Here Are Zeta CEO’s Three Buckets To Segregate Financial Businesses

Fintech SaaS unicorn Zeta’s CEO and cofounder Bhavin Turakhia believes the term fintech is often used incorrectly to define all financial businesses and that there is a need to divide these companies into three core buckets for better understanding – manufacturers, distributors and technology service providers.

“If you look at the financial services space, it is no different than any other ecosystem. You have manufacturers, distributors, and technology service providers. That captures the entire value chain of the industry per se,” Turakhia said at Inc42’s The Makers Summit 2023, speaking at a session on fintech.

“We can either become a bank or power banks (that provide services to banks). That is what I call fin and tech,” he explained.

Turakhia categorised banks and licenced entities as ‘manufacturers’ of financial products and the companies selling financial products as ‘distributors’.

“You’ve got your manufacturers – these are licenced, regulated, chartered institutions (such as) banks, NBFCs, credit bureaus across the world that are licensed to manufacture a financial service product. You’ve got your distributors, which include the vast majority of fintechs. They are not themselves manufacturers but are distributing products manufactured by others,” the Zeta founder explained.

He asked fintech founders to carefully choose the category they want to do business in and advised them to not be present in two or more categories due to the inherent differences in their margin profiles and profit pools.

Referring to the collapse of the Silicon Valley Bank, the Zeta founder said that technology plays an important role in assuring a bank’s stability. As a result, banks are now more willing to adopt new technologies and pay for them, he added. However, he also highlighted the reluctance in some of the banks in using new technologies.

“Different financial institutions will be ready at different times. There are financial institutions that are both forward-thinking and ready. There are institutions that are interested but not ready themselves. They know they have to change the technology but are kind of sitting on the sidelines. The third bucket (of banks) is the sceptical ones. They are very very risk-averse and are not ready to make any changes,” Turakhia said.

However, talking about the use of technology, he said that banks these days run the risk of a bank run in the event of a technical failure, which wasn’t the case earlier. 

Talking about Zeta, the CEO said that the unicorn works with the third bucket of technology service providers.

Founded by Turakhia and Ramiki Gaddipati in 2015, Zeta offers a cloud-native neo-banking platform for issuance of credit, debit and prepaid products that helps companies launch retail and corporate products. 

Zeta’s Indian entity reported a 50% year-on-year decline in its net loss to INR 20.71 Cr in FY22, while operating revenue grew 2.1X to INR 615.05 Cr.