Payments focused FinTechs -Opportunity or Threat?
Payments focused FinTechs are moving into insurance for multiple reasons (e.g.):
Margin capture (higher customer LTV)
- Pre-existing distribution to customer base (no CAC incurred)
- Opportunity to collect commission
- Core payments business might be at risk – PSP (Payment Service Provider) fees to be abolished for P2M (peer-to-merchant) UPI transactions 
- FinTechs have already explored lending
Source: MobiKwik (09/19); PhonePe; Paytm (06/19)
Recent insurance announcements by FinTechs
Jan 2020 – PhonePe forays into insurance with a travel insurance product. 
Feb 2020 – Optional benefit against “virus-based pandemic diseases” 
March 2020 – Paytm subsidiary gets insurance brokerage licence 
MobiKwik – Insurance ventures
Paytm – Insurance ventures
Opportunity and Threat
Distribution of micro-insurance and small sachet products
- Changes to of micro-insurance regulation in India allow distribution via a corporate agency structure.
- Low CAC and pre-existing distribution channel is ideal for small ticket policies.
Could Payment focused FinTechs become price comparison website 2.0?
- Aggregator’s role is to source business; payments platforms have access to distribution (MAU > 100M)
- Unlike traditional aggregators, payment focused FinTechs have 0 CAC (economies of scope).
Challenge to traditional insurance brokerage model
- Payment focused FinTechs can go omni-channel via the PoSP (point-of-sales person) model as suggested by Paytm (16M partner merchants)
An unintended consequence
Investor’s might face portfolio co’s conflict (e.g. Softbank Vision Fund)
- Did Softbank Vision Fund block Paytm’s acquisition of Coverfox due to its position in Policybazaar?
- What happens now that Paytm has an insurance brokerage licence?
- What does Policybazaar’s foray into B2B tech (Zphin) and HealthTech (DocPrime) suggest?
Would also apply to Sequoia if MobiKwik got an insurance brokerage licence due to Sequoia’s Turtlemint investment.
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