As 2023 draws to a close, the Indian fintech scene stands transformed. 

While the broader startup ecosystem grappled with funding winters and profitability woes, the fintech space faced a different challenge: the ever-present gaze of the Reserve Bank of India (RBI).

• One message resonated loud and clear this year: compliance is king

The RBI sent a strong signal that no fintech business, regardless of size or ambition, is exempt from its regulations. From domestic payments to cross-border transactions, credit on UPI to digital lending norms, the regulator kept a watchful eye on the sector's meteoric rise.

So, before we flip the calendar page, let's rewind and revisit the must-read fintech stories of 2023.

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• One sector that has seen light-touch regulation is the one for payments made on the UPI platform. This year, it has witnessed a flurry of new features, with the pace of innovation putting even startups to shame. Full credit for this goes to the National Payments Corporation of India (NPCI) and its chief, Dilip Asbe. More on that here
  
  
• NPCI's rapid expansion into the credit space through UPI has encountered an unexpected speed bump in the form of the merchant discount rate (MDR), which is the commission merchants pay banks for facilitating digital payments. Long considered a contentious issue in the country, the success of UPI has largely been attributed to the zero MDR regime mandated by the government. Unfortunately, this cannot be mandated for credit, and as a result, several merchants refuse to accept credit card payments on UPI. Find out more
  
  
• Speaking of challenges, one of the significant headaches for NPCI has been the fact that the two largest UPI players together hold around 85% market share. NPCI sees this as a concentration risk for the ecosystem, but its solutions are deemed impractical. However, an innovation has emerged, posing a potential disruption, at least for merchant payments. Go deeper
  
  
• Digital has not only revolutionised payments, but it has also transformed the landscape of investing, with over 60% of all stock trading now facilitated by discount brokers. Two Bengaluru-based startups, Groww and Zerodha, are in a fierce battle for the top spot. While Groww surpassed Zerodha in active user base this year, the latter maintains its lead in terms of revenue and profitability. Find out more
  
  
• While Zerodha rakes in hefty profits, fintech giant Paytm received a blow from the RBI, potentially prolonging its quest for profitability. Despite impressive revenue and profit growth, fueled by providing a platform for banks and NBFCs to reach a massive 9 crore loanable market via smartphones and earn healthy commissions, Paytm's explosive growth in unsecured small-ticket consumer loans has raised concerns at the RBI. Dig deeper
  
  
• Sachin Bansal, another poster boy of the startup world, has found himself on the receiving end of regulatory scrutiny. Following the denial of a banking license, Bansal decided to sell Chaitanya India Fin Credit, a microfinance institution. This will likely hamper his big ambitions to become a major financial services provider for digitally savvy Indians. It is not just Bansal who harboured ambitions of making a splash in India's financial sector. Cred, WhatsApp Pay, and Amazon Pay all attempted to gain significant traction in the country's digital payments ecosystem but failed to make it big.
  
  
• Several payment aggregators held their breath, anxiously awaiting the final PA license from the RBI. On December 19, their wish came true as Razorpay, Cashfree, and others received the nod. For Razorpay, this meant not only securing the license but also lifting the ban on onboarding new merchants. This marks a significant shift in their game plan for 2024. Here's what Razorpay co-founder and CEO, Harshil Mathur, said about getting the RBI nod.
  
  
• Lending, a darling segment for fintech investors and founders, catapulted Indian startups, several of the highest-valued, onto the digital wave. Soaring disbursements in India's credit-hungry market fueled their rise. But can lending maintain its momentum as a major segment in 2024?
  
  
• The RBI's move to approve First Loss Default Guarantees (FLDG) between regulated and unregulated entities, while capping them at 5% of the loan portfolio value, sent ripples through the fintech segment. However, many fintechs welcomed the move, viewing it as a catalyst for forging healthy partnerships with banks. Find out more
  
  
• PhonePe had a very busy 2023. The company not only changed its domicile back to India but also ventured into a new business segment: stockbroking. The firm launched an online stockbroking app called Share.Market. The space is currently dominated by players like Zerodha, Groww, and Upstox. The $12 billion-valued fintech firm aims to secure a significant share of this market. PhonePe has raised over $850 million this year from investors such as General Atlantic, Tiger Global, Ribbit Capital, TVS Capital and its parent firm Walmart.  
  
  
• The ZestMoney saga stands as a significant chapter in 2023. It started as a popular app among consumers and eventually culminated in shutting down operations earlier this month. The company's co-founder and CEO, Lizzie Chapman, shared her journey and lessons from ZestMoney in a heartfelt interview with us. Read the full interview

• The upcoming rules of the Digital Personal Data Protection (DPDP) Act may introduce provisions that raise eyebrows and bring relief to different sectors of the industry. Firstly, according to an unreleased version of the rules, the Cabinet Secretary is likely to head a committee responsible for appointing the chairperson of the Data Protection Board. Secondly, in a development that may come as a relief to many, the government plans to exempt educational and healthcare institutions from the restrictions associated with processing children’s data. Lastly, in a welcome move, the government also intends to mandate that social media and e-commerce platforms delete user data for those who have not used a particular platform for three years.
  
  
• FirstCry's parent company, Brainbees Solutions, filed its DRHP and plans to raise Rs 1,816 crore through a primary issue of equity shares. Existing investors, including Mahindra and Mahindra (M&M), SoftBank, and founder Supam Maheshwari, will sell a total of 5.4 crore shares in FirstCry through an offer for sale (OFS).
  
  
• Byju's' hiccups have cast a long shadow over the Indian edtech sector, eroding investor confidence. With funding plummeting, edtech companies are scrambling to survive.  Some are showcasing their embrace of generative AI, while others are pursuing a profitable makeover. But for most, the hope is pinned on a funding resurgence in the new year. Meanwhile, investors say that the sector urgently needs a refresh, with the entry of a new cohort of startups into the arena. Go deeper
  
  
• India's real-money gaming sector, which forms the bulk of the country's overall gaming industry, had a rough 2023 amid a series of legal battles and regulatory headwinds that have even raised the question of viability for several companies in the fledgling sector. As we approach 2024, the sector stands at a critical juncture with its future growth resting on the implementation of a comprehensive regulatory framework and the verdicts in the upcoming court cases. Read our deep dive
  
  
• Zomato, in an exchange filing late last night, said that it had received a show-cause notice from tax authorities demanding the food delivery company to pay Rs 401 crore in pending GST dues related to delivery charges. The company, however, has pushed back and said that it "strongly believes" it is not liable to pay any tax on delivery charges, contending that the tax burden should be borne by gig workers. Find out more
  
  
• The increasing number of Covid cases worldwide has not deterred Indians from proceeding with their international travel plans, as no travel restrictions have been imposed by any country thus far. Indian tourists have neither cancelled nor modified their overseas holiday plans despite the surge in Covid cases. Due to the rise in Covid cases, travel firms and associations expect no significant impact on India’s outbound travel market, currently estimated at $15 billion, which is expected to increase by up to 50% in the next one to two years. Find out more
  

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