It was very easy to spot R Madhusudanan, A Muthukumar and R Prabhu, the founders of M2P Fintech, in the packed two-story Jio World Center, which hosted the Global Fintech Fest last year.
They were the only veshti-clad men. But it was almost impossible to get time in the almost week-long gala, as they were constantly bullied either by idea pitchers, journalists or other fintech honchos.
Outside of their attire, they were rightly the men of their time. Five back-to-back deals, even in the middle of the beginning of the “funding winter”, and, more importantly, carving a niche in a rapidly crowded fintech space, puts them in the spotlight.
“If there was a board agenda for banks, ‘partnership with fintech’ was never part of it. But today it has an indelible presence,” says Madhusudhan, and he credits the Reserve Bank of India with the reset in thinking. “2022 was a turning point where fintech became more mainstream.”
Founded in 2014, M2P Fintech works with over 100 banks, NBFCs and over 600 fintech companies across India, the Middle East and North Africa and South Asia. Much of the accelerated growth started in recent years, and 2022 was something of a catalyst.
M2P Fintech acquired five companies – Origa (loan recovery platform), Wizi (credit card infrastructure company), BSG IT soft (banking solutions provider), FinFlux (cloud lending platform) and Syntizen (identity validation startup), all for 300 days last year, and by shelling out approximately $60 million. The DNA of the company has gradually changed. M2P Fintech started its business as a payment stack provider, offering debit/credit cards, prepaid instruments and UPI payment solutions.
Today, it has evolved as a technological player in the banking world, offering end-to-end lending solutions and digital core banking infrastructure. As Madhusudhan puts it, a bank looking to digitize its credit card issuance process or automate its loan management system can simply launch its products by integrating M2P’s solution.
The feather in M2P’s roof is that a highly recognized small finance bank has recently migrated from Infosys’ Finacle (among the leaders in digital banking) to M2P’s mobile-first core banking platform. A few large private banks are also building their “buy now pay later” products using M2P’s solution.
“These will go live in 2023,” says Madhusudanan. The company’s operating income rose from ₹ 42 crore in FY21 to ₹ 194 crore in FY22. But alongside, losses also widened from ₹6.6 crore to ₹41 crore during this period.
From being aggressive, 2023 will see the company take a calibrated approach to diversification.
Each project will be viewed through the prism of build versus lease or partnership versus purchase approaches. “The purchase decision comes only after we are convinced that it makes more sense to buy than rent or partner,” he adds.
For example, if there is demand for an anti-money laundering (AML) solution from banks, M2P will consider players who have deep domain understanding in that area for a deal. But a transaction does not necessarily have to take the form of an acquisition; it may end up as a partnership arrangement.
The nuanced attitude is not motivated by a lack of capital, but the need to nurture capital. M2P Fintech’s $56 million Series C1 funding in January 2022 was led by New York-based private equity firm Insight Partners, along with MUFG Innovation Partners.
Existing investors – Tiger Global and Better Capital – also added capital, after valuations nearly doubled to $605 million. If M2P’s eyes are on the unicorn brand, then the days of cash burning are over. Companies that focus on generating net profit may have a better shot at a billion dollar in today’s time, and Madhusudanan is aware of this.
He wants to take M2P’s product offering global. From 15 per cent, the share of international income will increase to 30-40 per cent in the coming years. But he is quick to add that India will remain the main market.
“No other country has greater mobile and Internet penetration or adoption. India will grow faster than any other market for us,” he adds optimistically.
