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🙅🏻♂️ Never underestimate regulatory risks
How Muvin's big bet on UPI failed because of regulatory changes
Admond Lee
December 08, 2024
Hey Founders,
Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.
Today’s story is about how a promising fintech startup in India died due to regulatory hurdles. Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → Muvin
⚠️ 2 Mistakes → Underestimated regulatory risks
🧠 3 Lessons Learned → Diversify your revenue stream
🔗 The Runway Insights → Nvidia: Past, Present, and Future
💰 Southeast Asia Funding Radar → KPay raises $55M from Apis Growth Markets Fund III and Apis Global Growth Fund III to support 1 million merchants across Asia in the next 5 years
☠️ 1 Failed Startup: Muvin
🚀 The Rise of Muvin
🇮🇳 Founded by Vineet Gupta and Mukund Rao in 2020, Muvin was a fintech startup to revolutionise financial literacy for the youth.
Our children’s minor bank accounts, through which we were giving them pocket money, had multiple challenges — from opening to enabling our children to use it freely, given the restrictions on bank ATM or debit cards.
The Problem — 💸 Young Indians (aged between 10-24) lacked financial literacy with limited options available to learn about money management and gain financial independence.
The Solution — 🤑 Muvin provided a prepaid card and a mobile app that allowed teens to manage their money digitally.
👦🏻 For teens — They could track expenses, save, and learn financial skills in real time.
👨🏻👩🏻 For parents — They could set limits and monitor their children’s spending habits.
Parents could also transfer pocket money directly to their children's accounts, set tasks for them to complete in exchange for money, and track their spending — all while ensuring that their kids learned valuable lessons about saving and budgeting through engaging content.
💵 In short, Muvin wanted to empower Indian teens with digital financial inclusion and financial literacy.
| 🇮🇳 Combining fintech innovation with education, Muvin served a niche market that others overlooked. 💰 Because of that, Muvin successfully raised $3 million in a pre-Series A funding round in January 2022 led by WaterBridge Ventures to fuel their growth and expand their offerings within the burgeoning fintech landscape targeting youth. |
🤳🏻 At its peak, Muvin boasted an impressive user base of 50,000 active users, with 80,000 wallets created on the platform. The app's features included UPI payments, savings goals, and educational resources that demystified finance for its young audience.
When Muvin poised for exponential growth in India’s booming fintech sector, something happened…
📉 The Fall of Muvin
Muvin was pushed into an existential crisis when the regulatory landscape in India turned turbulent.
🚨 Everything collapsed when the Reserve Bank of India (RBI) issued a directive that would change everything for Muvin and several other fintech startups.
📌 Here’s what happened to Muvin:
💃 The Youth Days
2020 — Muvin was founded by Vineet Gupta and Mukund Rao.
Apr 2021 — 💰 Secured $1.5+ million in seed funding from high net-worth individuals.
Jan 2022 — 💰Raised $3 million in a pre-Series A round led by WaterBridge Ventures for product development and hiring.
Aug 2022 — 📈 Grew to 50,000 active users with 80,000 active wallets created on the platform.
Muvin was free for users to use.
It made money from the interchange fees incurred by merchants for card transactions.
🙅🏻♂️ The Regulatory Blow
Jun 2023 — 🚨 RBI issued a directive banning Unified Payments Interface (UPI) co-branding arrangements for prepaid payment instrument (PPI) issuers unless they held the appropriate licenses.
This regulatory change directly impacted Muvin, which had heavily relied on UPI integration for its services.
The RBI's directive forced Muvin and similar platforms like Akudo and FamPay to halt their UPI operations.
Without a PPI license, Muvin had to disable core functionalities, leading to a sharp decline in user activity and trust.
Early 2024 — 🥵 Muvin officially shut down operations due to regulatory challenges.
Muvin communicated with users through notifications stating that their card program was closed and any remaining balances would be migrated to the issuer Livquik app.
The closure of Muvin highlighted the harsh reality of navigating India's regulatory framework.
👮🏻 While Muvin's vision of empowering young people with financial tools was noble, it failed to adapt quickly enough to the evolving regulatory landscape, leading to its downfall.
Want to learn more about Muvin’s downfall?
⚠️ 2 Mistakes
Mistake 1: Underestimated regulatory risks
Muvin’s business model was to make money from the interchange fees incurred by merchants for card transactions via UPI. That means Muvin depended heavily on UPI for its operations and revenue stream.
