Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
Building The Pipes For Fintech | Prabhtej Singh Bhatia @ Falcon
343 Plays2 years ago
Every company is going to be a Fintech company- Prabhtej talks about the Fintech revolution that India is experiencing and how Falcon is selling shovels in the gold rush. Falcon facilitates fintechs, startups, and BFSI firms in introducing new financial solutions. Tune in to know how this embedded finance start-up is disrupting the way of building modern fintechs!
Know about:-
- Figuring out the whitespace
- Shifting focus from B2B to B2C
- Concept of payment processing
- Revenue model
Recommended
Transcript
Introduction to Founder Thesis Podcast
00:00:01
Speaker
Let's take a minute to talk to you. Let's talk to you. Hi, I'm Akshay. Hi, this is Saurabh and you are listening to the Founder Thesis Podcast.
Fintech Focus: Conversation with Prabh Tej
00:00:17
Speaker
We meet some of the most celebrated sort of founders in the country and we want to learn how to build a unicorn
00:00:28
Speaker
This is the second part of Akshay's conversation with Prabh Tej. In the first part, they spoke about Prabh Tej's journey of building India's coolest craft beer brand Simba. You may want to hear that episode first. In this part of the conversation, Prabh Tej talks about the fintech revolution that India is experiencing and how his venture Falcon is selling shovels in the gold rush. Falcon is a middleware company that helps fintechs to connect with banks and start offering a variety of instruments to their customers within a few hours.
00:00:58
Speaker
Think of the revolution brought out by the payment infrastructure companies like Stripe and Razorpay. Falcon is bringing in the next generation revolution in this space. Listen on to this masterclass on fintech space in India.
Journey into Fintech: From School to Startup
00:01:11
Speaker
So now let's talk about the journey to building a fintech. And so how did that happen? These are so poles apart. I went to high school in Delhi and Priyanka and I both used to carpool together because we used to live in the same part. In fact, you also live in the same part of Delhi. So we used to carpool together to Sona Road, which is about an hour and a half away from where we are. And all we could speak about
00:01:34
Speaker
was building something together and different ideas came and a lot of time and our parents convinced us to go to college, which is a good thing, I guess, because Priyanka got into Yale for her undergrad and she's a smart one in the team. Obviously, we used to carpool together to school, all we could speak about was business and I'll tell you a very funny thing. We actually wanted to get into something that was completely unregulated.
00:01:57
Speaker
because we had the belief that something that is unregulated would actually give you the most growth and we will be able to scale up very fast, which is true. But every time we got into a conversation, we started thinking about things, we ended up in a space which was in financial services because that is where I think both Priyanka and I, we both
00:02:16
Speaker
We were very interested in the space and we felt that there's so much that can be done in general and with the advent of tech at the time and it was back in 2008-09 while we were doing this and that was with the advent of tech, a lot of things would change and we could speed up completely change the way people are doing things, building digital native products and things like that. But we definitely wanted to be in a space that was not regulated.
00:02:42
Speaker
And how we've ended up in a space that's, I think probably the most segregated, but that's one of those contradictions in life. But that's great.
Building Kite: Challenges and Insights
00:02:50
Speaker
And what we did with Shalkan primarily is we realized, in fact, prior to this, we were building a B2C product called Kite. And we had to, yeah. What was that for? Like, tell me about that for like, what was the idea there that you started with?
00:03:07
Speaker
So it's very similar to what we do here, but it's just serving a different kind of audience. So basically what we did at CHI was we built a commercial payments platform, right? So we realized that most businesses in India don't have the right tools or payment products to scale. Like for example, they so much so that
00:03:25
Speaker
I think less than half percent of the businesses in the country have a credit card. And we realized that while most of the companies in India get funded by man, so that was like the primary source of funding for them in the VC's bank. But almost no one got a credit card.
00:03:40
Speaker
And we realized that that was a huge problem to have. And obviously in India, unless you're a bank, you can't issue credit cards or you can't issue cards at all. And so we built this, we built a relationship with multiple banks and we convinced them. We started building our own tech and then we started convincing them, sold them on our ideas. They were also receptive, but then the time it takes from going from the first meeting to then launching at least a 18 month journey, provided everything is going in your direction.
00:04:10
Speaker
Like what you built was like a digital distribution platform for issuing cards and at the back end you had a bank partnership. The bank would actually issue the card and all that, but like say a policy bazaar issues insurance policies, but it's essential.
00:04:27
Speaker
So they are largely a sales platform, lead generation platform. We actually built the entire product. So we gave an app to the company, we gave them controls that they never had. So the company would sit on a, we would give them a platform where they would just log in and can manage
00:04:43
Speaker
like the entire payment space that the company has. They want to issue cards to their senior employees. They want to issue a card to a digital marketing team and sitting at the comfort of their desk, they would be able to control where each one of them is allowed to spend. They can set policies. They can set the days it should be off, the use cases, but digital marketing card would only be used online.
00:05:05
Speaker
Right? The card that is given to a Pune cannot be used at a jewelry store, for instance. And all of that, it would just sit on the laptop in the head office and could turn off, turn on.
Falcon's Fast-Track Strategy for Fintechs
00:05:17
Speaker
As simple as that. So we did not change the medium that the customer would use for the end pay. But we changed everything that was in the middle. So we built this middle where we were a very powerful engine that allowed for all of this to happen. And that only could have happened
00:05:31
Speaker
if we had an integration at a level that nobody else could offer with a bank.
00:05:38
Speaker
Because you're talking about really controlling the end-use case. How Stripe has built the acquiring side of businesses, right? Where any payment gateway in the world largely is around what Stripe is doing. So the whole conversation is there. So we are trying to build something on the issuance side of it. So while they were able to solve the problem on the acquiring side, the issuance side is equal amount of opportunity that's there.
