According to reports, the Bengaluru-based fintech startup Slice paid $3.42 million (INR 28 crore) in September last year to acquire a 5% stake in the Guwahati-based North East Small Finance Bank. After months of investigating such opportunities, the transaction was completed. The significance of Slice’s acquisition and its effects on the Indian fintech sector will be discussed in this article.
For a number of reasons, Slice’s purchase of a 5% stake in North East Small Finance Bank is significant. Since regulatory approvals are not needed for investments with sales of up to 5%, the deal did not need them. But if Slice wants to increase the size of its investments, it will need to talk to the Reserve Bank of India (RBI).
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Slice’s Approach
Sources claim that, through the agreement, Slice is looking into various integrations and tailoring its offerings for its users. For the fintech player. Collaborating closely with the small finance bank would “open many doors” and “make things easier” for Slice. Consequently, it is anticipated that the acquisition will open up new business opportunities for Slice.
Regulatory Obstacles
After the RBI told Slice to do something in June 2022, it had to deal with regulatory problems that hurt its business model in a big way. The credit solutions that the fintech startup offers are mostly for people between the ages of 18 and 29. It once provided prepaid credit cards, but it closed the vertical. After the RBI barred non-banking financial institutions (NBFCs) from adding credit lines to prepay payment instruments (PPIs). Reforms Slice implemented a number of reforms and split its credit and payments businesses into two distinct verticals in response to regulatory changes. Additionally, it has been attempting to scale up new products like unified payment interface (UPI) services. Slice finally received a PPI licence from the RBI in December last year.
Purchasing Stakes
The RBI is so picky about giving out banking and even NBFC licenses. Many fintech companies have thought about buying shares in smaller banks or partnering with large banks so they can run smoothly. Before, BharatPe and Centrum Financial Services worked together to create the Unity Small Finance Bank. Which later took over the PMC Bank when it ran out of money. Additionally, HDFC Bank recently paid INR 31.1 crore for a 5% stake in fintech startup Mintoak. In order to scale their offerings and provide products. Banks like Federal Bank and SBM Bank India have collaborated with a wide range of new age fintech startups, from Niyo to Jupiter.
The Future of Slice
Since the RBI told Slice to do so, the company has moved up its plans. To look into possible investments in banks. Slice’s investment in the North East Small Finance Bank is important. As it shows how the fintech unicorn needs to find its way through the regulatory minefield that has grown over the last few years. Despite having an NBFC licence for almost four years. Slice will also be qualified to change its status to a bank after five years by obtaining a new licence. The Market Opportunity for Fintech The country’s total fintech market opportunity is predicted to reach $1.3 Tn by 2025, growing at a CAGR of 31% between 2021 and 2025, according to a report from Inc42. Because of this, there is tremendous room for growth in the Indian fintech market, and the acquisition of Slice is a step in the right direction.
