3,75,000

Table 3.10: Amount matrix on the loan amount basis

MCA data fetching and analysis in the case of Companies and LLP firms to be done. As explained earlier, this can be done through API integration. Credit managers should have a separate app, or, within the app, the facility to take pictures, record audio, record video, write comments, edit answers to prefixed questions, and so on. Based on this, the score shall be generated. All this data (pictures, recordings, and more) should automatically go into the loan software.

Disbursement

As you would have seen in the earlier part of this chapter, a loan is thoroughly checked by the credit manager using various tools and then either rejected or approved as per the company’s credit policy. • Once the credit manager approves the credit facility for the loan, the next step is the execution of credit facility documents or loan agreements. Depending on the nature of the credit facility, there can be various documents that need to be signed by the borrower. The initial information given by the applicant, along with his consent forms, is part of the credit facility application. The borrower can sign or execute these documents using an ink pen. However, various tools

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allow digital signatures, also known as e-sign, to execute loan agreements in the digital world. These digital signatures are approved in most countries as legally accepted signatures in the court of law. • After that, it moves to the operations department or the disbursement department to re-check the loan documents and approve it further for disbursement of the loan amount in the customer’s account. The operations department generally has a checklist to ensure all documents are correctly executed. For small-ticket personal loans where the loan Agreement is digitally signed by the customer, such a checklist may not be required. However, a checklist is necessary for a large ticket or a secured loan backed by collateral. As explained earlier, there can be various kinds of loan products. Hence, the checklist may also be different for each product. As a modern-age fintech entity in the learning space, the Tech platform must have the facility to service multiple lenders on this platform. The tech platform  should have auto-checking of the checklist and some other features, as mentioned in the following table. A sample checklist is given as follows for better understanding, although it can be customized based on each fintech entity’s product and internal processes. Checklist for Disbursement of Unsecured and Secured business loans  Application form duly and completely filled in  Borrower signature verification in case of physical signature KYC documents self-attested by borrower and Guarantor Current Residence or business address verified (Electricity bill/ Water bill / Property paper with previous owner bill / Rent Agreement) GST or any other tax registration verified The bank statement and its analysis as per the policy Physical cheques or NACH or e-NACH mandate C KYC form

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Cersai Form Property Paper  legal Report / Vetting / Technical or Valuation  Table 3.11: Loan Disbursement Checklist

The tech platform should be able to generate entire credit facility documents, loan kits, or loan agreements of multiple lenders if the platform uses numerous lenders. • Loan agreement auto-generation should take care of the following: o Application duly filled in with all the required information as provided by the applicant. o Sanction letter along with terms and conditions as set by the lender. o Loan facility documents – as per product – there may be many products like personal loan, unsecured loan, secured loan, and so on. o Guarantee (PG) agreement wherein there may be more than one guarantor; hence this has to be dynamic to generate the guarantees’ documents based on the number of guarantors in a loan facility. • Digital signatures by both parties – lender and borrower should be available. This may be built by the Fintech entity, or an integration with a third-party product may be required. There are various methods to get the e-sign or digital signatures by the parties. o Aadhar (UIDAI) based signatures: Where the person gets a One Time Password (OTP) on his mobile number linked with his Aadhar number. On giving the OTP, the document is digitally signed. o Date and time stamp with IP address: For small ticket loans, some Fintech companies use a practice of getting their term and conditions accepted by the borrower and capturing the date, time, and location along with the IP address. The same is used as a stamp or sign on the documents as an e-sign.

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o Digital signature: There are tools where the signatory person gets a system-generated OTP and a facility to draw their signature on the smartphone or computer screen. In some cases, they also provide a few designs of signatures to be used by the person. These tools capture the date, time, location, and in some cases, the photo to keep an audit trail of the document’s signature flow. o DSC: A traditional but secured digital signature method companies use to file and sign government authorities, and regulators documents. This is done using hardware (drive) to sign the documents digitally. • Security creation on property documents and auto fetching of the following reports from the vendors can be done through the system itself though applicable only to loans secured by collateral or properties. o Legal report o Search report o Valuation o Vetting

Loan servicing and monitoring Independent database

The entire database must be kept independently in various formats in different tables. All such tables must be interlinked with autorefresh and auto-update features. The mobile app - subject to consent from the customer, should have the ability to read the text messages (SMS) and analyze them, especially for financial transaction alerts like applications for a new loan, banking transactions, cheque bounces; new app downloads mainly related to loans, location, contact list, and call tracking to know the nature of calls and so on. Operations are more about monitoring loans, including foreclosure, and so on. There is a need to monitor borrowers (location, messages, significant changes, new loan applications, and so on) for their activities, send notifications, and so on.

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Customer service

Under this, the customer needs to be provided various facilities with easy-to-use experience, • Log in and find out about all kinds of status updates about their account • Information through website, App - notifications, text messages and auto WhatsApp (messenger), email, and so on. • Query resolution through website/ App – a chatbot o Chatbot for FAQ – regular queries

o Chatbot for marketing/sales/ lead generation

o Chatbot for customer services for existing customers

Facility to manage top-up loans

Most lending institutions offer a new loan facility during the currency of an existing facility based on the repayment track record, called Top Up. This means offering additional loan facilities in addition to the existing ones. In my understanding, this is not a commonly used feature created by most Fintech entities. It would be good if a machine learning tool could be made and, based on some rules, an auto offer could be generated for a new loan.

Facility for multiple loans to the same borrower

Many fintech companies, while building the tech platform, create a restriction that the same email, mobile number, PAN, and Aadhar cannot be used. When a customer can be provided with various kinds of loans and products, it should be the other way around. The system must allow multiple facilities or developments to the same customer using the same KYC data and other available information, including the existing track record.

Other charges, overdue interest, penalties

In case of default or delay in payment by the borrower, various charges are levied by the lenders’. These charges should be autocalculated based on the repayment data to avoid manual calculations.

Auto generation of ACH mandate form (e-NACH)

The feature can be either built by Fintech or provided by integration with third-party software.

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Auto generation of insurance policy

Most lending institutions tie up with insurance companies to insure the borrower and the property in case of collateral-based loans. The insurance cover note or application can be pre-filled and auto-sent to the insurance company for the borrower’s insurance.

Foreclosure charges and the entire foreclosure process

There are a lot of times a customer comes to close his running loan before the maturity date, called a foreclosure. Most companies levy a fee or charges in case of foreclosure. Generally, there is a slab-based structure in case of a foreclosure. An illustration of such payments for a 36-month loan can be: • Fee of 4% if the loan is closed within 12 months • Fee of 2% if the loan is closed after 12 months but within 24 months • Fee of NIL if the loan is closed after 24 months but within 36 months The tech platform should be able to calculate these charges automatically with a facility to edit, reduce or modify these charges if needed.

Collection or recovery

The collection or recovery can be done in the following ways:

Reminders for EMI due

Before EMI is sent to all borrowers, they are reminded of the due date on which they should keep sufficient funds in their bank account. Nowadays, EMIs are presented electronically. The funds should be kept in the account on the previous day for quick EMI redressal. Secondly, as per new rules in India, the debit instructions or auto NACH presentation can also happen on a holiday; hence the EMI may also hit the bank account on a Sunday or public holiday. This must be communicated to the borrowers clearly to keep funds in their bank accounts well in advance.

Messages for bounces

When the cheques or NACH or e-NACH are presented and not

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cleared for whatsoever reason, the same should be automatically informed to the defaulting borrowers.

Messages for representation of EMI

Most lenders generally represent the bounced EMIs after 3 or 5 days. In such a case, the exact date on which representation shall be done should also be communicated to the borrowers giving them another chance to clear the dues.

Receipt for EMI received

If the dues are not auto-collected by NACH or cheque presentation, and a collection agent collects the same, the receipt should be autogenerated and sent to the customers. This is risky as the collection agent may or may not issue the receipt for the amount recovered from the customers. A centralized collection monitoring and receipt issuance system helps reduce frauds.

Payment integration with online payment gateway

Other than the regular recovery by way of e-NACH, many times, the lenders also need to collect the dues through alternative mechanisms such as Paytm/ Mswipe/RazorPay and so on. The tech platform being built must integrate with the maximum number of possible platforms so that it’s easier for borrowers to make payments using payment wallets, UPI, and so on.

Auto credit to account in operations and accounts

The last and most crucial feature is built to integrate Loan Management System (LMS) with the accounting system, wherein the collections are not only entered into the LMS but also the accounting system. All these messages may be communicated in multiple languages (mainly in English and one in a local or regional language). Similarly, messages should be shared by numerous means of communication like text, messenger, and email. There are specific guidelines from the Reserve Bank of India (RBI) related to the recovery process. The Fintech must take care of them and build them into the system. The Fintech must also record all the calls to ensure no foul or unwarranted language is used by the recovery agent. They should not harass borrowers by posting their names, pictures, addresses, and other details on social media. It should not capture or store sensitive data, information, contact list,

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photos, call history, SMS data, and so on of the borrower without the specific and explicit permission of the borrower.

Legal

While most fintech companies focus on  customer acquisition and customer servicing, one of the important aspects to focus on in lending institutions is the efficient handling of legal matters. Generally, legal issues are complex, and it becomes challenging to concentrate on and track every legal case manually. A separate database and workflow of legal matters must be built for the faster resolution of issues and a better reporting structure to the management. Some of the key activities which can be built into the platform are as follows: • Empanelment of lawyers • Allocation of cases • Tracking of legal cases • Loan recall notice (LRN) • Arbitration proceedings • Criminal cases under section 138 • Withdrawal of cases

Accounting

While the accounting software is a separate and independent system, the fintech platform needs to be integrated with the accounting system to avoid duplication of work and ensure the correctness of data. This makes all the information available to the customer on the loan management system as reflected in the accounting system or software. Some of the essential things to be taken care of are: • Integration of accounting software with Fintech/ loan software • Auto debit/ credit to borrower account based on LAN or any other linked no (mobile and so on) • Interest calculation as per the laid down policy and process • Additional charges, overdue interest, penalties

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• Foreclosure charges and the entire foreclosure process • MIS generation o As mentioned previously in operations

o As per accounting process/ policies/ RBI guidelines

MIS generation

All organizations need to prepare and present various data and information not only to their management but also to various external agencies like their lenders and investor, and so on, some of them may be: Disbursement, collection, overdue and outstanding: • Salesperson-wise, branch-wise, district-wise, state-wise, region-wise • Day, Month, quarter, year-wise • On different parameters – based on credit questions, CIBIL range, score range, ROI wise, age-wise, Overdue (DPD wise), and so on.

Conclusion

The chapter has given an overview of building the technology platform for a lending institution.  This would help create the key parameters and features in the platform. Needless to say, this is not a very exhaustive list of all the features to be built, but this will help create broad parameters that would be different for each product and per the organization’s vision. In the next chapter, we will learn about building a scalable technical structure to develop a faster, more efficient, and more cost-effective tech stack.

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Chapter 4 Building a Secured Tech Stack Introduction

This chapter discusses the requirements of building a scalable technical structure to develop a faster, more efficient, and costeffective tech stack.

Structure

This chapter covers the following aspects of a tech stack: • Technology exposure based on business size and stage • Parameters for selecting a tech stack • Technology Stack of INDIFI (India) • Security aspects of a Fintech software • Backup/Data Protection solutions • Deployment of software • Maintenance of the software • Case studies of Fintech in India

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Objectives

The objective of this chapter is to help readers choose the right set of technologies required for building a successful technologybased financial company. We have explained the pros and cons of technology for building a fintech.

Technology - An absolute necessity

Technology can be a boon or bane. This was a topic for discussions/ debates until a few years ago, but that discussion is long gone. Nowadays, technology touches everyone’s life knowingly or unknowingly, and the same goes for businesses. If any business needs to survive (forget about improving or expanding), it must use technology in one way or another. Especially after the pandemic, it has become more critical to have technology built into business processes. Hence, businesses are not dependent on people, and technology becomes the company’s backbone. In recent times, we have seen many start-ups, which are highly technology-driven, be it Cred, PhonePe, Practo, Zomato, or Ola. Even small-scale vendors are using Facebook/ WhatsApp / Udaan/ Meesho-like platforms for their businesses, are proving to be very successful. This shows us the power of technology. Every business or new start-up must think through technology. While they are in their initial phase of whiteboarding, technology involvement can be decided depending upon the business idea and time to the market. It can be minimal, some ready-made solutions that can be bought from s/w solution vendors, or something that has to be built within the organization. Here, this chapter will give some high-level ideas on how the technologies can be decided and what one should consider while implementing the technology in-house or taking help from outside. Figure 4.1 shows a technology spread:

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Figure 4.1: The technology spread

Considering that businesses can now be loosely categorized as small, midsize, and large-scale. You can benefit from this knowledge based on which category your conceptual model belongs.

Technology exposure based on business size and stage

As a start-up, there is quite a good chance that your small firm may not have a CTO or dedicated full-time IT specialist unless you are purely a technology company. However, with so many business operations shifting to digital platforms or the “cloud,” most small business owners should initially choose, evaluate, and purchase readily available software for the company, although it is not always as easy as it seems. Your company’s operations and financial performance will ultimately influence by the software you select and how it interfaces or aligns with other systems. Most business owners, especially in the lending or banking space, are not very tech-savvy, and they generally do not have to be either. But making the most significant choice for your business does help to have a basic understanding of how most software platforms operate. A well-integrated “tech stack” can help you save money while also saving time. Ask yourself some crucial questions regarding need, client choice, scalability, security, and so on. as you develop your company’s technology stack.

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Prior to beginning any software development project for your Fintech, selecting the appropriate technology stack is an essential exercise for any founder. The projects could range in size, design, and complexity. Most of the technology platforms also involve thirdparty integrations for each platform; web, mobile (Android and iOS), and even desktop applications are possible. While some projects call for a customer-engaging, user-friendly interface, others may be designed to be quick and straightforward to use for the customers as well as for the internal team. You must carefully analyze your project requirements before any code is developed. There are several programming languages, technologies, frameworks, and tools available, and picking the incorrect stack could negatively impact the project or the business in terms of cost, time, insufficient scalability, security, performance, and lousy UI, to name a few. A group of technologies used to create software projects is known as a tech stack. It is a collection of tools, frameworks, libraries, thirdparty software, and programming languages used by developers. There are two types of software that make up an application: • Client-side and • Server-side These are commonly referred to as the front end and back end. These features are used to build each layer of an application, forming a stack. The front end is the app’s user interface, also called UI, which lets users communicate with it. Its main goal is to make usage convenient and enjoyable. The back end ensures all functionalities are working correctly and respond to user queries. It comprises operating systems, databases, APIs, server-side frameworks, and programming languages. The back end also includes hosting, deployments, and business logic. Middleware connects the front and back end as a covert translation layer; it is not a development tool. Middleware integrates two or more frameworks, programs, or parts to make communication easier. It includes tools that support App or Web development and distribution, such as app servers, web servers, content management systems, and other related tools. The following figure shows the layers included in a common tech stack:

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Figure 4.2: Layers of Common Tech Stack

Today, developers can combine various technologies, frameworks, and tools to create reliable, simple-to-scale online apps. The tech stack may change depending on the project’s size, complexity, and other elements. The founders must check the tech stacks for large and most popular platforms and new-age small Fintech firms as the technology keeps evolving quickly. Some technologies are frequently used in conjunction, even though no two projects are identical. You can employ tried-and-true tech stack models to save time and money. One of the most widely used tech stacks is MEAN, MongoDB, Express, AngularJS, and Node.js, abbreviated as M-E-A-N. • MongoDB (NoSQL database). • A backend web framework is Express.js. • A front-end framework is Angular.js. • A cross-platform, open-source server is NodeJS. Figure 4.3 is an illustration of popular tech stacks:

Figure 4.3: Some popular Tech Stacks

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Some examples of popular tech stacks are listed as follows in the following Table 4.1: Application

Tech Stack

MEAN Stack Cloudfront S3 Transactional DB

MySQL

Configuration DB

QA Project Management

NOSQL Docker K8S/Jenkins Bugzilla Clickup

Team and Workflow Management

Miro

UI Prototyping Design Handoff MVP App DB Backend

Illustrator/Figma Figma Figma Flutter NoSQL JS Based

DevOps Integrated

Table 4.1: Popular Tech Stacks

The following figure explains the stepwise process of requests through web applications:

Figure 4.4: Flow Chart of Process of requests through web applications

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It is possible to create sophisticated mobile and responsive web applications using the MEAN stack. Although JavaScript is frequently used for front-end development, other frameworks like Angular, React.JS, and Vue.JS have become more popular. Although Java and .Net are frequently used as examples for back-end development, a wide range of alternative programming languages and frameworks are also available, including PHP, C++ , Ruby on Rails, Python, and others. Different development stacks are required for various projects. While new, cutting-edge technologies might not have the necessary functionality or support, time-proven technologies might not be the best option for all tasks; hence, new experiments may be needed to build the desired technology platform.

Use of technology

The most widely used technologies for various project categories can be:

For Developing web applications

JavaScript is frequently used as a scripting language to add interaction to online pages. Various JavaScript libraries, including jQuery, Bootstrap, and Slick, are integrated into frameworks like Angular, Vue.js, and React.js to enhance user interface capabilities. HTML is used to create and place content, position, and arrange every element on a page. While CSS is used to format structured material, HTML is used to structure content. This primarily refers to fonts, colors, layout components, background material, and so on.

For creating mobile applications

Mobile technologies can be classified as cross-platform, hybrid, or native. The foundation of native app development is using native programming languages, such as Swift and Objective-C for iOS and Java and Kotlin for Android. The foundation of hybrid development uses tools like HTML5, JavaScript, Ionic, Cordova, PhoneGap, and Xamarin. React Native, Xamarin, and Flutter are used most frequently for cross-platform development. Today, a native mobile app development strategy is preferred due to its increased control and simpler hardware access. In any case, the technology selected should improve application speed while enabling the development team to manage the product’s codebase and iterate more quickly.

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Parameters for selecting a tech stack

When selecting a tech stack for your Fintech start-up, there are quite a few important aspects to consider in order to develop a faster, more efficient, and cost-effective stack that should be scalable as well.

Latest technologies

A Fintech should select technology that enhances current business policies, procedures, and workflow. While there may be time-tested old technology available, sometimes the new technology adoption can be expensive in terms of cost, time, and the risk of failure. You must decide which ones to invest in because of this factor, as generally, the founders are very passionate and ambitious. Asking yourself whether the technology stack and platform would improve your business today in terms of cost and efficiency; will help you decide if you are looking at the proper technology stack. Your company’s internal needs, and customer expectations, should always be your guide when investing in technology for your firm. When introducing new technology in the workplace, many businesses fail to consider their demands. For instance, it would be more feasible to provide your sales executives tablets if you are in the loan selling company or, a lending business where they need to go to the field. These are more appropriate for booking and tracking sales or presentations because they are lightweight. The technology you purchase should be utilized by your staff efficiently and should increase productivity. Seeking out technology that other business players utilize in a similar segment is important to consider. It’s never simple to switch to a new technology that is not being used and tested by other players in the industry. One way to get information is to ask around in your industry. When looking around for new technologies, visit forums or exhibits, meet people and write to them to take opinions. The technology your rivals and other participants in your sector use will help your business. For instance, adopting cloud computing technologies for your company would be wise if most businesses in your industry do so. You must be able to justify the cost of the tech stack being built financially. You can look for ideal corporate solutions which toprated Fintech firms are using. However, there is little purpose in purchasing such heavy and expensive software systems if your

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budget is insufficient or if the promised benefits of the technology do not outweigh their expenses for your business. Make sure your investments in tech platforms and innovations will benefit your company. The most costly and incredible techs might not necessarily be what your company needs. To avoid wasting money, conduct a cost-benefit analysis with the CFO or accounts person of the firm. Personal requirements of the people, whether customers or vendors, or internal team members, should be considered first. The technology you chose must be appropriate for the issue you are trying to resolve. Large-scale projects needing detailed, difficult, or complex business logic must operate consistently, as must platform-independent code. Users’ needs should be considered when developing mobile apps. Consider who will use your app and how to give them a fantastic user experience. In the MSME lending segment, the micro business owners may not be very familiar with the technology used. In contrast, in the Personal Loan segment, applicants are primarily working-class employees better equipped to use technology gadgets. Before enhancing performance with your own infrastructure, if you want to join the market from a technology point of view, you can start with a ready-made environment in which deploying your code and applications is faster, less expensive, and less time-consuming. Investing a lot of time and money is unreasonable when you have a small user base. Still, after you pass the necessary size or benchmark, you might consider a high-performance tech platform to be built inhouse or get it developed by a reputed vendor.

Project’s Purpose and size

Smaller projects can often be completed quickly, without complex frameworks and technology. You might need to rapidly create a minimum viable product (MVP), show it to the customer, and solicit insightful feedback. To accomplish that, you could use open-source software and basic tools. The M-E-A-N stack explained earlier is very helpful for a start-up. There is a higher level of technology participation for mid-size projects. Depending on the requirements, they could require a mix of various programming languages and frameworks. Such initiatives call for more sophisticated technologies that supply more complex features and algorithms. As more functionalities, integrations, security, and sophistication are required, a wide range of programming languages and frameworks are used in the development of social networks like

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Facebook; online markets like Amazon and ERP systems; Payment gateway firms like Paytm; Lending Fintech like INDIFI and Udaan and so on. In this case, the technology stack must be of a high level. The Crypto exchanges or platforms are built on distributed ledgers using extremely complicated tech platforms.