00:06:03
Speaker
Okay. But this you figured later, like your initial approach was acquiring side. Like you would go to SMBs and start-ups and offer them a credit card, like a virtual credit card or was it like an actual plastic card? No, so it was virtual as well as plastic.
00:06:21
Speaker
So they would choose, they could choose. So the thing was that when you were saying acquiring, actually I was talking more from the payments industry terminology. So acquiring sign on the payment industry means the payment gateway site, which is where Stripe is. And then there's the issuance site that the people who are issuing the card. So even if you were slurring the SMBs, we were on the issuance side of the business. You were on the issuance side. Okay. I understand.
00:06:45
Speaker
And I think we built this engine. Some more questions on how you launched it, like that initial launch journey. Tell me about that. Which bank did you tie up with? How did you do your customer acquisition? What was the customer onboarding process like? Who took care of things like risk underwriting? To issue a credit card, that risk underwriting is an important process. So tell me about those nuts and bolts. I guess by now you would have figured out, I love details.
00:07:11
Speaker
So basically I think we actually crafted the entire journey where the customer onboarding process, obviously there are defined rules and guidelines and that is where we were. We were going out in the market, our team was taking documents, taking to the bank, we tied up with RBL bank and then Punjab National Bank which is the second largest public sector bank in the country and these guys were sitting on a mountain of companies that they used to fund.
00:07:35
Speaker
but basically has a non-existent credit card business or a card business. They're completely shut out to this and they will realize that most banks don't even realize that they're going to be disrupted. Like they're going about their lives, giving out loans and having excellent distribution. The kind of trust they have with people, I have not seen it across industries because people are trusting them with their money, with their livelihoods and they just
00:07:57
Speaker
didn't know what to do with all of that. And I think it's also the way because the way they are structured, they're not tuned to be innovative. So they tend to be... Their job is risk management, basically. Yeah. And they're in a position for three years, two years, and building a digital initiative is not a two-year, three-year job. It has to be very consistent with the larger vision of the bank that everything is going to be distant. And therefore, I think they miss the whole payments piece
Falcon's Pivot to B2B Financial Enablement
00:08:23
Speaker
in the earlier game.
00:08:24
Speaker
B2C where we were also B2B but more from the SME side. But we realized and I think we were building that very well with these banks. We were going about getting business also. But I think the one thing... How did you acquire customers like digital marketing or did you have salespeople like the SMEs to whom you were? Yeah, we had salespeople on the ground and we were getting a lot of good business also. And I think one of the things that started happening
00:08:52
Speaker
that the businesses were coming. They were all keen on something like this. But a lot of times, the banks would not underwrite because you were not in the business of underwriting. You were in the business of getting them the leads and qualified leads. In fact, to the extent that these were companies that the banks had given out loans. Like banks would share their list of customers with you to target.
00:09:12
Speaker
Yeah. Yeah. So they were comfortable lending to these guys, but they were not comfortable giving them credit cards. They were happy giving them $15 million loans, but not a $15,000 worth credit card primarily because the banks worked in silos. Yeah. The credit card department is different then. Right. And it's seen as an unsecured product and things like that. So we realized that there was a larger problem at hand that we had. And while we could solve for those problems,
00:09:36
Speaker
It would have been a much longer journey. We were getting a lot of inbound interest. A lot of customers wanted the product.
00:09:43
Speaker
Then we tied up with Yes Bank also, where we launched these products. And one of the things that happened was after we did this integration, the bank started coming to us and said, this is another startup that wants to tie up with us. They have this huge case that they want to go after farmers to give out cards. So this is not just credit cards in general, because we do also integration with the bank. Can you allow them to ride on your tech?
APIs and No-Code Solutions for Financial Scaling
00:10:10
Speaker
because we've already spent almost a year integrating with you. The tech we've seen with you is one of the best in the best in class. And we do not have the bandwidth to integrate with every startup that comes to our doors because there are more than 2000 startups. We know five or 10 of them are going to become huge, but we don't know
00:10:29
Speaker
which ones and we do not have the bandwidth and we realized that there's a real opportunity at hand here. So while both Priyanka and I had built this amazing platform and it took us years, like it took us three to four years of very hard work, building the team, everything, ending the ropes from ground up. And we also, since we come from that traditional mindset, business mindset, that we did not want to build one that does not scale at that phase that you want. And second, it's not, it should not be too much of a cash burn.
00:10:59
Speaker
We don't believe in too much of a cash burn or something that we don't think that we are good at, personally. And there was a bunch of amazing companies. We just said, you wanted to speak to these companies. We spoke to them and we realized that these guys are each one of those companies is doing a fabulous job at what they're trying to do. A larger mission is great. Whether they end up achieving it or not is irrelevant. The fact that these guys are trying and they've built an amazing product around it, an amazing team around it,
00:11:25
Speaker
So we were both young and I sat down and we realized that why can't we actually do what we are good at? We built this amazing middleware that allows for so much freedom and that was primarily built for our own product. But why can't we leverage this and
00:11:41
Speaker
allow others to do it. It was kind of an AWS moment for us in a much smaller way, but it was that kind of moment that we built this amazing engine. And can we allow these tempos? Which year was this? When did you start thinking of? Just last year. Okay. 2020. And by 2020, what scale was Kite at? How many cards had you issued? What metrics were you tracking for Kite?
