Why we invested: Fi
There are decades where nothing happens and then there are months where decades happen. In the last 18 months, we have seen the rapid scale up of digital and neo banks across the world. These fintech players are addressing critical customer pain points across varying geographies and customer segments. Neo banks are now solving for the underbanked population in Indonesia, low net promoter score of some of the traditional banks in Brazil, low level of retail credit penetration in Philippines and lack of integrated banking/financial & payment tools for small merchants across markets, among other pain points.
The incredibly fast adoption of neo banks across the world can be explained by a growing disappointment of users with conventional banking solutions, resulting in a pressing consumer need for better financial platforms. The increasing digital penetration globally, further enables neo banks to be a reality in emerging markets.
In India, 600 million users are already online, with another 300 million expected to come online by 2025, setting the stage for customer experience (CX) focused solutions to grow rapidly. Traditional banking applications have not progressed at a similar pace in recent times, and as a result, CX-focused, personalized banking platforms are now stepping into the gap.
Overall the Indian banking sector has developed well over the last 15 years with a large profitable market. The financial services space has been an attractive hunting ground for VC/PE and public market investors. This is a mirror image to the mid-2000s during my time in private equity as it is today. One of the investments made from a prior investment firm in Kotak Mahindra Bank (PIPE deal at the time) highlights this market cap creation potential.
India is now amongst the fastest growing fintech markets in the world. Of the 2,000+ fintech companies existing in India today, over 67% have been set up in the last 5 years. The industry has seen cumulative investments into fintech companies of more than $10B over the last 5 years.
Let’s take a look at banking. The Indian retail revenue for private banks is about $45 billion. When we have looked at neo banks globally they are projected to hit a penetration of 20-25%.
As we were looking for opportunities in this segment we met the Fi team in 2019. They are targeting the 60 million salaried millennials in India focused on digital banking solutions including saving accounts and debit card facilities.
As seen across several countries, millennials are not as connected to their banks as the previous generation. They are open to switching and are used to a high quality customer experience. This is true in India as well. In addition, the country has seen a massive surge in mobile and internet penetration in the past 5 years. Following the surge, many platforms in ecommerce, food delivery and ride-hailing are thriving and the experience offered by the platforms has become a norm for millennials.
Fi is reimagining banking experience whether it’s instant account opening, hyper-personalized app, FIT rules, smart savings or simplified payments. We believe several of these features are game changers. As part of our work, we interviewed several potential customers and received extremely positive feedback for Fi’s offerings. You can check out the product for yourself here!
Imagine opening a new bank account in under four minutes, specifying your savings goals, and making small savings deposits every time you order from Swiggy, or Virat Kohli hits a four in a cricket match! To further help you save, you can review your recent spending at the tap of a button, and get personalized spending insights, recommendations, and rewards. This is banking re-imagined, simplified, even fun!
Fi even it’s early days has been a magnet in attracting stellar talent and taking a product first approach. They have a 70+ member tech team, building a world class product which is focused on customer experience.
We are excited to partner with Sumit Gwalani, Sujith Narayanan and the entire Fi team as they help users demystify their finances, maximize savings and enable them to spend intelligently. The Fi team has already proven themselves to create high CX products in the fintech space to elevate customer experience having previously scaled Google Pay to ~50mn monthly active users in India.