FINTECH INDUSTRY

REPORT

Assigned By: Ashwani Kumar

 FintecH
~ VIBHU RAJ
In 2021, India was in the spotlight with its FinTech achievements that echoed the global
momentum in this industry. India is the third largest FinTech market, following the US and
the UK, with several FinTech unicorns, startups, and funding. EY and Chiratae’s recent study
shows that the next decade will record a 10x growth in the India FinTech market to achieve
$1 trillion in AUM and $200 billion in revenues. Apart from the COVID-19 lockdowns as an
unexpected but critical push for digital adoption in financial services, several other factors
continue to contribute to the FinTech’s growth story. These factors include reliable and fast
computing power of handheld devices, faster and widespread internet access, and the
government’s push for a digital economy. In addition, increased demand for inclusive
financial services, customer expectations, and hyper-competitive financial services market
underpins the rise and growth of FinTech.
Major FinTech trends that emerged globally are embedded finance, PayTech, e-commerce
growth, Insurtech, and Wealthtech. From payments to investments and lending, embedded
solutions are penetrating every aspect of financial services. Digital payments have become a
critical enabler of e-commerce sales, supporting the expansion of businesses small and large
to new customer segments and new global markets. From mobile money to services like
BNPL, crossborder transactions, mobile wallets, and payment orchestration, FinTech players
like (Visa, Klarna, and PayPal) are playing an important role in increasing the banked
population around the world. InsurTech and technology startups, to ensure the majority of
the population is insured, continue to redefine customer experience and smooth onboarding
processes through innovations such as risk-free underwriting, on-the-spot purchasing,
activation, and claims processing. WealthTechs are increasingly democratizing equities and
alternative investments for retail investors. The shift from single purpose to multipurpose
apps has resulted in the emergence of solutions and services such as Super Apps. These
services include transportation (like Lyft), retail (like Amazon), food delivery (like DoorDash),
banking, entertainment, and more. From traditional institutions deploying ‘robo-advisors’ to
advanced algorithms assessing a credit applicant’s risk, fintech companies will probably
continue to expand their use of AI and machine learning in 2022.
In line with global trends, India’s FinTech ecosystem has seen tremendous growth over the
last few years, making it one of the largest and fastest-growing FinTech markets. Earlier in
2020, India topped among Asia-Pacific (APAC) countries in FinTech investments, and then
extended its lead in FinTech investments, with $7.8 billion raised in 2021.
Southeast Asia-based FinTech companies were close behind and registered the biggest
funding growth in Asia-Pacific in 2021. FinTech startups in Southeast Asia netted $4.70 billion
across 217 transactions in 2021, up from $1.13 billion across 118 deals in the prior year. For
a comparative lens - according to S&P Global Market Intelligence, private funding received
by FinTech in Asia-Pacific more than doubled to $15.69 billion in 2021 from $5.87 billion in
2020. While this growth followed subdued funding activity in 2020, the 2021 figure also
represented a 74% jump from 2019’s pre-pandemic level. Deal volume followed a similar
trend. In the most recent year, FinTech companies in the Asia Pacific sealed 754 deals, up
81% and 49% in 2020 and 2019, respectively.
 According to the Tracxn database, as of July 2022, the number of FinTech startups in India
was over 7300, excluding the acquired and the deadpooled players. Some of these are
recently founded players in the early days of building minimum viable products. The total
volume of FinTech funding till June 2022 has been approximately $30.2 billion, with 35% of
the funds raised in the last sixteen months. In 2021, FinTech funding recorded a massive
surge, clocking at $7.8 billion. While earlier in 2020, FinTech faced a dip in funding by 26.7%
to $2.9 billion.
 Zerodha - Bootstrapped to a Billion Dollar
Valuation Startup
~ MAHALAXMI SWAMINATHAN

What is Zerodha?

Registered with the Securities & Exchange Board of India (SEBI), Zerodha Broking
Limited is a financial services company member of BSE, MCX, NSE, NCDEX, and
MCX-SX which was built to provide brokerage facilities to traders of the stock
market. Founded by Nikhil and Nithin Kamath in 2010 and headquartered in
Bengaluru, it offers various facilities like retail brokerage, mutual funds, bonds, and
currencies & commodities trading. Popularly called the bootstrapped startup, it is the
fastest startup to attain a self-assessed valuation of over $ 1 billion in 10 years.