00:12:01
Speaker
The thing is that it took us two, two and a half years to build the product and get the integrations and all of that. And so earlier it was not very high numbers. It was a couple of like 70, 80 crore or something. But it was still fine. What? 70, 80 crore of what is this? Transactions. Okay. Okay. Number of transactions through cards that you issued. So it was good, but it was not great. But it was picking up very fast. But we realized that the end getting each customer one by one who are non-tech,
00:12:29
Speaker
to then train them. It was a really up in task for something somebody like us. And your earning was like for the kite business first before we come to the falcon business. I just want to ask more about kite. So in kite your earning was like that, that MDR, the merchant discount rate. Yeah, exactly. So some
00:12:47
Speaker
Interchange. So that's about 2%. Interchange. Okay. So some percentage of that would be shared with you by the bank. Yeah. A large percentage of that would be shared with us by the bank. If the bank was taking a risk, if it was a credit card, so there were two products. One was a prepaid card and the other was a credit card. So if bank was taking the risk, then they would keep a higher share. But if the bank was not taking a risk, they would actually pass on 95% to us.
00:13:10
Speaker
Okay. I'm guessing that prepaid card business would have been like happy also had that prepaid card. Exactly. And so obviously we had different kinds of products, but if you have to put it in the largest sphere, that was where it was. And which was a bigger business for you, credit card or prepaid? Both growing very fantastically. Obviously prepaid we launched first, credit card, it was not picking up because the banks were really slow and taking the credit on. Okay. Approval was not okay. Okay. Okay.
00:13:36
Speaker
So there was far more demand for it. But we realized that the banks are not really up to it in that sense. They're not able to take those calls very fast. Okay. The credit card business would have been like what Kodo does today, I guess. You've heard of Kodo? Yeah, Kodo. Yes, yes. So sort of that, but not necessarily meant for just startups. It was meant for anybody, any business. That was something that we did.
00:13:58
Speaker
Then, you know, the whole moment of reckoning came for us where we started meeting these companies, amazing companies that were doing some amazing work. And we realized that we built something great in hand because everything that they needed, our engine was ready to provide. We'd already built the journeys in terms of digital KYC, the most customer friendly processes that are possible legally.
00:14:23
Speaker
were built in our system and that was largely built for our own use and the banks were coming to us and then we realized that are we really sitting on something that's so many people and so many tech are met. These are companies that did not need convincing of the product. They in fact came in to buy those products and the only thing we did was they also realized is that we said that there are two big problems when you're in the fintech industry today and largely they are that you have to one the time it takes to integrate.
00:14:51
Speaker
with the bank has limited bandwidth, it has a lot of approvals processed and you may end up spending a lot of time with the bank and realizing that they're not keen on working with you at all sooner or later. That happens with the bank. And the whole business that you are betting your time and money and resources on goes out for a toss.
00:15:08
Speaker
And then the second piece is building this entire engine that will allow you to do what you want, right? So you have to build it at your end, because you can only integrate with the bank for basics, everything else you have to build the use cases that you want to make. And the third is the distribution to the customer and your value proposition as a product. And these are all three, two high mountains to climb at once. And a lot of startups, a lot of index would actually
00:15:35
Speaker
not see the light of day due to this. They would get demotivated and the larger purpose of these businesses was far more important. So we actually realized that both Priyanka and I were sitting on sort of a gold mine where
00:15:47
Speaker
It was not from a money point of view. It was largely from the enablement point of view. Because I think the one thing that both Yanka and I shared and the vision that we know or the common belief we have is that every company is going to become a Fintech company. Something that Mark and Tristan said. That every company is going to become a Fintech company and we could not agree more. Even the biggest
00:16:11
Speaker
tech companies, d2c companies, poultry companies, dairy companies, you name it, they are all eventually
00:16:19
Speaker
going to be in a position to monetize that data and the way they'll be able to do it is in the FinTech world. So even if you are a Zomato, now you see they've come out with their own NBFC license, right? Because they're realizing whether or not they make their money in the primary business, FinTech is where they can actually monetize it and actually bring their offering closer to the customer and become completely irreplaceable to the customer. Like Zomato's NBFC license is for lending to restaurants, is it?
00:16:46
Speaker
No, lending to customers, BNPL.
Supporting NBFCs and Fintech Startups
00:16:50
Speaker
Okay. Okay. Okay. Okay. Got it. So they are, they are sitting on mountains of data about you. They know what the size of your family is. They know where you work. They know where you raise your houses. They know where your preferences and they know how you've been paying. So they've been able to build a profile around you and the.
00:17:06
Speaker
And how can they make your life easier by making that entire play? And so what we did is that we thought that, okay, let's try enabling our platform for others. And in that journey, we realized that what are the kinds of things that we want to do ourselves? And that's when the seeds of Falcon were sold. In the sense that we only moved away our focus from B2C to B2B. The engine is the same. We're just tuning it more for others to connect with us.
00:17:34
Speaker
Earlier it was meant for SMEs, now it's meant for other tech companies. But the engine is what we were really working on. And since we are the latest, we're also the most liberal because we were not built with older rules. Due to COVID, there's been a lot of change in terms of openness from the banks. So we actually have a lot of liberty at hand, which most other platforms won't have. And every other platform will take at least a year to build it, minimum, provided everything they need has gone in their direction.
00:18:02
Speaker
Like just to recap my understanding of Falcon. So essentially the way Stripe is something which an e-commerce company can just easily integrate and start accepting digital payments. Falcon is a way for a startup to
00:18:18
Speaker
start issuing cards. Is that right? It could be prepaid card, it could be credit card, either of the two, depending on what the bank and the startup are agreeing on. But issuing cards is what Falcon enables. Like the way Stripe enables accepting payments, Falcon enables issuing of cards.
00:18:37
Speaker
Yeah, we enable not just tech companies, we enable banks, NBFCs and startups to launch any payment or lending product using our open APIs and no code solutions. So I'll actually kind of expand on that going forward. Yeah. I think the most beautiful part about things that we do is.
00:18:55
Speaker
We actually help companies get revenue. So what we've done, you're aware of the NBFCs of the country. And NBFCs are non-banking financial lending institutions. They're not banks, but they lend. They can't take deposits. They can't take deposits. There are some that can take deposits, but they're not banks per se. But these NBFCs are amazing at distribution. But the cost of capital is high.
