SUMMARY
The transaction was executed back in September last year and is said to be pegged at $3.42 Mn
With the acquisition, slice is said to be exploring multiple integrations and customised offerings for its users
Inc42 estimates that the country’s total fintech market opportunity is projected to reach $1.3 Tn by 2025
Bengaluru-based fintech startup slice has reportedly acquired a 5% stake in Guwahati-based North East Small Finance Bank for $3.42 Mn (INR 28 Cr). The transaction was executed back in September last year after months of exploring such opportunities.
Sources told The Economic Times that slice could further increase its stake in the Bank but those discussions are yet to materialise.
It is pertinent to note that investments involving sale of up to 5% do not require regulatory approvals. However, the fintech player will have to seek the Reserve Bank of India’s (RBI’s) approval if it intends to further scale its investments.
“There is more at play between slice and North East Small Finance Bank which is why it’s been under the wraps thus far,” a source was quoted as saying.
People familiar with the development also said that slice was exploring multiple integrations and customised offerings for its users through the deal. However, more clarity could emerge over the ‘nature of partnerships’ between the two sides on facets such as products and ownership in the next few months.
Sources also added that working closely with the small finance bank would ‘open many doors’ for the fintech player and would make ‘things easier’ for slice.
“… Essentially, it makes sense to have more stake in the small finance bank and own the stack for its businesses. They have been very sensitive about it since it would involve the regulator’s clearance,” added people aware of the development.
Why slice’s Acquisition Means More Than What Meets The Eye?
Slice sped up plans to explore potential investments in banks ever since an RBI diktat, in June 2022, rendered a major blow to its very business model. slice, which was founded in 2016 by Rajan Bajaj, offers credit solutions largely targeted at the younger demographic in the age range of 18 and 29.
Previously, it also offered prepaid credit cards but shut down the vertical after RBI, last year, barred non-banking financial companies (NBFCs) from loading prepaid payment instruments (PPIs) with credit lines.
Subsequently, it instituted a slew of reforms and hived off its payments and credit businesses into two separate verticals. It has also been looking to scale new products such as unified payments interface (UPI) offerings.
In some respite, the fintech unicorn finally received a PPI licence from the RBI in December last year.
The investment also underscores the fintech unicorn’s compulsions to tide over the regulatory quagmire that has emerged in the past few years. Despite owning an NBFC licence for close to four years now, slice will also be eligible to convert itself into a bank, via a fresh licence, post operating as an NBFC for five years.
However, RBI has so far been very picky when it comes to granting banking and even NBFC licences. It flagged a slew of concerns when it comes to fintech players applying for such licences, ranging from ownership of fintech startups to the origin of capital flowing into these entities.
As a result, many fintech players have looked at acquiring stakes in smaller banks or partnering with big banks to operate seamlessly.
In the past, the beleaguered fintech major BharatPe signed a joint venture with Centrum Financial Services to launch Unity Small Finance Bank, which eventually took over the cash-strapped PMC Bank. Recently, HDFC Bank also picked up a 7.75% stake in fintech startup Mintoak for INR 31.1 Cr.
Banks such as Federal Bank and SBM Bank India have also worked with a slew of new age fintech startups from Niyo to Jupiter to scale their offerings and offer products.
An Inc42 report estimates that the country’s total fintech market opportunity would reach $1.3 Tn by 2025, growing at a CAGR of 31% between 2021 and 2025.
