Bet big on fintech

Chennai has a long history of banking, insurance, nonbanking finance and even chit funds. The Madras Bank, which was subsequently merged with SBI, was established in 1682. Madras Urban Cooperative Bank, India’s first cooperative bank, was established in 1906. The country’s first private mutual fund was launched in the city in 1993.
The city is a competitive hub for technology and several IT majors have established themselves in the BFSI services sector.But when it comes to marrying finance and technology, Chennai lags behind Mumbai and even the emerging GIFT City in Gujarat.

“Chennai offers a fantastic ecosystem for fintech. It is home to some pioneering banks and NBFCs and has always had a robust pool of technology talent in BFSI,” says Venkat Subramanyam, founder, Veda Corporate Advisors, a leading investment bank. “This fusion of finance and technology skills should ideally place Chennai at the forefront of fintech action. Hopefully, we will see more successes going forward,” he adds.
As a first step, the state govt unveiled an exclusive FinTech Policy in Nov 2021. Its key objective is to develop infrastructure for attracting next generation fintech firms.
“The financial services space is changing rapidly. Banks such as IDFC First Bank and JP Morgan increasingly see themselves as technology companies with a banking licence,” says Ramkumar Ramamoorthy, partner at Catalincs, a technology growth advisory firm.
“Likewise, born-digital companies such as Google and Alibaba, also called techfin companies, are into financial services in a big way. The distinction between traditional financial services players, NBFCs, fintech and techfin companies will gradually blur and we will see increasing collaboration and crosspollination,” he adds.
“Recognizing this, TN’s fintech policy covers all categories of financial services companies that have technology as their underlying platform for business as well as those that are building the technology platform ecosystem,” says Ramamoorthy.
“I expect not only fintech unicorns from Tamil Nadu such as Yubi (formerly CredAvenue) to multiply but also well-established financial services players -ecosystem and platform builders such as M2P Fintech and Kaleidofin, infrastructure providers such as FSS, and incubators such as FinBlue -to play a meaningful role in tech-enabled financial services,” he adds.
In Jan last, TN launched FinTech City, a project spread over 56 acres, that will offer developed plots for financial institutions to establish base, with commercial and residential space. It will also have a FinTech Tower with 5.6 lakh sqft of developed space for fintech startups and BFSI companies.
“State govt is slightly late with fintech focus. No one has marketed or spoken much about FinTech City. They could have identified and built smaller infrastructure instead of waiting for the larger project. If they wait for construction to complete, they will miss the bus,” says T R Suresh, General Partner, July Ventures, a venture capital fund.
“Chennai has the technology and knowledge base for this sector and it is already the SaaS capital. But financial services are highly regularised. If institutions already in core functions join hands with companies focused on innovation, the products will be perfect in terms of compliance,” says Suresh.
“It is not too late for developing anything, especially infrastructure. Unlike other states, FinTech City is coming up well within city limits and in line with the upcoming metro rail corridor,” says Sandeep Nanduri, managing director of state-owned Tidco, which is promoting the project.
“We are developing it in two phases to offer infrastructure support to enable the growth of fintech companies. While the FinTech Tower is under construction, we are also offering developed plots on auction for financial institutions (FIs) to establish their own bases,” he says.
Recently two plots were auctioned and two FIs successfully bid for them. Since the Model Code of Conduct is in force, formal agreements will be signed after the first week of June.