Page 46 - Banking Finance October 2020

ARTICLE

country's preference for cash being reflected in its high cash- Ease at setting up of account at the comforts of home when
to-GDP ratio of 12.04%. In November 2016, the compares to the traditional financial services and wide range
Government of India undertook a demonetization drive, of services conveniently accessible are reasons for consumers
scrapping high-denomination notes. This provided a get attracted. India has seen significant growth in both the
significant boost to Fin tech startups (mobile wallets and number of smart phone users and internet users over the
digital payments), pushing citizens to use to digital modes past few years. India is ranked third in terms of number of
for payments. Without the governments support no firms, smart phone users and deep penetration into the Indian
specifically Fin tech firms that is being operated in a tightly population base offers Fin tech firms an opportunity to
regulated industry cannot survive. address issues of low banking penetration. But with increase
in base of consumers the demands and requirements from
The government and the regulatory bodies have recognized them will start varying.
the changes that are taking place in the Indian Fin tech
space and have constantly kept pace with the rapidly Partners to Bank
changing environment in terms of technology and customer
The Indian financial sector is highly regulated with significant
expectation.GOI and RBI are pushing heavily for moving capital and other constraints on firms interested in
towards a cashless digital economy and creating an eco delivering financial services. While this level of regulation is
system by providing funding and promotional initiatives. GOI aimed at protecting the interests of consumers, it has had
with its initiative of startup India has given the funding the unintended effect of creating large entry barriers for
advantage to budding Fin tech entrepreneurs. With the GoI
Fin Techs. However, in areas that are relatively lightly
scheme of Jan Dhan Yojana lot of new customers are being regulated, Fin Techs have been able to disrupt, or
added into the banking sector hence there is a lot of scope significantly impact, the business models of traditional
for such firms.
players as a result of lower cost structures, and more
effective technology design and implementation.
Govt with the digital India project have started bringing in
the digital infrastructure to even villages hence such fin tech The relationship between Fin techs and traditional financial
companies are getting vast scope for their business. The institutions has morphed from competition to collaboration,
investors have started understanding the importance and but this potential of collaboration is just the start. Fin tech
impact fin tech companies would be able to create. It was companies were initially seen as technology based business
initially started off with mainly payments technology but
moving into the space of financial institutions. They were
soon it started moving onto other spaces such as lending, perceived as a threat to the existing banks since slowly the
investing, wealth management and other financial related fin tech companies were occupying the space of the banks.
activities. The highest number of startups has been in Fin tech companies usually target a particular segment and
Bengaluru. However, for Fin tech start-ups to continue their try to dominate them.
way forward, they need to demonstrate to regulatory bodies
that they can benefit the society, by being transparent to Banks having to focus as a whole started lagging back since
public, institutions and the regulators that they can be the no off fin tech firms raised and they started on focusing
regulated and monitored.
exclusively in their target groups. Banks started slowly losing
their customer base due to this. Banks started moving from
Consumer Perspective the traditional conservative mindsets, to align their
Consumers have already started turning to Fin tech firms strategies and better collaborate with Fin tech players in
as alternative providers of access to payments, credit, the payments, lending and wealth management space.
investments, insurance etc. Even in urban areas where Banks realized the importance of working with them rather
branches are in plenty, banks are often unable to live up to than seeing them as disruptors. They started understanding
the increasing expectations of demanding customers. the impact which could be created if collaborating with fin
Younger customers do not have the patience to visit tech firms was done.
branches. They are looking for fully automated, simple to
use, digital products and services - an area where banks are Due to a plethora of data, fin tech startups have gained
found lacking - especially when compared to the digital significant traction. By introducing innovative ways, they are
offerings off fin tech firms. successfully offering products and distinctive solutions for

46 | 2020 | OCTOBER | BANKING FINANCE