Siddhartha Ahluwalia 00:56

Hi, this is Siddhartha Ahluwalia, welcome to The Neon Show. Today, I have a guest who I have known for 6 years. He is one of the legends in Indian banking and has worked in the banking sector for more than 15 years.

Today, your host Siddhartha Ahluwalia is going to talk about lot on Indian banking sector, the evolution of Niyo Banks, the travel tech sector, and as you know, I am also the founder of NEON Fund, a B2B enterprise SaaS focused fund that invests in the most upcoming enterprising SaaS companies started out of India, building for the globe. Vinay, welcome to The Neon Show. So excited to have you here.

You have been the founder of NiyoBank and you are also like Niyo and Neo both run together, right? N-I-Y-O-N-E-O. So you have been the pioneers of Niyo Banking or new age banking as we see.

And Niyo today leads all the sectors, you know, everything which is travel tech married with finance, be it providing credit card, debit card, FX, you know, for the customers. And India has seen a huge and huge number of people travel abroad. I think every year we do a new landmark in the number of people who travel abroad.

And you have been in the banking sector for how long, Vinay?

Vinay Bagri 02:11

I think 2003 was the first time. Almost 21 years now. And yeah, Siddharth, it’s a pleasure.

Thank you so much for having me here. Yeah, it’s always fun interacting with you. So yes, it’s been a long time in banking, almost 21 years.

Siddhartha Ahluwalia 02:32

And how, first I want to, you know, before we dive into Niyo, travel, tech, finance, I want to dive into, you know, your experience, right? Can you share it in your, was 2003 the first job that you took after college?

Vinay Bagri 02:45

No, I was in FMCG. So the first job actually, after college was Parle, where we used to sell mineral water. Not the normal Parle, you know, the biscuit.

It’s the other Parle, which was selling Bisleri mineral water. So they owned Bisleri, which was a household name for the mineral water category. And my first posting was in Rajasthan.

So 1998, when people used to jump off the train to fill their bottles of water and get back on the train. So that was the time when we actually wanted to make mineral water like a common ubiquitous available product for the consumers. So it was, I think among all the jobs I’ve done, including what I’m doing today, probably the most exciting time for me, because it was almost like a category setting.

People didn’t know mineral water, and at least for commoners, it was only typically sold in hotels. So, and especially in Rajasthan. So we used to be on the trucks, be on the autos, doing the highways, you know, putting up the product for display in the highways for people who are travelling from Delhi to Jaipur, let’s say, or Jaipur Bikaner to pick it up.

Siddhartha Ahluwalia 03:58

And which college you were from?

Vinay Bagri 03:59

I passed out from a college called IIRM in Jaipur. And from there, Parle was the…

Siddhartha Ahluwalia 04:05

And it was an MBA?

Vinay Bagri 04:07

It was an MBA, yeah.

Siddhartha Ahluwalia 04:08

Okay. So the first job people imagine is like consulting jobs after MBA, right?

High posh offices, travelling abroad. And here you were in the midst of, you know, the hardest conditions.

Vinay Bagri 04:21

So in our, that time at least, 1998 types, one of the most sought after jobs were FMCG.

Siddhartha Ahluwalia 04:29

Okay. Hindustan Unilever and PnG.

Vinay Bagri 04:31

Yeah, if you get Unilever, you get HUL, you get Parle, it was the best of the jobs you could aim for. And when you started the job as an MT, they would put you through fire. So you would start, there was nobody who would get a management job unless you’ve done sales.

So you start off on the ground, you start off on autos, selling in cities, on trucks, selling on highways. And that’s where you learn the tricks of the trade and from there you go forward.

So I was there for three, four years with Parle. Like I said, very, very memorable years. Started off on the trucks, of course, learning my trade, then on the factory production floor, you know, learning about production.

And then finally I was heading the Rajasthan unit before I decided to move into banking.

Siddhartha Ahluwalia 05:15

Okay, and what was, why the switch into banking?

Vinay Bagri 05:18

So, banking was like a sunrise sector at that point in time because earlier banking was very limited to people walking into the branch. But this whole concept of a bank walking up to you was very new in, back in 2001, 2002. And they needed people who understood distribution. And who can set this whole distribution. So banks were actively chasing FMCG talent.

And that’s where it came in and, you know, we thought maybe it will be an exciting thing to do. You always hear about banking and it definitely looks exotic. So we thought, and that’s practically the reason why we thought, okay, we’ve done FMCG for five years, let’s try something new. So we shifted to banking.

Siddhartha Ahluwalia 06:05

Tell us about how you have seen the banking sector evolve since 2003-2004 till you jumped here, you know, and became a founder in 2016.

Vinay Bagri 06:14

So banking, as I told you, till 2001, at least as we remember, was a very elite kind of a thing where, you know, people had bank accounts, but typically if you want everything, you have to go to bank and you’re always kind of thinking how I’ll get the service and you’d be very obliged if the bank would give you a loan, you’ll be ever thankful to the bank.

If you get a credit card, my God, you cracked it in life types. So it used to be a very kind of, almost like an elite product and very much product where all the power was on the side of the bank and a consumer would go there, you know, not expecting much.

Siddhartha Ahluwalia 06:54

Even the bank cashier used to be an elite job.

Vinay Bagri 06:56

Yeah, the bank cashier was, you know, he had his own. It was a very, it’s supposed to be a very good job, you know, one of my classmates joined, became the bank cashier and we were like, wow, he’s cracked it. It’s good.

So, and branch manager used to be like a really powerful guy in the city itself. You got a branch manager, means he’s…

Siddhartha Ahluwalia 07:19

Branch manager used to be a mini CEO.

Vinay Bagri 07:22

Absolutely. So, yeah, and even more nakhras, I think.

So, that was, that was the bank which we kind of started off in 2002. And from there, the way it has evolved is it has become a more, like a consumer business where consumer is the king and everybody’s trying to solve for you. And if you come in, what is depending on, if you’re a priority customer, there’s a different lounge for you, priority sector, different lounge for you.

