Zeta’s Bhavin Turakhia Calls Fintech A ‘Fallacy’; Here’s Why

“Fintech is the most abused buzzword out there,” said Zeta’s Bhavin Turakhia while talking about what the word ‘fintech’ actually means, adding that the term is actually a fallacy.

Speaking at Inc42’s The Makers Summit 2023, Turakhia said the term, which has a lot at its core, is being used interchangeably across startups providing financial services.

According to Zeta’s founder, ‘fin’ and ‘tech’ are very different things, and only a few startups can be called fintechs. “We can either become a bank or power banks. That is what I call fin and tech,” he explained.

“There is no clear definition [of a fintech], and it is kind of difficult to make a clear definition out of it,” Turakhia noted.

Explaining his stance, Turakhia said that the financial services ecosystem is just like any other sector/industry or ecosystem that has manufacturing, distribution and technology at its crux.

“If you look at the financial services space, it is no different than any other ecosystem. You have manufacturers, distributors, and technology service providers,” Turakhia explained.

If Turakhia is believed then all licenced, regulated and chartered financial institutions are the manufacturers of the space, and the companies like Zeta and the ones that provide enterprise solutions to licenced financial institutions are technology service providers.

According to his categorisation, almost all ‘fintech’ startups are the ‘distributors’ in the financial services ecosystem.

“The word ‘fintech’, for the most part, fits in this bucket (distributors). A majority of fintechs in the world are actually distributors,” the founder said.

So, How To Know If You Are Running A ‘Fintech’ Startup?

“If you truly want to call yourself a fintech, partner with a bank, and, at the same time, work on adding your own value. Create a niche experience, whether it is for commercial or end users, which the banks may not provide,” Tarukhia said.

He added that fintech startups can build layers of value on top of a bank’s original products and then charge for that value. The Zeta founder said that companies should be able to create such an experience that their customers are willing to pay for it.

“That’s a true fintech business if you really want to use the word,” he said.

Turakhia, however, said that although founders are free to define their financial services business in any way they want, they need to be clear on selecting the right bucket.

“You can’t be both – a manufacturer and a distributor, or a distributor and technology service provider,” he said, adding that even the regulators do not want this. 

RBI has clear guidelines on this, which discourage the practice of information exchange in bulk, Turakhia said.

According to Tarukhia, startups that do so put themselves at massive regulatory risk. He added that such startups find it hard to get their core business values in place, including margin profile, persona, problem statement and product.

The Zeta founder, who halved its FY22 losses in India, said there were significant opportunities in building niche financial businesses in the three buckets he described above.

“However, you should be clear about the kind of business that you want to run and have a clear focus on four key things — product, persona, problem and proposition,” he concluded.