Please don’t launch a fintech startup




  • Regulation and compliance

  • Security

“Regulation and compliance are a lot of work but relatively straightforward. You follow a pre-defined process and get regulated. What’s hard about fintech is finding & executing a viable business model that doesn’t put you in a race to the bottom versus an incumbent with huge capital reserves.

Nearly every fintech you read about has a questionable to non-existent business model or are a niche player. It’s very rare to see a fintech with strong unit economics. Most are losing a ton of money by subsidizing a product to acquire users to get more venture capital.”

What do you think?


I agree with you that Fintech start ups are harder to get off the ground. But I don’t agree that regulation is easy to follow. Regulation is brought about through experience or to avoid a perceived threat. The way we are poised in financial services today, the Indian regulators have the track record of being amongst the most conservative. The down side is that the progress is slow, but the upside is that we remain relatively insulated from global economic shocks, the 2008 crisis being a prime example. Also, what is a viable model? Financial Institutions are smart enough to know how to source business, so they are already in places seen as low hanging fruit. And you are absolutely right, in Fintech the large role is played by understanding regulation and not just by implementing latest tech solutions. Because the chances are that the FIs are already using the tech solutions, so yes you are fighting behemoths in this space…But is there scope for disruption, yes…
Lastly, when i look around the new economy all i see is subsidisation, e-commerce being the best example. In an environment like that, how can one section stick out and not do what every one else is doing?


Hey Guru,
For the benefit of us who are novices in this space, how better can we understand the role that regulation plays ?
Like are there a fixed set of dos and donts when trying to create a fin tech enterprise, or is this something very dynamic (new rules coming in all the time) and completely controlled by the centre.


Hey Ron,

That is a little difficult to answer, as the scope is really wide. There are multiple layers of regulation in almost everything that we do today. A simple thing like paying by credit card has to go through a pre-approved network of the Point of sale Device provider, the issuer of the credit card and the aggregator (Master, Visa, Rupay, Amex, Discovery etc). So imagine two scenarios here. I use an Axis Bank card. I visit M K Retail for my groceries and they bank with ICICI bank. So when i swipe my card, in an instance the point of sale machine pings Visa to ask if I was issued this card bearing a specific number and if i have enough credit left to honour that payment. Now imagine i am still using the same card and am traveling overseas and wish to pay at a restaurant. In the first case, it is a domestic payment and will only pass through one loop, as against the second payment has to go through two as it a FCY payment. All this data is stored and verified only after the RBI approves the use to all three stake holders. So, technology is not the biggest challenge in financial services. Millions have have been invested and are being invested as we speak to automate this sector.

Also, I have seem way too many scams first hand, from a few thousands to a tens of crores to know what people do to avoid the legal and regulatory framework. So, it is not so easy to say that i want to disrupt something without the regulator breathing down my neck.

My guiding principle would what you said to me once, don’t be naive to say that just because i am not aware of something, doesn’t imply that someone isn’t doing it or hasn’t tried. Go down the path completely, make extensive research on the idea, speak to the regulators if you want (they are actually pretty approachable) understand why someone hasn’t disrupted the current world order. Then take a call.