So, whole differentiation between the customers, then how fast we can make the turnaround so that you don’t have to wait. So, everything is around the customer and then there is reach out, which is where you don’t have to even leave your home if you have an RM. If you’re a good enough customer, we attach an RM to you and he will come and do everything for you.

So, life has really, really changed. Processes have changed. So, when we were back there in 2014, 2013 even, account opening used to be such a pain.

Big pain. Where you have a stack of documents to open a basic bank account to Aadhaar coming in. And now, you know, I think majority of the accounts in India are opened just on a mobile app.

So, dramatic evolution in terms of comfort for the customer to open the account, in terms of how much the power has kind of shifted towards the consumer, how much better the services have become. And now, if you compare to global standards, and we will touch upon as we go on NiyoBanking, Indian banks are among the best in the world in terms of technology. So, your experience you give to the customer and what regulator kind of forces you to do, to improve.

So, for example, your lock unlock of a card. This was a big feature in other parts of the world where a NiyoBank will come and say that, you know, we have given lock and lock, big shift. RBI has made it mandatory for all banks to make it available.

So, in India, it’s a, you know, hygiene that you need to have a lock unlock, you need to get a message whenever a transaction happens, you need to have a second factor authentication on security. So, a lot of what is hygiene in India today, I think it’s probably the most advanced in the world.

Siddhartha Ahluwalia 09:41

Do you really think that? Like, you can compare India’s HDFC with Wealth Fargo and JP Morgan in the US?

Vinay Bagri 09:49

So, in terms of apps, like HDFC is one, but if you go to, let’s say ICICI’s app. If you go to IDFC’s app or Axis app, they’re not too far behind from Wealth Fargo. They’ll be better maybe.

Siddhartha Ahluwalia 10:05

And what was your first job in banking? Was it Kotak?

Vinay Bagri 10:07

No, the first, I spent 10 years at Standard Chartered. The first job was probably the longest. So, 10 years in Standard Chartered Bank, amazing, amazing place to work.

And I started off on the lending side, doing personal loans and later on business loans. And then I did various roles there. So, yeah, on both sides of the balance sheet.

So, lending, and then I also did the other part of the job where you collect money. So, salary accounts, savings accounts, current accounts.

Siddhartha Ahluwalia 10:40

And after Standard Chartered?

Vinay Bagri 10:42

After Standard Chartered, I joined ING, which got taken over by Kotak. So, there I spent another 2-3 years, I think, 2013-2016.

Siddhartha Ahluwalia 10:50

I remember, before you started Niyo, you were a VP at Kotak.

Vinay Bagri 10:54

Yeah, I was working with ING, we got taken over by Kotak. So, 3 years I was there. So, total 10 years in Stanchart, 3 years in, and 1 year, actually I started off in ICICI, sorry. But that was a very small stint, like 9 months hardly.

Siddhartha Ahluwalia 11:04

So, what was the pivotal moment when Indian banking decided to shift to digital? Which year was that?

Vinay Bagri 11:10

I would say it was around 2010-2011 is when it started with a lot of digital kind of trends happening and channels getting more digital. But the big shift happened with Aadhaar.

Siddhartha Ahluwalia 11:30

So, 2014-15 is the time frame?

Vinay Bagri 11:32

With Aadhaar coming in, I think that really changed the game.

Siddhartha Ahluwalia 11:36

Because today I don’t remember when the last I visited a bank branch.

Vinay Bagri 11:40

Yeah, you don’t need to. You don’t need to anymore. So, I think the change started in 2008-2010 and by 2020 in that decade, it is complete.

Now whatever is happening is incremental in nature. But the big leap from branches being the one and all, number of branches being the most important factor to number of customers being important, branches really don’t matter today.

Siddhartha Ahluwalia 12:04

And I think my complaint with the banking sector of what it has become in India has become very sales and push heavy. So, I avoid even going to the bank branch because they will try to sell me 10 products. When did this transition happen? Because earlier it was like…

Vinay Bagri 12:21

It was all inbound, yes. Inbound. So, again it is maybe a little legacy of FMCG guys like us.

Yeah, but what happened is that FMCG is all driven by very objective measures, very clear targets and it’s a daily target game that you have to sell everyday. And branches earlier were largely the source of revenue used to be CASA.

Which is current account, savings account. And in current account, savings account, you really can’t push somebody. If you got money, you got money.

If you don’t have money, you don’t have money. It’s as simple as that. Similarly, loans, you can’t push anybody too much. If I need a loan, I will take it. If I don’t need a loan, why will I take the loan? So, these two were the core banking products.

In these products, there was never a push. So, for 100 years, it is very simple. You want to deposit, you deposit. If you have extra money, you will deposit. If you need money, you will take loans. That has been banking all along.

And then comes insurance. And then comes mutual funds. And then comes all these structured products where margins are crazy for the banks. So, insurance distributor margins are anywhere from 30-40%. In earlier days, when ULIP used to be there, it used to be like 80% margins. And all banks run on ROI.

So, when you are running on ROI, what are the choices available to the branch manager to make money? Deposits, you can control only so much. You can get new customers, you will get deposits fine.

Lending, very much driven on the, whether the customer needs it or not. At one point, if you push lending, the money will never come back. So, these are the traditional things they were doing.

Beyond that, the revenue you have to make, you have to push insurance. And insurance is a very hard sell product. Nobody gets up in the morning thinking about buying insurance.

So, you have to really push it down the throat of people, practically. So, that, and hence, the RM looks very pushy. Because he will come and sell you insurance. He will come and sell you mutual funds. He will come and sell you structured products. The locker, you have only so many.

So, now, locker becomes an instrument to sell the other products. So, if you want to buy a locker, typically, you will say, okay, first you do an insurance of one lakh and then I will give you a locker. So, that’s how typically it is.

Yeah, that’s why it feels very pushy. That you really want to avoid the bank RM these days. That’s true. And which is why, you know, people are comfortable with digital banking. They can do whatever they want. They can create FDs, break FDs, order a checkbook. Whatever feature you wanted when you wanted to walk into a branch, you are getting all that.