00:19:19
Speaker
So they usually fund the kind of use cases that a bank would normally not fund. Or they would fund a certain use case so fast that the bank could never reach that speed or scale. And we've seen amazing examples come out of it. Bajaj Finances, more as for market cap, they're much larger than
00:19:37
Speaker
Most banks, except one or two banks in the country, they're larger than every other bank in terms of market cap. And they built an amazing solution. So despite being a NBSC, which means higher cost of capital, not issuing a bank account, not controlling a customer's deposits, or not being able to get that kind of data into a customer's profiling, they're able to build a business that is so scalable. And they've managed to surpass, I think they're in the top three in terms of financial services in the country.
00:20:05
Speaker
and the only two who are bigger are the biggest banks in India and doing something like that. But most NBFCs face this problem. There are three problems they face. One is the cost of capital. Second is the fact that once they disburse into a person's account, they have no access to that data whatsoever because they've disbursed into a third-party bank account.
00:20:25
Speaker
Yeah, they can't see how it's getting spread. Third, every time they want to give out a loan, they have to do that process over and over again. The whole consumer onboarding journey is extremely difficult, which means that below a certain price or below, let's say, a certain size of loan,
00:20:43
Speaker
It is not viable for them to give out loans. Or even if it is viable, it has to be at a very high interest. So while we are building this, a lot of tech companies are coming to us and I'm going to talk to you about that as well. But a lot of these NBSCs are coming up. Now, digital lending startups are coming up. There are a lot of these NBSCs that are coming to us and saying that we would love to use something like that you guys do. We are great at distribution. We already have a million customers, for instance. We give out loans for these small businesses, SMEs. But
00:21:10
Speaker
What we don't have is the tech or the know-how to issue cards. And we are actually now helping a lot of NBFCs and microfinance institutions, which is something that's extremely close to both Piyanka and my heart. Piyanka actually worked for one of the largest microfinance institutions, the Grameen Foundation, that works in microfinance for some time. It should work there, right? So it's close to both of our hearts. And both these sets of customers, the microfinance companies and NBFCs, they've come to us. Now they want to issue cards and start dispersing loan on cards.
00:21:40
Speaker
these people. So these are prepaid cards, but they're giving out loans on it. So it's essentially a credit card. It's just that from a terminology per se, we can't say call it a credit card, but it is a credit for all its practical purposes of the customer. Like if you're approved for a loan of 10 lakhs, then you would get a card in which you can spend up to 10 lakhs. That account did not have 10 lakhs lying there idle, but so that cost of money also comes down because that in BFC doesn't have to
00:22:07
Speaker
They're able to optimize and they don't have to give that entire, they don't have to do a bank transfer of 10 lakhs to a customer. They just give him a card and tell him, here you go 10 lakhs and he can spend as he wishes, or he can withdraw from an ATM if he wants to. Absolutely.
00:22:22
Speaker
Okay. Amazing. Amazing. Okay. Actually, if he wants, he can pull it into his bank account also from the app that we give them. So basically what we do is these NBFCs now give out loans on these cards. Now they're able to actually get far more intelligent data as to where this person is going, how he's spending, and what is he spending on. And they're able to build their engines more attuned to that. They're able to optimize liquidity, right? And since we actually share a large part of that interchange that we get,
00:22:50
Speaker
India that we get, we actually should pass it on to the NBSC. So they're able to reduce their cost of funds by up to 2%. And that's one of the one thing that makes them competitive, far more competitive than they would ever imagine to be. And all of this is not happening at the cost of the consumer. The customer is not paying for this.
00:23:08
Speaker
And that's amazing because you're able to now build a product that was unlike and unheard of. Look at BNPL, right? Like you give out these cards and the customer, if he pays back within a month, doesn't even need to pay interest on it. It's one of the most phenomenal products out there. And it was controlled by a bunch of bankers for the longest time and they were not letting it out in the open public. Today, with the solution that we built, we are democratizing that. Any company, any startup in this country wants to issue cards.
00:23:36
Speaker
wants to issue, give out BNPL cards, wants to issue loan on cards, you just go ahead and do it. As long as you're sure of recovery, you can actually give out interest free cards to that extent because we are giving you an interchange. If you're able to get the money back in from the customer within a month, it'll actually be very viable.
00:23:52
Speaker
as a business proposition. Because you're still earning on transaction. Exactly. And this is something that has taken the whole microfinance institutions, the NVFCs, by storm. And we know that the moment one of these programs scale, there'll be a barrage of these NVFCs and microfinance institutions wanting to do this.
00:24:11
Speaker
And that's where we realized that's the biggest opportunity because these NBFCs, these microfinance institutions are actually serving the underserved. They are serving the people that nobody would want to give out downstream and they've built their expertise there. And if you help them lower their cost of fund, which eventually translates into lower costs for the end customer,
00:24:30
Speaker
It's a game changer and it's basically a life changer for these people. These people are dependent on these loans for survival. When we initially, Priyanka and I were building something that was very novel, but the moment something like this came forward, we realized that
00:24:44
Speaker
It is going to be brutal on our part and ruthless on our part to not allow the world or delay this access to the world, to the Indian financial ecosystem. It will be very wrong and it was like largely coming from that emotional point of view, more from a business side.
00:25:00
Speaker
Because we realize that business can be made. Both of us understand business. So we can make business. We can make products. We understand that part. But this level of impact cannot go unwatched and we have to make this happen. And if we don't, somebody else will.
Case Studies: Innovative Card Solutions
00:25:15
Speaker
And that may be one year later, but that's another year of pain for these customers. So we actually went all in. We even changed our strategy. We said that why are we trying to get one SME at a time, which will bring some scale? Why not?
