How Fampay’s Rs 200 Crore bet on fintech for teenagers fell flat

Fampay, A youth-focused fintech company promised investors the moon with its interesting business model. The idea of a neo-banking platform aimed at teenage demographics was appealing enough to attract a record $38 million in series A funding. Other venture funds that invested include Elevation Capital, Peak XV originally known as Sequoia Capital, and General Catalyst. 

A Sharp Turn

Nevertheless, events in Fampay’s life soon started to turn sour. IDFC Bank pulled out in February 2023, thus ending the payment partnership between the two organizations. Customers were only given a limited time within which they had to spend their balances. This situation did not take long to play out, several users left Fampay and could not regain them. This promising startup was on the cusp of a great moment. 

Fampay’s Crucial Move

Fampay did suggest an important change. Two years when it had the biggest fundraiser the company switched to a UPI-focused app like PhonePe/Paytm. This transition became inevitable, especially after losing more than 200 crores on the failed business model. The Bengaluru-based firm posted a loss of Rs 120 crore in FY23 and has marginal revenue in the company. 

Revenue and Loan Extension

Fampay’s total operating revenue for the year FY23 was Rs 7.7 crore. Commissions, partnerships, payment facilitation, and subscription fees helped contribute to this relatively small figure. Measures of employee benefits, marketing, and overhead expenditure rose considerably. Legal, subscription, technology, and travel were other prominent issues that had impacted it. Fampay provided an unsecured fund of Rs 55 crore to acquire an organization known as Pehe Limited. Thus, in non-payment, a longer period of implementation and a higher interest rate appeared.

Growth Journey of Fampay

FamPay, a firm that offers financial services to teenagers, attracted attention with an appealing story and recently secured $38m in a series A funding round. FamPay’s strategy in targeting Teenagers is to promote a cashless Society. Their goal is simply to make FamCard a brand that the teen will eventually turn to for all their financial needs as they grow older. During operations for only eight months, FamPay gained more than 2 million users and expanded rapidly.

Image Source: FamApp  

Facing challenges, FamPay decided in March 2023 to completely shift its business model. Also, it underwent a metamorphosis from its core offering to become a UPI application like PhonePe and Paytm after suffering more than Rs 200 crore due to the abandoned business strategy. However, the grand launch did not translate into massive sales, and FamPay registered relatively low revenue sales of Rs 7.7 crore in FY23.

This total included income generated as commissions, partnership revenues, payment facilitation, and subscription fees. However, the company’s expenditures continued to rise due to factors such as the cost of employee benefits and marketing expenses. Notably, FamPay showed its credit Appetite by giving an unsecured loan of Rs 55 crore to Pehe Limited for acquisition. When no payments were made for one year, the time frame was adjusted, and the interest rate was raised to 7.6%.

Conclusion

Fampay’s experience depicts a clear example of this with its business becoming distressed after investing in football clubs’ shares. Leading a startup purely by narrative isn’t possible; the fundamentals are important. As the dynamics of the fintech market gradually change experiences of Fampay reveal several lessons about sustainability, perseverance, and cost management. Thus, the FamPay story can be seen as one of how developing narratives and maintaining a focus on basic financial fundamentals along with market dynamics is key.