And you don’t have to handle it, everybody likes to be nice in the world in general. India in particular. So, you don’t like to say no again and again.

Siddhartha Ahluwalia 14:57

So, when you started Niyo in 2016, you would have, I believe you would have quit your job in 2015.

Vinay Bagri 15:02

Yeah, I put down my papers in 2015. And there was like a transition period of around 6 months before I could be released. Yeah. So, I joined in April 16.

Siddhartha Ahluwalia 15:10

And it was unusual because you started when you were in early 40s, right? Yeah.

Vinay Bagri 15:15

Yeah, you can say that.

Siddhartha Ahluwalia 15:18

Yeah. So, it was very interesting, right? You started with a thesis of, like, most of the folks that had the kind of experience that you had would have started an NBFC.

And NBFC was like a default yes, because you can easily scale an NBFC, let’s say, to 100 million dollars or 800 crores of AUM easily. And you can keep on rotating that money and keep on organically growing bigger and bigger. And NBFC is a very easy way to list in an Indian market. Why did you choose the different path?

Vinay Bagri 15:53

Maybe it is also a little bit to do with my history in terms of the experience. So, as I mentioned, my first job was lending when I, all first roles were lending till 2008. And 2008 during that crash, lending was the worst impacted.

So, that kind of left an impression on me that this is really dangerous. Whatever money you make can evaporate overnight.

Siddhartha Ahluwalia 16:17

Did Indian banks also suffer in 2008?

Vinay Bagri 16:18

Massive. Massive. 2007-2008 was a complete washout for anybody who was doing unsecured. So, and I was always in unsecured lending. So, hence, I had a little bit of bias towards it. Bias towards lending.

And I thought liabilities was a much better business. And that was, I think, the main reason.

Siddhartha Ahluwalia 16:38

And what was your thesis on, like, NiyoBank was not a word even then. NEO. When you started. So, what was your thesis when you started it? How did you want to change the banking sector?

Vinay Bagri 16:50

So, I could see that branches were not really a place where customers enjoyed coming.

Siddhartha Ahluwalia 16:59

It has also happened back then, like, 2015, the customers started hating branches.

Vinay Bagri 17:05

Yes, it has happened since ULIPs. So, ULIPs were there in the 2000s. I think the ULIP whole trend started in 2005, I think.

So, the number of customers who have got scammed, I would say, definitely, by ULIP and by the branches selling ULIPs, I think everybody will have a story.

Siddhartha Ahluwalia 17:23

What were the other thesis when you started Niyo?

Vinay Bagri 17:26

So, the other thesis was that if you don’t want to go to a branch, then you would want a digital experience which is cutting edge.

You don’t want an app to have glitches, you really want an experience which is seamless, just like, you know, you would have the best of other apps which were available back then. So, that was the idea that you kind of convert, make everything digital and you kind of provide a service to an average customer, which a typical high value customer would get with an RM. So, with the RM, you will have the ability to, the RM will come and guide you right or wrong, whatever it is, but at least the RM is there at your back and call.

You don’t have to go to the branch, etc. So, with digital, it is like a digital RM available to you to do anything. You want to order a checkbook, you want some kind of a leave delivered to you, you want a check to be deposited, a lot of this stuff could be money to be transferred, all of this, you could do it through the app. That was the whole concept.

Siddhartha Ahluwalia 18:30

Got it. And what are the first areas that you picked up when you started?

Vinay Bagri 18:34

So, we wanted to kind of change the salary landscape.

So, in the US, salary was paid every 15 days, in India, it was paid every 30 days. So, we thought, why don’t we bring that in. So, that was the original idea with which we started. And a salary account is a very stable business.

Siddhartha Ahluwalia 18:50

Banks love it, right?

Vinay Bagri 18:51

Banks love it because the CASA keeps growing, very good for cross-sell. So, I also came with the idea that let’s create a different salary account with a full digital flow. So, no branches and a salary account will be the kind of best combination.

So, that’s what at that point in time we came in with. And when we started, we realized it’s really complicated.

Siddhartha Ahluwalia 19:12

Why?

Vinay Bagri 19:13

Because you cannot do that business unless you are a bank. And as an outsider, to start a business where you are integrating with the bank, into their core banking system in 2016, was practically impossible. So, it took us almost four years before we could roll out a first co-branded savings account.

So, that’s how because it was… the full thing was a concept. Nobody kind of was willing to understand what it was.

Siddhartha Ahluwalia 19:43

And when did the current pivot towards the travel tech happen?

Vinay Bagri 19:47

That was 2018. In 2018 is when we rolled out our first Niyo global card. We tested it in IIMs and to exchange students.

And we realized that this was a really good value add to the customer because till then, getting a Forex card, getting Forex itself was very painful. Then you load it, you pay some money, you use it, you pay some money, unload it, you pay some money. So, we came up with this whole revolutionary concept in 2018 that was we will convert your debit card or a credit card into a Forex card.

You use it like a normal debit card when you’re in India, when you travel abroad, that’s your Forex card. You don’t need to do anything. So, absolutely revolutionary.

I think it’s probably the best product even today in cross border. So, that was the idea. So, we started in 2018, we did in 2019 and as we were scaling, Covid came.

So, naturally, for two years, nobody was travelling so the card was not needed. So, we had to do the pivot into traditional Niyo-banking and trying to do all that and once the Covid kind of settled down in 22, we again came back to what we like doing. So, we loved the product because it was a category creator, really good value add to the customer and generally gets you the kind of customer where you can cross sell some stuff and be profitable in the long run.

Siddhartha Ahluwalia 21:14

So, what is the current avatar and what are the current features or the products that you offer to customers?

Vinay Bagri 21:20

So, from 2018 to now, I would say the original product remains the same. So, debit card which hardly charges you any forex, fill it, shut it, use it, forget it, so that continues to be the core. We’ve added credit card also with partner banks, a secured credit card with a similar feature, unsecured credit card also, it’s around the corner.

