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1. Eko : Scaling up a Fintech Start-up in Volatile Market and Regulatory Environment WAC 2 Group B15 Aditya Sharma PGPGC202300107 Chenna Sampat Manikanta Vikas PGPGC202300120 Dharshan J PGPGC202300123 Harsh Diwan PGPGC202300131 Manish Pradhan PGPGC202300138 Siddarth Yadav PGPGC202300174

2. Agenda Timeline Market and Business Analysis API: Porter’s 5 forces API: Competitive Analysis DMT: Banking the Unbanked Evaluation of Options Financial Analysis Decision Making Roadmap Contingencies Regulatory Changes

3. Timeline

4. API: Porter’s 5 Forces Moderate API business is technologically complex Requires regulatory compliance However, awareness and talent pool are increasing High There are several established players like Stripe, PayPal, and Razorpay Competition on price, features, and service Constant innovation and differentiation are crucial for success High Multiple API providers are available with varying features and pricing. Switching costs: low due to standard APIs Buyers can build their own API solutions if needed Moderate Dependence on core infrastructure providers (cloud, payment networks). Consolidation can increase bargaining power Alternative solutions, like building in-house infrastructure, exist Moderate Traditional payment methods (e.g., bank transfers) still exist. Alternative API solutions could emerge However, APIs offer unique propositions like easy integration & scalability

5. API: Competitive analysis Company Similarities Differences Figures Razorpay APIs for online payments Customizable payment solutions Payment gateway services Primarily focuses on facilitating online payments for businesses Not targeted at remittances or start-up entrepreneurs Total processed payments value: Over $50 billion annually PayU APIs for online payments Payment gateway services Offers additional services like payment processing, fraud prevention & subscription billing Processed over 3.5 billion transactions globally (2020) Instamojo Provides APIs for businesses to accept payments and sell products online Offers a platform for small businesses and entrepreneurs to set up an online store Targets small businesses and entrepreneurs Focuses on providing tools for setting up online stores and selling digital products Over 1 million merchants, processing $2 billion annually Paytm (similar to PhonePe) Offers APIs for businesses to accept payments online Provides a mobile platform for consumers Offers various financial services, including bill payments, mobile recharges, and ticket bookings Broader range of financial services like digital wallet, insurance, and investment options Ecosystem: targets consumers in addition to businesses Processed payments value: Over $100 billion annually

6. DMT: Banking the Unbanked Where do we compete? Market Segments: Unbanked and Underbanked population in India, focusing on low and moderate-income individuals Geographical Areas: Primarily in urban and semi-urban areas across India Competitors : Google Pay, PhonePe , MobiKwik , BharatPe How will we reach the arena? Partnerships: Major banks (SBI, ICICI Bank, Yes Bank) and other financial institutions Technology Infrastructure: Using robust API framework for easy integration of its services by retailers and businesses Unique edge? Convenience and Accessibility: Leveraging small neighborhood shops as banking agents. Technology: Offers a secure and reliable platform for instant cash transfers, boasting high success rates and safety standards Commission Model: Enables retailers to earn commissions on transactions, creating an incentive. Staging sequence of moves? Gradual Expansion: Strategically expanding its services geographically to reach the unbanked. Technology Development: Continuous investment in technology to enhance its platform's capabilities in the fast-evolving fintech sector. Economic Logic Transaction Fees: Earnings from fees charged on money transfers Commissions: Revenue from commissions paid by financial institutions and service providers for utilizing Eko's network

7. Option 1: Focus on DMT DMT contributes 90% to the existing revenue Eko charges a 1.5% commission per transaction in its DMT business. If Eko is able to scale this up, as value of transactions rise this would enhance the profitability. Profitability High Customer Acquisition Costs (substantial costs in marketing, often spending over half of their monthly transaction volumes) Eko’s PPI license has been canceled they have to partner with established banks Funding, Regulation TAM remains high. 20% population doesn’t have bank account, further 20% people having bank account are inactive users. So, in essence they can cater 36% of the population. Scaling up business requires significant investments because of high customer acquisition cost. Scalability Eko's DMT service aligns with the company’s vision of banking the unbanked customers remit cash digitally without the need for a bank account, making it accessible to underbanked populations​​. Vision

8. Option 2: Focus on API Very competitive business with competitors having greater resource strength Operational efficiency is prioritized over margin, minimal (Sub 1%) Substantial increase in transactions processed: Can leverage massive data generated Profitability Funding & Regulations Scalability Vision Relatively low funds are required for paying engineers and maintaining cloud servers They already have a released API; incremental costs will be incurred for building additional features No additional regulatory requirements Easy to scale API requests without the need for additional fixed resources Can continuously build new services and features to add to the service without friction Unfulfilled: API solutions are usually used by startups and urban businesses There is no rural aspect or inclusion of underprivileged Can play a role if increased smartphone and internet penetration leads to more digital transactions

9. Option 3: Digital Lending Potential: Rapidly growing lending market, good loan recovery record in recent past. Steady cash flow: Repayments linked with income cycles  lower default rates  recurring revenue Profitability Additional capital: Low due to access to bank funds for lending Dynamic environment : Requirement of constant monitoring and adaptability, concerns about predatory lending practices, etc. have led to stricter regulations. Funding & Regulatory Environment Potential: Scalable to non-standard income patterns, leverage existing network of agents Tech-driven solutions: Automatic credit scoring and loan disbursement processes reducing need for physical infrastructure Scalability Alignment with company vision: Improving financial inclusion, cater to micro-entrepreneurs and individuals with irregular incomes Financial literacy programs: Such programs could enhance customer trust and loan repayment Vision