Market timing

When you need to start your project quickly and feasibly, a Minimal Viable Product (MVP) is a fantastic choice. To reduce the time required to enter the market, you could start with ready-made solutions that many software companies offer. For instance, the Ruby on Rails framework, provides access to several fundamental libraries and can help you save time. Through third-party connectors, you may expand the functionality of your App without starting from scratch and wasting time looking for developers. Additionally, a welldocumented technology workflow can make designing particular functionalities for a fintech company much more effortless. It would be a good idea to get the demo of multiple service providers in your segment before you start building your own platform.

Scalability of business

Don’t forget that the tech stack you use needs to have the ability to scale effectively if you anticipate rapid growth in your business. Every tech stack built may not have enough potential to scale sufficiently with the pace of business. You can expand your app horizontally by adding more physical machines or processing units to your server, or vertically by adding new features to the same platform. For example, most payment gateway fintech firms have added lending as a feature by offering credit facilities to the merchants by tying up with banks and financial institutions on the back end. Similarly, broking services provider companies like Zerodha have started offering mutual fund investment and gold investment products on their platform. Business-related technology is developing and changing very quickly. When it comes to company software and equipment advancements, one or two years feel like an eternity. Having said that, the best you can expect is a piece of technology that will function for the foreseeable future but not indefinitely. You want a business solution to improve operational efficiency in the next three to five years. Along with costs, implementing new technology can also cause productivity hiccups. Therefore, change in the tech platform cannot be done very frequently.

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Security systems and cyber security

Most start-ups, especially financial services-related start-ups, banks, and so on, are prone to cyber-attacks as the hackers keep a close track of financial institutions that are new to technology use. It is essential to guarantee that the website, emails, and mobile app are created with the finest security and threat mitigation methods available in the market, especially when dealing with financial services and building a Fintech firm in the payments, Banking services, or Lending sector. You might need security checks on both the client and server sides to eliminate typical security vulnerabilities and cyber-attacks. Before beginning the development, you should carefully analyze your choice of technology because not all are equally secure. Nowadays, as most people have started using AWS, it protects the server-level risks. Your new technology should also have strict system security, enhancing company processes and fulfilling your organization’s needs. The correct technology should not be the weakest point when it comes to attacks from hackers and other entities who might try to steal your data, as wireless connections have become the standard among businesses nowadays. Choose technology that has been approved and tested by certified people and experts. To sum up, we can say that different web and mobile applications demand various development tools depending on the size and stage of the business. There is no standardized, efficient, cost-effective, and most efficient technological stack in the market which can fit all businesses. You must first consider your project’s requirements while selecting a technology stack. Time-tested technologies cannot always be sufficient because you need to be realistic and consider each technology’s advantages and disadvantages. It would be good to have a team or advisors who have domain knowledge and experience in developing a tech stack related to your business and can assist in determining the project’s requirements and make recommendations for the best tools to use to create a scalable and highly functional website, and mobile app (Android and iOS) that will outperform the competition and help you scale up in your sector.

Tech stack examples

Let us look at the tech stack used by more prominent and successful companies, including some Indian Fintech firms.

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Netflix

Nearly every country in the world receives content from Netflix each month, totaling over 6 billion hours. It takes a lot of engineering work to create a system that can deliver high-quality video to that number of users:

Figure 4.5: Tech Stack of Netflix

Shopify

Presently, Shopify’s tech stack includes about 100 programs and tools. The most used applications are Frenzy - Buy Sneakers and more, shop: delivery and order tracker, Shopify – e-commerce business, logo maker: design and create, Scratch photos, Hatchful - logo maker, and Shopify ping. Additionally, over 4,000 apps have direct integration options with the e-commerce platform. Additional tools that are part of the architecture of Shopify technology include a logo creator, a QR code generator, a business card maker, a template for a gift voucher, a privacy statement generator, a template for a shipping label, and a converter for profit margins. This platform is used to drive sales by businesses of all sizes, and at its busiest, Shopify can handle approximately 80,000 requests per second. Shopify’s robust tech stack is a key contributor to its success.

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Figure 4.6: Tech stack of Shopify

Paytm

Paytm uses internet technology like JavaScript, a lightweight, objectoriented, go-platform scripting language. Client facet programming language, Markup language, Character encoding, Zendesk, and so on. Please refer to the following figure:

Figure 4.7: Tech stack of Paytm

Udaan

Udaan is India’s largest business-to-business e-commerce platform. It was established in 2016 to “change the way trade is done in India by investing in technology.” Lifestyle, electronics, home and kitchen, essentials, fruits and vegetables, FMCG, medicine, toys, and miscellaneous items are just a few categories in which it operates.

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The tech stack of Udaan is shown in the following Figure 4.8:

Figure 4.8: Tech Stack of Udaan

Technology Stack of INDIFI (India): Lending institution

Learn more about Key Technologies used by Indifi from the following Table 4.2: Technology

Tech category

MailChimp

Email Social Media Marketing

Timely

Appointment Scheduling Management and time tracking

Angular

Software Frameworks

PostgreSQL

Open-source, object-based relational database system used for large and complex operations.

Linux

Operating System

TeamWork

Project Management

MySQL

Database Management

Google Font API

Fonts

AWS

Amazon Web Services Table 4.2: Tech Stack of INDIFI

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The use of tech platforms by the internal team is equally important. While discussing the tech stack or platform, the focus remains on the product and user interface (used by the customer and customer experience). However, it is equally essential that the internal team members, and staff, whether in the front office, sales, marketing, research, back office, and so on, must be trained to use the tech platform. They should also know the qualities of the platform along with competitive advantage. There is always a cost associated with staff training for any platform, whether in terms of training expenses or employee time. Although some software may be relatively simple to use and easy to navigate, many more platforms demand in-depth expertise or specialized abilities of the users. If you buy a ready-made solution, ask for a free trial for a few days. If this approach is not feasible, a live, one-onone demo with the entire team who will use the tech platform before signing up with any platform will help the staff become familiar with all the features. Additionally, this is the ideal time to determine whether any functions are missing and how effectively the system will integrate with other devices you already have in the company that the team already uses. Asking the team to change the entire platform is always a difficult task. It is good that the team is encouraged to participate in webinars, online courses, seminars, training programs, or workshops that show them how to make the most of the platform’s features after it is integrated into the business. When people and technology operate together as a single unit, it will ultimately maximize efficiency and productivity in the business.

Security of a Fintech software

In this section, we will discuss various aspects of fintech software.

Terminology

Security is probably one of the most critical aspects of technology and something which has to be built-in into the technology stack and the day-to-day operations. At the same time, the security solutions must always be up-to-date to protect the business from unending attacks in the form of malware/virus/ransomware and so on. It is a vast topic, and we will cover some high-level areas that should be considered while building/maintaining a technology stack.

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Before we get into the types of security, let’s understand some of the common terminologies: Malware: It is some “malicious” software to steal data and/or block access to the data/computers. Some examples include ransomware, Trojan viruses, spyware, worm, and so on. Virus: A kind of ‘malicious’ executable code hidden in some other program that can modify/send/delete data once executed. It can gather data from the device and send it outside the organization without user knowledge. Ransomware: As the name suggests, it is a kind of attack where a hacker has access to your business computer systems and has encrypted the data to deny you access. The fastest and easiest way to get the access back happens wherein the business generally needs to pay a ‘ransom’ payment. Ransomware is a form of a virus. Phishing: Type of attack where cybercriminals try to steal sensitive information like passwords/credit card info, and so on, or install malware on your computer by pretending to be someone you trust, like your bank/colleague/friend, and so on. Primarily email is used for such attacks.

Security system

Now with some common terminology covered, we can look at security considerations. Some of these come under IT security, and some under application security. All these systems collectively prevent security threats that otherwise can have a huge impact on your business. • Firewall: Network security device to monitor and control incoming and outgoing network traffic based on the set of security rules defined by the organization. By doing this, it protects against attacks by preventing the network from unwanted traffic. Some major players are Cisco, Netgear, Fortinet, SonicWall, and so on. • Network security: It is used to protect your network from unauthorized access. It ensures the integrity, reliability, and usability of internal/confidential data, and the systems are always available within the organization. Some of the big names providing solutions in network security are Cisco, Broadcom, and so on.

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• Endpoint security: To protect the ‘endpoint’ (aka device like computer/mobile and so on). Most antivirus and hardened OS images are installed as a part of the solution. The provision of automatically pushing the OS/other installed s/w security updates regularly to keep the endpoints up to date should be made. Then there are other solutions like blocking some of the hardware components like USB/Camera, which can further increase the security of the devices. Major players in this segment are Broadcom, Trellix, CrowdStrike, QuickHeal, and so on • Mobile device security: With more smartphones being used in business communication/data access, it poses new challenges regarding device security. Here, network security should consider this its security umbrella. Some solutions that should be considered are antivirus software, VPN access, email/data security, two-factor authentication, and so on. • OS security patches: Keeping system (production as well as staging) OS up to date should be considered as one of the critical, regular maintenance for payment of activities the business has to plan. This, therefore, helps in fixing known vulnerabilities in the operating system. Appropriate Unified Endpoint Management (UEM) tools can be used to make this activity hassle-free and with proper reporting to know the possible vulnerable systems to take appropriate actions. Some tools are Software Center, ManageEngine, SanerNow, and so on. • Patching of 3rd party software: Other than OS, patching the s/w being used for regular day-to-day work and in the product software built for the business is equally important. When we say, ‘use in the product software,’ we are talking about the component (open-source/paid) used in developing software like apache, log4j, java, and so on as these opensource software continue to release new versions/patches to fix security vulnerabilities. • Security compliance: It is to monitor and understand whether networks and systems comply with various national and international regulatory requirements, including security standards. Depending on the organization’s size, ensuring security compliance across the board could be lengthy and complex. Still, it is very important to be in the game and to

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comply with data security and privacy. Various regulatory requirements depend upon the sector and the business’s countries. Some of the most requirements are:

common/important

compliance

o GDPR: It is called General Data Protection Regulation and came into force recently for all the companies handling the personal data of people across the European Union (EU), irrespective of whether they are physically present in the EU. It talks about the standards a business needs to follow/comply with, to protect citizens’ personal data from any data breach. The main principles of the regulation are transparency, Data minimization, Integrity and confidentiality, storage limitation, accuracy, and purpose limitation. o SOX: Sabanes-Oxley Act (SOX) requires any financial records to be kept for seven years. It is a USA regulation and is to be complied with, by all company boards and accounting firms. This helps backtrace older records during audits and cases where financial fraud is investigated. o PCI-DSS: It stands for Payment Card Industry Data Security Standard regulation and is applied to handling credit/debit card information during any online transaction. It is to protect cards and transactions from any fraud. o FIPS: It is called Federal Information Process Standards and lays out the list of standards related to data security and computer systems that an organization must follow while developing FIPScompliant software. The standard primarily deals with secure design, roles/authentication, and cryptographic modules. All US government companies require any software to be FIPS-compliant before considering them for their environment. The most common standard is 140-3. o OWASP: It stands for Open Web Application Security Project. It is an open-source community that aims to work on improving software security. Every year

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OWASP releases a list of Top10 vulnerabilities found across web applications. The report is compiled by a team of security experts around the globe after analyzing the data of many organizations. This list is highly valuable for any web application and should be used as a base reference while doing Pen Testing. https://owasp.org/www-project-top-ten/ • Web Security Testing: This is the process of testing, analyzing, and reporting the security posture of a web application. Many different techniques are used for such testing to identify the vulnerabilities that can impact the security/integrity of the application/data. Some most common techniques are: o Brute force attack testing o Password quality rules o Session cookies

o User authorization processes o SQL injection

• Penetration/Pen Testing: It performs simulated attacks on software/hardware to evaluate its security. It can also be considered ethical hacking, using the same tools/techniques and so on, and used by attackers to find the security vulnerabilities in the given system. Such testing is kept confidential, and only a few within the organization have access to tools to perform such testing. Mostly it is done in a restricted network to avoid product/network vulnerabilities causing multifold impacts across the organization. Often, such testing is done by a 3rd party company with expertise in this (security testing) area. Here the goal is to assess the security posture of the software and accordingly decide what needs to be fixed right away before deploying the software in production and what can be fixed in future releases with mitigation plans in place. • Database Security - It refers to protecting the database from unauthorized access and various cyber threats. Database security includes all aspects and components of databases: o Data stored in the database o Database server

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o Database management system (DBMS) o Other database workflow applications

Importance of security

Security is vital for any organization for a variety of reasons. These include:

• Ensuring business continuity: Many enterprises cannot operate until the breach is resolved. • Minimizing financial damage: Once a breach occurs, an organization must sustain high economic costs to communicate the breach to all its customers, manage the crisis, repair or update the affected systems and hardware, pay for investigative activities, and so on. • Loss of intellectual property: If a database is accessed, there’s a chance that a company’s trade secrets, proprietary procedures, and other forms of intellectual property are stolen or exposed. In some instances, this means the complete loss of any competitive edge maintained by that organization. • Brand reputation damage: Once a breach is notified to the customer base, partners and customers may lose faith in the organization’s ability to protect their data. The brand’s reputation will suffer, and many might decide not to buy that organization’s products or services anymore. • Penalties and fines: Organizations must be compliant with a large number of regulations, such as those in the General Data Protection Regulation (GDPR), Payment Card Industry Data Security Standard (PCI DSS), Health Insurance Portability and Accountability Act (HIPAA), and more. If a data breach occurs because the organization failed to comply with these regulations, fines, and penalties can be very severe, in some cases even exceeding several million dollars per violation.

Backup/ data protection solutions

Data protection is another vital aspect to consider in the software development process. Data is the new gold; it must be protected like a precious commodity. We all have heard many stories of companies not taking care of their data, losing their business, and going through

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painful lawsuits. We also listen to stories of ransomware attacks happening all around the globe; hence, we need to consider a data protection solution that protects our data from any unforeseen failures or human error and how the solution can protect us from ransomware attacks. Another crucial factor to consider when choosing a data protection solution is the volume of activities, the amount of data that will produce and safeguard, and the criticality of the data in terms of RPO and RTO. • RPO: Recovery Point Objective is where the organization can get the data from the backup copy in case of any disaster/ data loss and so on. It would mean frequent backups if the requirement is to have it as close to the current state as possible. • RTO: Recovery Time Objective is the maximum time an organization sets as a goal for the restore to complete to resume normal operations in case of disaster/data loss. Suppose the requirement is to complete the restoration in less time; the software having unique features like snapshotbased backup/restore, instant recovery, and so on needs to be considered as a backup solution. Then there are other aspects like applications, file systems, physical versus virtual systems, in the cloud, Legacy systems, Deduplication capabilities, and so on. • Deduplication: Process of identifying the duplicate blocks of data and thus storing only one copy of data along with the references. It helps in reducing the storage requirement significantly for a backup – the higher the Dedupe ratio, the less the storage requirement. Again, there are various techniques backup software employs to find the duplicate blocks to reduce the storage and backup time. Depending on the budget and the scale of operation, a company can either go for an in-house solution or get it as part of services offered by different vendors. There are many players in this space providing different solutions. Some important players are Veritas, EMC, IBM, Veeam, Cohesity, VMware, and so on. The solution varies from software form (BYO) to pre-built appliances. Among the solutions most notably are Veritas NetBackup, Veritas BackupExec, EMC data domain, and Veeam VMware-specific solutions. Some of these vendors also provide solutions in the cloud, including backup as a service.

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Deployment of software

Launching an application on a server or device is called software deployment. A software update or application may be delivered multiple times throughout the development process to test its proper operation and look for bugs. It may be released to a test server, a testing machine, or into the live environment. Software deployment is making an application functional on a target device, such as a test server, a production environment, a user’s PC, or a mobile device. Most IT companies and software developers now use a combination of human and automated processes to deliver software updates, patches, and new applications. Software deployment procedures include release, installation, testing, deployment, and performance monitoring of software. Software deployment is one of the most crucial steps in the development process. Applications, modules, updates, and fixes are distributed to users by developers using a deployment process. The techniques developers use to create, test, and release new code will impact how quickly and well a product adapts to user preferences or requirements changes. Although many development teams still opt to host applications using on-premises IT infrastructure, cloud service providers like Amazon Web Services (AWS), Google Cloud Platform, and Microsoft Azure provide IT Infrastructure-as-a-Service (IaaS) and Platform-as-a-Service (PaaS) products that enable developers to deploy applications into live environments without the additional financial and administrative burden of maintaining their storage and virtualization servers.

Steps in the deployment of software

Every company must create its software deployment procedure or workflow; the workflow shall depend on whether the framework is from an already established service provider or prepared by customizing the company’s individual needs. There are three stages: preparation, testing, and actual deployment for proper software deployment.

Preparation Developers must gather all deployed code and any additional libraries, configuration data, or resources required for the application to run

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during the preparation phase. These components can be bundled up as a single software release or in multiple phases depending on the size and complexity of the software. Developers should also ensure the host server is configured correctly and operating without issues. They should consider all the possible scenarios and prepare themselves well.

Testing An update should be delivered to a test server, also called a staging server or UAT environment, where it can go through a pre-configured set of automated tests before being uploaded to the live environment or production server. Before releasing the update to the production environment, developers should evaluate the results and fix any faults or errors found during preparation or testing. Generally, the tech vendor or developers also ask the end users to test the software before deployment.

Deployment An update can be pushed to the live environment when it has undergone thorough testing on the staging server, and bugs are fixed. Before changes can be implemented, developers may execute scripts to update pertinent databases. To guarantee optimum user experience for users interacting with the new update or features, the last stage is to look for faults or errors or bugs that manifest on the live server during or after deployment based on own observations or feedback from the users.

Maintenance of software

Any software deployment is not the end of building a Fintech organization. The act of updating, modifying, and upgrading a software system to keep it at par with the latest technology and user needs is known as software maintenance. After a product has been released or deployed, software maintenance is carried out for various purposes, such as enhancing the program, fixing problems or bugs, improving performance, adding new features, and more. Software upkeep is an inherent component of the Software Development Life Cycle (SDLC) in the Fintech industry, as customer needs or regulatory requirements drive continuous changes. Software

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developers must continuously look for ways to rectify and enhance their work to remain competitive and relevant. Proper software maintenance approaches and strategies are essential to maintain any software working for a long time to satisfy users and customers and to meet growing compliance requirements. Any software system or product must be flexible to change and highly scalable without incurring much time and cost.

Various forms of software maintenance Each type of software maintenance is carried out for a separate set of objectives. A particular Fintech software product would require multiple maintenance procedures throughout its existence. These can be classified as under:

Corrective software maintenance

The regular form of maintenance is corrective software maintenance. It effectively means that when something goes wrong with a software product, such as flaws, errors, bugs, patch updates, changes at any other service provider, and so on, corrective software maintenance is necessary. Generally, these things need to be fixed immediately since they could significantly affect how the software functions, and the organization’s work may stop if not addressed.

Preventive software maintenance

The goal of preventive software maintenance is to plan so that your programme can continue functioning as intended for as long as feasible. This includes implementing any necessary upgrades, modifications, and other adjustments. Preventive software maintenance may address minor flaws that may not seem important but could grow into more serious difficulties later. These latent faults must be found and fixed to prevent them from becoming practical. This is being one step ahead of Corrective Maintenance so that users do not face any issues and there is no interruption in business.

Perfective software maintenance

New problems, requirements, and suggestions develop when the software is made available to the Company users while testing the features. Perfective software maintenance seeks to modify software by deleting unnecessary or ineffective aspects and adding new features as needed. Software remains relevant via this process as the

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market and user needs evolve. The Perfective software maintenance process is used in this situation.

Adaptive software maintenance

Adaptive software maintenance takes into account the evolving technology, increasing demand for new features, and the rules, regulations, and compliances that apply to your software systems, and entity. For example, RBI mandates certain audits of the software systems in the entities regulated by it. These consist of hardware upgrades, cloud storage, operating system modifications, and so on. The Fintech software needs to adapt this maintenance procedure when these modifications are made to function effectively and meet new requirements.

The software maintenance process The following steps are present in most models of software maintenance processes: • Identification and tracing: The process of identifying the software component that has to be changed or maintained. Depending on the circumstance and individual defect, this may be user-generated or detected by the developers or service providers themselves. • Analysis: The process of studying the proposed adjustment or changes, which includes figuring out any potential repercussions or impact on the server and so on. The costbenefit analysis is often part of this process to determine whether the change will be profitable in the long term. • Design: This process considers the specifications to design the new modifications that may be needed. The design needs to be user-friendly and should match the existing design. • Implementation: The procedure programmers go through to implement the new modules, as discussed earlier in this chapter under “Deployment of Software.” • System testing: The software and system must be tested before being launched. This refers to the module or a feature by itself, the system as a whole, and the system and the modules combined.

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• Users test the modifications, changes, or updates for acceptance. They may identify any problems and suggest modifications in the software that will be more important to make the implementation successful. • Delivery: New software or the upgrade is installed on the live server for usage of the users. Another crucial factor to consider when choosing a data protection solution is the volume of activities, the amount of data that will produce, safeguard, and the criticality of the data in terms of RPO and RTO.

