Fintech is a country’s growth enabler, says Softbank Vision Fund’s Munish Varma

Financial technology, or fintech, enables a nation’s growth as it allows access to goods and services that are otherwise not available to everyone, said Munish Varma, managing partner, Softbank Vision Fund.

Speaking at Mint’s India Investment Summit 2021, Varma said, “fintech allows services to those who did not have them before, at low cost and in a frictionless manner. If India can bring more such services into the formal banking/lending system using companies such as Paytm, the country will grow more”.

Japan’s Softbank Group has invested in Indian digital payments startup Paytm and insurance aggregator Policy Bazaar, which according to Varma, are “doing very well”. He said Softbank is “excited” for fintech, not just in India but globally, and with the support of tools such as machine learning and artificial intelligence, the services can be improved over time.

The pandemic has transformed and fast-tracked the evolution of some sectors such as e-commerce, edtech, healthtech and fintech, he said, adding that these businesses will continue to grow.

“If you take example of certain sectors that have faced tailwinds from the pandemic, e-commerce is a case in point. E-commerce penetration was expected to be 25% in the US by 2025, but we have already achieved that in the last quarter of 2020. The pandemic has accelerated the transformation and evolution of certain business and sectors,” Varma said.

Startups, especially in the e-commerce, edtech, healthtech and fintech space, have attracted funding or are drawing investor attention because of the dependency of their businesses on technology. Varma said investors know the potential of technology-driven businesses in the future and, thus, the interest.

“Of course, there is abundant capital in the global market, both in the public and private space, and part of that capital is finding its way into Indian startups. More importantly, there are Indian startups of a certain size and scale, which is really catching global attention,” he added.

Varma said a few companies under Softbank’s portfolio in India are “actively contemplating” accessing public capital market. “I know that in 2021 and over the next 12 months some companies will go public, and that will be another sign of the maturity of the Indian ecosystem,” Varma said.

Softbank-backed Paytm, Policy Bazaar and online grocery delivery service Grofers have been reported to be planning an initial public offering in 2021.

Varma said liquidity conditions are the most “benign” globally, and part of this capital is flowing into the market, whether public or private. He said, “It is very hard to say whether valuations in tech companies, public or private, are excessive or not.”

He added if a company is genuinely solving a consumer or business need with its established product-market fit, operates across sectors and has significant tailwinds, capital availability is abundant as it is believed to compound capital in the long run.