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Innovation precedes regulation: Pontaq Partner
Pontaq is a UK-registered venture capital fund with a sectoral focus on fintech, emerging tech (such as IoT, AR/VR, AI, Blockchain) and smartcities.
It is now launching its UK India Innovation Fund 3 (UIIF 3) to expand its scope of opportunities. The entity has a corpus of 50 million pounds, constituting Pontaq’s broader strategy of increasing its assets under management to 500 million pounds soon.
Since 2015, it has been capitalising on the massive opportunity of innovation exchange between the UK and India, says Mahesh Ramachandran, Partner – India. Started as a five-million pound fund, it is on the verge of attaining the 10 million pound mark. It has invested in 11 companies so far, including three in TN – at money, Max Byte and Kritilabs. In an interview with DTNext, he shares insights on new gen tech ventures and the rationale of investing in such companies. Excerpts:
We are essentially in the broad space of banking, where we see tremendous opportunities. For instance, the neo-banking or tech-enabled banks offer such possibilities. Lending is turning into an interesting space, especially with Chennai having some of the credit scoring companies, including innovative ones like PayPal. Trading remittance, robo advisory and wealth advisory are part of the open banking landscape. From a global perspective, the fintech companies are disrupting the space. They will change the experience of banking given their ability to pull information from multiple banks. This enables a portfolio view, which, in the next few years, will provide a different benefit system to customers. Even if a person has an account with one bank and chooses to apply for loan from another one, the transfer of data from one bank to another bank through the e-way eases up the process. RBI regulation is coming into play in this regard.
Next, we see in the impact of wearables in the payment space. The National Payments Corporation of India deserves due credit for all the innovation that they have done. Now, fintech companies will be able to work closely with innovative banks. Obviously, the new gen banks are ahead of curve compared to certain banks by offering customized services at a nominal fee. Large public sector banks must ride the fintech wave. Sitting on huge data, the State Bank of India, for example can do remarkable things. Their announcement to stop debit cards has opened up new vistas. Just like mobile disruption dealt the death knell to landline, this technology will eliminate the intermediaries (issuer, acquirer) thereby simplifying the transactions.
Most fintech start-ups are good in technology, possibly good in user interface in terms of presenting solution on their website, but they need to have a ‘go to market’ strategy pitch ready besides knowing the ways of raising funds and having a basic understanding of finances. B2C is a difficult sell and so, B2B2C is a better way of penetrating the market. When it comes to B2B sell itself, training is imperative. This is where the fintech Centre of Excellence ecosystem plays a role wherein mentors are engaged on a regular basis. Onboarding professional mentors must be compensated for their time and energy. A small shareholding or compensation will pave the way for attracting more such mentors, making hand-holding an impactful exercise.
Leveraging advanced tech
There is a paradigm shift happening and the use of voice-enabled technology only magnifies the role of ‘Alexa’ like business disruptions. So, it will not be surprising to have local language in a remote place as the gateway to rope in unbanked customers in the country. Amazon, for instance, has a huge R&D centre in Ambattur and with cost of devices coming down, the focus on English language teaching skills including phrase usage corrections is a reality. Extrapolate the same to money transferring process and you will note that security products selling will be picking up. While there is a constant chase between hacking and security, it has to be discerned that sometimes, hackers are ahead of the curve, keeping abreast of developments. Innovation always precedes regulation. Chit fund, when re-imaging it by taking it online, turns out to be an interesting model. Couple of companies like Moneyclub online has reached us for funding and mentoring support. We encourage Indian firms to grow opportunities in the UK and similarly, we have the license for operating funds in the US. Such opportunities lead to cross pollination between India-UK and UK-US and US-India. We have been approached by British Columbia to come and set up shop there as we see opportunities in VR and augmented reality for a cluster of industries. Firms in those spaces drive innovation and the valuations are high.