Software maintenance techniques and strategies To handle software maintenance thoroughly and efficiently, every software organization should have a precise plan. One key strategy in creating software is detailed, well-explained documentation. Upgrading can be difficult if the software documentation is outdated or poorly written. Information regarding the workings of the code, prospective fixes, and so on., should be included in the documentation. A software maintenance strategy should also include the role of a Quality Analyst (QA). To ensure that the software is produced correctly and to provide insight into making modifications when necessary, QA can be implemented far earlier in the process, preferably during the design stage, to avoid any issues later.

Case studies of fintech in India

With the help of the following Case Study of LenDenClub, we have tried to explain their journey of building an effective Tech Stack.

Tech platform for Fintech lending institution: LenDenClub

LenDenClub is a trade name of Mumbai-based, RBI-registered P2P NBFC ‘Innofin Solutions Pvt Ltd.’ By making credit scores more accessible and investments more lucrative and using modern technology, LenDenClub is revolutionizing the Indian financial services in the retail lending sector. The most reputable peer-topeer lending platform in India, LenDenClub connects salaried or

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self-employed borrowers seeking a personal loan with lenders or investors seeking high returns within the regulatory framework.

Challenges with Fintech for building tech stack

The key challenge was comprehending the lending process to make it simpler for borrowers and lenders on a digital platform. The users should be able to invest or lend quickly by displaying the KYC documents like PAN or Aadhar, Investment history, Portfolio details, and Payment page with the maximum amount of information possible for the users. The task was to make the platform efficient, scalable, and compliant with maximum use of technology and minimize human intervention.

Technology Solution

The service provider company, Tech Stalwarts, divided and categorized all the processes an investor had to do in the beginning. They made an effort to design with a minimal appearance and feel and then digitalize the lengthy forms and legal documents by focusing on the information that was most important in the field of: • Portfolio Management for both lenders and borrowers • Online Video KYC (Know Your Customer) as per RBI norms • Bulk investment facility The application wireframe was created by making the application more straightforward and user-friendly. They chose a color scheme comparable to the brand logo to retain the brand familiarity and the inventive mood of the app’s overall visual style. The color Palette was kept as per brand color and font style. Please refer to the following figure:

Figure 4.9: Example of Color Palette

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The technology stack is based on ‘react’ and ‘python.’ Please refer to the following figure:

Figure 4.10: React and Python

Success story

LenDenClub, a platform for peer-to-peer lending, secured $10 million in a Series A investment. The investment round was co-led by a group of investors that included Hardik Pandya, an Indian cricketer, Tuscan Ventures, Ohm Stock Brokers, Artha Venture Fund, Kunal Shah, the founder of CRED, Alok Bansal, the co-founder of Policybazaar, Ramakant Sharma, the co-founder of Livspace, and Krishna Bhupal, the cofounder of Promaxo and a board member of GVK Power and Infra. The company claims to have registered loan disbursements totaling more than 2,000 crores and currently has over 25 lakh borrowers and 10 lakh investors. Reference: https://techstalwarts.com/casestudies/lenden/

Conclusion

With the help of high-level thoughts on the technologies to be chosen and the factors a fintech should consider while deploying the technology, one should be able to understand the processes in detail. Also, in the process of deploying the technology, the readers would be able to have a clear vision of major challenges that may come up during implementation and also would be able to understand the areas of improvement and possible resolutions of the obstacles. In the next chapter, we will learn about the future aspects of Fintech. We will discuss the focus areas regarding Artificial Intelligence or Machine Learning. We will explain the problem areas when developing technology in an indigenous environment.

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Chapter 5 The Three Vs of Fintech Introduction

This chapter explains how the Fintech industry will function and the key areas to focus on when a Fintech uses any kind of Artificial Intelligence or Machine Learning. The three V’s or significant factors to be kept in mind are Voice, Vernacular, and Video. Going forward, we have explained everything in detail.

Structure

In this chapter, we shall study

• The future of Fintechs driven by three important Vs: o Voice

o Video

o Vernacular

Objectives

With an understanding of the important aspects of the three Vs of Fintech, the reader would be able to understand the difficulties a

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fintech faces while developing technology-based systems. We will also be able to understand the ways to resolve the issues.

Future of Fintech

Understanding the factors influencing the Fintech business is crucial when discussing its future. While there have been numerous advancements in the past concerning loans, payment gateways, and insurance products, we must keep the three V’s in mind while discussing some common characteristics that will drive the Fintech business. We have always heard or learned that V stands for victory, but now the time has changed, especially in the fintech world, where V means Voice; V means Video; and V means Vernacular. These are the three Vs that will define the fintech segment in the future. While we have already seen many use cases for voice and videos, we have yet to see extensive use of the language or vernacular in the Fintech space. We should look at this more from the point of view of a country like India, which is very diverse in spoken and written languages. Keeping in mind that the Fintech industry will serve the bottom of the Pyramid or the unserved population in the country, it must look for a better communication system driven through these three Vs.

Voice

The time has gone for sending text messages or emails. People like to interact by talking to save time and show their expressions. Here, I do not mean an increase in human-to-human interaction, but in my view, going forward, people will talk to computers or voice bots. Nowadays, we have chatbots, where we can chat with automated machines; in the future, we will likely speak to the bots about all the queries related to product information, services offered, or specific account information. These Artificial Intelligence (AI) empowered bots will have complete information about your account and will be able to disseminate the same while talking to you in the same style and manner as humans do. This can prove to be a very efficient and cost-effective tool for customer servicing and collecting dues. We have witnessed large-scale technology usage for voice to text, the flow of voice to text, is shown in the following figure:

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Figure 5.1: Flow Chart of Voice to Text

As the technology for the use of voice bots is developed, the flow can be explained in a simplified manner, as shown in Figure 5.2. However, it is an over-simplified illustration of how unstructured information from the sentence spoken by the person (voice) is converted into a structured sentence or information (voice), by picking up the right keywords:

Figure 5.2: Voice bot mechanism

Some of the major players in voice technology are: • Google Contact Center AI

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• Amazon Connect • Nuance • Talk Desk • Haptik.ai • Vernacular.ai • Saarthi.ai We need to understand and know the important factors to consider while creating any multilingual voice or conversational application (software system) using Artificial Intelligence or AI. Some of the important factors are:

Understanding the language Systems must convert speech or unstructured text into structured information during this process. In this step, a language comprehension engine extracts various signals, such as the statement’s goal, named entities, emotions, and so on. Players in the conversational AI sector use translation services to translate non-English inputs into English. A multilingual discourse cannot be delivered effectively using machine translation. Since the source and target languages differ lexically, syntactically, and semantically, information is lost, and inputs are misrepresented. Without the aid of translation, India-based startup Saarthi.ai developed a Native NLP stack over vast amounts of non-English data to understand non-English inputs in more than 20 languages. They claim that they have the advantage of realizing the full potential of Conversational AI in non-English languages.

Processing the speech Given the large information bandwidth of the channel, voice-first conversational AI applications should be used. For voice assistants on digital platforms and IVR, precise speech processing is essential. The challenge is to extract important semantic information from user voice input. Low-resource non-English languages are once again a problem. Due to the variety of dialects and accents used in non-English languages, accurate transcription of speech in such languages is very

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difficult. My interaction with Indian startup Saarthi.ai suggests that it has done away with the need for transcription by directly inferring semantic signs from the speech signals in the target language, such as domain, semantic roles, dialogue acts, contexts, and intents. On a global benchmark dataset for speech commands, their research team has achieved above 96% accuracy in determining intent, action, and location from noisy audio signals.

Naturality of language to the conversation or voice or dialogue Modeling intents and slots for virtual assistants has become the development standard across many industries today. The main problems with this strategy are that the Bots are taught to determine the optimal course of action based on the user’s most recent sentence. Because the assistant is unaware of what came before the current dialogue stage, this causes tunnel vision. Secondly, when more than one action is involved in a sentence, system performance is severely constrained, most often referred to as multi-intent comprehension. To execute dialogue in real business use cases at levels comparable to human dialogue performance, a conversational AI assistant must parse multiple semantic phrases in a sentence. It must recognize roles, domains, business context, dialogue acts, belief states, and emotions, among other signals. Contact centers frequently have reams of information about human-to-human conversations via phone recordings and live chat. The technology interface has to handle all these issues for a better result for the user.

Automation of the process flow and language Before a problem is solved, most questions and requests go through several steps and, perhaps, even several discussions. Therefore, rather than ignoring the domain ontology, Conversational AI systems must use it to be helpful. Some of the newer technology firms, like Saarthi. ai, have been developing enterprise and domain-specific ontologies for telecom, lending, collection, and e-commerce, while maintaining a highly replicable pipeline for other domains. These tech companies can automate close to 70% of contact center volume without manual assistance because of the advantages of conversation-based data

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modeling, continuously developing data ontologies, and dialogue policy-based conversation management.

Case study of Saarthi.ai In this chapter, to make it more like a case study, I had a detailed interaction with the promoters of Saarthi.ai. Mr. Sangram Sabat, Cofounder and COO, gave a detailed overview of the entire process, workflow, and the industry which has made this chapter more like a story or a journey which incidentally also matches with my thoughts on how the Fintech industry is going to use Voice and Vernacular going forward.

Bharat : The unique land

‘Unity in Diversity’ has always been India’s identity. With a 1.4 billion population, India is almost a continent of various cultures, languages, socio-economic groups, and preferences in food, clothing, entertainment, and more. Culture runs deep in our veins. The only successful initiatives in India are the ones that cater to and have an intricate understanding of the socio-cultural trends. India is undoubtedly one of the largest and fastest consumer economies in the world, but a large portion of the country remains underserved even with the advent of disruptive technologies.

The great digital and geographic divide

There is a significant digital divide between the Tier 1 cities and the lesser developed suburban and rural areas, which columnists generally refer to as the divide between ‘India’ and ‘Bharat.’ The latter either do not have access or are unskilled in using technology, putting the country at a competitive and economic disadvantage. The demography, especially the young populace, has low digital literacy, is vastly unskilled in Information Technology (IT), and is unable to take advantage of the vast amount of information online. While “Artificial Intelligence,” “Internet of Things (IoT),” and “Blockchain” are the talk of the town all around, “loan waivers,” “subsidies,” and so on remain the buzzwords in the 6,00,000 villages and 7,935 towns of India. India is rising, but more than half the population does not have access to the Internet, and many more are not on the information highway that the rest of us are on. But, that is changing fast.

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In India, access to public entitlement is hard; the poor and illiterate get misguided quickly. Access to basic human necessities like pension, daily wage, food, healthcare, and education is challenging. Around 2012, the Ministry of Rural Development (MoRD) and the Unique Identification Authority of India (UIDAI) signed an MoU to integrate the MGNREGA process with Aadhaar. It was expected that Aadhaar would soon facilitate a range of MGNREGA, banking, insurance, and other services for rural citizens. However, it was reported that compensation paid on time drastically declined from 50.1 percent in 2013–14 to 26.90 percent in 2014–15. In 2008, when the central government had directed that all MGNREGA wages be paid through banks and post offices, the banks and post offices were unable to cope with the volume of payments. [1] However, this and a host of other schemes are now improving thanks to the internet penetration, the government’s efforts, and the JAM trinity (JAM is used as a short form for Jandhan Yojna, Aadhar, and Mobile Number combination). Demand is not a problem in India, but supply and access are significant concerns. If information dissemination through technology is not intuitive and infrastructure doesn’t evolve to accommodate the exponential surge of queries and requests, everything will fall apart. If we become a global superpower, our generation will tell the story of the great “Bharat.”

The rural uprising

The country’s condition is much better than many parts of the world like Sub-Saharan Africa, where people have to live with expensive data plans and smartphone prices, limiting both the coverage and usage of the Internet. In Sub-Saharan Africa, the cost of entry to lowlevel devices represents 375% of monthly income. In India, cheaper smartphones and data plans have increased internet penetration. Although that’s largely been an urban phenomenon until now, the upcoming digital revolution will be a story of “the rise of the rural consumer.” As per Nielsen’s Bharat 2.0 report, the number of active Internet users aged 12 years and above are 592 million. Compared with 2019, the active internet user base for 12 years and above has shown an impressive growth of about 37 percent. The rural users’ growth at 45 percent continues to outshine urban users’ growth of 28 percent over 2019 and own growth as well, which was 35 percent in 2019.

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The other trend is related to online banking and digital payments. A study revealed that the users of Online Banking and Digital Payments had been identified as urban, affluent users (from NCCS A), with 2/3rd of the users belonging to the age bracket of 20 to 39 years. While the usage is higher in urban areas, 46 percent of its users are from rural India.

Voice for Bharat

With the various means to make technology available everywhere in this fast-improving world, the focus is shifting towards making technology humane and inclusive. In this context, literacy, digital savviness, and infrastructure challenges are major barriers. Voice-based AI-assisted interactions with technology and services will level the playing field by removing the barriers to digital literacy and awareness. Voice-based payments and assisted banking are a rage amongst banks currently, although it is still in the nascent stages. But, this is just the beginning of what can be achieved. Anyone who can talk can benefit from Voice AI. An average person can speak five times as many words in one minute as they can type. It is the most natural and efficient mode of communication. Text and touch were the initial modes due to the lack of technology. Although it continues to be an extremely difficult topic of active research, availability of computing power, data, and focused research in the current times signal that the problem will be mostly solved for mainstream use, in various domains like healthcare and finance, within this decade. Besides that, the human voice carries orders of magnitude more signals than text. Voice conveys speech and information on gender, demography, emotional state, and much more. Such signals may be helpful for a variety of studies and use cases, from biometric verification to helping to communicate with consumers in a situationbased, tailored way. Voice not only conveys speech, but also provides information on the speaker’s gender, identity, and emotional state. Voice AI can also work on telephony, carrying services to rural areas or rough terrains with inadequate infrastructure or poor networks. The icing on the cake is perhaps the augmentation in customer experience. Voice AI can make any interaction engaging, contactless, fast, and independent of rigid UI paths.

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The language of technology

Water changes at every mile, and language at every four miles in India. The Internet mainly consists of websites built-in English, and a minority of them in either Japanese, German, French, Spanish, Portuguese, or Chinese. Many parts of India have very few people that can understand English. More than 90% of internet users are non-English speakers. Many are neither as skilled in leveraging the internet nor as adept in interacting with a predominantly English web. This is a global problem as less than ten percent of people are Englishliterate while the rest, more than three billion, speak languages that are sparsely represented on the web. Hindi is the mother tongue of close to 44% of Indians as per Census 2011; the rest of India speaks almost 120 other languages. As per the census of 2018, no fewer than 19,500 dialects are spoken in India. If the statistics are mindboggling, imagine how many users are marginalized because of the unavailability of technology in their language. Even if we do not consider 120 languages, we know that there are at least 15 important and well-spoken languages like Telugu, Tamil, Punjabi, Kannada, Malayalam, Marathi, Gujarati, Bangla, and so on. Enterprises attempting to enter or strengthen their hold of the Indian market should be aware of the country’s digital user categories, and their language preferences. To the creators of software and technology, there isn’t an iota of doubt now that Natural Language Processing (NLP) and Speech Processing are more relevant and significant than ever in influencing the lives of 20% of the global population. From India’s perspective, there are publications in local and regional languages, but there is hardly any process, system, or technology to understand the spoken local, or regional language. We all have observed an accent difference when a person from South India communicates in Hindi, or a person from North India speaks in English. In many cases, even when the person is speaking correctly, we find it difficult to understand the words, meaning, or intentions. Similarly, the tone of voice also changes how communication is done.

The mission for vernacular and Voice technology Company: Saarth.ai

According to Curtis Kularski — “the digital divide is composed of a skill gap, and a gap of physical access to Information Technology

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(IT), and the two gaps often contribute to each other in circular causation. Without access to technology, it is difficult to develop technical skill, and it is obsolete to have access to technology without first having the skill to utilize it”. Information and Communication Technologies (or ICTs) are an irreplaceable tool in society. The diffusion of ICTs in the financial, educational, and healthcare sectors has been transformational. In the absence of knowledge about using ICTs, the potential to generate a socio-economic impact from the young population will go in vain. Saarthi.ai is driven to become the primary medium of interaction for millions of people in India by implementing a Conversational AI platform to make the web more intuitive and reach regions where the internet is scant through telecommunication via multilingual AI bots. They are making the power of the internet accessible to everyone in their native language. Traditional interactions with systems like apps, websites, social channels, and Interactive Voice Response systems (IVRs) are non-interactive, rigid, and mainly in English. Conversational AI transforms these interactions into simple conversations. Imagine if a farmer could call a number and talk on the phone with a virtual agent to learn more about their agricultural credit scheme! Wouldn’t it be a boon for the users who face digital exclusion? The company focuses on developing the language-diverse geographies of Asia Pacific (APAC), Europe, the Middle East, and Africa (EMEA), starting with India. This is a matter of human rights when people cannot access pivotal technologies, leading to a divide between the “savvy” and the “nonsavvy,” and the threat of leaving behind billions of people on the fringes of complete digital exclusion. In the past, Initiatives have relied on employing humans in contact centers to interact with the language-diverse demography. However, catering to such a vast user base requires the intervention of AI, as a human-only solution puts tremendous pressure on the infrastructure. It also creates many low-value jobs that become obsolete as automation gradually takes over, thereby vastly underutilizing the true potential of human capital. India, the second most populous country, has the majority of its increasing population in the working age group, giving it a strategic economic advantage. A more working population implies more development. But this can be possible only if the young population is adequately equipped to adapt to an exponentially evolving world.

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The current state of technology “AI is witnessing an early innings in India. It has a thoughtful government, and India can race ahead if it chooses to.” – Andrew Ng

In my view, the ‘Voice Bots’ will be the future of conversational engagement between a fan or follower and a celebrity or a brand. The famous sports players, movie actors, politicians, and so on may do a two-way interaction through voice bots where the follower or fan won’t even realize that they are talking to a bot. Currently, these people interact with their fans and followers through social media platforms in text or typed communication managed by agencies. Market leaders are waking up to build NLPs focused on Indian languages, but cultural complexities, and techno-human constraints, are a massive barrier for Indic language computing. • Scale and diversity: India has grouped variations of languages written in 13 different scripts, and officially recognizes 22 major languages, including a plethora of dialects. Thus, there is a need to develop approaches that can be generalized, and scaling to multiple dialects should be only a task of adaptation. To begin, voice communication must be built in English, Hindi, and most spoken regional languages. • Code mixing: This uses more than one language in the same utterance (speech or text). Handling code, switching from one language to another in an automatic speech-to-text, and understanding the language simultaneously is very difficult. • Resource scarcity: One of the most crucial revelations to Indiclanguage computing recently was the scarcity of data which makes any movement in this sector impossible. Language computing uses sophisticated machine learning techniques for large amounts of high-quality data. We take the example from automatic Machine Translation (MT): the Hansard corpus for English-French contains 1.6 billion words, and even WMT 15 data for English-Czeck has about 16 million parallel sentences in 2019. At that time, one of the only meaningful examples for an Indian Corpora was the CFILTIITB En-Hi corpus, which has 800,000 similar sentences. The situation is worse for other languages. For example, the

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available corpuses for Sinhala-Tamil do not reach even 50,000 sentences. • Lack of staged development of speech and Natural Language Processing (NLP) tools: The NLP pipeline comprises several stages, from processing words (known as tokens) to classifying sentences to discourse computation. As per the name, the pipeline has many downstream tasks that are affected by the accuracies of earlier stages. Globally, since the language for business was English, all work on linguistic computational processing was done in the same language. This led to a uniform and progressive development of NLP tools. In contrast, other languages do not even have basic morphology analyzers (that split words into their roots and suffixes). Even if there are any tools or algorithms, most of them are inaccurate. • Absence of linguistics knowledge: While it may appear on the surface that Speech processing and NLP are only driven by humongous amounts of data and faster computation speeds, it will surprise many to know that many teams have at least one linguist who has a deep understanding of language phenomena. This helps solve the problems of saturation in accuracy. It also helps design good strategies and make results more explainable. Such a linguistic tradition is absent in many languages. • Script complexity and non-standard input mechanisms: In an Indic language such as Devanagari, there are 13 vowels, 33 consonants, complex conjunct characters, 12 vowel marks (matras), and special symbols (chandra bindu, anusukta, and so on). Script complexity makes input speeds 2–3x slower than English. The presence of 13 different scripts aggravates this problem. To counter this problem, people work around Roman inputs through transliteration. • Non-standard transliteration: Although transliteration is widely used to input words across devices, it is far from being standard. For example, the Hindi transliteration for “mango” (a fruit) can be “am,” “Am,” or “aam.” This creates even more complexity for the computational processing of language. The following figure shows the major concerns while creating blockages:

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Figure 5.3: Major concerns creating blockages

Challenging language phenomena Another language phenomenon common to major Indian languages is compound verbs. Compound verbs are composed of two verbs such that the main information content of actual action is carried by the first verb (the polar), and the information for Gender/Number/ Tense/Aspect/Modality is marked on the second one (the vector). Consider the following example: Hindi sentence: Bol uthaa (Hindi string) General translation: Speak rose (gloss) Accurate English: Spoke up (English translation) Here, the vector verb, the second word, carries a ‘feeling’ on top of the main action of speech. Catching such fine nuance is essential, for example, in emotion analysis. Many Indian languages also show heavy stacking of morphemes. Marathi sentence: gharaasamorchyaanii malaa saaMgitle Morpheme breakdown: ghar+aa+samor+chyaa+nii+mala a+saMgit+le General translation: house++front+of+ me told (gloss).

oblique

Accurate English: The one in front of the house told me (translation). This needs sophisticated word segmenter and morphology analyzers. We can rest the case by concluding with one last nuance of language – “polysemy,” wherein the same word can vary in meaning based on the context. For example, “I have to study for the bar” vs. “I want a chocolate bar.” Besides, multiple other problems make the development of pervasive technology extremely hard. A few of them are mentioned:

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• Background Noise • Inflections of words in speech • Domain-specific words uttered in a non-English language • Punctuation placements • References to the past or a central subject in a conversation Conversational AI today is designed for English and relies on Machine Translation (MT) to deliver multilingual conversations. Translation leads to misrepresentation and loss of information in spoken language. It also corrupts the data, which is a huge blunder for any Deep Learning based system. Language understanding Engines in the market capture only 2-3 cognitive signals from even English messages. This makes them inept in crafting human-like conversations, as they do not understand many nuances of language understanding. Thus, the current approaches are unreliable and limited in comprehending unstructured non-English conversations. It inhibits the adoption of technology and the inclusion of the people for whom it would benefit.

