Marriage of Convenience
Business Today|June 27, 2021
FROM DISRUPTERS TO PARTNERS, THE FINTECH-BANK RELATIONSHIP HAS COME A LONG WAY. WHAT IS THE NEXT LEVEL OF THIS PARTNERSHIP?
ANAND ADHIKARI

A decade ago, the entry of Fintechs in the fast-growing financial services space was a shocker for traditional banks. Bankers were worried that at some stage in the future, Fintechs would eat their lunch. Be it payments, software as a service, or lending, the new age start-ups in the financial services space went all out with innovative models in underbanked and unbanked areas to woo customers. But banks, too, followed with their digitisation drives, pushing Fintechs back. Regulators also stepped in to fill the gaps and encourage innovations. For instance, the unified payment interface-based platform hit mobile wallet players hard. On the other side, the entry of Techfins such as Google Pay, Amazon Pay and WhatsApp started changing the rules of the games. While the tug of war still continues, the jury is still out on the future of traditional banks.

A Win-win For Both

A partnership model has been evolving steadily between Fintechs and banks in the past few years. Fintechs bring in the perspective from the customer standpoint, which sometimes banks may not be able to because of multiple functions.

“Fintechs need banks as much as banks need Fintechs. We look at it as a collaborative partnership. We work in conjunction with Fintechs to deliver superior customer experience,” says Shalini Warrier, Executive Director at Aluva, Kerala-headquartered Federal Bank.

Meghna Suryakumar, Founder and CEO, Crediwatch, a Fintech that deals with digital onboarding, credit assessment and risk management, says there are always going to be challengers and partners. “A majority of Fintechs end up partnering with banks,” she adds. Banks need strategic technology tie-ups to focus on existing customers, whereas Fintechs bring technology, innovative products, and also a better understanding of risks by using databases. ”The need of the banking sector is to use Fintechs to create an elephant called the bank,” says a public sector banker.

Services On Offer

Banks currently engage with Fintechs for value-added services or software as a service, which help them influence customer experience through Artificial Intelligence (AI), Machine Learning (ML) and other digital tools. In fact, Fintechs are coming up with smart solutions for traditional banks to plug and play. Banks only need to open up their core banking solutions and Application Programming Interface (API) for Fintech players.

“A lot of automation and tech used in traditional banks is being pushed by Fintechs. The journey of digitisation in the banking sector has started,” says Satyam Kumar, CEO and Co-founder at LoanTap, which offers personal and business loans.

Today, banks have hundreds of Fintech tie-ups. The country's largest bank, SBI, for example, is using Fintech services for real-time KYC (Know Your Customer) verification, underwriting small and medium enterprises (SMEs), gamification for employee engagement, machine-based learning model, and data analytics. Today, Fintechs have become a crucial link for banks to provide better and faster services.

Bank-Fintech partnerships have also extended to Agritech (the application of technology to make the farming process more efficient) space. A number of Agritechs are offering information services. “These partnerships are now taking the shape of co-branded products. Banks are ready to pay for the information, which they were not paying earlier,” says Yogesh Patil, CEO at Skymet. The private forecaster has tied up with Bank of Baroda for information, including weather forecast, crop advisory services etc.

“Banks and Fintechs share a symbiotic relationship. Fintechs bring in the idea and banks provide maturity. The idea and the maturity together offer a superior customer experience,” says Ravindra Pandey, Chief Digital Officer, SBI.

Traditional bankers agree that the ostrich approach will not work in the current environment. Post pandemic, many banks, which were reluctant earlier, are now engaging with Fintechs.

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