It will take another three to five years to have a billion-dollar fintech company emerge in India as the sector will take a profit-first and valuation-later approach, unlike their e-commerce counterparts, said panellists at News Corp VCCircle FinServe 2016 summit in Mumbai on Thursday.

India’s fintech startups will also learn more from China, owing to similar demographic opportunities and challenges, unlike other industries that primarily learnt from the US, the panellists said. While there are no successful models yet, companies are experimenting with different models that include marketplace, bidding process and intermediary, they added.

Moderator Anand Lunia, founder at partner at India Quotient, said the fintech segment has several players with each exploring different business models and asked if these companies can be called as the extended arm of banking companies.

Adhil Shetty, founder and CEO of Bankbazaar, said the popularity of the company is that its website received 90 lakh visitors in the month of March alone. Hence, it won’t be an extended arm as the platform offers products from partnering financial services companies as well standalone products. 

Vineetha MG, partner at Samvad Partners, said that there has been no disruption outside of the pure lending domain and there is scope for insurance players to tap the fintech model for delivery of their products. She added that India follows the UK's disclosure-based model for regulating the sector. 

Democratisation of data
The panellists concurred that the exclusive data used for processing loans by each fintech company should be available in the market, wherein every non-banking finance company will have access to it.

Gaurav Hinduja, co-founder of Capital Float, which operates a hybrid model by lending online through its non-banking finance company, said these data sets will reduce the time taken from application to disbursal to 10 minutes. He added that social data can be used for verification as well as help in recoveries. 

Hinduja also said that a price war among fintech companies is inevitable, but it won’t be as much as in e-commerce, which is a winner-takes-it-all business. Fintech players have a large enough market to grow and they will take years to match the market share of public-sector banks.

Rajat Gandhi of Gurgaon-based Faircent, which operates a peer-to-peer (P2P) lending platform facilitating borrowers and lenders through a bidding process, said that credit score would continue to be main criteria for disbursal of loans while data from social media can only be a value-add. 

Shankar Vaddadi, CEO and founder of P2P lending company i-lend, said data is an enabler and should be used to provide traditional products with a difference and cut the disbursal costs.

Customer acquisition, delinquencies
Vaddadi also said that fintech companies are increasing focus on customer acquisition, but added that this will not be done by burning cash.

BankBazaar’s Shetty explained that the business is different from the e-commerce industry, which needs to burn cash for acquisition of customers. He said BankBazaar’s business has grown five times after Sequoia Capital and Amazon invested in July 2015. Fintech companies need to spend mainly on marketing, people and core technology, he said. He added that fintech companies will question the status quo, pushing banks to change.  

The panellists also said that chances of default by borrowers are lower for fintech companies as these firms monitor the business performance of the borrower through analytics that can give out an early warning. Vaddadi said his firm has a 0.16% default rate. 

The day-long event saw participation from nearly 250 delegates.

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