Bridging the gap To understand the uniqueness and reliability of Saarthi’s voice-first Multilingual Conversational AI platform, one must first picture how an AI Assistant (a Dialogue System) functions. The figures shown above, (Figures 5.1 and 5.2) are oversimplified examples of how unstructured information from your sentence is converted to structured data. If no voice inputs are given, one can simply remove the Automatic Speech Recognition (ASR) - used for the Speech Processing part of these figures. The structured information is then sent to a Dialogue Management layer which predicts the best possible action. Corresponding to the action, a response is retrieved from a set of responses. That response is then synthesized into speech, if necessary. Therefore, the following are paramount to any voice-first multilingual Conversational AI application: • Language understanding

In this process, systems must transform unstructured text or speech into structured information. This step makes

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use of a language understanding engine that extracts different signals like the purpose of the statement, named entities, emotions, and so on. When it comes to processing multilingual “spoken language” inputs, which is the prevalent form of communication for all service-related interactions, incumbent systems use translation services to convert nonEnglish inputs to English. It incurs a loss of information and misrepresentation of inputs due to lexical, syntactic, and semantic differences in the source and target language. Saarthi.ai built a Native NLP stack over huge corpuses of non-English data to natively understand non-English inputs in 25 languages without the use of translation. Such Lossless Multilingual Understanding gives them the edge to unlock the true potential of Conversational AI in non-English languages. • Speech Processing

Precise speech processing is paramount to Voice Assistants on digital mediums and IVR. The problem involves identifying key semantic signals from the voice input of users. A significant issue again comes with non-English languages that are a low resource. Accurate speech transcriptions in nonEnglish languages, and their different dialects and accents, are impossible. A very simple example is that if you say, “Mera Order kahan hai,” that might get converted to text as “Mera Border Kahan hai,” thereby corrupting the data sent downstream to the text-based natural language understanding system. A speech-based language understanding layer is not only free from such mix-ups. It opens up a universe of possibilities, as your speech may contain more than 100 cognitive pieces of information. Saarthi has eliminated the dependency on transcription and infers domain, semantic roles, contexts, intents, and various other semantic signals directly from the speech in the native language. Thus, the system is a hybrid system where both speech and text inputs would be leveraged to augment solution reliability.

• Enabling Natural Conversations

Today, the development standard across the industry is to model intents and slots for virtual assistants. The most significant issues with this approach are:

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o Bots are trained to infer their response from only the current sentence of the user. This leads to tunnel vision as the assistant has no idea what happened before the current state of the conversation. o System performance is limited when multiple actions are present in the sentence, commonly known as multiIntent understanding. o System neglects that the same sentence can be used in different contexts. o System failure often occurs with minor digressions. This is because the assistant doesn’t know what path the conversation should take. To deliver near-human dialogue performance in real business use cases. An accurate Conversational AI Assistant needs to know how to parse multiple semantic phrases in a sentence. It needs to identify roles, domains, business contexts, actions requested, emotions, dialog states, and many other signals. Contact centers often have a lot of human-to-human conversation data from live chat and call transcriptions. Their data annotation system uses a novel annotation scheme that considers semantic phrases in a sentence and provides flexibility to assign multiple labels on and within the phrase. Phrases in a sentence are linked to other parts of the conversation as well through relations to various goals that might be a part of the conversation. This coarse-grained data is then used to train an all-in-one model for richer language understanding and natural conversations. The learning achieved over conversations helps the assistant get back on track and traverse the best possible path to complete the goals identified from the user’s conversation, even with multiple digressions, and carries forward context to understand references. • Utility of automation

Due to unscalable data modeling techniques and a focus on understanding conversations, many industry applications were earlier unsuitable for conversational AI-based automation. This is partly why we do not see assistants in environments where multiple tasks are carried out over long conversations. The other primary reason is that most applications try to take up generic processes across domains,

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such as meeting scheduling. This lets systems avoid the complexities of domain ontology. However, most queries and requests involve numerous exchanges and sometimes even multiple sessions of conversations before a resolution is made. So, to be truly useful, Conversational AI systems must use the domain ontology rather than avoiding it. Saarthi has constantly been building up a domain, and even enterprise-specific ontology for telecom, healthcare, e-commerce, and BFSI, and has a highly replicable pipeline for other domains. • Cross-lingual embeddings With the commencement of the Information age and the ubiquitous availability of media at the fingertips, the very concept of language, culture, and communication has undergone a huge change. Code-mixing and switching are the same results, and Hinglish is a prime example. Such language transformations arise out of language contact that’s very common in diverse language geographies. To handle this, Saarthi built models that can share and decode the vocabularies of multiple languages at once. They help compare the meaning of words across languages for crosslingual information retrieval. They also enable Saarthi to share learnings between resource-rich and resource-low languages as the learning and representations are common for multiple languages. • Transfer learning Building any task-oriented virtual assistant requires a lot of human-labeled data, making technology development slower and more cumbersome. To work around this, besides changing the data modeling technique, Saarthi.ai transfers learnings between languages and domains. Their models are pre-trained and start working with some amount of finetuning. This helps Saarthi’s systems work with 10–15% of labeled data required by other comparable systems, making them more agile. This also helps adapt technology within language groups and dialects once the acceptable accuracies in the parent language have been achieved.

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Pervasive innovation is not a result of a single technological improvement but multiple nuanced and novel improvements in various technologies working in unison. They have devised ways to thread conversations across channels and devices. Deep Learning is notorious for the huge size of its models, thereby making it difficult for enterprises to use; due to cost and responsiveness issues. Through knowledge distillation, Saarthi.ai compresses model sizes up to 7 times. This helps them traverse the lab-to-enterprise journey quicker, save enterprise’s expenses and enable a better user experience. While working in the financial sector, especially in lending and collections, they have worked to build a system that can predict precise offers or recovery strategies that work for different personas. The combined advantages of various innovations and data accumulated allow them to automate more than 70% of customer contact center conversations with customers without any manual intervention. It will enable enterprises to achieve significant operational efficiencies and cost reductions and helps them implement the technology at a much broader scale. When you can interact with a user in their language based on a myriad of conversational signals and history, imagine the powerful and inclusive experiences you can create! We are still far from a future where technology is more humane. Still, solid foundations are being built for various domains to communicate with users in every nook and corner of India. Besides all these innovations, they are also forming alliances with various academic and government bodies, like FICCI — ILIA (Indian Language Internet Alliance). Government policies on data sharing for supporting Indic Language study, computing grants/subsidies for companies to experiment, and so on. have all been implemented to date. They have also contributed to the cause with their benchmark datasets in many languages. There is also an imminent need to re-skilling the workforce as traditional roles vanish. The rapid emergence of new technologies generates the need for new skills, creating a huge skill gap. About 40 percent of India’s workforce must

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be reskilled over the next five years to cope with emerging trends such as AI, IoT, machine learning, and blockchain. There’s huge despair over job loss due to automation as firms across industries are laying off almost 50% of their workforce. Most of these are knowledge workers and contact center employees. According to a new World Economic Forum (WEF) report titled ‘The Future of Jobs 2018’, the Fourth Industrial Revolution will make 75 million jobs obsolete by 2022 but will also create 133 million new jobs — a net gain of 58 million. Saarthi will be contributing to the re-skilling initiative byo Partnering with existing re-skilling ventures to offer contracts to people on data-related tasks and helping subsidize their education necessary for re-skilling. o Making their AI platform more layman-friendly to aid knowledge workers and contact center employees in building robust solutions for the rising market demand. This two-pronged approach will boost existing nascent roles and generate new employment opportunities for the massive working population of India.

A strong and sustainable Bharat

Voice-first Conversational AI will prove the impetus to digitalize India. Significant leaps in deciphering natural language, enabled by deep learning and AI, will pave the way for the localization of content and services to make the internet a pleasant experience for Indian language users. Language and other barriers to ICTs impact users’ understanding of privacy policies and their ability to protect their identities and sensitive information. It is scary to think how this will lead to disparities in information access for diverse language speakers in critical situations prevalent in Healthcare. The current localization situation on the internet reflects how colonialism and cultural imposition have shaped the language landscape worldwide. These differences should not be a barrier to using tools and services that protect people and make their lives easier. Localizing technology can even play a role in ensuring that native languages survive.

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“The Web does not just connect machines, it connects people!” - Tim Berners-Lee

Language is just as crucial to building human connections online as offline: it forms the basis of how users identify with each other, the lines on which exclusion and inclusion are often drawn, and the boundaries within which communities grow around shared interests. Voice-first Conversational AI transcends barriers of technology interfaces, complex systems, and cultural contexts to humanize interactions between enterprises and users. When interactions with enterprises are simple, empathetic, and instantly accessible, we will form a stronger and more sustainable Bharat. Intents: An intent is the user’s intention. For example, if a user types “show me yesterday’s financial news,” the user intends to retrieve a list of financial headlines. Intents are given a name, often a verb and a noun, such as “show News.” Entities- An entity modifies an intent. For example, if a user types “show me yesterday’s financial news,” the entities are “yesterday” and “financial.” Entities give a name, such as “date time” and “news type.” Entities are sometimes referred to as slots. Models: These result from a broad set of computer science techniques that allow computers to learn without being explicitly programmed. Mostly Python (a coding language) is used to build models. Through calculations, they enable a system to correctly interpret external data, learn from such data, and use those learnings to achieve specific goals and tasks through flexible adaptation. While we deal more with Voice, especially vernacular voice, let us read some of the important quotes by people in this segment:

How does speech recognition work?

While understanding the voice technology, let us look at the global leaders’ views about using voice bots in various services and sectors. This will give us an idea of where the world is headed regarding technology that provides a better communication system.

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“The computer takes in the waveform of your speech. Then it breaks that up into words, which it does by looking at the micro pauses you take in between words as you talk.” - Meredith Broussard; Data Journalist and Professor at NYU “So the lexical models are built by stringing together acoustic models, the language model is built by stringing together word models, and it all gets compiled into one enormous representation of spoken English, let’s say, and that becomes the model that gets learned from data, and that recognizes or searches when some acoustics come in and it needs to find out what’s my best guess at what just got said.” - Mike Cohen; Manager of Speech Technologies at Google.

What Are some of the ways it can be applied? “From a person’s voice alone, most people can tell if someone is angry or nervous, but there are a ton of subtle things that are not perceivable by the human ear that are also connected to your thoughts. In our work, we measure thousands of aspects of speech and language, and many of them go beyond human hearing. We certainly can’t objectively measure them, but machines can, and those features are often highly correlated with one’s cognitive status and can indicate whether someone has Alzheimer’s, dementia, depression or anxiety.” - Dr. Frank Rudzicz, Toronto Rehabilitation Institute-UHN “In the past decade, voice-based solutions were mostly used in banking and telecom call centers as well as in healthcare, but this was largely an experimentation stage, considering the issues of accuracy and business relevance. Only in the past few years, we noted a significant increase in demand and preparedness for speech technologies in financial services, insurance, and other sectors. There are many positive implementation examples across these industries: for example Barclays, Citibank, ING, Wells Fargo and others in banking.” - Alexey Popov; CEO at Spitch

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“It’s nice that ASR [Automatic Speech Recognition] is actually starting to be useful now. When I started out, the most visible ASR product was Dragon Dictate, which few people actually used— I believe it was marketed as the ideal Christmas present, which was deceptive. These days we have Amazon Alexa and Google Home, which people actually use — not to mention call center dialog systems. They are annoying, but that’s often a limitation from the dialog management rather than the ASR.” - Daniel Povey; Associate Research Professor at the Center for Language and Speech Processing at Johns Hopkins University

All the preceding quotes highlight the importance of automated Voice communication in various fields of financial services. With many companies offering such services, we have witnessed the use of automated voice messages for collection reminders by the lending Fintechs in India during the Covid epidemic.

Video

Video will be the second way to disseminate information and communicate for Fintech players. The time has gone when we used to send long notes or detailed paragraphs or emails to explain the products or services or even information about your accounts. That trend has already started to provide information through small videos. Please remember these videos are of concise duration, generally between 30 seconds to three minutes. These self-explanatory videos are good enough to explain each subject, product, service, policy, or process. People can capture the entire information within a short span of time because these videos are created by using multimedia technology. We have discussed and explained the Voice and Vernacular in detail above. Videos are a further crucial sector that will shape fintech’s future. A lot of communication, especially training and explanatory communication, will happen through videos. Video communication, especially if it is two-way video, helps both sides not only communicate the message but also understand the body language of the other person. During the pandemic (Covid-19), we all have experienced the increased use of video meetings through Google Meet, Zoom, or other platforms. While no other specific technology is required for video communication, it is a mix of text and voice

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communication and can also be done in local and regional languages. Thus, addressing the Vernacular issue as well. In the financial market, we have already seen video communication done to meet regulatory compliances as well, for example, video KYC done through various agencies in India empaneled with regulators like the Reserve Bank of India for SEBI. Let us understand the use case of Videos in the Financial Services or Fintech industry. Recently, RBI approved using Video KYC as a method for remote customer verification in the banking and financial services industries supported by Fintech entities. The financial services industry, particularly the NBFCs, PPIs, and smaller fintech startups operating on shoestring budgets, found it challenging to grow their reach after the Supreme Court prohibited Aadhaar-enabled e-KYC from being used to authenticate the identification of consumers. The nonbanking companies (NBFCs) that sought to serve the unbanked people in rural India were likewise in transition, with physical KYC serving as the only tool for proving a customer’s identification. This recent action by the RBI will provide a tremendous boost to the neo-banks or Fintechs, which rely on digital channels for client service. A seamless, paperless, presence-free, and cost-effective KYC solution will be created by combining the V-CIP (Video-based Customer Identification Process) with the offline KYC mechanism based on Aadhar (UIDAI). This will benefit the industry participants and customers who have previously suffered from lengthy, ineffective, inefficient, and burdensome KYC processes. By accessing their potential consumers, the financial services sector, which includes lenders and payment providers targeting rural unbanked groups, is also anticipated to experience higher market penetration. The techloving millennials and Gen-Xers who have grown accustomed to having the world at their fingertips may find this option particularly appealing. A mobile-first approach is picking up across the Fintech segment to meet regulatory compliances. An alternative to physical and digital KYC is ‘Video KYC’ or paperless KYC, which can be carried out with the customer’s permission. However, it is exclusively the responsibility of the Regulated Entities (REs - which are registered and regulated by institutions like RBI and SEBI) to ensure the procedures’ integrity. As instructed by the RBI, activity records with the credentials of the official or business correspondent doing the video-KYC must also be kept. Additionally, only after a contemporaneous audit of the account can the KYC be

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declared complete. The NBFC or Bank, not any other service provider, must execute the audio-visual interaction for liveness detection. While the video KYC process is being widely used now, there are a few challenges that must be taken care of while building the tech platform for your Fintech and must be taken care of. Some of them are: • Preventing location spoofing: The Video KYC recordings must be precisely geotagged to confirm that the person whose KYC is being completed is in India and at that specific location. • End-to-end encryption: The video recording must be fully encrypted from beginning to end and securely saved on the cloud server of the lender. The recording date and time of the video recording should also be included to make it simple to retrieve for thorough auditing when needed. • High-quality picture: To facilitate information parsing and verification, OCR and image processing algorithms should make sure that the photographs taken by RBI registered entities (RE) are of high quality to avoid any dispute subsequently. • Facial recognition: The face matching algorithms, based on AI/ML, should make sure that the person whose video is recorded for the KYC is the same as the person whose details are provided, resulting in a system that is impregnable against fake identities. While the face match may not happen 100% with the government-provided identity documents like PAN or Aadhar, a 70% or above match is sufficient to establish the identity match and facial recognition. • Liveness detection: Random activities during video recording, such as head, eye, and lip movements and interactions, will ensure that no previously recorded movies are used throughout the V-CIP processes. This could be a 5 to 10 seconds activity where the person is asked to read out a text on the screen. While many Fintech entities provide the preceding facility, a growing lending institution must consider building it in-house.

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Video as a tool for branding and marketing Top fintech firms have long incorporated animated videos into their marketing plans. But in recent years, that pattern has become more prevalent, and many more businesses are doing the same. It is used to showcase the products, and specific product features, to introduce the new website, and the latest mobile application (APP). These videos help to achieve multiple objectives. There’s a significant probability that your marketing approach is comparable to your rivals’. You are producing the same kind of content and engaging in the same activity; however, you will get noticed in the crowd if you build a good video content using vernacular languages as well. You must differentiate yourself from the competition to provide your brand growth, trust, and sustainability. Organizations can stand out from the competition thanks to the creative industries, which include animation. It allows you to communicate engaging stories, create a unique visual identity, and distinguish your business from competitors. If your brand stands out, it can grow more quickly. The correct marketing plan is used to support it. Videos or animations draw attention almost immediately. This is the rationale behind the widespread use of fintech explainer videos in online advertisements by major financial institutions today. Due to the little time, they have to grab the audience before getting skipped. A fundamental advantage of animated video is its capacity for attention-grabbing, which makes this type of material particularly effective with the younger audience that is constantly on the go and has a short attention span. While earlier, the videos used to be 2-5 minutes or longer, the attention time has been reduced to less than one minute. Delivering a pertinent message comes next, which can be done very well with a short, animated video that satisfies this requirement. Fintech explainer videos have been used for a long time as a powerful storytelling tool. They may deliver stories in a more engaging and immersive way with beautiful pictures. The audience then hears your message and responds to it consciously or unconsciously. The cornerstone for creating a brand identity is more significant engagement. This benefit of video marketing is to leave a long-lasting impact as straightforward and obvious as they come. Due to their superb

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visuals and storytelling components, fintech explainer videos have a better retention value. This streamlines the task of branding and marketing professionals. You may use this to build strong brand identification and, therefore, the trust value if people remember your fintech video, message, and name for longer. In actuality, animated Fintech explainer films are excellent. A vibrant marketing film can be used to give viewers more information about your product, including an explanation of its characteristics, advantages, and recommended uses. All of this strengthens your value proposition, opening up the potential for brand creation.

Tips for effective fintech videos for branding Your unique fintech films should be tantalizing on an emotional level. One method to achieve this is to tell an engaging story that people can relate to, and identify with, pertinent to their life. Videos that tell emotional stories will leave a more profound and long-lasting effect. Additionally, it will have a more significant impact on getting the audience to do the necessary action that a Fintech expects. Make sure to speak with the scriptwriter or author in-depth if you’re dealing with a provider of video services. If you’re producing animated fintech videos internally, hire a talented copywriter. Explain your fintech brand’s basic principles, the firm’s purpose, and the problems it solves in the stories. You need an animated brand logo that works with and enhances your financial video marketing initiatives, just like some well-known companies like Paytm, Cred, VISA, and so on. This animation logo can be used in the economic video’s start, outro, or even in the middle. Your financial brand name’s identity and recall value can be strengthened by it. It is neither difficult nor prohibitively expensive to convert your current logo to animation. Animated video that works isn’t only about pretty pictures. Its appeal and impact can be increased with the correct audio, which you can also employ for branding purposes. One video can use multiple audio voices to use the local region impact, which will create the most important vernacular impact. Competitive analysis is one of the essential components of a fintech video marketing strategy. You may create your KPIs, establish

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benchmarks, and spot consumer trends with its assistance. Analyzing your rivals also reveals a wealth of suggestions for the type of animated fintech movies you should create, the length of your fintech videos, the ideal distribution method, and more. Decide who your primary and closest rivals are. After that, examine their tactics and results to glean concepts and sources of inspiration for your branding approach. All the videos being created for branding and marketing must be created or dubbed in the local, and regional languages; the Vernacular is very important, especially in countries like India. To summarize, voice, video, and vernacular will drive the Fintech growth in India and Bharat.

