Thanks for starting this thread. I have a few friends in the fintech space so did a little bit of scuttlebutt on Apollo Finvest. Here are my findings:
Apollo Finvest makes money in 2 ways:
(1) Providing capital to fintechs - Already a big business for NBFCs given the advent of fintechs over the last few years. DMI Finance, Fullerton, ABFL, MAS Finance, Clix Capital and Avanse Financiers are some of the main lenders in this segment all having AUMs in excess of Rs 2,000cr. DMI Finance is the leader with Rs 3000cr+ AUM. NBFCs ask for a deposit of 10-25% to start a lending relationship. For ex: if a company wants to lend Rs 100, they have to provide Rs 20 as deposit to the NBFC. Most startups borrow at 10-14% and lend at 14-20%.
It will be very difficult for Apollo Finvest to compete with most of these NBFCs as their cost of borrowing will be much higher. They might attract a few very early stage startups but these startups will migrate to bigger NBFCs eventually to reduce their cost of borrowing and increase scale.
(2) Providing a plug and play software as a service (SaaS) to enable lending: This is a interesting way to capture clients and make up for the disadvantage in capital. The problem here is two-fold: (1) Most fintechs want to build their own tech hence the word ‘tech’ in fin’tech’. (2) There are SaaS companies focusing on individual aspects of lending ex: Setu for collections, Hyperverge for video verification, Digio for document verification. Most companies will start using these solution as their backbone and build out a layer on top to bring operational efficiencies, collection efficiencies and sourcing efficiencies.
The above points hold true for non-fintech companies too. For ex: BYJUs and OLA have been borrowing from much bigger NBFCs.
In a nutshell, Apollo Finvest is in a interesting space but don’t see them scaling too much unless they change something major about their business model. Will be very interesting to track their progress though!