00:25:28
Speaker
allow access to all of our technology to all of these companies that already have amazing distribution out there and let them do what they do best and let's do what we do best. So I was going to come back on the tech platform where what we've done is we've built two sets of solutions because there's two sets of companies that are largely coming to us. One, there are tech-first companies, so you have in-tech startups, tech startups that understand. So there are in-tech startups, then there are tech startups, and then there are regular financial institutions, and then there are regular companies.
00:25:57
Speaker
Yeah. And each one of them would be falling under two buckets. One, that if they understand tech, they would want their own native API apps and they would build their own journeys, which they're great at because these tech companies and these companies understand that, right? We have our open APIs and SDKs that we allow them to use and they can then integrate those into their product. And it's as if you're not even there.
00:26:22
Speaker
the whole experience would be, right? The customer would not even know that Falcon exists in the back end. And then there are companies like... So, that service is basically like the pipe from the bank to the customer, that pipe you are powering. Exactly. We are a middleware and the entire engine also. So, what we do, we take these tech companies to banks,
00:26:43
Speaker
they approve of these products. And in a matter of weeks, not even months, in a matter of weeks, they can go live and start testing. And these companies have to experiment a lot. Every day, every week, they need to take out a new product, a new experimentation, do something like that. And with a bank, unfortunately, that cannot happen. And I feel for the banks also because there are 1000 fintechs that are approaching them.
00:27:04
Speaker
they don't know which ones will succeed. They don't have the bandwidth to have such a huge manpower dealing with these companies. They are actually in a much better position. They told us, in fact, the banks have actually first told us that why don't you go live with these guys? You take them live on your platform.
00:27:20
Speaker
We're happy to. And we realize that's a huge opportunity for us where we can actually allow these companies to build amazing financial products without reducing their go-to market time by up to 95%. And when I'm talking about 95%, I'm talking about going from 18 months to a month.
00:27:38
Speaker
That's crazy in terms of any metric. And so if you're able to do that, it's a quantum jump for these customers, for these FinTech, because they're able to do what they do best. They're able to build these journeys for their customers and by not focusing on things that are logistical in nature, because that is where a lot of their time and effort goes, unfortunately. We actually tell them, why don't you focus on your business? Why don't you focus on your customers? Why don't you focus on your journey and your value addition? These are all commoditized things. Like you, don't worry about it. You use our engine.
00:28:07
Speaker
Right. Like payment gateway. Nobody needs to build a payment gateway today. They can just do an integration. Few API integrations and that's done. Right. Few lines of code and you're good to go. So something similar like that. And then... So that's for Fintech, the other segments.
00:28:24
Speaker
The tech also, there are different types of tech companies, but some of them are happy to. So there is these open API solutions and then there is this no code solution is a completely white label platform. You don't have to lie and write a single line of code. We discuss with you the entire user journey and we give you a product with your branding. We give you a white label product. You just go live with it.
00:28:43
Speaker
Like, say Amazon telling its customers that get an Amazon co-branded credit card. So that could be something that Amazon could use Falcon for. Exactly. All these NVFCs don't have the apps, they don't have the tech web at all, but they're very good with
00:28:58
Speaker
distribution. So we actually give them a portal, we give them an app for the customer. And the customer feel is actually that NBSC app. For example, Chola Mandalore. It feels like it's the Chola Mandalore map. So they didn't have to do anything, just do their branding on it. And everything else is taken care of from our APIs and our integration in the backend.
00:29:15
Speaker
So we give them these apps ready to use. What we are doing is we are enabling Shintech at a pace and level where things are going from months or years down to minutes and days and how we managed to get here. But we actually took a lot of calls where we felt that one, we are not the best in the world at everything. We cannot get. So let's pick our battles. Let's see where the maximum amount of value addition that can be done from our side to the customer.
00:29:41
Speaker
No, we've realized that we cannot be the best at everything in the world. We don't intend on. And we believe in partnering up with the right companies to do that. So for example, payment processing is an area which has been really difficult. And the FIS actually has 70% global market share in that. What is FIS? It's like a payment gateway company. What is it?
00:30:05
Speaker
No, FIS is a global payments processing company. They're a global payments processor. They're a multi-billion dollar company. So most banks actually... What does this mean, payment processor? How is this different from payment gateway? Like, just help me understand what is this payment processing? So basically what happens is payment processing is basically the moment a transaction happens, right? So there is a processing engine. So basically the moment a person swipes the card,
00:30:29
Speaker
That call then comes to a payment processor via the network. It goes to the network, the network hits the API of the payment processor and it has to have a few milliseconds. It has to respond. And that engine has to be very active and fast in terms of responding. And that's what FIS does. They respond. And on back of FIS, we are sitting and the bank is sitting where we are built on it.
00:30:53
Speaker
on their platform. So they're able to quickly see whether to approve this transaction or not, and make sure that they have the right ledgers. So the moment that transaction is passed, they actually there's an exchange of ledger that happens between the two systems. But this will add, but so that for recon and SOR, the Statement of Records, it's there for recon later. So that's where processing injury is used.
00:31:16
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:31:36
Speaker
Got it. And FIS would be charging on a per transaction basis. Yeah. Yeah. So they used to also be charging on a Capex model where you could buy the engine, but they've recently, I think looking at the competition in the market and looking at the global landscape changing, they've actually changed that and they're actually helping us build, they built a business model around companies that would serve us because we are not in the Capex business. So we actually took an OPEX model from them rather than a Capex. So that really helped us.
00:32:03
Speaker
And so this is what you provide to NBFC's Vintex. This is something that is lying in the backend. So processing is a very tedious. If I have to build my own processing engine, it would require at least a thousand just doing that. And we as a company realize that it's not necessary. We are not really in the business of doing processing primarily. Making sure that if the processing engine was broken, then we would have done it, but it's not broken. It's only a matter of few bips per transaction, but they're the best in the world at it.