Vernacular

The third and last V is vernacular. While this may be applicable and true for the global Fintech industry, it is essential and relevant for India. India is a vast country with multiple regional languages. Any communication, whether written or verbal, is more effective in the local or regional language with the people or the customers. Any communication done in a local or regional language will have more impact and will be result oriented because it connects the customer with you directly and also creates an emotional bonding. While there are 22 official languages in India, the bigger states or geographical areas speak Hindi, Bengali, Kannada, Malayalam, Marathi, Punjabi, Tamil, Telugu, and Oriya. These would cover most people; hence all the Voice and Video must look to use these languages for communication though it may also depend on the geographical area being serviced by a Fintech. The language (Vernacular) also has a social and emotional connection with the service provider. It creates belongingness or comfort between the customer or user and the Fintech, who communicates with the customer for lending services, collection, other products, or services. From a compliance point of view, it is mandatory by RBI to explain the loan agreement, sanction terms, and all other important aspects to the customers in the language the borrower understands. The lenders need to take a ‘Vernacular Declaration’ that the borrower has explained everything well in the language they understand.

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Conclusion

In this chapter, we have learned about the future of Fintech, focusing on the lending industry. It will be essential to use the technology in Voice, Video, and Vernacular space and how it will improve the efficiency of the Fintechs not only from a sales and marketing perspective but also for better compliance. Considering India’s size and diversity, this technology will play a major role in the growth of any Fintech in the future. We shall also witness new startups in this segment which will offer customized solutions to the Fintech industry and other industries. As we have learned about building a solid and secured tech platform for a Fintech in lending space and the importance of three Vs. In the next chapter, we shall discuss the final point of this book, the ‘Investment pitch.’ We will also cover the essential aspects to be taken care of while you pitch to various kinds of prospective investors.

References

1. https://www.thehindu.com/news/national/aadhar-to-belinked-to-mgnregs-wages/article2515629.ece 2. https://www.business-standard.com/article/economypolicy/71-mgnrega-wages-not-paid-on-time-14-delayedbeyond-30-days-study-shows-121102901592_1.html

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Chapter 6 The Investment Pitch Introduction

This chapter illustrates that succeeding as an entrepreneur requires the ability to market one’s company in an appealing manner. A solid elevator pitch demonstrates one’s familiarity with the firm, which is helpful when one decides to hunt for investment, even if they have no immediate plans. We have provided a fair framework for creating an effective investment pitch for potential investors in this chapter.

Structure

In this chapter, the readers will understand the following topics: • The need for a pitch for investments • Recognizing the requirements of various investors • Making an Angel investor pitch • Revenue model overview of the products/services • Handling the term sheet • Post Investment management information system

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Objectives

The purpose of creating this chapter is to make the readers learn to make a successful investment pitch for their business, service, or product. Readers can comprehend all the crucial key aspects to convey to potential investors with the emphasis areas presented in this chapter.

The need for a pitch for investments

After the business plan has been prepared, and we are simultaneously working on the technology stack built up, we will look at the business numbers for the next few months or maybe a few years. We will also be looking at the capital required to start and grow the business as per our dreams, expectations, and vision. While the current scenario has been very violent on the private equity investment or fundraising from external investors, there are a lot of success stories where fintech entities have built powerful businesses and raised vast amounts of money from investors. Some of the most famous and recognized fintech entities have even become unicorns and taken the path to get themselves listed on the stock exchanges. While many people consider raising capital at a very early stage, even as they develop their technological stack, they continue to consider constructing business valuation. At the same time, many people think they should start a business, put in their funds (called bootstrapping), and then raise money from outside investors. There are pros and cons whether you raise equity from outside investors or not. It will depend significantly on how much risk capital you have, how much equity you are ready to dilute, or how much control you can give investors when you start your business. When young entrepreneurs start working on an idea and come from humble backgrounds, it becomes necessary for them to raise capital to support their idea. A startup will also need to increase funding even if the promoters have a large sum of money invested for the business expansion to be fast, or the business model is such that it would need a large sum of investment to scale up the business. A bootstrapped fintech startup may run its operations as long as it wants. Here, we shall discuss how to raise funds for the business.

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There is no standard formula for preparing a pitch deck or investment pitch. There is also no standard format that can be used. It all depends on what kind of prospective investor you are pitching to. Here we shall discuss some of the broad parameters which should be considered while preparing your investment pitch. A startup fintech must understand, and the promoters must know all the investors, whether they are angel investors or venture capital funds for private equity funds. They meet hundreds of people yearly, while the deal happens with very few of them. I have been associated with one Angel investing platform where the platform used to get almost 50 applications every month, out of which only three were presented to the investors. The chances of getting funded were hardly one of them. Not that the other proposals were not good, but the investors always prioritize the startups that could present better at that particular time. The fintech startup must know that pitch is crucial to get funding. The biggest challenge for a startup while making the investment pitch is the available time, the founder’s passion for their products, and their ability to speak within a stipulated time since the investors give them a concise to present themselves. Hence, the pitch must be impactful within 10 or 20 minutes. If we take the example of “Shark Tank,” they don’t even give this much time. It is important to note that the challenge is to find investors and decide what kind of investment pitch has to be made. There are some important points to be kept in mind which will help the startup founders when facing prospective investors.

Recognizing the requirements of various investors

Although there are different types of investors, venture capitalists (VCs) and angel investors are the most prevalent. A creative illustration of that can be seen in the following figure:

Figure 6.1: Angel investors Vs. venture capitalists

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• The venture capitalists: A private equity investor known as a Venture Capitalist (VC) lends money to businesses with strong development potential of trading for an equity stake. This could involve providing beginning capital or aiding small businesses that want to grow but lack access to equity markets. • The angel investors: High-net-worth individuals who support small companies or entrepreneurs financially are referred to as angel investors (also referred to as private investors, seed investors, or angel funders). These individuals often do so in exchange for ownership stock in the startup or entrepreneur’s business. Angel investors are frequently found together with an entrepreneur’s friends and family. Angel investors may contribute one-time capital to help a firm get off the ground or continue support to assist the business get through its challenging early phases. Whether you are speaking to an angel or a venture capitalist, the manner you prepare your pitch will change slightly.

Making an angel investor pitch

High net-worth individuals that invest as angels act as solo investors. This means that individual angel investors generally move faster in making decisions as they do not depend on others to make decisions. They focus more on the big picture, the possible upside, and the sizable market the business’ product covers while making an angel investor pitch. Generally, Angel Investors invest through platforms.

Introduction with venture capitalists

VCs are more meticulous, focused on the details, and interested in the numbers. They have a big responsibility to make wise choices since they are writing cheques on behalf of a group of other investors. While pitching to VCs, we should concentrate on specifics, data, and potential hazards.

Getting ready with the right amount of time

Since most investors schedule meetings in advance, we will be aware of how much time we have to make the pitch. Though it may be longer, this typically lasts between 20 and 30 minutes. For instance, if you only have 20 minutes, your pitch will be substantially different

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than one that would’ve been made in 30 minutes. Don’t forget to prepare for the Q and A session, which is also usually scheduled (for example, there might be a 30-minute meeting with 20 minutes to pitch and 10 minutes for questions, or vice versa). By giving practice pitches to friends, relatives, or other people who are unfamiliar with your startup, you can get practice addressing impromptu Q and A.

Due diligence on investors

To ace your first pitch and close a transaction on the spot is a very uncommon occurrence. Often, it will take multiple rejections from investors before you eventually receive money. The attitude to adopt in this situation is that you can learn something from every interaction with an investor, including every rejection. We will pick up some tips on presenting your business, responding to typical inquiries, and what information investors are looking for. We may improve the pitch and story by seeing three or four investors first. This will help us be more prepared when we do meet the investor we want to collaborate with the most. The Fintech founders must do thorough research on each investor they are about to meet and try to learn things like startups they have previously invested in, what motivates them to think positively and say yes and what they don’t like in a business. Their profitable investments and loss-making investments; What types of inquiries they make generally, and a few phone calls to founders who have worked with that investor in the past can be a wonderful place to start if you cannot uncover all this information with a quick Google search. It would be a good idea to follow their social media handles and understand their thoughts. Do not assume that all investors are interested in the same information.

Considerations for right investment pitch

When pitching an investor or a group of investors, The Fintech founder should always begin with an elevator pitch. This is essentially a one-minute overview of the entire pitch you are about to make. The elevator pitch may cover some key points like, the problem statement or the issue the fintech has observed, the proposed solution the Fintech will provide, and the Key Selling Points (USP) of the Fintech for customers and investors. By starting here, the founders

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will ensure that when they move to the next step, the investor is on an equal footing with the founders. The story about the product or services must be compelling, clearly showing the need or demand for the product. Most founders find this phase very simple because they frequently have an engaging tale to share. It should demonstrate that we have understood the problem or pain point and found the solution. Everyone listening to the story should get attached to it. Include a section on your current team (founders, co-founders, board of directors, advisory board, and so on) in your pitch. It is recommended that their experience, credentials, and areas of expertise they bring to the business are highlighted. Investors will be more confident in bringing the idea to market. One of the critical points the investors look for is that the founders must be very certain of the investment required and how it will be used. If we indicate that we are okay with whatever money we get, the investors will take it negatively. Instead, the founders should be clear with investors about the financing they need from them. The founders must communicate the following: • They are looking to raise the amount of funding in USD and/ or INR terms. • The anticipated duration of this money will be enough to run the business, including some grace time to raise the next round. • What they plan to do with the money; with the amount and percentage of funds to be utilized in various activities like marketing, infrastructure, team building, product development, and so on. • Where do they plan to be when the funds raised are utilized; for example, are they striving for profitability and won’t need more funds to be raised or reach a point where they would qualify for the following fundraising rounds. The investors look to know the market potential of the product and services being offered by Fintech startups. The founders must be bold when describing the market that their solution serves. The market potential must be explained by stating the size of the entire addressable market, considering all potential present and future uses

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of the product. After this, the numbers should be narrowed down to the Target Group (TG) or Target Audience. Generally, small numbers rarely motivate investors, so the founders should go big with this. However, the numbers should be realistic. Other promises regarding market potential, addressable markets, or any financial projections should be supported by reliable data because savvy investors can spot inflated statistics when they see them. In other words, we should be able to precisely describe the calculations and be ready to show how we arrived at those estimations. The investors are more informed about the segment since they meet many more people in the same or similar segment. How we intend to sell the product should be explained in the marketing strategy. How will others find out about us? And how do we intend to draw in new clients? We all enjoy novel and intriguing concepts, but investors know that the adage “build it and they will come” is untrue. The brand’s marketing approach should be highlighted in the pitch to prospective investors, whether it involves trade exhibitions, online or digital marketing, blogs, content marketing, channel, or direct sales.

Business plan and projections

The Business plan should describe how the product or services offered shall generate revenue annually for at least 3 or 5 years. An effective pitch also provides a straightforward explanation of how this model relates to targets for total annual income. While we shall be discussing the executing summary, one of the driving factors for investment is the financial projections of the business plan presented to prospective investors. Finding out whether or not your Fintech will be financially viable over the short, medium, and long term is one of the most crucial reasons to perform a financial forecast. By taking the time to analyze project revenue, costs, business growth, and cash flow, we can see how the economic situation will stand after a certain amount of time, say over a period of three and five years. Additionally, while looking for investors, we will need financial predictions to demonstrate our strategy and understand when they will get a return on their investment. Financial estimates, however, should be understood not to be utterly correct since, with any kind of economic forecasting, numerous factors could influence the predictions.

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Financial predictions generally contain several data points arranged into three financial statements which are made on a monthly, quarterly, and annual basis: • Balance Sheet (Table 6.1) • Income statement or profit and loss statement (Table 6.2) • Financial ratios, in the case of a lending fintech (Table 6.3) • Cash flow forecast (Table 6.4) There is a further break up of revenue and expenses (profit and loss statement), which is itemized for explanation to the investors. One common factor investors use is, asking about ‘Unit Economic’ which may drive the decision-making. BALANCE SHEET Financial Projections of a Lending Fintech Company

Rs lakhs

PARTICULARS

Year 1

Year 2

Year 3

Year 4

Year 5

Equity Share Capital

1,462

2,462

2,462

3,462

3,462

Reserve and Surplus

213

345

751

1,476

2,402

Borrowings

10,671

33,736

45,382

56,829

23,288

34,811

47,571

59,467

Loan and advances

11,446

22,039

Fixed Assets

53

55

39

36

34

Cash and Bank balance

165

182

1,315

1,637

2,991

Table 6.1: Balance sheet

In Table 6.2, we can see the financial projections of a lending fintech company: Financial Projections of a Lending Fintech Company PARTICULARS

Year 1

Year 2

Year 3

Interest Income

1,961

4,384

7,260

Processing Fees

294

529

708

Year 4

Rs lakhs Year 5

INCOME 10,091

12,905

859

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Other Income

127

199

199

294

295

Total Income

2,382

5,112

8,167

11,244

14,242

Personnel Cost

406

603

674

844

1,037

Finance Cost Admin and Expenses

1,210

2,815

4,730

6,579

8,497

588

1,142

1,650

2,021

2,268

2,204

4,561

7,055

9,445

11,803

EBDTA

178

551

1,112

1,800

2,438

Loan loss Provision

140

361

535

706

872

Depreciation

23

16

17

12

11

Profit Before Tax

16

174

560

1,082

1,556

TAX

3

38

123

238

342

PAT

12

136

437

844

1,213

149

EXPENSES

other

Total Expenses

Table 6.2: Financial Projections of a Lending Fintech Company: P&L

The following table shows us the financial ratios in a lending Fintech: Financial Projections of a Lending Fintech - Key Ratios PARTICULARS

Year 1

Year 2

Year 3

Year 4

Year 5

6.83

8.29

10.83

9.63

10.14

0.16%

0.78%

1.50%

2.05%

2.27%

6.37

7.85

10.50

9.19

9.69

CAR (%)

14.57%

12.03%

9.22%

10.37%

9.86%

ROE (%)

0.97%

6.07%

14.52%

20.71%

22.46%

Operating Expense Ratio

13.28%

10.14%

8.06%

6.98%

6.20%

Leverage ratio (Times) ROAA (%) Debt-Equity ratio (Times)

Operational Self Sufficiency 101.65% 103.87% 107.60% 110.78% 112.36% (Income/Expense) Interest Coverage Ratio 103.19% 106.76% 112.20% 116.63% 118.43% (EBIDTA/Interest) Table 6.3: Financial ratios, in case of a Lending Fintech

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Table 6.4 showcases the Cash flow forecast: Cash flow Items in Lending Fintech A. Cash flows from operating activities Net (loss)/profit before Tax Adjustments:

Interest and dividend income Profit on sale of mutual fund Provision for standard and sub-standard assets Loan Balances w/off Finance cost Depreciation and amortization Operating (loss)/profit before working capital changes (Decrease)/ Increase in provisions Decrease /(Increase) in loans and advances Decrease/(Increase) in other non-current assets Decrease/(Increase) in other current assets (Decrease)/Increase in other current liabilities Cash flow from/(used in) operating activities Income taxes paid Net cash flow from/(used in) operating activities (A) B. Cash flows from investing activities Purchase of property plant and equipment Interest/dividend received Net cash flow from/(used in) investing activities (B) C. Cash flows from financing activities Proceeds from issue of share capital Proceeds from Short Term Borrowings Interest paid

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Proceeds/(repayments) of long-term borrowings Net cash flow from/(used in) financing activities (C) Net increase/(decrease) in cash or cash equivalents (A+B+C) Closing Cash and Cash Equivalents Closing Cash and Cash Equivalents Table 6.4: Cash flow forecast

Business risks

Talking about potential business risks is necessary while pitching to the investors, since they may raise queries on this aspect. A lot of founders are so confident in their product idea that they neglect to take external risk into account; however, if anyone says there is no risk at all, no investor is going to buy the idea and would consider that the founders are not aware of the market scenario. There are risks related to the following: • Regulatory changes. • Legal and compliance issues. • Technological risks as the technology changes at a fast pace. • Geopolitical risks and risks related to global situations. When questioned, we need to be ready to discuss how we intend to approach and reduce each of these hazards. Presenting SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis helps properly handle the risk factors. Most investors are always keen and interested in learning about the exit strategy, whether during the early funding phases as seed funding or the next level of angel funding, and so on. However, it may not be a condition to invest. However, as your business grows and investment numbers reach higher, this question becomes more critical for both angel investors and venture capitalists. The founders would need to mention and explain the exit options available for the investors, whether it would be by going public (stock market listing, in India, the SME platform is a great option to provide exit) or potential acquisition or buyback by the founders or secondary sale in the next round of funding.

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Preparing an executive summary

Generally, the investors or these angel network platforms would ask for an executive summary with an overview of all the details covered in the investment pitch, as it is usually to present to your reader before the entire presentation is made to them. Here are vital points which should be covered in the summary.

Business brief

• A briefing is a meeting for informational or educational purposes. Consequently, a business briefing is held to update staff members about new policies, goals, strategies, or assignments. In small businesses, every employee might take part in a single briefing. Store or department managers frequently hold briefings unique to their teams in larger or dispersed small business operations. • Special-purpose gatherings lack the focus of business briefings. If a retail company creates new service policies, each shop manager may brief their team on how the policies operate and instructions on implementing them. A sales manager might conduct a briefing to update the staff on a new product offering. Before taking action, a small business owner might inform his management or leadership team about a layoff or other tactical moves. • Businesses can develop briefs for: o New initiatives

o New customers o Investors

o Plans for business expansion o New target demographics o Commercial loans

o Brand awareness industry-specific solutions o Increasing revenue Example: NetMoney Financials, is an India-based financial technology company with its corporate headquarters in New Delhi City. This

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pan India-based fintech payment system helps fintech start-ups digitize their systems with rapid actions and go paperless. They provide multi-level solutions to the companies in the lending segment, and provide solutions from New Customer Acquisition to collections. Team • The management team is important when creating a business plan proposal for investors. The executive team will be considerably more important to the investors than the actual business concept. They know that selecting, preparing, and inspiring a successful management team will determine how the business plan is implemented and whether it succeeds or fails. • The management team’s plan includes mainly these three objectives: o To demonstrate that our present team can carry out the possibility described, or, in the event that it isn’t, to choose who must be hired to complete the current team. o To persuade lenders and investors—such as venture capitalists and angel investors—to finance the business (if needed) o To outline the best ways aboard, if any, can support your team’s success Example: Mr. Amitraj Khanna is a technology and business management professional having a diversified experience of more than 23 years of experience in Information Technology (IT), Finance, and the Equity market. He is a management graduate from Shailesh J. Mehta Institute of Management, IIT, Mumbai, and Certified in Data Sciences from Harvard University. The system comprises a highly experienced core team. NetMoney is continually trying to advance tech-driven, creative solutions that will empower Fintech start-ups and promote financial inclusion throughout the nation.

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Revenue model overview of the products/services

• In terms of presenting your business investment pitch, it is critical to understand both market size and market worth if we operate a business and present it appropriately. They can demonstrate to you not only the volume of clients you can anticipate, but also the annual revenue potential of your company. • The structure for generating income that is a component of a company’s business model is known as a revenue model. Subscription, licensing, and markup are typical income strategies. The revenue model aids companies in deciding how to generate income, such as which revenue source to focus on, who their target consumers are, and how much to charge for their goods. • Because each is a separate source of revenue production, revenue models and revenue streams are frequently confused. They are also mixed up with business models, which include revenue models. Business models must consist of revenue models to be complete. These models assist business owners in deciding how to manage their income streams. • Many diverse people will benefit from a businesses’ goods and services. As a result, our business will have plenty of clients; we might even consider them all crucial. A crucial customer sustains your firm, boosts your profitability, and sticks with you through good times and bad. Important clients are invested in the success of the business as a whole. They are the most significant clients we can have.

Example:

Let’s imagine that ABC Company was considering expanding its operations. They currently make widgets, but they want to consider the possibility of making gadgets. Before beginning the production, the company needs to determine the size of the gadgets market. This ABC Company looked at their competitors’ sales and the consumer as the final user to determine the market size. The ABC Company estimated that the American market for devices was worth $100 million in 2015. By examining sales statistics from their

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competitors, they learned that DEF Company had $20 million in sales in 2014, whereas XYZ Company had $40 million. Since there is a $100 million market for devices, both XYZ Company and DEF have been informed by ABC Company. Look at the following figure for an understanding of MSMEs:

Figure 6.2: Explaining market size and opportunity for MSME lending Fintech

Key competitors/customer options and competitive advantage competitors

• In the pitch deck’s crucial “who are your competitors” slide, many entrepreneurs respond with either barely comprehensible or downright untrue answers. Who are your competitors is a question that needs to be investigated. • It begins with the notion that we don’t have any competition, which is how many founders begin. Following that, the standard answer is, “Then you have no market.” Most people are reluctant to discuss other companies for fear that doing so may somehow devalue their own enterprise, as opposed to praising it. One must consider competition as a means of verifying a market. • Maybe you already know your competitors if you intend to launch any business. Before successfully identifying the

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competitors, we need to understand the product or service and how it fits in the market; What value does it have? What makes it unique? Once we know the offering, the following steps can be carried out to define the competitors: o Do market research.

o Ask your clients or potential clients. o Visit social media.

o Keyword analysis. o Google ad.

o Search engine outcomes. Example: Direct competitors: Growth DirectInvest, Kwik Financials Value proposition: Faster adoption for businesses in the early stages of the data journey; Plug-and-play compatibility with current opensource data tools and technology; Complete services through the platform, encouraging customers to stay with the platform.

