Fintech firm Niyo betting big on booming Indian travel to Asian countries: Founder Vinay Bagri

Vinay Bagri

Fintech startup Niyo is betting on versatility when it comes to attracting customers looking at foreign transactions, whether it is forex cash, debit or credit. Among the first companies to launch a zero-forex markup card in the country, Niyo upended the bank-led prepaid forex card market with a debit card launch in 2018.

Even as a new generation of zero-forex markup credit card-focused competitors sprang up over the last couple of years since COVID, Niyo is betting on cash being a major use case in Southeast Asian markets, where most of the Indian tourists go.

“One of the important use cases abroad is cash, which you would want to withdraw from an ATM, especially in markets where Indians travel a lot. Thailand, Vietnam and Indonesia are very high cash markets. And if you, by mistake, withdraw through credit cards, it is going to be very costly,” Niyo Global founder Vinay Bargi told Moneycontrol.

Hence, debit cards still hold more value for a large segment of Asian travellers than credit cards, Bagri said. The company also has credit cards with zero markup, but that is only 20 percent of its overall business.

Offline expansion

This thesis also explains the company's recent acquisition of Kanji Forex, an offline currency exchange firm, a few months ago. “Nobody travels to foreign countries without cash. Usually, most customers carry 20-30 percent of their expenses in cash even while travelling to Europe, where card payments dominate,” Bagri said.

With Kanji, Niyo is looking to deliver foreign exchange to customers’ doorsteps within a few hours. The regulatory requirement is that only institutions with branches can deliver this service, and Niyo is looking to expand Kanji service to the top 30 cities over the next couple of years.

The origin story

Founded in 2015 as a fintech startup that provided bank accounts for the bottom of the pyramid or blue-collar workers with debit cards, the firm has pivoted to catering to the upper-middle-class globe-trotter community.

“In India, it is difficult to make money providing financial services for less affluent people. There is lending, but it has high default rates. There is nothing to be made by selling small SIPs or mutual funds,” Bagri said.

In 2018, Niyo launched its zero forex markup debit card in partnership with DCB Bank. This has proved to be popular among customers and has seen several fintechs follow the model from Fi Money, Scapia, Uni, among others.

Today, almost 90 percent of the Niyo’s revenue comes from the travel segment. Niyo opens a savings account and then issues a debit card to these customers with zero forex markup.

How does zero forex markup work?

There are an estimated 17 million outbound tourists in the country, and all the fintech forex-focused cards have an install base of around 2 million, indicating a large untapped market.

While some of the premium credit cards of banks also offer a similar value proposition, those cards charge an annual maintenance fee of Rs 5,000 or more, apart from joining fees. Most fintech cards have zero annual charges and joining charges, proving to be a much cheaper alternative for middle-class travellers.

Using a regular debit or credit card will incur big forex markup charges. Most banks and forex companies make money on the exchange rate as well as the forex markup. Zero forex markup firms make money mostly from the exchange rate.

For instance, when you search for a foreign exchange rate, what you see might not be what you get when exchanging the currency. This difference is the margin that foreign exchange companies and banks make.

Low-cost operations

“We realised the existing bank cards were charging a high markup since their costs are high. Since our costs were low and we ran a tight ship, we can offer zero forex markup and make money on the exchange rate as well as the international MDR ,” Bagri said.

MDR, or merchant discount rate, is the payment commission that merchants pay to payment companies for facilitating digital payments.

Niyo has raised a total of $180 million from investors such as Accel, Lightrock, Beams FinTech Fund, Prime Venture Partners, JS Capital and Multiples Alternate Asset Management, among others.

“We basically built a model where customers get a better price and better service than what they would get at banks, and we spend much less money than banks. So, as a result, we can make the equation work,” Bagri said.

Why are credit cards more popular for forex

Most fintechs and banks offer zero forex on credit cards, instead of debit cards.

Typically, most Indian customers might use the card only once or twice a year when they travel abroad, if the product focuses only on international usage. Credit cards tend to be used more than debit cards for domestic payments,  because of the credit facility, as well as reward points.

For year-round usage, a credit card is better for payment firms as debit card usage in India is declining, and, hence, the cards might not be used for any domestic transactions. UPI tend to be more widely used for digital debit transactions.

However, most credit card customers have multiple cards and use them only for the purpose for which they acquired those cards. It is also one of the reasons why some of these players have launched Rupay credit cards, which can be linked to UPI accounts for daily payments.

Credit card commands a higher MDR, proving more remunerative for card issuing banks and their fintech partners.

Opening a savings account also helps Niyo to offer UPI payment services to customers, balancing the savings account’s use case.

Financials

Niyo has seen its financials swing wildly over the years, with COVID-related travel disruptions hitting the firm hard.

The Bengaluru-based company reduced its losses by almost half during FY 25 to Rs 78 crore from Rs 143 crore it reported during the previous fiscal. Its revenue grew 32 percent to Rs 123 crore during FY 25.

In FY24, the company reported its revenue declining by 29 percent to Rs 94 crore.