There was a common refrain in Indian fintech a few years ago: “As a fintech startup, you eventually pivot to lending because that is how one makes money.” All that has changed now.

Startups enabling billions of digital transactions (UPI) were not earning much from payments, due to zero MDR (merchant discount rate) imposed on UPI transactions of all ticket sizes. Lending was the first answer, but now, after many years, Indian fintech startups are looking at stock broking to break out of the revenue hole.

Building a lending layer on top of the existing mammoth UPI user base made sense around 2019 and 2020, especially when demand for personal and small business loans was high. The Reserve Bank allowed banks and NBFCs to lend through UPI super apps, but the lending boom led to lending malpractices and unscrupulous players.

Soon, every app was a lending app. But the RBI cracked down on the wanton digital lending and credit disbursement, leading to troubles across the fintech ecosystem.

First, it came for credit card companies in 2021 and 2022, many of which had to pivot, and then the BNPL crowd, which was more or less pushed out by regulations around the same time.

In late 2022, there was a mandate on RBI-registered banks and NBFCs to increase the risk weights for digital unsecured loans, and finally, the first loss default guarantee (FLDG) guidelines, which made it expensive for lending apps to operate.

These changes and a slight slowdown in the frenzied loan demand post the pandemic have resulted in a chill in the digital lending space.

Suddenly, apps and platforms that had indexed for lending operations, added new risk and underwriting models were left with no real revenue advantage. Everyone is more or less operating as a loan distributor today when it comes to the lending, And in the meanwhile UPI has not really changed into a revenue generation product. So what are fintech companies turning to next?

The answer is stock broking. Everyone wants to be the next Zerodha and Groww.

Fintech Giants Flock To Stock Broking

The likes of Jio FInancial Services (JFS), MobiKwik and others have recently bagged approvals to operate their own digital discount broking platforms. It’s a heavily crowded field that also includes Paytm Money, PhonePe’s Share.market, AngelOne, Upstox, Coinswitch-owned Lemonn, INDMoney and others. Kunal Shah-led Cred has also applied to operate as a stock broker via Spenny which it acquired in 2023.

Does it make sense to join this heavy competition especially when the Indian equities market is going through a bit of a slowdown?

The newfound obsession for stock broking licenses, according to a VC who invests in early-stage fintech companies, is reminiscent of how the fintechs would rush for NBFC licenses during the prime lending days.

However unlike lending, equity markets according to the industry experts we spoke to present a much predictable monetisation opportunity with a stickier userbase, a large underpenetrated market and not many cost overheads.

Bipin Preet Singh, CEO of Mobikwik, said in a statement that as a new broking platform, it will try to attract new investors that join the........

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