So, those were the core remains the same. So, our acquisition for a user coming to Niyo doesn’t change. The user will come to Niyo if you want to really solve for your cross border payment through cards.

That concept has remained the same for many years now. On top of it, we’ve added a lot of features, which are typical travelers, because now people associate us with travel. So, then we’ve added a lot of features where we try and make the travel experience really good.

So, from earlier banking made safer, simpler, used to be our core line, to now we’re saying the Niyo way to travel. That if you want to travel…travel the way. A Niyo way to travel is a new way to travel in life. Debit cards, credit cards are what they are.

You can now take currency through us, so your forex cash taking experience is significantly better.

Siddhartha Ahluwalia 22:36

I can order currency at my home?

Vinay Bagri 22:38

Yeah, you can order currency at your home, remittance experience is significantly better, so these are all cross-border payment instruments, everything available at a single point in Niyo. And then beyond that, we are also now trying to give an elevated experience on other travel items. So for example, Visa is one challenge.

So we have probably the most transparent Visa app in the country. There may be players who are digitally selling more than us, but I can say 100% sure, similar to our debit card, we have the most transparent Visa process in the country, and probably the lowest cost, I think, for sure. Similarly, flights, so we recently launched flights. Again, extremely transparent flight process, beautiful UI, UX, we have some reward programs you can use on flights, burn it.

So experiences, we are still working to make it really the best. So our cross-border products, Visa and Flight, I think all these products, we are fairly confident that they are best in the category where we are. Experiences, which is when you travel abroad and then you want to buy a ticket for Eiffel Tower, ticket for Louvre museum, those are the partnerships we are still working on, but the objective is that anything to do with travel, maybe we will not do 1000 of those services, we will do 10, but those 10 will be the best the user can get in terms of value for money.

Siddhartha Ahluwalia 24:12

And why bet the company on travel so much, like what’s the numbers in terms of overall India travel spends, category spends, overall market size.

Vinay Bagri 24:22

So when we started it was, we didn’t look at the market honestly, we just looked at the value, what we can create and are we doing something different, and at that product point of time we were probably the only company in the world doing it. Now in India itself we’ve got 30 people doing a 0 forex. So it was just the excitement of building a new product.

And then we realized with this excitement as it always happens if you build a beautiful product, the market will find itself. And we had some setbacks in terms of regulator challenges with our partner banks and all those things, but irrespective we have kind of managed to navigate through all that. And the market has grown much more rapidly than we would have thought.

The number of Indian students going abroad to study used to be half a million, 5 years ago it’s 1.5 million now, and almost everybody is either doing a post grad or an undergrad there. So, unexpected growth and continuing. Similarly, the number of Indians travelling abroad now, for most countries, there, the country’s travel strategy depends on Indians reaching there. That’s a dramatic change.

Siddhartha Ahluwalia 25:35

Like even for developed countries like Australia, US and UK?

Vinay Bagri 25:38

Of course. So, for a lot of countries, especially with COVID and Chinese travellers taking a backseat, because of whatever internal was going on in China, India became really important and hence you look at a country like Malaysia, a developed country, which should ask you 5000 questions, just 10-20 years ago, for you to allow you to enter Malaysia, it’s the most welcome.

It’s a visa on arrival, you know, free visa for Indians. So, you take Malaysia, you take Indonesia, of course, South Asian countries, Sri Lanka, Maldives, like we used it as a diplomatic instrument.

So, Indian travel, especially in this geography, is very important. Europe, it is super important, but Europe has a different challenge, that as it is, there are too many tourists in Europe. So, you would have seen what’s happening in Spain, where they are throwing water guns at tourists and saying please go back.

So, it remains important for these countries, but in some of the other countries, you take Georgia, Turkey, so these countries, Indian tourists are really a very important part of those strategies.

Siddhartha Ahluwalia 26:51

So, do you think in these countries that you mentioned, especially South Asian countries like Thailand, Singapore, Malaysia, Middle East like Dubai, would, let’s say, they earn 100 bucks through tourism, would Indian travelers make 5-10% of that?

Vinay Bagri 27:04

Easily. Like, it will be for countries like Vietnam, it will be more than that.

Siddhartha Ahluwalia 27:10

Okay, like 20-30%?

Vinay Bagri 27:11

Yeah. It will be around that zone, surely.

Siddhartha Ahluwalia 27:14

But are Indians travelling to these countries because they are relatively cheaper? Let’s say, travelling to Europe or Australia would be a bit expensive.

Vinay Bagri 27:21

So, typically what happens is when you start your life journey, so, another big change in, not in banking but in human behavior is that in 2000s, your first loan would be your two-wheeler loan, would be your car loan, then you will take a home loan and then you will think of anything else. Cut to today in the Instagram world, the first loan is a travel loan. So, the number of personal loans which are taken for travel is almost 40%, if I am not wrong.

Siddhartha Ahluwalia 27:54

40% of all the loans?

Vinay Bagri 27:56

All personal loans.

Siddhartha Ahluwalia 27:58

Has India converted from a savings country to a splurging country?

Vinay Bagri 28:01

I would say for the young generation for sure. So, you would, like the number of people who would take personal loans for travel is, I would not have imagined as a banker 20 years ago.

Siddhartha Ahluwalia 28:13

What is the age of these people who are taking these personal loans for travel?

Vinay Bagri 28:16

It starts as early as 23. You get into a job and after the first year you are planning Norway. So, that is one big change and what happens is because you are travelling early, the first thing you want to travel is travel close by.

So, where you kind of understand what international travel is. So, Thailand is typically the first place you want to go because you know the budget is.

Siddhartha Ahluwalia 28:41

Because of the country, the welcoming nature of the country?

Vinay Bagri 28:47

Many, many things. One is the budget. When you do the research, you know as an individual you can go and do a nice two weeks vacation in a lakh if you are a single person.

Europe, you can’t even imagine that. So, that’s one. The second is that you know that you can plan today and leave tomorrow and still be able to make it because visa on arrival.