⚠️ When the Reserve Bank of India (RBI) issued a directive that disrupted UPI co-branding arrangements, Muvin found itself in a tight spot.
As a result, Muvin’s primary revenue stream crumbled because they had built their entire business model around this integration without considering alternative pathways.
Mistake 2: Failed to adapt quickly
When the RBI’s directive came in June 2023, Muvin didn’t take decisive action to secure the necessary PPI license or pivot to an alternative operational model.
Competitors like FamPay and Slice took quicker steps to mitigate the impact, but Muvin faltered.
⚡️ In fast-moving industries like fintech, the ability to pivot quickly can be the difference between survival and collapse. Instead of quickly exploring alternative solutions or partnerships, Muvin remained tied to its original plan, leading to a rapid decline in user trust and engagement.
🧠 3 Lessons Learned
Lesson 1: Stay ahead of regulatory changes
Fintech startups often operate in legal grey areas as they innovate faster than regulations can adapt. However, ignoring regulatory risks can halt even the most promising ventures — as Muvin learned the hard way.
🌟 Key Takeaways:
🤝🏻 Engage with regulatory authorities
Building relationships with regulators can provide insights into upcoming changes and help you stay compliant.
For example, you can attend industry conferences or workshops where regulators speak.
This not only helps you stay informed but also builds credibility with regulatory bodies. Consider joining industry associations that facilitate dialogue between fintech companies and regulators.
🔥 Regulatory innovation can be an opportunity
While regulations may seem like hurdles, they often create opportunities for differentiation. Companies that adapt early can set new industry standards and win customer trust.
Build solutions that align with regulations while delivering value to your customers.
For example, Apple Pay designed its services to comply with stringent EU privacy laws, using compliance as a selling point to differentiate itself from competitors.
Lesson 2: Diversify your revenue stream
💣 Muvin’s reliance on a single revenue stream — interchange fees from card transactions — was a ticking time bomb.
When the RBI banned UPI co-branding arrangements, their primary source of income disappeared overnight. Diversifying revenue streams isn’t just about increasing income — it’s about building resilience against external shocks like regulatory changes, market disruptions, or shifts in consumer behaviour.
🌟 Key Takeaways:
🚨 Single Revenue Stream = Single Point of Failure
Avoid putting all your eggs in one basket. Develop multiple income streams to reduce dependency on any single factor.
Regularly audit your revenue sources and assess their vulnerability to external factors. Prioritise the development of alternative revenue channels.
For example, Google earns from multiple streams like advertising, cloud services, YouTube subscriptions, and hardware, insulating it from a single source's decline.
Lesson 3: Be ready to pivot
Muvin was essentially trapped in its existing business model and product strategy, unable to swiftly adapt to the RBI’s directive on UPI co-branding.
By failing to act fast enough, Muvin missed out on opportunities to maintain user trust and business continuity.
🌟 Key Takeaways:
⚡️ Pivot quickly when faced with an existential crisis
When faced with external threats, consider all possible solutions immediately.
If your core offering is suddenly compromised, think about alternative revenue streams, pivoting to a new product, or partnering with other players to ease the transition.
During the early stages of the COVID-19 pandemic, many restaurants quickly pivoted to delivery and takeaway models.
For example, Shake Shack shifted to delivery apps and curbside pickup services to maintain business operations during lockdowns.
🌳 Don’t be over-reliant on one feature or channel
Diversify your business and product offerings so you aren’t dependent on a single feature, channel, or technology to make it easier to pivot if needed.
Evaluate your business model and assess potential single points of failure.
Design your product so that if one feature is restricted, there are alternative methods or technologies that can be implemented with minimal disruption.
🔗 The Runway Insights
💰 Southeast Asia Funding Radar
KPay raises $55M from Apis Growth Markets Fund III and Apis Global Growth Fund III to support 1 million merchants across Asia in the next 5 years (Link)
Mimin, Indonesia’s GenAI startup, raises $1.5M led by Skystar Capital to expand in SEA (Link)
The Money Club raises $2.5M in Series A led by Prudent Investment Managers (Link)
TMYTEK, a satellite tech company in Taiwan, secures $40M in Series B to boost 5G (Link)
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That’s all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
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