Name & Tagline

Being an English-Sanskrit portmanteau word, the term ‘Zerodha’ consists of the

English word “Zero” and the Sanskrit word “Rodha” which means Barriers or
Obstructions. The whole word sums up to “No Obstructions” which is the motive of
the company. With the tagline of “The Free Trade Zone”, the platform provides
hassle-free online stock broking opportunities to a wide client base of 5 million
users.

Vision and Mission

“India is very dependent on foreign capital to drive the country. For any country to
do well, you need residents to put their money in the market. The money shouldn’t
just stay in fixed deposits and real estate. I want to encourage people to educate
themselves and put the money in the ecosystem in some way or the other to drive
growth.” - Nithin Kamath

Zerodha is firmly dedicated to working towards the vision of no broker for the benefit
of stakeholders in the financial markets. The company is committed to providing the
best customer experience with highly personalized customer services and support.

The upcoming goals aim to add 5-10 million new investors with the help of its
platform to the Indian financial markets.

How it Works?

The company works on the principle of reduced commission or low brokerage

charges on various transactions to attract a large number of traders and investors to
use this platform. With the first-mover advantage as the first discount broker, it also
puts in constant efforts and comes up with ideas, strategies, and innovations for
making it a user-friendly platform. This also gives it an edge over its other rivals.

Business Model and Revenue Model

“Low margin and high-volume model” is what is followed by Zerodha as a business

model. Due to high trading volume, Zerodha charges minimal transactional fees from
traders. These smaller fees collection from a huge client base generates a good
amount of revenue for Zerodha. One more factor aiding the company in its high-profit
margins is the operational cost. The cost of operations is low for Zerodha as
compared to other top brokers due to its online trading structure which reduces
maintenance and operational cost to a very large extent. This also allows the
company to divert its revenue in the development of its structure and take the
necessary steps to achieve its vision for future financial markets.

Diversification

Zerodha has diversified and expanded its core business to include partners like
SmallCase, Streak, and Sensibulland GoldenPi. These offer specialized platforms for
Investments, Algo & Strategy, Options Trading, and Bonds Trading. These platforms
help Zerodha in retaining a customer base that is on a constant look out for a more
specific platform for their respective needs.

Marketing Success Factors

The factors involved in the success of Zerodha are as follows:

1. Standard Proposition

The first strategy of Zerodha was about making things crystal clear for its
customers. Most users don’t trust brokers due to high and non-transparent
prices that often involve confusing the clients as well. The FAQ section of
Zerodha comes to the service for its customers by giving short, direct, and
crystal clear answers to the various queries raised by their users. This is
highly admired by most users as it makes things easy and convenient for
them.

2. Referral Program and Business Affiliates

The major factor helping Zerodha marketing is its referral and affiliate
programs. They choose to give commission to their referrals rather than
 investing in advertising their company. By giving a commission to their
promoters for every purchase that happens due to the affiliation program,
Zerodha managed to tap into thousands of customer bases without zero
upfront cost.

3. Innovation and Technology

Keeping in mind the need and importance of change and growth, the
company took the advantage of technology to offer something different and
unique to its customers and launched various applications such as Kite, Coin,
GoldenPi, etc. The new features that the company keeps adding to these
applications make sure that their clients don’t lose interest in them.

4. Online Engagement and Digital Marketing

Online presence and engagement are very important for a company. By

offering various platforms for the clients to educate themselves, the company
could keep its users engaged on its website. The Varsity of Zerodha offers
a lot of content on the fundamentals of the stock market and thus brings a lot
of traffic to its website. Digital marketing enhances the authority of the domain
in the eyes of Google and provides a subscriber base. The genuine and
prompt help of customer service also increases the customer’s trust in the
company and keeps them engaged and loyal to the company.

Risk and Challenges

The various risks and challenges faced by Zerodha are as follows:

1. Heavy trading volume on the platform can cause technical glitches which can
decrease customer satisfaction.
2. Due to the unavailability of offline branches, the company faces the challenge
of a lack of faster and more efficient customer service and support.
3. Non-adherence to the 48 hours payout time limit and delayed payments can
lead to accumulated payables for the company and can prove to be a burden
and obstacle to the company’s growth.
4. The company does not provide advisory reports and investment pattern
analysis to its customers. The availability of such services from other big full-
service brokers can prove to be a challenge in the growth of Zerodha.
5. Competitors are offering lower charges for transactions which pose tough
competition to Zerodha and may lead to a loss of market share.
6. Regulatory changes may affect profit margins thus reducing the total revenue
of the company. This may also affect the ventures of the business.
Zerodha - Future Plans

At present, Zerodha is looking to reduce the cost of transactions in its discount

brokerage services. To attain its target, the company would be launching low-cost
funds.

