Startup Watchlist: 7 Indian Fintech Startups To Watch Out For In 2021

This article is part of the fifth edition of Inc42’s Startup Watchlist series, an annual series in which we list the top growth-stage startups to watch out every year from some of the most trending industries in the Indian startup ecosystem. Explore all the stories from the ‘Startup Watchlist’ 2021 edition series here.

You can view our early-stage discovery watchlist here. 

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The Covid pandemic acted as a booster shot for the country’s fintech sector, giving it the much-needed energy and growth trajectory to expand its footprint across the nation. The year-on-year growth in volume stood at 70% from 1.30 Bn transactions in December 2019 to 2.2 Bn in 2020, while the value of UPI transactions increased 105% from INR 2.02 lakh crore in December 2019 to INR 4.16 lakh Cr in December 2020. Investors were quick to arm their startups with the required capital to expand their wings.

Out of 900+ startup deals and $11.5 Bn total funding raised in 2020, fintech topped the chart with $2.1 Bn worth of funding across 131 deal counts, according to Inc42 Plus Annual Indian Tech Startup Report 2020.

This is why, of the 11 Indian startups —  Unacademy, Pine Labs, FirstCry, Zenoti, Nykaa, Postman, Zerodha, Razorpay, Cars24, Dailyhunt and Glance —that became unicorns in 2020, three belong to the fintech segment. This momentum is likely to continue in 2021 as well.

Among the leading deals in the fintech sector last year,  Flipkart founder Sachin Bansal-owned Navi Technologies led the chart with $398 Mn infusion by Bansal, Gaja Capital, and World Bank’s investment arm IFC, followed by Pine Labs at $300 Mn and PaySense’s acquisition by PayU at $185 Mn.

According to Inc42 Plus, funding in fintech is expected to grow to $2.7 Bn in 2021. Out of which lending alone is estimated to hit $819 Mn. But, which startups in the growth stage will be the game changer in 2021?

Like every year, Inc42 has curated a list of some of the growth-stage fintech startups that are likely to outperform their competitors, changing the market dynamics. We have selected 7 startups that everyone should watch out for over the next 12 months.

Editor’s Note: The below list is not meant to be a ranking of any kind. We have listed the startups in alphabetical order.

Cashfree: Eyeing For 10X Growth

Aiming to bridge the gap between online payment collections and mass real-time disbursals, Bengaluru-based Cashfree, a payments and banking technology company, has enabled more than 50K businesses in India with payment collections, vendor and worker payouts, and instant loan disbursements among other services.

Charging a certain fee on each transaction as part of its revenue model, Cashfree currently processes more than $12 Bn worth of transactions on an annualized basis. The company registered an upward growth during the lockdown period as many businesses were forced to go online.

On profitability, cofounder Akash Sinha said, “We are Profitable for the last four fiscal years, we have grown our topline rapidly and strengthened our workforce to over 240 employees. Cashfree clocked operating revenue of INR 7.14 Cr during FY18, achieving a 7X year-on-year jump in revenue. In FY19, these revenues grew 4X to INR 27.8 Cr. We doubled our workforce during the lockdown, and plan to grow this number to 400 by December 2021.”

According to Tofler data, the company’s profits have increased from INR 1.28 Lakhs in 2017 to INR 4.08 Cr in 2019.

Cashfree plans on processing transactions worth $30 Bn by the end of the calendar year 2021. The company plans on expanding its operations across the country, beyond the existing offices in three cities, while growing its merchant-base to 5 lakhs from existing 55K.

Cashfree customers include leading internet companies such as Cred, BigBasket, Zomato, HDFC Ergo, Ixigo, Acko, Zoomcar, and Delhivery among others.

CoinDCX: Making Crypto Mainstream

In order to help grow the Indian crypto traders’ community to 50 Mn, Mumbai-based crypto trading platform CoinDCX has been on a mission by offering investments in crypto at as low as INR 10. Besides having organised several campaigns for crypto awareness in recent years, the company has come up with a single interface for products like crypto-trading which currently offers investments in over 250 cryptocurrencies, Bitcoin and Ethereum futures and decentralised lending services.