So, these are some of the reasons which added to Thailand being a very, very popular destination. Now, Vietnam has become similar. Direct flight. You don’t have a hopping flight, etc. It’s like a two hours, two and a half hours you are reaching Thailand. So, Vietnam also took off after the direct flight.

Now, it’s turn of Bali. So, they are definitely way more value for money. If you are first time want to experience international thing, then Dubai is again very close by. Great value for money. Again, your return ticket is same as Bangalore, Delhi, Bangalore, Dubai is almost same. And beautiful, beautiful place to be there.

So, this circuit between not other Middle East country, Dubai for sure. So, Dubai and Sri Lanka and the South Asian countries tend to be the first sphere of travel. And from then you kind of expand to few people go to Japan and then on this side you go to Europe. And once you go to Europe, then of course you have to go every few years.

Siddhartha Ahluwalia 30:11

I think this year, this summer was the highest number of Indians visiting Europe ever.

Vinay Bagri 30:17

Yeah, I think it is going to be there every summer now because Indians are getting richer. You see where we were 20-30 years ago. 1992 to 2022 is a dramatic change.

So, there is a lot of disposable income and your willingness to take loans. Because you are feeling good about the economy, which means you are feeling good about jobs, which means you are not worried that you will lose your job and I have to save for a rainy day and you can be aggressive with your lending and travel and things like that. And another dramatic shift is the double income.

That back 30 years ago typical families were a single income family. Now it’s a double income family. So even if one person loses a job, fine, the other will be there. So spending capacity is increased.

Siddhartha Ahluwalia 31:03

And does India GDP and the GDP growth have a direct role to play here in the number of people traveling abroad?

Vinay Bagri 31:12

Absolutely. The more richer you get, the more comfortable the other countries are in receiving you. And more comfortable you are in traveling.

Travel is very much related to your disposable income, one, and your sense of security, that you know that in even in a rainy day, I will have enough jobs around me to make this EMI work.

Siddhartha Ahluwalia 31:37

And the other country knows that this person is not coming here to settle, right?

Vinay Bagri 31:42

Yeah, the other person, Malaysia, the reason I gave the example of Malaysia and not the other countries, because others are still developing. Even maybe Thailand or Indonesia are not too far away from India in per capita income. But Malaysia is a developed country.

It’s a very, very good, good country. So for them to have confidence that Indians will not come and settle down here. And they find enough jobs and opportunities and reasons to be in India is a very, very good sign for us.

I think…even the Schengen visa also, like my first visa when I took in 2005, I was traveling for 17 days, I got the visa for exactly 17 days. If I had missed my flight, I would have been an illegal person there to today, where they’re saying, okay, we made a policy that if you have been there last year, I’ll give you two years now or three years now.

If you come again after two years, I’ll give you five years. So it’s a dramatic shift from what people thought of Indians back then and now. So I think it is really very, very proud.

Siddhartha Ahluwalia 32:49

How far are we from an Indian passport being equally powerful to a US, Singapore or Australian passport?

Vinay Bagri 32:57

Like 2047, I think. When we are a developed country, that will take time. Because see, the reason is that Singapore’s total number of people itself is a few million.

Yes. We are like 1.4 billion people. And we will want to, some of us will want to emigrate, etc.

And so it is not not going to be easy for the passport to be as powerful. Because even if the country becomes very rich, it is never equally distributed. So you will still have a lot of people who would want to go and settle somewhere.

So that risk will be there with other countries. So they would want to kind of if somebody wants to settle there, it’s good, but then you have to come through the right channels. So hence the unlimited passport, I don’t see changing to the US level, at least for the next 10, 15, 20 years.

Siddhartha Ahluwalia 33:46

But over a period of time, do you have data points of how has India passport become more powerful?

Vinay Bagri 33:50

Yeah. Of course, there is a passport index. So the passport index ranks you among 180 countries, where do you lie? So Indian passport is moving up.

Siddhartha Ahluwalia 34:02

Let’s say for example, when you mentioned your first Schengen visa, right? 2005. You got it only for 17 days. Yes. And back then, I assume Thailand and every nobody would have visa on arrival.

Vinay Bagri 34:14

You would have of course, Nepal was there. No meaningful country.

Siddhartha Ahluwalia 34:20

But these countries haven’t still become visa free for Indians, right? That you don’t require a visa to travel.

Vinay Bagri 34:26

I think some of them have. I think in Thailand, you can, it’s visa free. I think so.

Siddhartha Ahluwalia 34:31

I think the last year it was visa on arrival.

Vinay Bagri 34:34

Visa on arrival with no visa fee. But I think yeah, I’m mostly sure that in Thailand, you can walk in and you don’t have to pay for the visa for sure. But you don’t have to like they will just stamp as an entry as if you’re coming to India.

Siddhartha Ahluwalia 34:49

Okay. Got it. But still, like for I think US and other countries.

Vinay Bagri 34:54

US is a, it’s a painful process. This is not an easy process. But the good thing about US is once you go through that pain, it’s a decade. Yeah. With Canada, it’s a decade. So yeah, it’s worth it.

Siddhartha Ahluwalia 35:09

And but you are, you will be keeping track of all these things very minutely because it directly impacts your business.

Vinay Bagri 35:15

Yeah. So we keep track of which country has made the your entry easy. Yeah. And which country has introduced a direct flight.

These two things dramatically change the tourism for that country, then you can tailor made some programs for that country, you can change your advertisements, you can create blogs, you can do because almost 50% of our business is all organic in nature. So we have to create blogs and we have to create that okay, this country also Niyo works to give you the comfort.

Siddhartha Ahluwalia 35:43

So can you tell us like recent five, six countries that made life for Indians more comfortable to travel there?

Vinay Bagri 35:50

I think the biggest example is Vietnam. Yeah. They both made the visa process very simple and introduced a direct flight.

So Indonesia is another example. Malaysia flights were always there direct visa is another example. Georgia is another example.

Your Kazakhstan is another example. Turkey is a great example. Whatever might be our problems.