00:32:30
Speaker
So why even bother? Is your customer's life going to change if you are able to charge them a few bips lesser? Not really. By bips, you mean basis points, which is 100th of a percentage. Exactly. A few bips will not change a customer's life. However, what will change a customer's life is the time it takes for them to let the systems are up and running. So because these companies are going to run at scale,
00:32:53
Speaker
So you need to have a processing engine, you need to have your engines running at that pace where they can handle thousands of transactions in a second. And we realized that the FIS has already been doing that, so let them do that processing. We are building this middleware where it allows all of these user journeys and all of these other use cases working at that same scale and speed.
00:33:14
Speaker
that can respond. We did not do the processing engine. We built the middleware and we really added the journeys and the products for the end customer, for the tech companies and these companies that would actually make sure that the product is live at all times. And they're able to scale their business without worrying that falcon down. That's the common worry that people will face. And the moment you go to banks anywhere in the world, they would actually, it's like we're in the middle of closing a very
Revenue Model and Expansion Plans
00:33:42
Speaker
large Middle Eastern bank right now.
00:33:44
Speaker
And we did not even have to convince them of our capabilities because we were walking in the door with FIS. So what is your proposition to a bank? Like a bank is also a customer for you, right? Like you've told me the proposition. They're one key stakeholder. Banks help issue cards, right? All of these FinTech companies are their customers because they keep deposits with them. All of that money that's flowing, they're actually flowing through the banks' pipelines. But they do not have the tech capability or the know-how. Indian banks still do, to some extent, to a little extent.
00:34:12
Speaker
The global banks don't even do that because they're all dependent on Indian systems in the back end. So they don't actually have a tech team in house at all. While they want to help these fintechs that are being built in their countries, they want to help these tech companies issue cards. They want to help a lot of these use cases to happen. But it's just not possible for them because they don't have the bandwidth or the know-how to understand their language. And they're very scared that if there is something that the startup wants, that's a little bit out of line from what I expect. The whole world will come crashing down for them and they don't want that.
00:34:41
Speaker
So for a bank, you make them, like you build the pipe to the fintech for the bank, basically. Exactly. So we help all of, and subsequently all of that business then flows to the bank because these startups will get funded. So that funding will also be parked. All these startups are going to have holdings, have millions of customers sooner or later. All of that money is also being kept at your bank because you are the
00:35:04
Speaker
key bank that's supporting all of this. And there are some banks that take the lead in this category and become the leaders in the whole system then. For example, RBLX Bank control almost 80% of the digital banking in the country today.
00:35:16
Speaker
in the sense of different businesses. And they basically grew on back of that without having a single bank branch, additional banks not supporting them. And that's crazy for them because at scale, that is what really matters for these companies. How can they scale without all these costs being built in? In fact, our CBO that has just joined us was
00:35:35
Speaker
the guy who we used to deal with at RBL banks where he first went there. And that's where we met him. And then after a couple of years, we felt that now that we are in a position like this and he built the entire FinTech department or the digital banking department at that bank, he's now a CBR. So he's connected to probably all the startups and all the banks and all the digital banking professionals in this country in a phone call. We've just recently hired him in November only. He's joined us, I think November and December, he joined us. And that's actually being, that's helping us a lot in our journey because
00:36:05
Speaker
Obviously banks also want to talk to somebody who understand banking. So most, one of the problems that startups case is that when you go to the banks that you don't understand our side of the problem. So when you have another banker sitting across the table and explaining to them, then they also actually take it with a, they understand that, okay, you understand their pain and then, you know, so it's actually helps them. So we see that a lot of that happening now for us. And you also said large corporates is one of your customer base or stakeholders. What is the proposition for large corporates?
00:36:33
Speaker
Yeah, you're a large SMCG company. Basically, they now want to issue cards to all their retailers in the country and they want like a BNPL card so that they can easily place orders.
00:36:46
Speaker
that will eventually turn into a VNPL card. Today, they want to get those cards based on the schemes. So, let's say for example, all the retailers that do X amount of sale in that particular festive month, they'll give them X amount directly into their card. So, no hassle of this recon or whatever. So, instant gratification. If you sell these many goods during the festival, during Diwadi, we'll send you this 10,000 bucks like that.
00:37:10
Speaker
Right. In fact, one of the large platform, I'll actually now come to my favorite, one of the favorite use cases that we've built so far. And that has really, it actually helps. I'll now maybe come to four sets of case studies. I think that is where I should have started, but there are these four case studies that I'll talk to you about.
00:37:28
Speaker
And this will primarily, I think, make you understand the power of our platform and what we're doing. So one of them is Tanzo. So what we're doing with Tanzo is, Tanzo has all of these riders around town that are there to run your errands and complete tasks. So now the moment a customer, let's say, orders something from H&M or wants something picked from a mall, the person goes to the mall, he sends you a message saying that the goods you asked for is worth, let's say, 2000 rupees.
00:37:56
Speaker
Instantly, you get a payment link from Danzo to pay that amount. And the moment you pay, Danzo will actually get that amount settled two days later. So what was happening prior to Falcon was Danzo would actually give cash advances to all these drivers to complete these tasks. Because these are higher end tasks where they take a lot of money. So Danzo would actually spend... A lot of times what would happen is a lot of these drivers would take that money and go off for a couple of days.
