In a significant development, Akudo, the neo-banking platform designed exclusively for teenagers, is slated to cease its operations, shutting down its core UPI and card business. This move comes in the wake of a directive by the Reserve Bank of India (RBI), which prohibited Unified Payments Interface (UPI) under a co-branding arrangement. According to insiders, the company is set to wind up operations completely in the ensuing weeks, following RBI’s directive issued in June 2023.
Sources who requested anonymity revealed, “Akudo has already ceased the onboarding of new users and has notified its PPI issuer LivQuik and infra partner M2P Fintech about the imminent shutdown.” Entrackr has verified that Akudo is not accepting new customers, despite multiple attempts by several team members to sign up via its app.
Founded by Lavika Aggarwal, Sajal Khanna, and Jagveer Gandhi, Akudo emerged as a digital banking alternative for teenagers, offering a suite of services, including parental control-enabled debit cards. Akudo secured a substantial $4.2 million in funding, with significant investments from Y Combinator, JAFCO Asia, Incubate Fund India, and AET Fund, among others, in September 2021.
However, with over 70% of its business hinging on UPI and a further 25% stemming from cards, the RBI directive has dealt a significant blow to its operational viability. “Apart from grappling with regulatory challenges, Akudo is facing a severe financial crunch, and its endeavors to secure additional capital have been unfruitful,” disclosed another source.
Despite repeated attempts, there has been no response to queries directed to Akudo’s co-founder Sajal Khanna or its partners, M2P, and LivQuik. This article will be updated with any forthcoming responses.
This development casts a shadow over the burgeoning sector of teen-focused neo-banking, which is still in its infancy. The regulatory restrictions have compelled several counterparts of Akudo like Dreamx (Dream11), Fampay, Muvin, and CheqUPI to discontinue UPI services due to the absence of a PPI license. Fampay and CheqUPI have, however, managed to maintain their operations amid the clampdown.
Fampay, considered a frontrunner in this sector, raised approximately $43 million but faced challenges in user acquisition and new investments. The company is yet to release its FY23 figures but reported a meager Rs 3 crore in revenue against an expenditure of around Rs 50 crore in FY22. Junio, another notable entity in this space, has managed to raise around $8 million to date.
Despite the financial backing and the innovative approach to banking for the younger generation, Akudo’s journey underscores the intricate challenges in navigating the regulatory landscapes and achieving financial sustainability. The shutdown brings to light the precarious balance that neo-banking platforms must maintain between innovation and compliance.
While the shut down of Akudo is a setback to the teen-focused neo-banking sector, it also emphasizes the need for stringent regulatory compliance and a robust financial foundation for such ventures. The eventual impact on the consumers, primarily teenagers who were the focal point of Akudo’s services, is yet to unfold, but it raises questions on the availability and reliability of specialized financial services for this demographic.
Moreover, the swift and unexpected shutdown of Akudo serves as a crucial reminder of the volatile nature of fintech startups, especially those that primarily rely on novel or disruptive technologies and services. For the neo-banking sector to flourish, especially those catering to niche markets like teenagers, there is an evident need for harmonious integration of innovative solutions with regulatory norms.
The vacating space left by Akudo provides a fertile ground for existing and emerging players to analyze and adapt. It necessitates a deeper understanding of the market dynamics, customer needs, and regulatory frameworks that govern the financial and technological realms. As the neo-banking landscape continues to evolve, learning from the trajectories of platforms like Akudo will be pivotal for future endeavors in the fintech sector.
In conclusion, Akudo’s untimely demise highlights the multifaceted challenges faced by fintech startups in aligning innovation with regulatory compliance and financial stability. The unfolding scenario emphasizes a careful reassessment of strategies and regulatory alignments for existing and forthcoming players in the teen-focused neo-banking sector. Whether this sector will witness a resurgence or a reevaluation is a narrative that remains to be seen in the evolving tapestry of fintech innovations.
