Live from SF it’s Tuesday morning!
I’m rather chipper because I finally have a new phone after AT&T came through when my previous phone just died on Friday night. Also rebranded the long form newsletter (hind.substack.com), which I will be running along with Vedica (https://twitter.com/vedicakant) and she dropped her first piece on Consumer Neobanks in India over the weekend.
So today I decided to give the cliff notes version of her piece (along with some stats that I found interesting), and the new Swiggy product which I personally don’t think will work very wel.
➡️ To answer the age-old (at least in the Twitter perspective) question, what the heck is a neobank? So a neobank (or challenger bank) is a digital or mobile-only bank that provides users with banking financial services (an account, a debit card (virtual and/or physical) as well as a range of financial services).
➡️ In the US & EU, we’ve seen a rise of digital-only neobanks over the last couple of years driven by the fact that current banks are not very user friendly and signing up for a bank (in some countries) is quite cumbersome.
➡️ A couple of ways these banks make money are by earning income on illiquid assets (deposits), by charging a subscription fee (more popular in the EU) or interchange fees on transactions (more relevant in the US post The Durbin Amendment)
➡️ In India, however, it won’t be possible to monetize through these avenues so Indian neobanks will have to come up with other sources of income. A likely solution is that Indian neobanks will offer other financial services (lending, investing) and will monetize through that.
➡️ Most of the Indian neobanks are still at a very early stage and haven’t really launched publicly yet. The companies are run by very experienced founders & operators in the fintech space so it will be interesting to see how this space develops over the next year once launch plans are in full swing. On a lighter note, leaving y’all with this tweet- https://twitter.com/BeingPractical/status/1258065795197726721
➡️ It seems like the hyperlocal delivery companies are “innovating” a bit recently. They are doing terribly new things, just new things on their platforms. And Swiggy is piloting a meal kit product (if you’ve heard of Blue Apron, you’re on the right track).
➡️ People have tried (and failed) to run this model in India. I also interned at a company (Innerchef) that tried to replicate the Blue Apron model before moving into the ready to eat space. The reason being that there simply isn’t a big enough market for it.
➡️ The reason why Blue Apron (and it’s competitors) kind of worked in the US was because a larger part of the country looks at cooking as more of an experience than Indians do. Blue Apron also massively discounted its product and had a very high customer acquisition cost, which led to the company losing 95% of it’s value from the IPO in 2017.
➡️ Along with having a very small market for the product in India, the model requires users to come back to the platform and make repeat purchases which also hadn’t worked for any of the meal kit companies in India during the FoodTech boom.
➡️ There is a key difference between Swiggy and Blue Apron though, Blue Apron creates its meal kits while Swiggy lets existing merchants on its platform to sell meal kits. Swiggy can leverage its logistics service and mobile platform to enable restaurants to sell these meal kits, while the restaurants would be investing in creating the kits themselves.
➡️ I doubt this service would move Swiggy’s revenue needle significantly but it wouldn’t take too much (on the company’s side) to launch this so could end up carving it’s small niche in the Indian market.
Feedback & ❤️ always appreciated
More tomorrow :) BONUS (Tweet of the day): https://twitter.com/amitranjan/status/1259835650410340353