00:38:24
Speaker
They won't even do tasks and they had to balance this somehow because they were in the primary, primarily they were in the business of completing tasks and they were getting into a lot of this loss that they were facing because of the attrition and drivers not doing tasks and they wanted to build the right motivation incentive structure. So where we came in was that at the moment that particular transaction got closed, the customer paid that money to Danzo. Danzo's API would hit us and we would unlock that driver's card that is at that store
00:38:53
Speaker
to the tune of let's say 2,000 rupees that amount that the customer paid only for 10 minutes. So only each and the moment that person would transact would transact like the moment that person would swipe that money will go back to Danso. And so basically what happens is now two days later when Danso's money comes they actually settled with an NBSC partner of Falcon. So what we did here was that Danso which was earlier out of pocket
00:39:19
Speaker
Now, we've built in a mechanism where 2 days later, the NBFC is very happy that they got a real-time collateral on the receivable of Danzo that you just paid as a customer. That became a real-time collateral. Using that collateral, that particular driver's card got unblocked for 2 minutes or 10 minutes. The moment the transaction is done, the card is again... So in that way, we were able to scale a business for Danzo without them being out of the pocket.
00:39:43
Speaker
got an NBSC that would get a share of that interchange for them. That would be amazing for that company for the NBSC because they're able to now lend. So this NBSC would have never thought of lending in doing a digital lending of this sort ever. But it was only because of the power of our platform that they could get real-time data, real-time collateral and an access to refund in such a secure manner that they're extremely happy and they're almost and so you're now just scaling up that program.
00:40:11
Speaker
This is something that was not possible. And we actually solved a case for the end driver, the customer, Danzo, all of them kind of went for everyone. The second case study is about a company that is now wanting to give out cards to these creators, digital creators, influencers.
00:40:28
Speaker
So earlier, this market was again cornered for very large influencers who would primarily charge maybe upwards of 100,000 followers, charge a bomb and you know that. But now there's this whole scene that's evolving, which a lot of nano micro
00:40:45
Speaker
many influencers that have come about that are creating their niche and this company actually is a platform for them that are wanting to issue cards to all of these influencers and now want to give out cards to these influencers for basically for these influencers to first purchase these products.
00:41:02
Speaker
And once they are able to get delivery of the product, they should post about this product on whatever social media platform. And based on the reviews that they get and the analytics of that particular post, they'll get the brands usually give them a cashback that ranges from 30% to 500% of the product value. Now imagine a product here, these brands would have been varying because these people would just post about it with may not even really purchase the product.
00:41:26
Speaker
maybe return it later. So this is not something that product they want, right? They want them to use this product on a continuous basis because they're not these very large influencers, they're just celebrities. These are people that are end users and they want to make sure that they are providing product and actually using it also. And they want to actually incentivize the end user in that way.
00:41:44
Speaker
And now, because of the product form that we have provided, they'll be able to actually manage the financial part of it, where they'll be able to keep a check on these influencers, whether they bought the product and that they did not return that product. Because even if they return, that money would actually come back in the same source, the card source. So all of that can journey is now being built on top of our platform for these two. Yeah, basically, it's frictionless now.
00:42:07
Speaker
Yeah, it's completely frictionless and it's full proof in that sense, right? There are no loopholes that people would use. And this is a huge program that they're talking about almost 2 million influencers across the country. So this is in this digital economy, there's digital creators that are new age, they're getting a new revenue source that will otherwise never been able to do that. This is the second case study where we are enabling all of that because and because of our card,
00:42:33
Speaker
because the real-time controls on the card, the platform is able to view these people, how, when they funded it, how they got the product, how long did it take for them to post it, so that they're able to build real-time analytics around how did the, they also have webhooks in all these social media platforms to understand how the particular post is performing.
00:42:49
Speaker
So they're building a solution for this. And even those cashbacks will actually come in the form of in the card only for them. So this part then becomes that. And like micro payments can start happening like on a daily basis, you can settle and stuff like that. Exactly.
00:43:04
Speaker
And these cards are now primarily for, they'll also have their Instagram handle. They'll have almost no branding of any bank or anything on there. It'll be just their name and like that. It's just a really cool card, right? And then that, and as you become like really hot in terms of the influencer size, you actually end up getting a platinum or a black card. Like you would get, get into the Amex.
00:43:25
Speaker
And all of this now being given to you, not by a bank or a large company, by a company that you trust, that is building business for you, that is helping you build your business. So that's another change of completely quantum leap for what used to happen before. And we're allowing for all of the use cases to come out. The third is, of course, I spoke to you about the whole NBFC case and the MFI. So that is even changing because that's very close to both young and my heart.
00:43:48
Speaker
The fourth is actually this logistics company, right? That almost has a hundred thousand drivers on their platform, like commercial vehicle drivers and commercial vehicles. And they are now wanting to not just give all these drivers a card. Also the fast tag on their truck is on our platform, like using our platform. And they're able to actually fund those, depending on the journey that they've given them.
00:44:13
Speaker
given these drivers on the route that they've sent it. They fund these, so we give them a single platform where they're able to look at all these 100,000 trucks that they have, 70,000 to 100,000 trucks that they have, and they're able to real-time fund it. There's a common pooled account. The money will actually be taken from that pooled account rather from an individual
00:44:30
Speaker
vehicle level, right? Now all these drivers get a card. So now based on this, the company is actually building data on how fast the driver is moving from one toll to the second toll. So they're able to build analytics on how much, what is the speed that the driver is driving at? What is the sleep at night or not? What is the sleep cycle of the driver? They're able to then also give out real-time tracking data to their customers as to where the shipment is. And all of this based on a single transaction, you can imagine, right? Like every toll and all of that.
00:45:00
Speaker
And then they give these cards to these drivers for them to spend on and they lock these cards only for food and fuel. And if there's ever an emergency money that's needed, in real time, they could just let the click of a button say, okay, this driver code, give 10,000 rupees. So this driver can then go to a nearby ATM and withdraw 10,000. Otherwise, that card was useless from a withdrawal point of view.
00:45:19
Speaker
Also, this turn-off, turn-on, real-time automation that we provide here is actually helping them in those corner cases where they would find it very difficult to serve those or enable these truck drivers to do completing their jobs. So, all of that is now being possible with the platform that we provided them.
