Can FamPay slay it in India's fintech space?

Sambhav Jain (left) and Kush Taneja's neo-banking platform for teenagers, FamPay, has become a winner among the VCs due to its growth trajectory and product innovations.

Over 85 kilos of food getting wasted in his college canteen was not acceptable for Sambhav Jain.

“Imagine this used to happen every month!” recalls the Indian Institute of Technology [IIT] Roorkee undergrad. What made the sin grave was the fact that the discarded food could easily have been used. “It is no rocket science,” wondered 19-year-old Jain, who then, along with batchmate Kush Taneja, started working on project Appetiser in 2017.

The problem, and its solution, was simple. Jain recounts that kids used to skip meals to have food from outside, while the hostel administration prepared food for all. Result: Wastage.

The solution devised by the duo involved preparing a weekly menu, making it available to students on an app and giving them the power to decide which meal they would like to skip. There were dual benefits: First, the hostel administration would not have to prepare extra food. Second, students would get the money back for the meals they did not consume. “Kids loved it,” says Jain, now 23. The app, he says, has become the official mess app at IIT Roorkee.

Two years later, in 2019, Jain and Taneja felt irritated. First of many issues was the lack of financial literacy among kids. In market research done with close to 100 kids below 14 years of age in Bengaluru, the duo developed another insight: Over 90 percent respondents did not have a bank account. This brought them to the second issue: Why were banks and other financial institutions not talking to kids and teens? “There was a very big gap,” Jain says, alluding to a reality that all financial products are focused on adults, while teens fell on the blind spot. Another slice of data egged the duo to take the entrepreneurial plunge. “Around 40 percent of India’s pop [population] is under 18,” Jain says.

The friends decided to look at banking from a fresh lens. The idea was to making banking cool, fun, and at the same time, empower kids in terms of financial literacy and responsibility.

Just three months after graduating from IIT Roorkee, the duo floated the idea of FamPay, a neo-banking platform for teens, and managed to close a seed round of $4.7 million in September 2019. They got a bunch of interesting backers such as Kevin Lin, co-founder of American live streaming platform Twitch, Vladimir Tenev, co-founder of financial services company Robinhood, and Amrish Rau, CEO of merchant commerce platform Pine Labs.

Over the next few months, Jain and Taneja started building the product and the team. The task, though, was no kid’s play. The biggest challenge, Jain recalls, was navigating the regulated fintech space. By February 2020, FamPay was ready to go live.

Then came Covid-19 and the lockdown. “There was so much of uncertainty. Schools got shut down,” Jain recounts. Finally in July 2020, FamPay was launched by rolling out FamCard, India’s first numberless card in partnership with IDFC Bank. The debit card can be ordered once the account is set up on the app, after both the parent and teen complete their KYC (know your customer) online. Since then, there was no looking back. Within eight months, the startup got two million registered users.

Cut to June 2021. FamPay has become a winner among the VCs. Early this week, the fledgling startup raised $38 million in Series A round of funding led by Elevation Capital. Existing investors including Sequoia Capital India, Venture Highway and Y Combinator, as well as new backers such as General Catalyst, Rocketship VC, and Greenoaks Capital participated in the round.

Backers are delighted with the progress. FamPay, they reckon, is firmly on track to re-imagine banking for teenagers. “We have been extremely impressed by FamPay’s product innovations, growth trajectory and customer love,” Mridul Arora, partner at Elevation Capital, said in a media release after the funding announcement. All these early signs, Arora added, indicate that FamPay is destined to become the destination app for Gen Z, and a gateway for their access to fintech services and beyond.

What makes funders bullish on teen neo-banking is the fact that India has a sizable population of 250 million adolescents. “Catering to this unserved audience with innovative products contextualised to their needs and behaviours will create a very valuable business,” Arora added. Sequoia India, which came on board during the seed round last year, is also upbeat. “They understood their users, and had very nuanced views on how to serve them best,” Shailendra Singh, managing director, Sequoia Capital (India) Singapore, remarked in the media release.

Though the funding and growth has come at a super brisk pace, the beginning, especially the time leading up to the founding of FamPay, was not easy. The founders were seen as ‘robinhoods’ during their college days, disruptive in their ideas.

When a bunch of their collegemates started to learn coding, it appeared jarring to Jain and Taneja. “Don’t you guys hate to code? Then why are you doing it?” they asked. The answer was unexpected, but practical. ‘It will get us a high-paying jobs. Our life would be sorted’ is what friends replied. The duo couldn’t understand how money could be the only reason to do a job. So both skipped placement season at college. Result: Friends mocked, others were dismissive. Their families, too, couldn’t understand the method behind the apparent madness. Placements, Jain explains, are the biggest part of IIT education. “At least that’s what we have been hearing for years,” he smiles.

Once the duo started to build FamPay for teens, it was the turn of bankers to be dismissive. Most traditional banks could not understand how 20-somethings could disrupt payments. Once the product was ready, Jain and Taneja travelled from Bengaluru to Mumbai at least three times a week to pitch their idea. There were no takers. Nobody saw much value in the teenage market. ‘Teens don’t earn, so they won’t spend’ was the widely accepted norm. Despite multiple rejections, the duo persisted.

Almost a year into the journey, Jain feels vindicated. Every year, he underlines, millions of new teenagers will start using their first smartphone and FamPay envisions becoming their go-to brand. The brand is connecting with them young, and is building an early relationship. “FamPay will become the gateway for brands to target Gen Z,” he says. The startup, he lets on, is approaching banking from a new lens, with its recipe of community and gamification to match the Gen Z vibe.

The journey ahead won’t be easy. Industry watchers point to potential roadblocks. First is the monetisation. Though FamPay plans to partner teens in their financial journey and intend to become the only bank they will ever need, the problem is teens would eventually graduate to become adults. And a product for teens would not resonate with adults. Second problem is stickiness. Wallet brands also think that users will migrate to their banking platform, but it seldom happens. Third, the product is dependent on parents’ consent. “Hence, the startup needs to ensure that parents see long-term benefit and don’t find it a hassle along with other managed products,” says Anil Joshi, founder at Unicorn India Ventures.

Jain is aware of these challenges. In fact, he figured it while naming the startup. Though the idea was to target teens, the flip side would have been losing once they become adult. “We definitely didn’t want to lose them,” he says. Moreover, parents are the financial engines behind the teens and their spending power. So it made sense to have family too involved in the venture. Fam, Jain underlines, is a cool Gen Z lingo for family. “This makes us a young brand. Our branding too is not childish,” he adds. FamPay’s goal, he explains, is to enable a financially-aware generation that understands the fundamentals of personal finance and is capable of making financial decisions with confidence.

The new kid on the block will have to ensure two things over the next few years: First, living up to the erratic expectations of the teens. Second, generating enough cash—through revenue and not funding—to ensure that banking finally becomes a child’s play.