10. Option 4: Focus on ELOKA (White label solution)  Recurring and regular source of cash flows and potential to create margins SAAS industry is expected to grow at a CAGR of 18% With low labour cost,remote customer engagement  and in-house customer support enables capital efficiency Profitability With existing competent capabilities in the product very scalable without high dependence on external funding. Less uncertainty in regulatory requirements as long as data protection is ensured. Funding SaaS solutions are designed to scale easily to accommodate growing user bases or increased data storage needs, with the infrastructure managed by the SaaS provider. Scalability Aligns with the vision to make digital solutions available to millions of Indians and developing markets in the world Vision

11. Financial Analysis Profitability, Liquidity, Solvency, etc.

12. Ratio Mar'20 Mar'21 Mar'22 Mar'23 Current Ratio 1.04 0.908 0.612 0.917 D/E  0.559 0.862 Growth in Revenue % 83 (58) (46) 3.92 ROACE 3.98 - - - Current Financials (1/3)

13. Ratio Mar'20 Mar'21 Mar'22 Mar'23 Current Ratio 1.04 0.908 0.612 0.917 D/E  0.559 0.862 Growth in Revenue % 83 (58) (46) 3.92 ROACE 3.98 - - - Current Financials (2/3)

14. Ratio Mar'20 Mar'21 Mar'22 Mar'23 Current Ratio 1.04 0.908 0.612 0.917 D/E  0.559 0.862 Growth in Revenue % 83 (58) (46) 3.92 ROACE 3.98 - - - Current Financials (3/3)

15. Digital Lending and DMT Eko should partner with lending institutions which has licensing for extending micro-loans Eko should continue expanding into the DMT business and add more retail touchpoints Eko should pivot from DMT to digital lending owing to better margins Rationale Lending is a relatively better margin business Funds for lending would primarily be provided by banks Aligns with the founder's vision of Banking the unbanked Existing touchpoints created for DMT business could be used to cross-sell loan product Decision Making

16. ACTION PLAN Leverage existing capabilities Using the existing competencies in technology and retail touch points to accelerate  business services in DMT and digital lending. Long term contracts  Foster a robust relationship with banks to enable offering DMT services and lending into rural households Geographic expansion Reaching all the states across India. Design marketing campaigns in regional languages S trategic partnerships with the central & state governments when opportunities arise to enable digital lending, microfinance, MSMEs, insurance through Ayushman Bharat Scheme, etc. Organizational Changes Training & development of employees to provide new services. Implement effective customer acquisition  and onboarding strategies.

17. Roadmap Year 4 Negotiate long term contracts with financial institutions for expanding into digital lending Training  & making  organisational changes to achieve the objectives Expansion of existing retail touchpoints throughout the country Start loan recovery, risk mitigation division Explore different business models basis change in regulatory environment Apply for banking license if the business growth is substantial Year 3 Partnering up with government institutions to execute national schemes like Ayushman Bharat, Micro-financing

18. Regulatory Changes Lending Digital Lending Guidelines (Oct 2022): Tightened credit norms, capped loan tenures, and stricter disclosures affect neobanks' credit offerings Payments Infrastructure Development Fund (PIDF) (Oct 2022): Aims to develop payment infrastructure, potentially influencing neobank partnerships with traditional banks RBI sandbox framework (ongoing): Allows neobanks to test innovative products before a wider launch. API & Payment Gateway Data Protection Bill (Dec. 2022): Establishes data governance, affecting payment gateways' data practices. RBI framework on PA onboarding (Apr. 2023): Increases due diligence, potentially slowing merchant acquisition. Clarification to PPI-MD (Oct. 2022): Bans direct loading from credit lines, impacting some payment gateways. Domestic Money Transfer Payment and Settlement Systems Act (Amendment) Bill, 2023: Empowers RBI to regulate payment systems, impacting compliance for money transfer operators. UPI Offline and AutoPay: Allows UPI offline and s treamlines recurring payments, posing competition to traditional methods RBI regulations on PPIs (ongoing): Stricter KYC norms and transaction limits affect micro-money transfer services.

19. Risks and challenges Political Neo banking regulations: Licencing requirements, capital adequacy etc Data Privacy Laws : Compliance costs and reduce data usage Government intervention: PSU preference or FII restrictions Economic Economic Slowdown: Reduced consumer spending will reduce transaction volume and amount Rising interest rates: Unforeseen events and high inflation can cause an increase in interest rates affecting loans disbursed Technological Rapid Innovation: Will need continuous investments to stay ahead Data security breaches: Vulnerabilities in infrastructure could expose customer data and lead to reputational damage Social Changing Preferences: Shift to smartphones and direct bank-to-bank transfers with increase in bank accounts Cybersecurity threats and aversion to technology: Can damage reputation and loyalty PESTLE Legal Stricter KYC regulations: Increased compliance burdens could raise operational costs and slow down customer onboarding Evolving regulatory landscape: Could require Eko to constantly adapt its business model & operations

20. https://eko.in/about-us https://privatecircle.co/company/profile_old/O9S2Se0i0uS8hhsnFRwC9OmgJB05sWMoiX8NiWy-tLs=/ https://www.ey.com/en_in/technology/how-are-indian-b-2-b-saas-companies-balancing-high-growth-with-capital-efficiency https://thedocs.worldbank.org/en/doc/505421483987551585-0050022017/original/N8India2.pdf REFERENCES

21. THANK YOU Group B15