Mumbai has a natural leverage as a city to become the world’s global fintech hub. It is the financial capital of India. The top financial institutions (FIs), regulatory bodies like SEBI, RBI and the talent pool are based in the city. These elements have to be aligned in the right manner to convert Mumbai into a global fintech hub.
Each of these elements and each entity inside these elements have a role to play. For example, there are many FIs and they are of many types. Each FI has developed a relationship with fintech in their own way. “They need to be more open. In the sense that they should open up their data sets when required by an innovative fintech, which has developed a solution, which will fail to prove its mettle until its is tested over a particular dataset. Subsequently, the solution can be scaled up. The faster this cycle becomes, the faster the innovation cycle to become the best. Otherwise, by the time, the fintech tests the solution, pitches to an investor, it is already a year and the idea becomes old and a few other firms have already developed similar solutions,” informs Suniti Nanda, Chief Fintech Officer, Maharashtra. A few organisations are doing it in an open way and there are certain FIs which are hesitant but still doing it in a closed manner and sharing their APIs with the fintechs. Open APIs is not a mandate but the FIs are opening up in their own ways.
The fintech innovation space blossomed in the UK after Open API was declared as a mandate in the form of Second Payment Services Directive (PSD-2). The nine biggest banks in UK, as a result had to compulsorily share their data in a secure and standardised format. This gave the necessary fuel to the fintechs to test their solutions for efficacy. Open API thus will set the base for Mumbai to become a global fintech hub. “The Government can prove to be the right kind of catalyst by bringing in the required reforms for innovation to be tested. In this line, the Govt of Maharashtra is considering to open its datasets,” states Nanda.
The regulator, in this case the RBI, has also launched a regulatory fintech sandbox. It allows fintechs to test their solutions in realtime with limited regulations. According to the RBI draft, the sandbox will provide a universal, closed and regulated platform for fintechs, regulators, innovators, FIs (as potential deployers of the technology) and customers (as end users) to have dry runs, and field tests to explore and collect evidence on the potential benefits of new financial innovations, while at the same time, carefully managing and containing their risks. Mumbai, as a coincidence, has all the necessary stakeholders – FIs, large fintech ecosystem, regulatory oversight – all in geographic proximity. Top it up with the educational institutes, which have already begun with curated courses to release the right kind of talentpool in the marketplace.
Need for entrepreneurial, product mindset
While all the necessary ingredients are present for Mumbai to become a global fintech hub, the Indian fintech entrepreneurs will have to evolve themselves to be more entrepreneurial. “We are a country, which started in the services domain. The conventional youth in India usually thought of going to college and then having a decent job. The shift has to happen towards running businesses, having a product and entrepreneurial mindset,” says Nanda.
India is a different marketplace compared to other countries. There is a huge opportunity in developing tech solutions that will enable financial inclusion and banking the unbanked – solving for India and solving for ‘Bharat’. “Another important area that requires attention is having the right business models. Just tech innovation will not suffice. Unless it is combined with a sustainable business model, where the accelerators play a role,” suggests Nanda.
Mumbai Fintech Hub
The MFH has created a fintech registry, with a pull and push mode. They register themselves on https://fintech.maharashtra.gov.in/. Over 300 fintechs have registered. “We keep track of these entities in terms of their activities and also coordinate access to the investor community. The MFH is also building a community of investors and providing them access to the kind of segment of startups they are looking for. The VCs, PE can also register. The attempt is to make a marketplace for the relevant stakeholders associated with the fintech space. The matchmaking can become autonomous then. “The idea here is also to be a connecting point. If a fintech comes to an incubator and if they cannot match the potential of the scale the fintech can achieve through them and if the same incubator is connected to MFH, then we can connect the startup to the right accelerator,” says Nanda.
The Maharashtra Government has grants worth `10 lakh for startups who have the right solutions but possibly close down for want of funds. Accelerators are also partnering with the government. The startups, which are B2C or B2B2C are given access to them to hasten their market access require-ment.
The MFH is also setting up an education marketplace of sorts – a platform for students and FIs, startups. Content will be generated, which will be consumed by students and accordingly there are mechanisms set, for the companies to hire students in entry level positions. On top of it, there are plans to devise special courses, both for students and employees to upskill themselves and make them market ready and employable. “The intent here is also to bring the talent in Tier 2/3 cities into the mainstream. If they have the right level of interest and talent then they can also be a part of the fintech ecosystem,” informs Nanda. There are about nine educational institutes and the content providers include NPCI, Kotak Mahindra Bank, ICICI Bank, S P Jain, IBM, etc.
Lastly, the Open API platform has been launched. It provides a common ground for FIs and fintechs to work together and speed up innovation. “MFH is also working with industry bodies like NASSCOM and others. They collaborated with us actively in the three roadshows done in Mumbai, Hyderabad and Bengaluru,” says Nanda.
In the last year’s budget proposal, the Maharashtra Government had announced a corpus of `250 cr for startups, wherein the idea was to take equity in fintechs and if that can help the ecosystem in a better way.
Future roadmap
The focus will remain on the platform FInD (FinTech Investments and Deals). With the objective to connect investors and startups, with respect to funding. The MFH targets to get close to US$ 500 mn of funding, in this financial year for the startups onboarded on the platform. The marketplace for educational institutes will also be extended to more institutes and companies. “From an ecosystem standpoint, three-four accelerators will be onboarded for different themes – financial inclusion, insurance, are the areas that will be stressed upon. The API sandbox will be scaled up further to add more entities onto it,”states Nanda.
Agri fintech space
In the fintech registry, there are a few startups having agri loan disbursal solutions. It is found that if the farmers do not get the loans at the right time, then they lose out on the opportunities.
There are agri fintechs offering solutions in predicting the right price, which will help in insurance and underwriting. Startups are also working on a blockchain marketplace for agri elements.
In February 2018, Maharashtra became the first Indian state to announce a fintech policy. Over the year, the government disbursed Rs 9 crore of funds in grants, reimbursements and prize money to 250+ startups in the state. In December, the government launched an inaugural accelerator programme, and 12 ventures were incubated. It also appointed a dedicated Fintech Officer to oversee growth in the sector. Looking this I believe time is not far for Mumbai to become a global fintech hub.