Revenue cost metrics

The complete cost of producing and providing a good or service to customers is the cost of revenue. The income statement of a corporation contains information about the cost of revenue. It is intended to show the upfront expenses related to the business’s products and services. The service sector frequently prefers the cost of revenue metric because it provides a more thorough accounting of all expenses involved in selling a good or service. Example:

FY 2021-22: Net Revenue: Rs. 4.6 Cr, Loss: Rs. 1.2 Cr, Monthly Burn: Rs. 16 Lakhs

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Prior revenues, current year estimates and next year projections

Developing financial estimates for a Fintech startup provides the founders a significant advantage, whether for launching a new firm or making plans for an existing one. Economic predictions or projections assist new businesses in obtaining funding and determining whether or not their financial trajectory is on track. The financial projections assist the fintech in deciding whether and when to obtain capital and forecasting future revenue and expenses for an existing business. They also assist the company in planning future expansion. Example: FY 22-23 Projections: Net Revenue: Rs. 15.50 Cr, Loss: Rs. 2 Cr, Monthly Burn: Rs. 15 lakhs. Current MRR: Rs. 1.20 crore, Operational. Breakeven at MRR of Rs.2 Cr

Marketing strategy

The portion of a pitch deck titled “marketing strategy” describes the company’s marketing goals and intentions. Here, we need to explain how we intend to reach the target audience, build brand recognition, and generate leads and sales. The pitch deck should have a succinct and clear explanation of the business plans. The marketing approach should be in line with the overall business strategy. We should have a clear understanding of the marketing strategy before introducing the business products/services to the investors. This serves as the pitch deck’s framework because it directly affects the company’s potential to produce revenue and, consequently, the

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ability to collect income for investors. The marketing strategy of a leading fintech can be seen in Figure 6.3:

Figure 6.3: Marketing or Customer Acquisition strategy of a lending Fintech

Total funds required and proposed deployment valuation

The business’s anticipated revenue at the time of exit is the primary input into the business valuation. The following details about the sales and valuation of the company should be included in the presentation slides: • Projected Revenue • Industry/Transaction Comps • Comparison against DCF • Post-Money Request • Money Request The information (especially the revenue assumptions) mentioned in the financial forecast presentation should be reflected in the projected revenue. • Total funds required Rs. 4.5 crores, out of which raised Rs. 2.5 Cr till now with SHA signed at Pre-money Valuation of Rs. 30 Cr.

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• Ask for a minimum of Rs. 1 Cr to close the round at the same Pre-Money valuation • The balance of Rs 1 Cr shall be raised after the closure of this round. Utilization of funds: • Technology stack improvement and development: 30% • Marketing and Business development: 25% • Team building: 20% • Others: 25% The pictorial representation of the utilization of funds can be seen in the following figure:

Figure 6.4: Utilization of funds - breakup

Establishment/shareholding pattern and external funding/patent by company or founders

The shareholding structure demonstrates how the total number of outstanding equity shares in the company are distributed among the different owners (individuals and institutions). It reveals how the various entities that make up its owners are divided in terms of ownership. From an investor’s standpoint, understanding the company’s financial situation is vital, but it is also essential to understand how ownership is divided among multiple investors. Therefore, potential investors should consider the company’s ownership or shareholding

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patterns while analyzing factors like financial profile, debt patterns, competitive advantage, and much more; before investing their money. A shareholding pattern also refers to the need for corporations to disclose their ownership structure, including promoters and nonpromoters, in the named document. It may also be defined as a corporation’s capital structure, where the capital pool is separated into different ownership groups, such as promoter group holdings, individual shareholding, institutional shareholding, government holding, NRI holding, and others. The fintech founders must understand the psychology of the investors. The investors are highly experienced people from diversified segments and meet many people. It would be beneficial to consider a few things while preparing and presenting the financial projections for the investors. The financial projections and presentation approach should be very realistic and practical. Sometimes or maybe most times, it can be very tempting to present our firm in the best possible light when making an investor pitch. However, if the projections are overly optimistic and we don’t deliver, it could cost us in terms of valuation and reputation. The financial predictions ought to be supported by facts and data available in the public domain, from a reliable source, our research, or a combination of all. The more information, market research, and data we have to develop our projections, the longer we’ll be in business. However, things might not be as simple, and there will be more guessing if we are making estimates for a new business. In such a case, the assumptions should be based on some available sources of existing business or government agency reports. The Shareholding pattern of a company can be seen in Figure 6.5:

Figure 6.5: Shareholding Pattern of the Company

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Creating multiple possible scenarios

Most entrepreneurs generally make the error of developing one financial plan and sticking to it, assuming that they have considered every aspect of the business. But we also need to plan for what might occur if things turn out better or worse than anticipated or projected. Invariably investors ask to change the projections based on their views and experience. Creating multiple possible scenarios will also benefit a founder and reassure investors. A solid indicator that we are financially prepared through the ups and downs demonstrates that we are ready if things do not go as planned. Three possible outcomes are advised for your financial projections and investment pitch discussions: • Standard business plan: This is our working and operating business plan, which is probably what we will show to all stakeholders and investors. It is based on our fundamental thinking and strategy, along with other key people in the organization. • Optimistic business plan: This is based on the assumption of quicker growth based on aggressive marketing, customer acquisition, and sales. This is our best-case scenario. Generally, investors would not be convinced of this plan unless they see a direct advantage due to team strength or government policies supporting the segment. The latest example of this can be the Electrical Vehicle segment. • Conservative business plan: It contains assumptions and is our “worst case scenario.” This plan is created after considering possible negativity based on the risk factors, assuming delay in the next round of equity raise, geopolitical issues, and other such concerns. While investors do not support this and do not value the company based on it, this gives them a picture of the safety of their investment in case things do not go as expected.

Follow up with the investors

Following up with the investors is essential for any business.

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Initial follow-up

Most of the time, we will need to persuade the investor to our business. The majority of investors won’t get in touch with us immediately following the meeting. Therefore, we must move on to the next step and follow up with them by sending an email with the information, data, or documents asked by the investors, and replying to the queries raised during the meeting. You may also include additional information and explanation from your end, which may help them understand the business better. You may also propose another video call on Zoom or Google Meet.

Regular and ongoing follow-up

Angel Investment platforms or investors keep getting multiple proposals for businesses similar to yours. Many investors will grow more enthusiastic about investing in the business if they keep hearing or seeing about it and get some updates, even if they would not have initially shown interest. Sending investors’ emails that go unanswered can make you lose confidence. Still, there is no harm in reaching out to them until you receive a definitive response, especially if there is growth in the business. While there is a definitive timeline of follow-up, you should send follow-ups on a fortnightly or monthly basis that should include the following: • Information about a commitment coming in the investment round and the balance amount available, • The new investors have shown interest, and some of them might have remitted the investment amount, and • Business updates regarding the launch of new products and services, traction, revenue generation, media coverage, and so on. While the founders may get a no from investors in the initial round, it would be a good idea to send the quarterly update to all those who understood the business idea but did not invest. They may consider investing in subsequent rounds if they keep getting an update from you. There is a saying, ‘Out of Sight, Out of Mind’ - so it is good to be in the investors’ minds.

Handling the term sheet

The startup founders are generally not experts in handling investments as they are good at their business or technology. Suppose you have

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made an excellent investment pitch and managed to convince the investors to invest in your business idea that is not the final success. The real challenge is handling the term sheet and closing the round. It is worth hiring a well-reputed lawyer who has handled this transaction and may have experience with the same kind of investors. First, send the lawyer and other trusted advisors a copy of the Term Sheet. It is best to hire the lawyers with term sheet experiences, such as existing investors, and mentors. Find out whether any clauses are unique or problematic, and inquire about their opinion of the arrangement as a whole. Founders typically have less experience with term sheets than lawyers and advisors. Therefore they must comprehend the validity of the conditions and any possible areas of dispute. In addition to the price and investment amount, the following terms are typically of the utmost importance: Board control, Board approvals for business budgets, employment above a certain cost or designation, reserve matters, Employee Stock Ownership Plan (ESOP), and so on.

Update and inform other potential investors

Since you must be in touch with multiple potential investors, it is beneficial to inform them that you have a term sheet but would like to complete the conversation with any other lead investors in your fundraising pipeline. If you have more than one interested party, negotiating a term sheet will be considerably easier. If you submit two or more term sheets, there will be a better chance of securing your preferred terms, and you simultaneously have a fallback alternative if your first choice withdraws. This also indicates that more and more investors have liked your business idea. Having an investor, whether an Angel Investor, a VC or a Private Equity (PE) on your board of directors is like getting into a long-term relationship that is difficult to break or exit. Hence, it is important to understand what working with this person or firm will be like. While founders run for money like crazy, it is essential to do a background check on the investors, to understand how they behave in difficult situations. If possible, a reference check should be done with the founders of the existing companies where these potential investors have already invested, whether the investee company is successful or even failed. This reference check must be done before executing the term sheet.

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For most entrepreneurs, receiving a term sheet is a significant accomplishment, so they should quickly get to the closing details, get the funds in the bank and make sure their business gets to a fantastic start as per plan and projections.

Drafting a term sheet

We have shown here how to draft a term sheet: Non-Binding Term Sheet for Investment by Private Placement This preliminary non-binding indicative term sheet (“Term Sheet”) summarizes the principal terms with respect to a potential investment by in . The terms stated in this Term Sheet are indicative of the heads of key terms. The Transaction (as defined below) is subject to the completion of negotiations, due diligence, and execution of definitive agreements (the “Definitive Agreements”) and fulfillment of conditions precedent and closing actions, amongst others, identified by and to the satisfaction of the Investor. Accordingly, this document is not intended as a binding agreement between the Parties hereto, except for the Binding Provisions (as defined below). The Parties understand and agree that the Term Sheet is non-binding and will be subject to execution of Definitive Agreements. Notwithstanding the foregoing, the Binding Provisions (as defined below) shall be binding upon the Parties hereto, and shall constitute a legally enforceable contract governed by the laws of India Investee Company or Company

•

Company Name

•

Registered office address

•

CIN

•

Website

•

Trade Name

Investor(s)

the “Investor – Pl mention exact legal names of investors”

Promoters

Promoter 1 Name Promoter 2 Name

Parties

Company, the Investor, and the Promoters

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The Investor will invest INR xx Cr into the Company through a primary investment through (“Series A CCDs”). The tenure of CCDs shall be of 5 years from the date of allotment. Investor has to convert the CCDs at any time at a price which is lower of the two below: A) At xx% annualized discount on Series B valuation, or, B) At pre-money valuation of Rs XX crore (@Rs. xx per share)

Valuation

(a)

Investor will acquire [ ___]% of the share capital of the Company on a fully diluted basis. For this purpose, the Parties agree that the enterprise value of the Company shall be INR [______ ] on a cash-free and debt-free basis (“Enterprise Value”).

(b) Based on the Enterprise Value, the Investor will invest the Investment Amount. ESOP

An ESOP pool minimum of x% will be reserved for senior management and employees of the Company post Investor’s investment into the Company based on mutually agreed terms.

Voting Rights

Each Equity and Preference share shall carry one vote per share at all meetings of the shareholders. The Investor shall have the right to vote on an as-if-converted basis in case of CCDs.

Director

On closing of the first tranche of the Transaction, the Investor shall have the right to nominate a director of the Board of Directors of the Company. The presence of the director nominated by the Investor will be required to form valid quorum for all board meetings.

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Affirmative Rights

The Investor will have standard affirmative rights on the following (in relation to the Company and each subsidiary): • Altering the capital structure of the company or issuance of fresh securities (options, warrants, convertibles, and so on included); • Any amendment of the Company’s charter documents; • Adoption/ creation of an ESOP scheme/ pool or any change thereto (including in size of pool); • Any variation of the rights attached to any class of securities; • M&A, JVs, listing, trade sale, change of control, composition/ other arrangements with creditors, liquidation, sale/ other transfer of a substantial part of the Company’s assets or business, including IP; • Any change in business or commencement or acquisition of a new line of business or creation of a subsidiary; • Any transactions involving the sale/ other disposal, acquisition, creation, modification or destruction or encumbering of any assets (including securities and IP) or property (or any rights thereto) • Any change in the terms of employment of any Promoter or hiring of top 4 employees and any change in duties and compensation; • Any related party transactions other than normal course of business; • Any change in accounting practices; • Appointment of, or any change, in statutory auditors; • Any change in the constitution, number or structure of the board; • Any declaration of dividends or buyback of shares; • Any external borrowing or lending; • Liquidation and winding up of the Company and its subsidiary. The preceding list is not exhaustive and any other items will be added to the preceding list as mutually agreed upon and contained in the Definitive Agreements executed between the Parties.

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Investor’s obligation to invest in the Company will be subject to the fulfilment of the following conditions: (a) completion of due diligence by the Investor to his sole satisfaction; (b) Approval of the board of directors of Company for the Transaction; (c) The Company and the Promoters agreeing on appropriate representations, warranties, and indemnity in the Definitive Agreements; (d)

Negotiation, execution, and delivery of the Definitive Agreements in relation to the Transaction by the Parties;

(e) Company carrying on the Business in the ordinary course; (f) Receipt of any regulatory approvals and thirdparty consents required by the Company in relation to the Transaction; (g) Absence of any material adverse change in the Company’s businesses financial condition, prospects, assets, or operations; and any other customary conditions precedent (for example, no existence of breach of Company’s and Promoters’ preclosing undertakings, covenants and representations and warranties, resolution of any due diligence issues, and all representations and warranties provided being true and complete as of the closing). Liquidity Preference

1x straight liquidation preference

Anti- Dilution Protection

The Investor shall be entitled to anti-dilution protection on all future issuances at a price lower than the Investor’s subscription price for each tranche.

Use of Proceeds

The Definitive Agreements will stipulate the permitted use of proceeds. The funds shall be used only for future business and onward lending.

Pre-emptive Rights

The Investor shall have the first right to subscribe to all fresh offering of securities by the Company.

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Exit

The Definitive Agreement will contain in-detail the exit rights available to Investors such as put option on Promoters, third party sale, buy back by the Company, redemption of the CCDs, and initial public offer.

Default Rights

The Definitive Agreement will set out the Promoters’ events of default. Definitive Agreements will provide for the legal rights of the Investor on occurrence of any Promoters’ events of default, including but not limited to drag rights, put option on the Company and Promoters, and control over the board composition.

Share transfer Restrictions

Promoters will have a lock-in on their entire shareholding in the Company for a period of 3/5 years. The lock-in will not apply to x% of the equity shares of the Promoters’ equity stake, calculated cumulatively, on a fully diluted basis, as on the closing date. Any transfers within this lock-in period will only be with Investor’s prior approval. Investor’s Right of First Refusal: The Investor will have a right of first refusal on any sale or transfer of shares held by all the other shareholders of the Company. Investor Tag Along Rights: Subject to the Investor’s ROFR, the Investor will have the right to participate pro rata in any sale of shares to third parties by the Promoters, provided that if the Promoters collectively sells more than 50% of their shareholding in the Company or any transfer by any Promoter leads to a change in control of the Company, Investor shall have a right to tag along up to its entire shareholding.

Additional Rights

Additionally, Investors will have all rights which any other existing or future investor in the Company may have. Investors will also have standard information rights, including relating to receipt of audited and un-audited financial statements and quarterly MIS. In addition, Investors shall have standard inspection rights.

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Auditors

Company will appoint and retain a reputed statutory auditor acceptable to both the Investor and the Promoters within a period of 6 months from Closing.

Warranties

Promoters and Company will jointly and severally provide standard representations and warranties, undertakings and covenants, and indemnities.

Non-Compete

The Promoters agree that so long as the Investor holds any securities in the Company, neither Promoter shall, directly or indirectly, carry on any business that competes with the business. The scope of the definition of “Business” for the purposes of the non-compete restriction will be detailed in the Definitive Agreement.

Assignment

The Investor shall be entitled to freely transfer or otherwise assign its securities, rights and benefits (in full or in part) under the Definitive Agreements to any persons or third parties of its choosing with certain standard exclusions.

Confidentiality

All the Parties agree to keep all negotiations and discussions with the Investor on a confidential, including the existence and contents of this term sheet.

Fees

The Company agrees to bear legal and documentation expenses for successfully completing the Transaction.

Exclusivity

The Company and the Promoters agree to negotiate the preceding contemplated Transaction with the Investor on an exclusive basis for a period of 60 days (“Exclusivity Period”) from the signing of this Term Sheet or such other extended time as may be mutually agreed between the Parties.

During the Exclusivity Period, in relation to the issuance of securities of the Company, the Company, and the Promoters undertake not to:

(a) discuss, negotiate or execute any document, including any letter of intent, memorandum, understanding, term sheet, and / or definitive agreement with any other person; and/or (b) solicit or entertain offers from, negotiate with, or in any manner encourage, discuss, accept or consider any proposal from any other person,

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Termination

If no Definitive Agreement is executed between the Parties within the Exclusivity Period, unless the Exclusivity Period has been mutually extended by the Parties in writing, this Term Sheet shall stand terminated.

Governing law and Dispute Resolution

This Term Sheet and the Definitive Agreements shall be governed by the laws of India. Disputes will be resolved by arbitration in New Delhi as per the provisions of the Arbitration and Conciliation Act, 1996. Courts in Mumbai/ Bangalore/ New Delhi will have exclusive jurisdiction.

Binding Provisions and Survival

The paragraphs captioned “Confidentiality,” “Fees,” “Governing Law and Dispute Resolution,” “Binding Provisions” and “Survival” and “Exclusivity” (collectively, Binding Provisions) shall bind the Parties and shall survive termination, withdrawal, or expiry of this Term Sheet.

Expiry of Proposal

Save as otherwise provided elsewhere, this Term Sheet will automatically expire, and be of no further force or effect, if (i) the Investor has not received from the Company a copy of this letter acknowledged and agreed to by the Company on or before 5:00 PM IST on ; or (ii) prior to any such receipt, the Investor orally or in writing, gives notice of withdrawal hereof; or (iii) if the Definitive Agreements are not finalized and executed within 60 days from the date of this Term Sheet or such other period as agreed by the Parties.

If the foregoing accurately describes the basis on which the undersigned are willing to proceed with regard to the proposed transaction, please indicate your approval by signing the copy of this term sheet and returning it to us. For Company __________________







For Investor (s)





__________________

Director:



Date:





Director: Date:

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Post investment management information system

All investors, whether they are High Net Worth Individuals (HNIs), Angel investors, VCs, or private equity funds, would always have a specific clause to get periodic updates about the growth in business as per the business plan. They would also want to know and get any important events or matters highlighted. Most investors also have a ‘reserve matter’ clause where some specific decisions can only be taken with the approval of these investors. A timely update on all important matters and proper detailed MIS is appreciated by the investors, especially if the founders also give their observations and analysis on the variances in the business, that is, the difference between the actual numbers and the projected numbers and the reason thereof.