The company’s revenue model revolves around the following categories:

• Trading fee: The company charges the user who initiates an order placement on the Platform a trading fee upto 0.1% of the transaction amount.
• Withdrawal fee: A flat withdrawal fee is levied upon users who initiate a withdrawal on the platform, independent of the transaction amount. The fee is applied across all coins and values of withdrawal from the platform.
• Listing fee: When an issuer approaches the company for listing of tokens, the company provides certain services that contribute to the revenue of the Company.

After the Supreme Court quashed the RBI’s ban on banks from allowing their systems to be used for cryptocurrency-related payments in 2020, leading crypto wallets and trading platforms CoinDCX, WazirX and Unocoin have not only witnessed a huge spike in terms of retail investors but also in terms of funding.

Among the trio, CoinDCX received back to back funding of $3 Mn in March 2020, $2.5 Mn in May 2020 and $13.5 Mn in December, last year. The company has recently launched its app CoinDCX Go which aims to take crypto trading to a larger segment by allowing people to begin investing in the currency with as low as INR 10.

Within the first quarter of 2021, CoinDCX expects to have a team strength of over 100 skilled employees. The company is planning to aggressively expand its Fiat to Crypto market (INR-crypto) which will help everyday Indian try and actively use crypto for the first time.

Easy Home Finance: Home Loans For The Underbanked/Unbanked

Easy Home Finance is a mortgage tech company that provides affordable digital mortgages. The company’s target market is the 400 Mn+ underbanked/unbanked middle-class Indians who are trying to buy their first home. The mortgage to GDP ratio in India is 10%, which is one of the lowest in the world compared to the country’s size. India is expected to add  50 million more homes over the next 15 years.

Founded in 2018 by Rohit Chokhani, Easy Home Finance charges interest and processing fees on its loan products. Its revenue has gone up by 300% y-o-y since 2018.  The company is currently in four states — Maharashtra, Gujarat, Madhya Pradesh, and Chattisgarh- and is planning to expand to states like Rajasthan and Karnataka in the coming quarters.

On the question of profitability, founder and chairman Rohit Chokhani said, “Yes, our business is profitable within two years of its establishment, as our technology keeps our operating cost low. In the coming years, partnerships with banks and impact institutions will drive our profitability margins even higher.”

The company estimates the growth of its loan book to be 10x in the coming fiscal year. It plans to offer green channel salaried class mortgages that will be made available within 24 hours. Green home loan schemes from banks such as SBI are considered to be loans extended against environmental-friendly residential projects, rated by the Indian Green Building Council (IGBC). Under the green channel salaried class mortgages, certain financial benefits such as concessions in interest rates as well as processing fees are also offered.

MoneyTap: Redefining India’s Credit Line With Its In house AI-Based Decisioning Engine 

An app-based credit line, MoneyTap provides quick, flexible, and hassle-free credit of up to INR 5 Lakh at interest rates starting 13% per annum. Besides the credit line, the company also offers lending products like credit cards, personal loans, consumer loans and other EMI financing options.

The company has built an in-house ‘AI-based decision engine’ that helps it assess credit applications within minutes and has partnered with multiple players to enable easy repayment options for customers on platforms like PhonePe.

Catering to the middle-class salaried professionals earning between INR 25K-50K per month, MoneyTap is present across 70+ cities and is also looking to expand into more Tier 2 and Tier 3 cities this year.

After a brief dip that was witnessed during the months when RBI provided moratorium on EMIs, MoneyTap’s business has picked up pace. Post moratorium, the company claims to have registered a V-shaped recovery in the business. Lending business, according to the company, is now back to 80% of pre-Covid monthly disbursement levels. In February 2020 (before the moratorium), MoneyTap disbursed INR 250 Cr, while the amount for October, 2020 stood at INR 210 Cr.

MoneyTap’s gross revenue has surged from INR 65 lakh in 2016 to INR 245 Cr in fiscal 2020. Having raised INR 500 Cr in January 2020, MoneyTap has hired close to 90 people during the last ten months and is actively looking to hire more people in the coming months.

On profitability, cofounder Anuj Kacker said, “At the unit level, we are profitable and MoneyTap makes money on every loan, but the startup is not profitable because of other costs. We have one foot on the accelerator and the other on the brake. That’s how the business of lending works. We were inching towards profitability this year, but the plans got derailed due to Covid. However, the goal is to be profitable and the company is clawing towards it, inch by inch.”