Otherwise with Turkey. Yeah. But yeah, you can, you can just walk in, it’s visa on arrival.

Siddhartha Ahluwalia 36:23

But I think, because they directly impact your business, these are all the states, most of them which are southern of India. Any states which are like, north of India?

Vinay Bagri 36:32

For example, Dubai, the visa has become process become really, really fast. Typically two days you get a visa. The thing is they make a lot of money on visa, the visa is from 5-6,000 bucks, that’s a separate issue.

But the process is quick. So then everybody wants to go to Dubai. Because it’s great for kids.

So the moment you have a couple of kids, you got only two places, Dubai, Singapore, there’s no third place. Actually, Europe, there’s nothing for kids, practically, maybe Disneyland, France. So till your kids hit, maybe the age of 15, the best place to visit remains Dubai and Singapore.

Siddhartha Ahluwalia 37:10

And what about South America? North America, we know is pretty tough.

Vinay Bagri 37:16

In South America so far, only the most avid travelers want to go to Machu Picchu and do some exotic stuff there. South America is not on the radar for various reasons. One is that travel is painful, it takes almost 30 hours to reach there.

Second, there is, like you’ve got Machu Picchu and some of these things, but it is not like Europe where you enter once and you can do 20 countries. Like Indians like to do a tick mark, I have visited so many countries. So you don’t have that there. Or it is like, it is not like Australia or UK or Canada or US where it is English speaking.

Everybody would have some relatives, some friends there. So all of this adds up, some kid will be studying there. So all that is not there.

And so these countries, English speaking countries, you go to drop your kids, you go to pick up your kids. So many graduation ceremonies have become a big shit now. So you go for that also.

So that is not there in South America, that is one. And then there is this, Indians typically want to really assess risk. For example, Afghanistan is a good place to travel, but would you and I travel? No. Definitely not. Because we optimize for risk somehow, which is absolutely fair.

So when you look at risk, going to South America, you would worry about going to Colombia, you would look at Mexico and think twice as an Indian because of perception. What is on the ground, I don’t know. I’ve not been there, I don’t intend to.

So similarly, Brazil, like there’s some crime in Sao Paulo, Rio, so it is not really as a, I don’t know many people who got their bucket list except for Machu Picchu. Machu Picchu is on the bucket list for a lot of people. But other than that, I don’t know.

Siddhartha Ahluwalia 39:02

But because you being in the travel industry, are you seeing more and more foreigners also travel to India now? Is India becoming safer and more convenient for foreigners?

Vinay Bagri 39:13

That I’m not so sure. At least the numbers don’t say that. The number of foreigners arriving in India, I don’t think it is, has gone up to the extent it should have.

Siddhartha Ahluwalia 39:25

And why do you think that is the reason for that? Because the GDP is rising, the India story, made in India is globally, like the marketing campaign that the government is doing is good. I can’t complain about it.

Vinay Bagri 39:36

Is that marketing about tourism? That’s the question. So is that marketing about India being great as a business entity, and India being great as an investment entity, and India being great as a tourism entity? These are all different elements.

Siddhartha Ahluwalia 39:50

But I think, let’s say if you position India, let’s say what most foreigners or institutions are perceiving India, that India is like China in 2004, exactly $4 trillion GDP, growing at 8%. And this continues to grow 6 to 8% year on year. In 20 years, India will be like a $18 to $20 trillion, at least.

Vinay Bagri 40:18

Which is true. But again, that doesn’t allure you to tourism. Like China is growing so fast. Like where I want to visit China, but for what?

Siddhartha Ahluwalia 40:25

But China has created their own set of, right? Where the richest man in China is also not secure.

Vinay Bagri 40:30

No. Security, China still, I’m not worried as a tourist. But like, I will travel for what? Like there’s Great Wall of China. Okay. The second biggest wall is in India, in my state, Rajasthan. So I’ll go to Kumbhalgarh then go to and watch because it’s very similar. So, similarly, the story for tourism in India is still untold.

Siddhartha Ahluwalia 40:56

I think we have the most diverse set of tourist locations.

Vinay Bagri 41:00

We have, there’s no doubt about having. But is it marketed and accepted the way it should be is a very different ballgame. Because we’ve got everything, we’ve got a desert. So you can give a Dubai experience in India, there’s no doubt and Rajasthan infrastructure is brilliant. Flights are there, trains are there, roads are there.

Siddhartha Ahluwalia 41:20

The number of airports that is getting created is massive.

Vinay Bagri 41:23

Fantastic. So there is no reason why you can’t do that. Similarly, you got Kerala, which is its own. But the bigger ones like MP has got amazing tourism potential. Maharashtra has got amazing tourism potential. You look at the state of forts in Maharashtra.

If the forts were similar forts, what Shivaji’s forts were in Europe, everybody would go and pay $100 to visit them. But here, nobody even, that Janjira Fort or whatever it is, I’ve been there, what a beautiful fort. Like as you approach it with the boat, you can’t see the entry gate itself. That’s all created some 400 years ago.

Siddhartha Ahluwalia 42:03

Which fort are you talking about?

Vinay Bagri 42:05

This is Jaljira or Janjira, so Janjira Fort. Something like that. It is very, very close to Alibaug. Mumbai. Amazing.

Siddhartha Ahluwalia 42:16

I’ve never heard about it. So we are so poor in marketing.

Vinay Bagri 42:2

That fort is like a, it’s a feat in engineering. Because till you reach maybe 100 meters of the fort, you can’t understand where to enter this fort from. Because everything looks like a wall.

And that’s how it has been built 400-500 years ago. So if it were in Europe, I’m telling you, like people would be paying hundreds of dollars just to get in. It is, so there’s so many places like that. So yeah, a long way to go. There are different priorities, different things.

Siddhartha Ahluwalia 42:50

Because also, I think it impacts, my belief is that it impacts your business because how many other countries are willing to, let’s say, make travel for Indians more easier is how many of their own citizens travel to India?