00:45:36
Speaker
What kind of revenue run rate are you at currently? What do you expect it to hit? What are the metrics you track for this? So we've so far hit almost 130 million transaction level, which resulted into a revenue of about 1.8 million or so, so far.
00:45:55
Speaker
And we are hopeful of hitting almost $800 million ton rate by I think September of this year. And hopefully in five years, we're looking to hit about $30 billion in transaction and almost $60 million in revenue. And this year by the end of this, by the end of financial year 23, we're hopeful of touching almost 10 million revenue ton rate.
00:46:18
Speaker
This GTV gross transaction value, that determines how much you learn because you learn like a percentage
Global Expansion and Strategic Investments
00:46:24
Speaker
of that. And that's the beautiful part, right? We are actually in the business of giving revenue to these companies, not taking revenue from them. We actually share a large part of the interchange that we made. And large means, the largest chunk goes to them. We barely keep anything. But it's all about scale. Once we're able to build that kind of scale and that kind of comfort with the clients, the money will follow. They'll be happily
00:46:45
Speaker
They'll be happy in giving you those funds. And now we're being approached by the networks who want to promote this because they're all interested in promoting this use case. The more and more cards are there, the more and more spend can happen on that platform. So we're actually seeing a lot of thrashing coming in from there. A lot of networks supporting us, workplace supporting us, Visa supporting us tremendously in building these programs. Now, FIS, for instance, I told you about the global opportunity of the company, right?
00:47:07
Speaker
FIS has actually taken care. We are now going to Middle East. We are on the verge of closing two large banks there. And there is a barrage of fintech companies and tech companies there that are waiting. And the economics there are better. Okay. And you're like bootstrapped? Have you raised funds? Until November this year, we were completely bootstrapped. So I had personally bought in five to six million dollars of my own.
00:47:27
Speaker
of both Priyanka and I have put in our own capital and we are again from those same mentality as you were speaking before. We wanted to make sure that we are in that position to scale and use the funds in the right direction and it was only around November or maybe the second half around September that we realized that we wanted to raise some capital.
00:47:45
Speaker
And we were getting a lot of interest from a lot of ways, but we then wanted to do a privilege round for a couple of very good angels that will be able to help us build this business, scale this business. Like they would be able to add value in a real sense. And this was the only time people with knowledge network. Exactly. So only people that would be able to then open doors for us or explain who's already built and scale systems themselves.
00:48:09
Speaker
So we have founders of almost, we did a privileged round of about $3 million. We actually wanted to do only $500,000, but such cool people wanted to come on board. So we took over $3 million and it was the only round that we could get individuals on board. And these were people that have supported us through chickens and we've known them for a while. Some we've just recently met, but we're great people who've done, been there, done that. So, you know, we have Shamir Karkal from Cinder Money. We have Paul Leang from Liseit. It's a company that exactly what we do in India, they're doing in America.
00:48:39
Speaker
Lythic, the founder of that, Charlie, he was in the founding team of Robinhood. We have the founders of Licious from India. We had a couple of people from the private equity space in India. We have the founder of DSG fund Deepak Shaddat. He's invested. We have Affairs, who's the investing manager for the Sovereign Med Fund of the UAE. He's invested
00:49:01
Speaker
Then Ali, who's one of the hottest startups in the US right now, Stonks, they're again a fundraising startup that we're changing. I think A16 Jesus just invested in them and he's a big proponent and he helped us. We were actually part of a second cohort. So Stonks actually does what we do. They actually help startups raise money completely on a digital platform and they built an amazing product there and a huge pool of investors that come on board there. So we were actually the second cohort to her pitch there.
00:49:28
Speaker
and we got a lot of access from there. We have some amazing people we met through there and who are helping us build and scale. So we did not want to say no to these people. In fact, we initially thought we'll raise 500,000. We were anyways on track to becoming very well. We were doing very well. So we thought each other we could do a quick round after that. Now we had some runways, so we're now doing things. But we increased our team. Obviously no marketing spent. We don't do that. It's because it's a B2B.
00:49:57
Speaker
Yeah. And there's a lot of inbound that's coming to us. We're looking to build more. We're looking to tell our stories in depth, like with you, because this is a complicated industry, but we're doing something that can change your lives in that way. And so it's only when we kind of get in depth and can somebody understand what we do. So therefore,
00:50:16
Speaker
We're now looking to start our fundraise in a couple of weeks. Right. And we're getting a lot of interest already getting a look. Yeah. Like a series, a lot of interest is already coming through the top tier funds. So we're looking to do that now. Okay. Okay. Probably like what 30, 40 million kind of around, I'm guessing. North of 20, I would say, but happy. We let the markets decide how. I guess the only direct competitor you have would be like an M2P. I don't think there's anybody else who's doing exactly this.
00:50:45
Speaker
M2P is the only other fintech that is trying to do what we do. And they've been in this place, yes. Is there any difference between your focus and their focus? I think we are building the entire engine, per se, themselves. While we are not getting into processing, like I explained, we are going in depth with our customers. We are actually value adding on those sides of things.
00:51:07
Speaker
We are allowing them to use our licenses. So we also have an NBFC license for companies that want to lend. So we are actually giving their entire tech solution to companies that want to just start and do something. We have a ready set of licenses, banks and network partners and processors that the FinTechs or companies can pick and choose from depending on what they need from us as part of this. So essentially your focus is enabling the go-to-market.
00:51:32
Speaker
Yeah. So enabling and making sure that they're able to scale in a very systematic way. We're not primarily in that zone of doing everything we can possibly. And we do not want to just touch someone. We believe in creating value that is irreplaceable to the end customer.
00:51:49
Speaker
If you like the Found A Thesis podcast, then do check out our other shows on subjects like marketing, technology, career advice, books, and drama. Visit the podium.in, that is, T-H-E-P-O-D-I-U-N.I-N for a complete list of all our shows.