The company plans to significantly expand its geographical footprint from 70 to 200 Indian cities. “We are looking to expand to more tier-II and tier-III cities, and in global markets as well,” added Kacker. MoneyTap has already expanded into SouthEast Asia and Middle-East and plans to expand to other markets as well.

Niyo: Changing The Way India Banks

Niyo claims to be India’s first and largest neo-banking platform, offering co-branded prepaid credit cards, saving accounts with debit cards in partnership with banks. In 2020, the company also acquired Goalwise, a wealth management and investment platform which has now been rebranded as Niyo Money.

The company aims to be a universal retail neo-bank for multiple segments of customers. Its product portfolio includes:

• Niyo Bharat – prepaid card for payroll / salary account targeting blue-collared workers
• Niyo Global Card – cross-currency forex card for international travelers
• Niyo Digital Savings Account – targeting young, aspirational salaried millennial customers

Niyo earns revenue from multiple avenues such as joining fees /annual fees, card interchange fees on POS/ecommerce spends, the share of customer balance, Saving and Current Accounts, spread from partner banks, and cross-selling revenue share.

While Niyo Bharat recorded a short-term dip in its business revenue during the pandemic’s peak, the company pivoted its Niyo Global Card, primarily a cross-border payment product, to an all-purpose debit card model with both domestic and international spends, in-built wealth management and goal-based savings.

On Pandemic impact, the company’s founder Vinay Bagri said, “We have also grown our Niyo Global Card customer base by 35% y-o-y, despite lack of international travel for the better part of the year. For our largest business segment, Niyo Bharat, we have achieved 15-20% y-o-y growth in volumes and 50% growth in customer base even in the year of COVID.”

While Niyo is not profitable at a company level, it has achieved operating breakeven (profitable minus allocated costs and corporate overheads) for its largest business, Niyo Bharat, according to the company. It aims to breakeven operationally at the company level in the next two years and has plans to achieve overall profitability in the horizon of three to five years. The company claims to be well-funded to sustain the business for the next 2-3 years.

The company is also looking to expand Niyo Money and create a full-stack wealth management platform in 2021.

Yap: Going Global

Yap is an API Infrastructure company enabling businesses to roll out their own branded Banking /Payment products. Currently, the company provides its API platform to 300+ fintech companies. Catering to companies that want to embed financial services into their offerings, the company aspires to be a global firm built from India, with aggressive plans to expand across South Asia, Southeast Asia and Middle East and North Africa region.

Asserting that the tailwinds of the pandemic have been very good for Yap’s business and that several banks and companies have accelerated their digital journeys, cofounder Madhusudanan R said, “Payments volume on our platform has grown by almost 5X in the past year, while our team has grown by 3x in the last nine months, we expect the revenues to grow by 3x as well for the full financial year. We also added four new International markets covering Australia, New Zealand, UAE and Nepal.”

The company is targeting to quadruple its volumes and revenues in 2021, whilte its team size is expected to double by the end of the year.

Recko: Automating The Reconciliation Process

Built around the idea of offering financial security to companies such as ecommerce platforms, insurance providers and banks which typically have a high volume of transactions, Bengaluru-based fintech SaaS startup Recko aims to automate the entire reconciliation process.

Being an independent third-party transaction reconciliation layer, it ensures that each transaction is accounted for and all settlements can be done in a timely manner.

Based on the SaaS subscription model, the company has deployed AI models for connecting the payment gateways, banks and merchant order management systems through APIs and helping businesses track receivables and identify settlement discrepancies.

Having raised its Pre-Series A funding in 2019 and then $6 Mn in Series A funding round in 2020, the company is working with internet companies across geographies. It has also expanded its market presence across Europe and SEA Geographies. In 2020, it has already doubled its team size to 68 with claims to have a steady runway for the next 24 months.

In 2021, while Recko intends to scale South-East Asia and enter US markets, it is also in the process to add more finance teams’ use cases.

Editor’s Note: The startups were selected for the Watchlist based on editorial discretion, keeping in mind various factors such as revenue growth, profitability, funding stage, pivot and growth of the companies in the preceding year among others. The chosen startups have been weighted thoroughly on the basis of the performance of the company, and information gathered from public and private sources.