Vinay Bagri 43:03

Yeah, that helps, especially in direct flights. That if a lot of people are traveling, then you have more direct flight connections. In Europe also, if I’m not wrong, maybe the UK, France, Germany, and Holland.

Only five countries have direct flights to India. There’s no direct flight from Spain, there’s no direct flight from Switzerland, no direct flight to Italy. So yeah, it definitely impacts.

Siddhartha Ahluwalia 43:28

One of the conversations that I wanted to have today is, now we discussed about the travel sector at quite large, we have covered length and breadth for our viewers to understand and how it impacts them personally, how when they travel abroad, which are the countries which are more favorable to them, which are the countries still difficult for them, and how can they make their life through Niyo card, for example, more easier.

But I wanted to touch upon the state of fintech in India, like you mentioned that, you know, the continuous monitoring by RBI, how has that impacted your business, both positive and negative?

Vinay Bagri 44:09

So one thing about our regulators is that they’re very focused on consumers, which is a great thing. So you would have seen that we had various crises, 95, 98, 2002, 2007. The Indian consumer has never lost a single rupee touchwood in any of the banking crises, and that’s all kudos to our regulators.

So they’re very conservative, consumer focused, consumer first thought process, which is fantastic for all of us. Like we don’t want to have a very cowboyish attitude where all of us end up losing our life savings. So they’re doing very well there.

Very, very particular about data, and how the data can be used, misused. So those are all great things about how the regulators are, and which is why we exist. If the regulation was weak, people would lose money, then anyway, people do not invest in any bank, leave alone NiyoBank or anything like that. Now, where it becomes difficult is that the licenses are only so many because the controls are fairly tight.

Siddhartha Ahluwalia 45:14

How many licenses, banking licenses are there in India?

Vinay Bagri 45:17

Total scheduled banks would be some 80 odd.

Siddhartha Ahluwalia 45:20

80? And how many do they increase per year?

Vinay Bagri 45:23

For scheduled banks they do hardly anything. The last licenses were IDFC and I think Bandhan Bank.

Siddhartha Ahluwalia 45:29

Is there any transparency on how these licenses get issued?

Vinay Bagri 45:33

There are certain criterias, etc. But it is extremely difficult.

Siddhartha Ahluwalia 45:39

So they said tomorrow if Niyo had to get a banking license, what would you have to be to get a banking license?

Vinay Bagri 45:45

For somebody like Niyo, to get a banking license, the only way is to get a small bank license. So there are three kinds of licenses available, small bank, payment bank, and the full universal bank. Universal bank naturally has its own terms and conditions, very difficult.

Small bank license, of course, it’s on tap. You can apply and based on what consumers you’re serving, does the regulator find you to be safe or not? It may be issued to you.

Siddhartha Ahluwalia 46:13

Government is still issuing a few small licenses?

Vinay Bagri 46:16

Yeah. Of course, they are regularly issuing small bank licenses. Corporate banks are getting upgraded to small banks. NBFCs can apply and have a fair chance at getting it.

So it is not easy by any stretch of imagination. But it is also not impossible, definitely. So what is like, what would have been great?

So for example, in Europe, you’ve got the digital license, which is very separate from everything else. And in fact, all our neighbors, take Singapore for that matter, Thailand for that matter, they’ve got a digital bank license available. So that is one thing on which regulators have not had the conviction that why should we have any digital license when our own traditional banks can do digital business.

So that’s maybe our problem that we’ve not been able to convince them that we can add value to the customer. That’s what they’re looking at the end of the day. But okay, I’ll give you a license, what value are you going to add to me?

Are you going to make it more accessible? Are you going to make it cheaper? Are you going to make it safer?

So these are some of the questions they ask and maybe as an industry, we’ve not been able to convince them on the digital bank license. And that’s what I think, if you look at Indian fintech, Indian fintech on lending, doing good. I don’t see any difference between NBFC, you can get an NBFC license fairly, fairly easily, I would say, if you have a good business model and good, you’re not going to jail or something like that.

So you would get an NBFC license, and it’s in good space, no problem there. Similarly, not related to regulators, but if you want to do an insurance business, you want to do a stockbroking business, or do a mutual fund business, all fairly easy to do. The banking per se, where you take customers deposits, is what is a very, very sensitive issue for regulators.

And that’s where they’ve been extremely tight about it, rightfully so maybe, but that pulls the whole Niyo Banking, which is, which effectively means taking deposits and being equivalent to a bank that is not taken off in India.

Siddhartha Ahluwalia 48:22

And has it affected your strategy also as a company over the course?

Vinay Bagri 48:25

Yeah, absolutely. So when we started off, we said, Okay, why can’t we be like Monzo? Why can’t we be like Revolut? Why can’t we be like NewBank?

But then over a period of time, we realized that all of these companies, within a few years of their existence, got a proper license to operate. And hence, they were able to scale without any worry about partnering with somebody, whims and fancies of others. And that opportunity we’ve not been given in India. And hence, we had to evolve and kind of look for our own ways.

Siddhartha Ahluwalia 48:58

To build your own moats, which are beyond banking.

Vinay Bagri 49:00

Yeah, build our own moats and build our own strategy where you’re not dependent on others. So for example, we’ve gone very cross border way, acquired some licenses, which are very limited in scope. But being India being India, that limited itself is very large.

So you know that you can make a very large company doing a very small work. So the canvas what we what we wanted, where we will do everything, what let’s say an HDFC is doing, but digitally, that is shrunk to say that we will do cross border better than anybody else for consumers in India.

Siddhartha Ahluwalia 49:36

And I want to understand today, since you’ve mentioned that you are zero forex, right? How does Niyo make money?

Vinay Bagri 49:44

Yeah, so there is an interchange, which comes to the issuing bank. So that interchange is there. And then of course, there are value added products which the customers buy from us.

So it can be, you know, the travel services I’m talking about, or other value added products in general.

Siddhartha Ahluwalia 50:03

But is that sufficient to offset the CAC?