Zerodha plans to remove reliance on legacy systems as per its latest report of April
2022. To do so, the Kamath brothers-led company would be developing an in-house
order management system (OMS) which will be probably rolled on in 2023.

Conclusion

With the help of technology and in-depth study and analysis of the market, Zerodha
become a pioneer in online discount broking in India. It catered to the needs of both
the existing investors and also the untargeted buyer groups. This is defined as value
innovation which is a simultaneous pursuit of both low cost and differentiation
thereby creating a leap in value for both buyers and the company.

Reference sites:
 https://tradingfuel.com/zerodha-founder-nithin-kamath-success-story/
 https://startuptalky.com/zerodha-marketing-strategy/
 https://startuptalky.com/zerodha-trading-services/
 https://www.analyticssteps.com/blogs/success-story-zerodha
 Paytm
~ SAYANTIKA DAS
Paytm (acronym for "pay through mobile") is an Indian multinational financial technology company, that
specializes in digital payments and financial services, based in Noida. It was founded in 2010 by Vijay Shekhar
Sharma under One97 Communications. The company offers mobile payment services to consumers and enables
merchants to receive payments through its QR code, point of sale and online payment gateway offerings. In
partnership with financial institutions, Paytm offers financial services such as microloans and buy now, pay
later to its consumers and merchants. Apart from bill payments and money transfer, the company also
provides ticketing services, retail brokerage products and online games.
Business Model
Paytm offer a comprehensive suite of payments services to acquire consumers and merchants, as well as
leverage their two-sided, consumer and merchant ecosystem and rich insights from their platform to cross-sell
high-margin financial services and merchant services (commerce and cloud).
Its business model revolves around providing digital payment solutions to individuals and businesses, as well as
offering a range of financial services.
Here are some key aspects of Paytm's business model:
1. Digital Wallet: Paytm's digital wallet is a key part of its business model. It allows users to store money
in their Paytm account and use it to pay for various goods and services online or in physical stores.
Users can also transfer money to other Paytm users and bank accounts.
2. Payment Gateway: Paytm offers a payment gateway that enables businesses to accept payments from
customers using various payment methods, including credit and debit cards, net banking, and UPI.
3. Financial Services: Paytm has expanded its business beyond digital payments to offer a range of
financial services, including savings accounts, insurance, loans, and investments.
4. Merchant Services: Paytm also provides services to merchants, including QR code-based payments,
POS machines, and online store development.
5. Advertising: Paytm generates revenue through advertising by displaying targeted ads to its users based
on their transaction history and profile data.

Overall, Paytm's business model is built around offering a wide range of digital payment and financial services
to individuals and businesses in India, while generating revenue through transaction fees, commissions, and
advertising.
Cost Structure
Being a service-driven technology platform, most of the expenses that paytm has to bear is related to its own
platform and customer acquisition. Apart from that a large part of its budget also goes into improving the
security of the platform and preventive measures to avoid any kind of fraudulent activities. It also invests in
systems to avoid the risk of money laundering.
Paytm’s major expenses include (i) payment processing charges (40%), (ii) marketing and promotional expenses
(11%), (iii) employee benefits expenses (25%), (iv) software, cloud and data center expenses (7%), (v)
depreciation and amortization expenses (4%), (vi) finance costs (%), and (v) other expenses (12%).
Market Share
According to the data released by the National Payments Corporation of India (NPCI), the fintech major
processed around 367.42 Cr transactions worth INR 6.49 Lakh Cr during the month of December, 2022. Paytm
emerged as the third biggest player in the Indian digital payments ecosystem following PhonePe and Google
Pay, accounting for 14.94% of the total UPI transaction value and 10.82% of the total count. In absolute
numbers, Paytm processed 117 Cr transactions worth INR 1.38 Lakh Cr in the last month of 2022.
Future Prospects
The future potential of Paytm is quite promising, given the significant growth potential in the digital payment
market in India. The Indian government has been pushing for a cashless economy, and as a result, more and
more people are turning to digital payment platforms like Paytm for their financial transactions. Paytm has also
been expanding its services to include new offerings like mutual funds, insurance, and wealth management,
which can attract more users to the platform. The company has also been investing in technologies like artificial
intelligence and machine learning to improve its user experience and make its platform more secure.
Furthermore, Paytm's recent IPO has generated significant interest among investors, indicating a positive
outlook for the company's future growth potential. Overall, with its established brand, wide user base, and
growing range of services, Paytm is well-positioned to capitalize on the expanding digital payment market in
India and continue to grow in the future.