Compliances

All investors would always prefer that the company in which they have invested should follow all the rules, regulations, and compliances. The same should be confirmed to them periodically during the board meetings. Any non-compliance must be immediately brought to the notice of investors, along with the reasons for the same. In any of the regulators take any penalty or action, the same needs to be resolved and informed to the investors. To summarize, the founders need to make a good executive summary and presentation to the investors that must cover all the major points as expected by the investors. While investors do due diligence on the investee company and founders, it is equally important for the founders to check about the investors to avoid future conflicts. The terms and conditions of the ‘Term Sheet’ are just the basic things to take care of as the subsequent Share Purchase Agreement (SPA) and Shareholders Agreement (SHA) have very detailed terms and conditions. They also include the process of the transaction, which is applicable after the investment is made in the Company. These are very detailed, complicated, and exhaustive documents with legal implications. While the success of a startup is generally measured by how much money the founders have raised and the valuation they created for Fintech, it is a very challenging journey for the founders; hence

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considering running the startup by ‘bootstrapping’ should always be the first option. One of the most challenging parts is the Question and Answer (Q&A) session with potential investors. Investor pitch meetings usually involve a Q&A session. Despite our best efforts to prepare, we can never predict what questions the investors might have. As a smart Fintech founder, responses like “I don’t know” or “I’ll cover that later in the presentation” should be avoided. However, you should be aware that investors are engaged and at least partially interested when they pose challenging queries. They might even be evaluating our quick thinking. So, when a challenging topic is posed, try your best to respond, but be humble and upfront about the fact that you were not as prepared as you could have been. For instance, “As far as I’m aware, [answer], but because you brought it up, I should be able to provide the appropriate response. After this meeting, let me check with you to make sure that’s accurate.” In India, there are many Angel Investment platforms where founders can approach and pitch their ideas, some of them are: • Indian Angel Network

A network of angel investors called the Indian Angel Network is funding startup companies with the potential to generate disproportionate value. The Network’s members are pioneers in the entrepreneurial eco-system since they have a track record of starting and running successful businesses and have extensive operational expertise as CEOs. The following figure shows the logo of the Indian Angel Network:

Figure 6.6: The Indian angel network logo

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The Indian Angel Network, founded in April 2006, offers money and continuous access to excellent mentoring, extensive networks, and opinions on strategy and execution. Due to their backgrounds, network members are more equipped to identify potential dangers at a preliminary phase. • Lead Angels

A group of three people from IIT Bombay founded Lead Angels to support early-stage investments in start-ups. Today, Lead Angels is a start-up provider of financial services with a full stack. In addition to investments, Lead Advisory helps start-ups with subsequent funding, and LA Management & LAMPS; Professional Services supports these companies’ regulatory and governance needs. The team achieves this by offering investor-members expert support in company appraisal and the operations of the portfolio companies. The following figure shows the logo of Lead Angels:

Figure 6.7: The lead angels logo

• LetsVenture

With the help of LetsVenture, entrepreneurs seeking seed funding can build online accounts that are prepared for financing and connect with professional investors. Additionally, the site enables startups to network with mentors and have the platform’s experts analyze their business ideas. Through its commitment-to-close bundle, it aids startups in the funding closure process. LetsVenture, a company founded in 2013, uses the capital it receives from angel investors to grow and attract additional foreign investors. The following figure shows the logo of LetsVenture:

Figure 6.8: The LetsVenture logo

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• Venture Catalysts A business called Venture Catalysts is dedicated to the entrepreneurial commercialization of technology. The business serves as a catalyst for the development of innovative technology-based businesses by assisting forward-thinking academics and entrepreneurs in realizing the full potential of their ideas. The following figure shows the logo of Venture Catalysts:

Figure 6.9: The Venture Catalysts logo

• Mumbai Angels For early-stage venture funding, Mumbai Angels is a leading venue for angel investing. Since its foundation in 2006, they have assisted numerous cutting-edge and creative projects in successfully taking off from the initial concept. They have 16 years of expertise and have witnessed several early-stage investment cycles. As a result, they focus on the importance of having a structured early-stage investment portfolio for the economics to work. The following figure shows the logo of the Mumbai Angels Network:

Figure 6.10: The Mumbai Angels logo

• India accelerator

India Accelerator program helps firms go from decent to excellent in the introductory phase. It is a systematic

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methodology that may bring the necessary mentorship, networking, technologies, ancillary services, and lastly, the capital. It is the only mentorship-focused program in India that is associated with GAN. The following figure shows the logo of India Accelerator:

Figure 6.11: The India Accelerator logo

Conclusion

This chapter discussed how to succeed as an entrepreneur. One must be able to pitch their business persuasively. A solid elevator pitch demonstrates one’s familiarity with their firm, which is helpful when they decide to hunt for investment, even if they have no immediate plans. We have tried to provide a fair framework for creating an effective investment pitch for your investors. This chapter aims to teach readers how to build a persuasive investment pitch for their company, service, or goods. The emphasis areas offered in this chapter will help readers cover all the essential critical points to express to potential investors. The next chapter is a gist of all the chapters. We have discussed numerous topics related to the Fintech Industry, the related products, and services. We have summarized the major components of building a FinTech business in relation to KYC underwriting standards, servicing consumers, recovering loans or dues, and how to authenticate data or information provided to you regarding how to use future Technologies. We have explained the key requirements to set up a fintech company and how you pitch your idea, which is a combination of finance and technology, to prospective investors.

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Chapter 7 Epilogue

Introduction

This is the concluding chapter of the book, incorporating the whole essence of the topics covered. This chapter includes the purpose of covering the topics and how the flow of contents is connected.

Structure

In this chapter, the following topics shall get covered: • Fintech startups in India: Challenges and Opportunities • RBI’s Payments Vision 2025 • Summary of RBI • Key Points related to RBI guidelines and the future of Fintech • Role of Fintech in MSME Credit

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Objectives

The objective of the book is to enable readers to emphasize the relevance of a text, highlighting the universal ideas that run throughout the entire work; and articulate the way forward. In the earlier chapters, we have studied about introduction to Fintech, learned about the key terms used in the Fintech industry, and got an idea about how Fintech industry has evolved over a period of time not just in India but also globally; we studied briefly about some major Fintech players in various segments and their business model. In the previous chapters, we learned how to build a user-friendly Fintech lending platform and provide a seamless experience to the borrowers for simultaneously availing the working capital finance requirement. The platform must take care of accounting and compliance for the organization. Knowing that, in most cases, an entrepreneur or Fintech startup promoter may be well-versed in financing or technology, I have tried to give details for both people. Hence, we covered the important technology-related aspects to be taken care of in the chapter related to building a secured tech stack. While I believe the founders must try to start and grow the organization using the bootstrap model since funding is a major concern area. I have also given broad guidelines on preparing the investment deck and various aspects of seeking investments from potential investors. The chapter explaining the 3Vs of Fintech is close to my heart, and I am sure the Voice, Video, and Vernacular will define the scale of Fintech in the coming years. We have already seen the successful implementation of companies like Saarthi.ai in the recovery process of various lenders. The faster Fintech entities adopt it, the better it would be for their growth and creating a local regional footprint. Like any other sector, the Fintech sector has a long way to go and is facing multiple challenges despite having evolved a lot. These challenges are also opportunities and areas to work on to create another unicorn by addressing the challenge being faced by other Fintechs.

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Fintech startups in India: Challenges and opportunities

Fintech lending companies frequently deal with challenges like lengthy fund-raising cycles, missed goals, and rising losses. The mishandling of the lending lifecycle is the leading cause of these problems. Fintech start-ups in the Indian context deal with various difficulties every day. We will discuss them in detail here:

Figure 7.1: Challenges and opportunities in fintech

• Non-banked and less banked population

Fintechs initially experienced uneven growth because of weak infrastructures like low internet penetration and low literacy rates in India. Although the Indian government is addressing these problems with generous policies, the advantages won’t become apparent for some time. The truth is that even today, a sizable portion of the Indian population lacks access to banking services and prefers to make cash transactions over internet purchases. The poor level of financial literacy in Indian society is another barrier to establishing Fintech in India. To increase financial inclusion, India, for instance, introduced the Pradhan Mantri Jan Dhan Yojana. However, according to a World Bank survey, more than 48% of accounts had no activity for more than a year. India remains a long way from financial inclusion, despite all the steps put in place.

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• Internet dangers

Fintech businesses handle private customer information and data like Name, E-mail address, date of birth, Bank account details, and so on. Online transactions experience significant financial losses due to several cybersecurity concerns, hacking or unauthorized access. These are entirely unjustified for the customers and prone to risks. The same technology that makes life more convenient makes it easier for thieves to access people’s internet accounts and sensitive information. Fintechs must strengthen their defenses against any threats from hackers and use strong security tools. Digitally accessible financial information of people and businesses is enormous; hence, the likelihood of cybersecurity breaches rises, which may cause substantial economic loss to customers. The risk is higher in the case of early-stage startups who may not spend money on security systems. We have discussed various security threats and protection tools in earlier chapters.

• Legal regulation and compliance

The slowing down of Fintech start-ups in the Indian financial sector is necessarily caused by numerous rules, regulations, restrictions, and controls by various regulatory authorities and a lack of clarity on many regulatory guidelines. An example is the recent guidelines and comments on Cryptocurrencies by the Reserve Bank of India (RBI) and the Ministry of Finance (MoF). These rules are difficult to follow and make it difficult for Fintech companies to join the Indian markets, such as RBI’s recent guidelines on using a mobile app for digital lending. To combat fraud, compliance regulations are put in place as a stringent regulatory framework. However, they serve as significant impediments to entry for new Fintech players. Before they even begin operations, Fintech startups must complete a long list of requirements by multiple regulators.

• Industry-related complexities

Fintechs are made to function using a complex working model. They find it challenging to keep good ties with other financial institutions like banks. Conversely, banks are hesitant to collaborate with Fintechs out of concern for their reputation. While most Fintech companies are strong in technology, the

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Banks, especially the Public Sector Undertakings (PSU) Banks, are far behind in the use of technology, due to which Fintechs are unable to grow the way they think or they can. The same is true for other financial services like Insurance. The regulators, whether SEBI, IRDA, or RBI, are not tech-savvy enough to gather and analyze the information generated by Fintech players on a real-time basis. In the lending space, the Credit Information Bureaus (CIBIL, CRIF, and so on) are also not updated on a real-time basis, and the data update is delayed. • Belief in cash economy

When it comes to daily transactions, most Indians take a conservative stance and settle on utilizing cash. They have relied on money as a sales medium for a very long time. Thus, it is challenging for them to break their habits and adopt new strategies. It is challenging to offer financial services in an unbanked market because these services are frequently connected to online fraud. Due to their lack of financial literacy, many Indians cannot recognize the value that Fintechs provide through their cutting-edge goods and services. Many people believe in the saying, “Cash is King,” and prefer to store and use cash for all their transactions. Cash receipts and payments are still very high in rural economies and dense commercial hubs where footfall is very high. A cash transaction illustration can be seen in Figure 7.2:

Figure 7.2: Cash transactions in retail shops

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• Lack of governmental assistance

Government incentives and assistance for Fintechs to safeguard their interests in the Indian financial markets are severely lacking. For new Fintech players, there is no motivation to do new experiments and innovations; hence can be very discouraging. Fintechs are essential for generating economic growth and must be provided with all the necessary resources to succeed. While the government is taking steps to promote technology in the financial sector, the frequent regulatory changes and restrictions make Fintech startups jittery about experimenting with new ideas and innovation.

Fintech: Growth roadmap In general, the Indian financial industry driven by Fintech is undergoing significant changes, such as digital signature, digital KYC, use of GST data, and transition to a cashless society. The Indian government is actively encouraging the usage and acceptance of technologies through tools like UPI, digital wallets, e-KYC, Aadhaar, and BHIM, among others, to turn India into a cashless society. After demonetization, India experienced a sharp increase in Fintech startups. These start-ups operate in several Fintech segments, including peer-to-peer (P2P) transactions, financing, insurance, and mobile point of sale (POS). They introduced innovative financial and technological developments. However, a few obstacles also prevent the Fintech sector in the Indian economy from expanding. Different communities value the market structure differently, and as nations move up the Fintech adoption ladder, these values may change. Authorities must, therefore, continuously be intentional about the results of policy changes announced. The result will rely on various factors, including how participants use their market power, consumer behaviors, and the abilities that affect switching costs in a particular market. Competition policy approaches that concentrate on more conventional metrics of consumer welfare, such as costs and prices, may not adequately account for the effects of digital platforms that prioritize growth over profits and data over revenue. Allowing market forces to decide the conclusion could have unexpected benefits or undesirable results. Traditional rules for separating banks and other financial services, for instance, Overview Trade and paper are already changing. It is necessary to reevaluate

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previous theories about the trade-offs between systemic integrity and privacy, inclusiveness and consumer protection, and competitiveness and stability. The regulatory perimeter may need to be increased in financial, consumer protection, competition, data privacy, telecoms, or the internet. There will be pressure on central banks to update their settlement services due to the growing importance of Fintech companies, the adoption of quick payments, embedded finance, and crossborder financial flows. The provision of central bank money might be redesigned, or existing mechanisms could be improved. By continuing to limit access to major bank settlement assets and services to only incumbents, risks may increase, competition may be hampered, efficiency may suffer, and the safety and dependability of payment systems may be impacted. The growth in Indian Fintech startups has been exponential, and the market is expected to reach USD 150 billion in valuation by 2025, as per Indian government officials. One of India’s fastest-growing industries is Fintech, which has drawn interest from domestic and international parties. Even though the bulk of Indian Fintech startups are under ten years old, their growth and development over the last few years have been exponential. According to some Indian Finance Ministry officials, India has a Fintech adoption rate of 87 percent, compared to the global average of 64 percent. CEO of UIDAI has said that by eliminating the requirement for a physical branch, the Aadhaar Enabled Payment System has, in a manner, transformed banking. More than 50 lakh banking correspondents are using the system nationwide to conduct “cash in, cash out” type transactions. With Aadhaar, consumers can be onboarded quickly. People now find it simple to complete transactions thanks to the Unified Payments Interface (UPI), and the technology is effective because several agreements were established to deploy it. Collaboration is essential for success. There have been rumors regarding who is competing against whom, who is going to eat, whose lunch, and so on. But in practice, what makes ecosystems like UPI safer is a variety of people cooperating toward a common objective. Due to the widespread use of smartphones, the Fintech sector is expanding quickly, and the government’s aim of digitizing more than 3,000 cities by 2025 will be achieved. A proper cyber

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security system, real-time dispute resolution, and tech consultation for emergencies are necessary. The following figure shows various methods of digital payments:

Figure 7.3: Various methods of digital payment in India

Source: Factory slowdown in Europe and Asia is warning for global trade (moneycontrol.com)

RBI’s payments vision 2025

The Reserve Bank of India (RBI) recently released its ‘Payments Vision 2025,’ that aims to strengthen the e-payments ecosystem in the country. Based on the core theme of ‘E-Payments for Everyone, Everywhere, Every time (4 Es)’, the document envisages providing users with safe, secure, fast, convenient, accessible, and affordable e-payment options. The vision document was prepared after consultation with key stakeholders and had five key themes – integrity, inclusion, innovation, institutionalization, and internationalization (5 Is). The document covers 47 specific initiatives and 10 expected outcomes as it aims to achieve over the next few years. The central bank aims to increase the number of digital payment transactions by more than thrice by 2025 and to curb the volume of cheque-based payments to less than 0.25% of the total retail payments. The document also envisages an annualized growth of 50% for UPI payments and 20% for Immediate Payment Service (IMPS) and National Electronic Funds Transfer (NEFT). In a further push for digital payments, the RBI will work towards the reduction of cash in circulation as a percentage of gross domestic product (GDP). It will also target increasing the number of registered

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users for mobile-based transactions at a compounded annual growth rate (CAGR) of 50% by 2025. The document also outlines the central bank’s aim of increasing point of sale (PoS) debit card transactions by 20% and increasing card acceptance infrastructure across the country to 250 Lakh touchpoints. All these initiatives are a part of the document, along with RBI’s initiative to ensure that debit card usage surpasses credit card usage in terms of value by 2025.

Big push for e-payments RBI will undertake 47 initiatives to streamline the e-payments infrastructure in the country as it prepares for the next evolution of the space. These include weaving in alternative authentication mechanisms besides OTPs, such as biometrics and digital tokens, to authenticate users. The central bank will also take initiatives to promote the usage of legal entity identifiers (LEIs) to promote cross-border payments and screen sanctioned entities. LEI is an alpha-numeric code used to uniquely identify parties involved in a financial transaction and faster tracking of payments. As part of the vision, the central bank will explore options to mandate the domestic processing of payment transactions. The decision was taken in view of the emerging geopolitical risks. RBI also said it would undertake a study on the feasibility of digital payments protection fund (DPPF) that will provide a security cover to defrauded customers and issuers of payment instruments. RBI will also enable a framework for geo-tagging payment system touchpoints across the country. As part of this, it has already begun the collection of data related to coordinates of the payment infrastructure across the country. The move has been designed to measure the extent of digital payment penetration across the country. RBI also appears to have turned its sights on big tech players, who are ‘increasingly dominant role.’ In the vision document, RBI said it would publish a discussion paper on the need for ‘proportionate regulation’ against big tech and Fintech players. This paper will encompass issues such as domestic incorporation, and data use, among others.

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Authorities will also undertake an evaluation of charges for all payment systems. “A comprehensive review of all aspects related to charges involved in various channels of digital payments shall be undertaken,” noted the document.

Use of technology The Vision 2025 document includes a provision that calls for developing a framework for an internet of things (IoT)-based payments systems that enable customers to pay via connected devices apart from users’ phones and tablets. RBI also intends to create a new method for processing payments via the internet and mobile banking services. Currently, these services are routed through payment gateways and other aggregators. RBI will also review the payment and settlement systems (PSS) Act. The central bank will also constitute a payments advisory council (PAC) to assist the board in regulating and supervising payment and settlement systems (BPSS). The PAC will comprise representatives from startups, consumer groups, and digital payments companies, among others. The feasibility of expanding RTGS to settle transactions in major trade currencies, such as the US Dollar, Pound, and Euro, too would be explored through bilateral or multilateral arrangements, the document noted. The RBI document also mentions that it is working towards introducing a central bank digital currency (CBDC) in the country. It further added that ‘various use cases would be explored to bring in further efficiencies in domestic and cross-border payment processing and settlement using CBDCs.’ The latest data shows UPI recorded more than 595 Cr transactions worth INR 10.4 Lakh Cr in May 2022. An illustration of digital payments transactions in India can be seen in the following figure:

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Figure 7.4: Digital payment transactions in India in last 5 years

Figure 7.5 is a representation of digital payment transactions:

Figure 7.5: Digital payment transactions

Credit: RBI’s Payments Vision 2025: Increase Digital Transactions By 3X (inc42.com)

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RBI norms for digital lending space Digital Lending had picked up the pace during the pandemic. In India, many Fintech entities started providing short-term loans for a brief period, say 15 to 60 days. While it did help a lot of people in managing their financial requirements, many such Fintechs also used unethical practices of charging exorbitant fees and interest collection processes and harassed the borrowers. This drew the attention of police and regulators and criticism from the public in general. RBI issued various guidelines, formed a committee of experts, took public opinion on the matter, and ultimately came out with regulatory guidelines on sourcing and servicing of borrowers by Fintechs or, digital lending mechanisms to tighten the whole process. All digital loans must be disbursed and repaid through bank accounts of regulated entities only, without pass-through of loan service providers (LSPs) or other third parties, the Reserve Bank of India said in its long-awaited guidelines for the segment. The policies, aimed at curbing rising malpractices in the digital lending ecosystem, follow the recommendations of a working group for digital lending. The RBI’s concerns are primarily related to unbridled engagement of third parties, mis-selling, breach of data privacy, unfair business conduct, charging of exorbitant interest rates, and unethical recovery practices. The central bank classified digital lenders into three categories: • Entities regulated by the RBI and permitted to carry out lending business, • Entities authorized to carry out lending as per other statutory or regulatory provisions but not regulated by the RBI, and • Entities lending outside the purview of any statutory or regulatory provisions. The latest regulatory framework is focused on the digital lending ecosystem of RBI’s regulated entities (REs) and the Loan Service Providers (LSPs) engaged by them to extend credit facilitation services. As for entities falling in the second category, the respective regulator may consider formulating rules on digital lending based on the recommendations of the RBI working group. For entities in the third category, the working group has suggested specific legislative and institutional interventions for consideration by the central government to curb illegitimate lending.

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Apart from direct disbursals and repayments of digital loans, the norms mandate that any fees or charges payable to LSPs in the credit intermediation process shall be paid directly by the Regulated Entity and not by the borrower. The guidelines are a nuanced blueprint to help the digital lending ecosystem grow responsibly and sustainably. At the same time, the RBI has addressed the need to stamp out incipient trends that are antithetical to best customer protection and data security practices. RBI has further instructed all lending institutions that a standardized key fact statement (KFS) must be provided to the borrower before executing the loan contract. The all-inclusive cost of digital loans in the form of an Annual Percentage Rate (APR) will have to be disclosed to borrowers. The APR shall also form part of KFS. RBI has prohibited automatic credit limit increases without borrowers’ explicit consent. The Key Facts Statements (KFS) and explicit consent measures introduced by RBI shall ensure the required transparency and inspire trust in the system. The clarity on the disbursal of transferring money to the customer’s bank account was much needed to instill trust in the public. The loan contract must provide a cooling-off or look-up period during which borrowers can exit digital loans by paying the principal and the proportionate APR without penalty. REs must ensure that they and the LSPs engaged by them shall have a suitable nodal grievance redressal officer to deal with the complaints related to Fintech and digital lending. The grievance redressal officer shall also deal with complaints against their respective Digital Lending Apps (DLAs). Details of the grievance redressal officer must be prominently displayed on the website of the RE, its LSPs, and DLAs. As per the existing RBI guidelines, if the RE does not resolve any complaint lodged by the borrower within the stipulated 30day period, they can complain to the central bank’s integrated ombudsman scheme. Data collected by DLAs should be need-based, have clear audit trails, and be done with the prior explicit consent of the borrower as per the latest RBI guidelines. Option may be provided for borrowers to accept or deny the consent for the use of specific data, including a chance to revoke previously granted consent, besides (the) option to delete the data collected from borrowers by the DLAs/ LSPs the RBI guidelines further state. The RBI said that any lending sourced through DLAs would have to be reported to credit bureaus by REs, irrespective of its nature

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or tenure. All new digital lending products extended by REs over merchant platforms involving short—term credit or deferred payments must also be reported to credit bureaus by the Res. The digital lending structure can be seen in the following figure:

Figure 7.6: Digital lending structure in India (source: RBI)

Credit: RBI issues strict norms for digital lending space | The Financial Express

Summary of RBI recommendations for digital lending Customer safety • Loan payments should only be made to lenders through the borrower’s bank account, never through a third-party pool account. • Instead of burdening the borrower, RE should pay the Lending Service Providers (LSPs) directly for the fees and charges. • Borrowers shall be provided with common sanction conditions or a Key Fact Statement (KFS) prior to receiving the loan amount. • The KFS shall contain the Annual Percentage Rate (APR), Loan amount, Recovery method, Grievance redressal mechanism, cooling-off/look-up period (if any), and other KFS contents clearly as part of the loan agreement.

