In the first instance of a fintech firm becoming a small finance bank, Bengaluru-based credit and payments start-up slice and Guwahati-based North East Small Finance Bank (NESFB) have announced a merger. The Reserve Bank of India has approved the deal.
RBI officials in the past have said that they were not in favour of fintechs gaining licences through the backdoor by acquiring licence-holding regulated entities such as banks and NBFCs. The regulator had earlier approved Centrum Capital and fintech payments firm BharatPe to invest in Unity SFB.
Co-founded in 2016 by Rajan Bajaj, slice (previously known as Slicepay) rose to prominence by offering a credit card-like prepaid payment instrument (PPI) came with no annual fees, interest, or late charges, functioning as a buy now pay later (BNPL) platform.
At one point, it was issuing 300,000 to 400,000 cards a month, more than any other credit card provider until FY22.
In December 2022,it pivoted to term loans by launching Slice Mini (prepaid wallets), Slice Borrow (unsecured loans with a 12-month term) and digital payments on UPI.
The firm is yet to file its FY23 numbers but sources outline that its revenue spiked almost three-fold and stood at around `870 crore in FY23. According to TheKredible, the company’s operating revenue grew 4.18x to `283.08 crore during FY22 from `67.7 crore in FY21 while losses rose 2.52x to `253.67 crore in FY22. Its total deposits rose by 33% to `2,039 crore ($245 million) in the year, according to filings.
The financial details of the merger have not been disclosed yet.
In its notification, RBI had clarified that prepaid instrument (wallet) providers such as slice are not allowed to offer credit lines. The company was last valued at $1.5 billion, while North East Small Finance Bank is estimated to be worth $60-70 million. Earlier, it had acquired a stake of about 5% in the bank for $3.4 million at a valuation of $68 million.
Commenting on the merger, slice CEO Rajan Bajaj said, “This approach allows us to serve a wider audience, including those often overlooked, while also building a deep emotional connection with our customers. We will further strengthen our risk underwriting through the use of technology and data, and always keep customers at the heart of our decisions.”
North East Small Finance Bank, on the other hand registered `314 crore in revenue in FY22 with a loss of `75.96 crore. The firm too has not filed its latest financial results (FY23).
NESFB MD & CEO Rupali Kalita said, “This alliance with slice marks an exciting expansion of our reach and enhancement of our services.”
NESFB will continue its dedicated service to North East India, merging technology with deep community understanding to offer top-tier financial services to the region.
As per TheKredible, Gunosy Capital is the largest stakeholder in slice with 14.84% stake. The company’s co-founder Bajaj holds 8.21% stake.
“RBI is taking a constructive view of the contribution of fintech to the overall financial services economy. They have recognised that there is an urgent need today for a digital first banking approach for this population of 600 billion smartphone users,” said Vikram Chachra, founding partner, 8i ventures.
“Traditional banks are making great strides in terms of delivering digital labs and experiences. But they’re obviously not there yet. The move marks RBI recognising the crucial role fintechs play in bringing digital first approach to banking while moving away from physical branches,” Vikram added.