Vinay Bagri 50:06

Yeah, of course. Because we, as I mentioned, 50% of business is organic. So our CAC is hardly even $10, less than $10.

Siddhartha Ahluwalia 50:13

What are your lessons on acquiring customers? Because that’s the hardest part, right? In this…

Vinay Bagri 50:18

So our thesis has been that if we build a fantastic product, and there’s a large enough market for that product, it will sell.

Siddhartha Ahluwalia 50:27

Okay. Without even promoting it.

Vinay Bagri 50:30

Yeah, I mean, you have to do bare minimum promotion, but nothing else. Although we’ve done IPL too. So we can’t say that we have not promoted, but our maximum sale has happened without promotion.

So my sale during IPL versus my sale non IPL, we have realized that non IPL is better, IPL gives you a lift for sure, and gets your brand recall right up there. But, you know, consumers take it on word of mouth. And hence the NPS becomes very important.

So we’ve been unlucky in some partner bank issues, which is, you know, users had a little challenge, and they kind of thought twice. But otherwise, from our side, there has been like no let up in effort to ensure that this is the best product a user can kind of carry abroad and continue in that.

Siddhartha Ahluwalia 51:17

So for example, let’s imagine a hypothetical scenario today, that it’s a white canvas and money is not an issue for you and previous what you have been doing is not an issue. What are the opportunities in fintech that you would pursue today?

Vinay Bagri 51:31

So cross border is one, what we are doing, I’m very, very bullish about it. Like if you tell me everything is gone and start zero, first money you get, what will you do? I’ll do cross border.

Siddhartha Ahluwalia 51:40

Cross border and that too consumer, not business.

Vinay Bagri 51:42

Maybe business also, because that is also broken. So any kind of cross border in India, you will make money. Whether you send money out, whether you get money in, whether you do it for consumers, whether you do it for corporate, you want to make money.

Because you’re going to improve, more than make money, you are going to improve the process which exists. So that is one business. Other than that, if you ask me what Indian fintech can do now, if I were to start, other than cross border, somebody tell me, okay, you’re locked out of cross border, what else would you do? Then maybe I would do home loans.

Siddhartha Ahluwalia 52:15

Okay. Why is that?

Vinay Bagri 52:17

Because home loan 20 years ago versus home loan today, it has evolved or rather the process of home loan 20 years ago versus now has changed dramatically.

Because 20 years ago, if I were to find out who the owner of this flat is, I would have to get 100 documents, trust in those documents. Now a lot of it is getting digitized. So in most of the cities or most of the states now, you can just go in and you will know the whole history.

And hence it enables you to lend better, lend faster, lend digitally. And it’s a safe thing because in a country like India, everything will go up and down. But over a period of time, your property at least won’t depreciate.

We have not seen that yet. So it’s a safe business. Now it is getting to that stage where I think personal loan was 10-15 years ago, and it is going to go digital. My belief is a large chunk of home loans

Siddhartha Ahluwalia 53:20

Home loans will become digital. You don’t have to visit anybody or make a request that please approve my loan.

Vinay Bagri 53:27

I don’t think so. I think it’s going to change dramatically. And the reason I say that is ING. When I joined ING, what really intrigued me back in 2013 was that ING was, I think, the second or the third largest provider of consumer market loans in Australia.

And they had zero branches. Everything was done digitally and through the phone channel.

Siddhartha Ahluwalia 53:50

And we know that, right? India is ahead of other countries in terms of UPI railroad that we have built. You touched this part upon that some parts of banking are also ahead.

What are the other areas that are, you know, we can say that, hey, we are the leaders in digital banking? And what are the things that still need to be improved in digital banking or other parts of consumer and business focused fintech?

Vinay Bagri 54:13

Digital banking, I would say leaders, UPI is of course, I would say the only thing where we are clearly the leaders.

Siddhartha Ahluwalia 54:21

Globally. Not even the US competes with us.

Vinay Bagri 54:24

Yeah. Nobody competes with us.

Siddhartha Ahluwalia 54:26

Peer to peer transfer.

Vinay Bagri 54:28

In other things, we are like there are, there would be somebody who will be equal, we are not too far behind in some things will be better, some things will be…

Siddhartha Ahluwalia 54:35

What is the second and third best thing after UPI in digital banking or infra in India, when compared to money transfer?

Vinay Bagri 54:44

I think the whole card management system, which is your credit card and debit cards and how regulators have mandated that it has to be logged, transactions, second factor security, it is world class. Okay. Not, not many.

Siddhartha Ahluwalia 55:02

You think the number of credit card scams in India is lesser than the other countries?

Vinay Bagri 55:07

Number of scams, that will depend on the number of scamsters and the number of naive people. So you won’t believe the number of people who give their passport details to scammers to open a new account. Unbelievable how naive the people in India are.

But in terms of process security, we are definitely better than most countries I have been to. And their frauds are less because maybe fraudsters are less. Yeah. Here, there’s so many Jamtaras floating around.

Siddhartha Ahluwalia 55:33

And what are the things that you think need improvement today?

Vinay Bagri 55:38

So home loan is one area, I think, clearly…

Siddhartha Ahluwalia 55:40

It will be completely digital, you mentioned.

Vinay Bagri 55:42

Yeah. Digital and there are so many instruments. Like in India, the reverse mortgage is, I don’t know, we haven’t started or I really don’t have any data around it, how much it is. But reverse mortgages are really a big deal in a lot of developed countries. When you say that my house is five crores, I’m going to go off in 20 years.

So you bet on it that, you know, the bank pays you money till you die. So that product is in India, because maybe it’s a cultural thing that you want to leave for your kid or something like that. It is different in developed countries, but that’s something which will, which is, these kinds of instruments are going to come back, come to India soon.

Siddhartha Ahluwalia 56:24

Thank you so much, Vinay. Loved having you on the podcast and enjoyed this conversation so much.

Vinay Bagri 56:30

Thank you so much. And it was very, very joyful for me also.

Siddhartha Ahluwalia 56:35

Thanks again.

Vinay Bagri 55:36

Thanks.