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• The borrower’s prior approval is required for any increase in the credit limit. • By paying the principal and the relevant APR during the cooling-off period, borrowers can cancel their digital loans without incurring fees. • A nodal grievance redressal officer employed by RE and LSPs shall address all borrower issues. • The borrower may escalate the issue to RBI if the RE does not remedy it within 30 days.

Technology and data • Data gathering must be done with the borrowers’ express consent and be supported by audit trails. • Digital Lending Applications (DLAs) shouldn’t ask borrowers for non-essential details. • The DLAs/LSPs must obtain the approval of the borrowers before accepting, rejecting, or erasing the data they have gathered.

Legal and regulatory • Any lending sourced through DLAs (of the RE or the LSP employed by RE) must be disclosed to Credit Bureaus (CICs) by REs. • REs must notify CICs of any new digital lending products involving short-term loans, BNPL, or deferred payments.

Key Points of RBI guidelines and the future of fintech

A paradigm shift has occurred with how finance is transformed. Data protection, privacy, and competition ask for innovative ways to regulate and oversee with increased engagement and cooperation with other public agencies. To play a crucial part in promoting responsible Fintech adoption and creating accountable, open, and inclusive markets for digital finance, the financial sector, and other public bodies will need to rise to this challenge. Several policy considerations become apparent in this regard:

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• Promote healthy competition and innovation while minimizing risks. Adopting an enabling approach can enable ethical Fintech innovation. This adoption is essential given the rapidly changing landscape and quick spread of ideas from market to market. To encourage trust, innovation, and investment, authorities must take a proactive, practical, clear-cut approach in collaboration with public and private stakeholders. This is especially important since Fintech’s issues touch on the jurisdictions of consumer protection organizations, market conduct and competition authorities, and financial prudential supervisors. • As the usage of Fintech increases, be aware of changing policy tradeoffs. No single solution works for everyone; for instance, digital currency and alternative credit have distinct prudential and monetary policy consequences at lower degrees of penetration than at larger levels. As Fintech continues to infiltrate the banking industry, policy tradeoffs will change. This necessitates the implementation of appropriate protections to preserve fair competition, financial stability, guarantee data, consumer protection, and stop the exploitation of market power, among other things. As Fintech adoption grows, regulators can be assisted in balancing the tradeoffs between stability, competition, concentration, efficiency, and inclusion by establishing frameworks for open banking and data ownership, encouraging the development of financial infrastructure, and ensuring fair and transparent access to it, and reviewing any restrictions on product tying and linkages between banking and commerce. • The financial sector’s boundaries are blurred by embedding financial services, expanding monitoring horizons, and reevaluating regulatory parameters. Financial services are delivered as a part of underlying commercial transactions or social interactions that are part of customers’ workflows and daily activities. As a result, financial services are becoming more decentralized, provided by various entities, and embedded into other products and services. These are made possible by underlying innovations such as the atomization of the value chains in the financial services industry, product unbundling, the separation of consumer interfaces from underlying accounts, crypto assets, and DeFi. These movements are

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creating a more complicated constellation of Fintech, large tech companies, traditional regulated institutions, technology, and product providers, among other providers. • Regulatory, supervisory, and oversight frameworks should be reviewed to ensure they remain appropriate for the authorities to promote a secure, effective, and inclusive financial system. Existing regulatory and supervisory mandates and approaches are becoming insufficient due to the variety of new products and providers. The use of new technologies and a more comprehensive range of data, and the inclusion of new customer segments in increasingly complex markets, increases the risk of institutional landscape fragmentation. Countries should implement new binding global standards as soon as possible because the decentralization of financial services as represented by crypto assets also presents local Fintech, the future of the Finance Overview Paper, and international regulatory arbitrage issues. Broad guidelines that support the policy stance include ensuring a riskappropriate strategy; maintaining an even playing field by addressing equivalent activities and hazards in light of technology; and ensuring the precedence of fundamental policy objectives, which may necessitate specialized methods. • To promote competition and contestability in the financial sector, we need to anticipate market structure trends and effectively shape them. The industry is already moving quickly into a concentration of companies and platforms, partly because of economies of scale and network effects in data, even while the early focus has been on allowing entry and the velocity of innovation have come from tiny businesses and new entrants. That trajectory may lead to inclusion and efficiency in developing economies lacking strong, competitive, and inclusive banking industries. Regulators must proactively monitor market behavior to maintain at least contestable markets and a dynamic balance between competition, concentration, efficiency, data protection, and inclusiveness. Regulators will increasingly need to examine and influence the governance structures of economic institutions. In addition, authorities will need to decide whether and how to include new market-level services that resemble financial institutions in the regulatory framework.

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• Despite quick advancements in private money systems, ensure that public money is still appropriate for the digital age. The ability of public authorities to influence and protect the financial sector and economic development would be hampered by the crowding out of public funds. The role of public money, competition, and privacy may be challenged in the future due to ongoing advancements in the digitalization of the economy and payments, the world of crypto assets, and the dominance of giant tech businesses in payments and user data. Public authorities may need to consider structural options like CBDCs, enhancing policy frameworks surrounding crypto assets and major digital companies, modernizing, opening the doors of payment and related market infrastructures, and so on. In cooperation with public and commercial stakeholders, nations considering establishing a CBDC should carefully analyze the wideranging ramifications and design alternatives. • Considering the supranational nature of Fintech, pursue significant cross-border coordination and sharing of knowledge and best practices. With the help of Fintech advancements, service providers can reach a large client base across borders and offer services without necessarily being subjected to regulation in the customer’s jurisdiction. To protect their different financial systems and clients, regulators and public authorities must work together and coordinate. Global standard-setting organizations and international organizations like the IMF and World Bank play a crucial role in this regard.

Role of Fintech in MSME credit

The Micro, Small, and Medium Enterprise (MSME) sector is one significant market segment that is gaining from the digital transformation of finance and commerce in general. High cost of service, a lack of credit history or collateral, and bankability—both in terms of registration, verification, and record-keeping as well as in terms of financial literacy and capacity—are significant obstacles that MSMEs face when trying to access financing primarily due to the nature of their business. There are about six million MSMEs in India, and lending-focused Fintech can help address these issues. Ninety percent of banks responding to the Fintech Market Participants

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Survey anticipate that digital transformation will lower the cost of MSME lending, which illustrates the potential in terms of service cost. Fintech and large tech companies are leading the development of specialized customer-centric goods and processes and new business models that can compete with established competitors on cost, convenience, and inclusivity. To compete, banks and NBFIs are using new technologies, often in alliance with Fintech companies. A bank with a successful technology implementation strategy will have lower production costs, a lower cost of capital, and more data to fine-tune its algorithms, further lowering its credit costs. From the standpoint of MSMEs, new companies that offer specialized, targeted products and the big players who utilize technology to increase efficiency and lower prices contribute to better financing access. Social media giant Meta (Facebook) runs an MSME-focused credit facility program in India based on data analysis by a Fintech company in India. A sufficient digital infrastructure, legislative frameworks that facilitate digital onboarding, new suppliers, innovative products, and capacity building for MSMEs are all necessary for countries to realize this promise. A foundation of business data that may be used for financing is established by promoting widespread digitalization of MSME activities, strengthening advances in MSME registration and identity verification, increasing businesses’ productivity and increasing market accessibility. There are various MSME-centric associations, and organizations working with multiple Fintech entities and lending institutions to provide affordable, faster, collateral-free credit facilities to MSMEs in India. There has been quite a lot of investment in MSME-focused startups in India.

Conclusion

India’s total Fintech market opportunity is expected to reach around 1.3 trillion USD by 2025, which is expected to be driven by Lending and Insurtech. Whatever we have seen is just the beginning of Fintech growth in India despite various regulatory challenges.

Points to remember

Few important points to be taken care of by the early-stage Fintech startups may be:

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• Have a proper mission and vision statement, not just to put it on a website but to follow in letter and spirit. • Setting up objectives for the organization, product, and people. The goals must be very clearly defined. • Scope of work or job description for each role must be communicated at each level, including for promoters or founders. • All terms and conditions, privacy policies, and dispute resolution policies should be well defined. • The minutes of meetings should be recorded, and Action Taken Report (ATR) should be a must. • It is very important to have Standard Operating Procedures (SOPs) for each policy and activity to be done. • SWOT analysis - Strengths, Weaknesses, Opportunities, and threats are dynamic and must be reviewed periodically. • Problems are opportunities; if you can solve a problem, that is a business opportunity. • Everything must be written, documented, and communicated. Clear communication is a must for any organization. The key takeaway from this book would be to consider all aspects of building a Fintech business which cannot be limited to just creating a technology platform, having a great vision reflected in a business plan, or making an excellent investment pitch to the investors. It is a combination of all. Another important aspect is to consider and consider changing regulatory environment globally. While one may not be an expert in all the subjects, it would be great to have a very strong, experienced, and passionate team before anyone starts a Fintech. The book may be ending here, but I would assert that: • This is not the end of the book. • This is not the beginning of the end of the book. • This is the end of the beginning of the book. ……. and the journey of learning continues.

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Index Symbols 3D secure 11 A adaptive software maintenance 109 Advanced Encryption Standard (AES) 9 Amazon Web Services (AWS) 106 Angel Investment platforms India Accelerator 174, 175 Indian Angel Network 172 Lead Angels 173 LetsVenture 173 Mumbai Angels 174 Venture Catalysts 174 angel investor pitch Business plan and projections 147-150

Business risks 151 considerations 145-147 creating 144, 145 executive summary, preparing 152, 153 angel investors 144 Annual Percentage Rate (APR) 189, 190 Anti-Money Laundering (AML) 5 application login, lending fintech document upload 64 OCR Technology, for documents uploaded 64 Application Programming Interface (API) 4 Artificial Intelligence (AI) 17, 30, 114 Auto loans 57, 58

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4 wheelers 58 electric vehicle loans 57 four-wheeler (4W) loans 57 three-wheeler (3W) loans 57 two-wheeler (2W) loans 57 Automatic Speech Recognition (ASR) 126 Automatic Teller Machine (ATM) 25 B B2B services 18 B2C services 18 bank digitalization 24 banking evolution 24, 25 BharatPe 35 Blockchain 31 C Cascading Style Sheets (CSS) 36 case studies, in India LenDenClub 110-112 central bank digital currency (CBDC) 186 Certificate of Registration (CoR) 43 co-applicant 68 collection or recovery auto credit to account, in operations and accounts 82 EMI due reminders 81 EMI receipt 82 messages, for bounces 81 messages, for EMI representation 82 payment integration, with online payment gateway 82 common tech stack 88-90 competitive analysis 138

compounded annual growth rate (CAGR) 185 consumer loans 53 Content Management Systems (CMS) 33 corrective software maintenance 108 CRED 35 Cred E-commerce 36 Credit Bureau Integration 70, 71 Credit Bureaus (CICs) 191 credit card evolution 25 credit underwriting 68 Cred Pay 36 Cred Rentpay 36 Cred Stash 36 current technology scenario 25-30 Artificial Intelligence (AI) 30 Blockchain 31 data analytics 31 machine learning 30 Robotic process automation 30 customer acquisition process co-lending lead generation 63 corporate tie-up 63 digital marketing 62 mobile application 61, 62 online agents 62 website 62 D D2C services 18 data analytics 31 data protection 104, 105 deduplication 105 definitions, related to Fintech 3D secure 11 Account Information Service Provider (AISP) 11, 12

Index Acquiring bank/Acquirer 12 Advanced Encryption Standard (AES) 9 algorithms 5, 6 Angel Investor 6 API banking 12 application 3, 4 Artificial Intelligence (AI) 6 bank account statement 6, 7 Bank Identification Number (BIN) 12 big data 7 biometrics 8 Block Chain 15 cybersecurity 8 delivery date 8 electronic signature 8 embedded credit 13 embedded lending 13 EMV chip 13 encryption 9 e-wallet 12 feedback data 10 FinTech Sandbox 13 Initial Coin Offering (ICO) 6 InsureTech 6 integrated service 10 integrated service pages 10 KYC 5 Machine Learning (ML) 7 mobile wallet 10 payment gateway 14 Payment Switch 14 PCI DSS 15 Peer to Peer (P2P) lending 10 PPI Card 12 Robo advice 11 Software as a Service (SaaS) 4 tokenization 15 venture capital 11 Digit 39

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digitalization of documents 16 Digital Lending Applications (DLAs) 189-191 digital payment services 18 digital payments protection fund (DPPF) 185 digital payment transactions 187 digital transformation 17 Direct selling agents (DSAs) 62 disbursement 76-78 Distributed Ledgers (DL) 17 distributed ledger technology (DLT) 15 DTH (direct-to-home) recharges 33 E electronic payment systems 24 Emerging Markets and Developing Economies (EMDEs) 18 Employee Stock Ownership Plan (ESOP) 163 equated monthly installments (EMI) 74 European Union (EU) 102 external CSS 36 F Faircent 43 FamPay 47, 48 Federal Information Process Standards (FIPS) 102 financial sector case studies BharatPe 35 CRED 35, 36 MobiKwik 38 Paytm 32-34 Razorpay 37 financial services startups 47 FamPay 47, 48

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Zerodha 49 Zeta 48 Financial Technology 2 Fintech 1-3 case studies, in India 110 definitions 3 evolution 22-24 future 114 industry structure 29 loans 52 RBI guidelines 191-194 role, in MSME credit 194, 195 security 99 Fintech startups 32 financial sector case studies 32 insurance sector 39 lending space 41 Neo Banks 46 Fintech startups, in India challenges 179-182 Growth roadmap 182, 183 opportunities 179-182 G General Data Protection Regulation (GDPR) 102 GNU zip (Gzip) 37 gold loans 54 features 54, 55 process 54, 55 gross domestic product (GDP) 184 guarantor 68 H High Net Worth Investors (HNIs) 11 HTTP Strict Transport Security (HSTS) 37 I i2iFunding 44-46

Immediate Payment Service (IMPS) 184 Income Tax Return (ITR) 65 India Accelerator 174, 175 Indian Angel Network 172 Indifi tech stacks 98 Information Technology (IT) 118 Infrastructure-as-a-Service (IaaS) 106 Initial Coin Offering (ICO) 6 inline CSS 36 Insurance Regulatory and Development Authority (IRDA) 39 insurance sector 39 Digit 39, 40 Turtlemint 40, 41 Interactive Voice Response systems (IVRs) 122 internet of things (IoT)-based payments 186 investment pitch 141 investor requirements, recognizing 143, 144 need for 142, 143 J Jupiter bank 46, 47 K key APIs 66, 67 Key Fact Statement (KFS) 189, 190 Key Selling Points (USP) 145 L Lead Angels 173 legal entity identifiers (LEIs) 185 LenDenClub case study 110-112 lending fintech, building 61 accounting 83

Index application login 64 automatic scoreboard 69 collection or recovery 81 Credit Bureau Integration 70, 71 credit underwriting 68 customer acquisition or sourcing 61 disbursement 76-79 legal 83 loan servicing and monitoring 79 MIS generation 84 qualitative parameters, auto analysis of 71 verifying APIs 65 WhatsApp APIs 67 Lending Service Providers (LSPs) 190 lending space Faircent 43, 44 i2iFunding 44-46 Prest Loans 41, 42 ZestMoney 42, 43 LetsVenture 173 Life Time Value (LTV) 13 Loan Disbursement Checklist 77, 78 Loan Management System (LMS) 82 loan service providers 188 loan servicing and monitoring auto generation, of insurance policy 81 customer service 80 e-NACH 80 foreclosure process 81 independent database 79 loan facility, for top-up loans 80 multiple loan facility 80

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other charges 80 overdue interest 80 penalties 80 loans, Fintech companies 53 Auto loans 57, 58 business or MSME loans 58-60 consumer loans 53 gold loans 54, 55 personal loans 55, 56 Loan to Value (LTV) 75 M Machine Learning (ML) 17 Machine Translation (MT) 123 Magnetic Ink Character Recognition (MICR) 24 malware 100 Micro, Small and Medium Enterprises (MSME) 41 Minimal Viable Product (MVP) 31, 94 Ministry of Finance (MoF) 180 MobiKwik 38 mobile point of sale (POS) 182 MSME credit Fintech, role of 194, 195 MSME loans line of credit 59 process 60 working capital finance 58 Mumbai Angels 174 N National Electronic Funds Transfer (NEFT) 184 Natural Language Processing (NLP) 121 Neo Banks 46 Jupiter 46, 47 O OWASP 102, 103

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P payment and settlement systems (PSS) Act 186 Payment Card Industry Data Security Standard (PCI-DSS) 102 payments advisory council (PAC) 186 Paytm 32-34 Peer to Peer (P2P) Loans. 45 Peer-to-Peer (P2P) transactions 182 perfective software maintenance 108 personal loans 55, 56 phishing 100 Platform-as-a-Service (PaaS) 48, 106 point of sale (PoS) 185 portable or moveable banking 24 post investment management information system 171 compliances 171, 172 Prest Loans 42 preventive software maintenance 108 Private Equity (PE) 163 Public Sector Undertakings (PSU) 181 Q qualitative parameters, auto analysis 71 amount matrix 75, 76 field investigation report, scoring 72 PD report, scoring 72 ROI matrix 73 sales visit report, scoring 72 tenure matrix 74, 75 third party integration, for fraud detection 72

Quality Analyst (QA) 110 Question and Answer (Q&A) session 172 R ransomware 100 Razorpay 37 Razorpay Capital 37 RazorpayX 38 RBI guidelines 191-194 RBI payments vision 2025 184 e-payments, streamlining 185, 186 norms, for digital lending space 188-190 technology, using 186, 187 RBI recommendations, for digital lending customer safety 190, 191 legal and regulatory 191 technology and data 191 Recovery Point Objective (RPO) 105 Recovery Time Objective (RTO) 105 regulated entities (REs) 188 Reserve Bank of India (RBI) 10, 45, 82, 180, 184 revenue model, products/ services competitive advantage competitors 155, 156 current year estimates 157 customer options 155, 156 investors, following up 161, 162 key competitors 155, 156 marketing strategy 157, 158 multiple possible scenarios, creating 161 next year projections 157 overview 154, 155

Index prior revenues 157 proposed deployment valuation 158, 159 revenue cost metrics 156 shareholding pattern 159, 160 total funds 158 Robotic process automation 30 S Saarthi.ai case study Bharat 118 digital and geographic divide 118, 119 rural uprising 119, 120 Sabanes-Oxley Act (SOX) 102 Secured Tech Stack technology, using 86-91 security significance 104 security system, Fintech 100 3rd party software, patching 101 database security 103 endpoint security 101 firewall 100 mobile device security 101 network security 100 OS security patches 101 pen testing 103 security compliance 101 web security testing 103 Shareholders Agreement (SHA) 171 Share Purchase Agreement (SPA) 171 Software as a Service (SaaS) 4 software deployment 106, 107 maintenance 107, 108 preparation 106, 107 testing 107 Software Development Life Cycle (SDLC) 107

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software maintenance 108 adaptive software maintenance 109 corrective software maintenance 108 perfective software maintenance 108 preventive software maintenance 108 process 109, 110 techniques and strategies 110 speech recognition working 132-134 standardized key fact statement (KFS) 189 SWOT analysis 151 T Target Group (TG) 147 technology for creating mobile applications 91 for developing web applications 91 in financial setups 15-18 tech stack examples 95 Netflix 96 Paytm 97 Shopify 96 Udaan 97, 98 tech stack, selection parameters latest technologies 92, 93 market timing 94 project purpose and size 93, 94 scalability of business 94 security systems and cyber security 95 tech stacks, of Indifi 98, 99 term sheet drafting 164-170 handling 162, 163

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updating, potential investors 163 transfer learning 129 Turtlemint 40, 41 U UIDAI CEO 183 Unified Endpoint Management (UEM) tools 101 Unified Payments Interface (UPI) 183 utility of automation 128, 129 V variables fields, scorecard benchmarking 70 Field investigation (FI) 70 Financial Control Unit (FCU) 70 social scoring 69 venture capitalists (VCs) 143, 144 Venture Catalysts 174 vernacular 139 Video KYC 135 end-to-end encryption 136 facial recognition 136 high-quality picture 136 liveness detection 136 location spoofing, preventing 136 video technology 134, 135 for branding 137-139 for marketing 137-139 virus 100 voice bots 115 Voice-first Conversational AI language 126, 127 natural conversations, enabling 127, 128 speech processing 127

string and sustainable Bharat 131, 132 voice technology automation of process flow 117 cross-lingual embeddings 129 current state of technology 123, 124 gap bridging 126-134 Information and Communication Technologies (ICTs) 122 language 116 language of technology 121 language phenomena, challenging 125, 126 naturality of language 117 players 115, 116 Saarthi.ai case study 118-126 speech processing 116, 117 Voice for Bharat 120 voice to text 114 flow chart 115 Vs, of Fintech vernacular 139 video 134-136 voice 114, 115 W W3Techs 33 web-based business models 24 web-based shopping 24 WhatsApp 18 WhatsApp APIs 67 Y Y2K 17 Z Zerodha 49 ZestMoney 42, 43 Zeta 48

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