Collaboration between old-fashioned fintech startups and traditional banking to win (customers) the market

Digital transformation has revolutionized the way people interact and act. Digital payments have caused a massive disruption in the lending and payment area. The digital age is the new norm, from cash in wallets to cashless transactions through e-wallets, from boring borrowing process to instant digital EMIs. The technology-savvy millennial customer segment is looking for modern digital solutions. Collaboration between old-fashioned fintech startups and traditional banking systems can help meet the ever-evolving consumer demands and build a robust digital ecosystem. The traditional physical banks have strong processes and frameworks for compliance in place, while fintechs have the technological knowledge and flexibility; a combination of the two creates a win-win situation for all parties.

Fintechs and banks can work together to offer innovative and customer-friendly products across different sectors such as asset management, insurance mergers, lending, account opening, etc. The goal is to come together to create solutions that improve the customer experience.

Addressing the dynamics of change

Over the years, digital payments have addressed the changing consumer behavior. Millennials and Gen Z have quickly adopted digitization for discretionary and non-discretionary expenses. With the popularity of smartphones and e-commerce platforms, new-age consumers want mobile payment solutions on the go and seamless and faster credit availability. Conversely, the merchant community uses digital payments to run large ticket sales. Flexible and transparent payment options help them attract and convert customers. The credit model of paying through monthly installments has been well accepted since the launch of credit cards. By taking it a step further, the new payment options give credit while you check out e-commerce portals or make a in-store purchase, and do not require carrying physical cards or remembering pins. While shopping offline in stores, instant, flexible digital payment schemes create a great win-win situation for customers and sellers. New technological solutions have eliminated the tedious documentation process and can provide real-time credit access with better risk assessment methods. Digital KYC, e-signatures, chatbots, etc. They are cost-effective and time-efficient processes for lenders, borrowers and resellers.

Trusted by thousands of trading partners and direct connections with the largest banks in India, modern digital platforms ensure that customers can now afford to buy through EMIs in seconds, even without a credit card.

Adopting a future of Digital Transformation in Traditional Banking A report from PWC on Indian payments states that the digital payments market has grown with a CAGR of 23% in volume and 21% in value since 2018. It is estimated that digital transaction volume will reach INR 167 billion NOK, and the value to touch INR 238 trillion by 2025. With the rising trend, traditional banks are transforming and using partnerships to digitize their offerings and meet the large consumer base. They are more open to digital partnerships across the value chain such as risk assessment, customer onboarding, alternative credit scoring, etc. A digital and data-driven approach can help lenders increase reach, reduce costs, improve the customer experience and reduce their risk. Therefore, banking-fintech partnerships have the ability to add value across the ecosystem.

The way forward

The Indian government aims to promote financial inclusion and move towards a digital economy. Various initiatives such as the Jan Dhan Aadhaar and Mobile (JAM) trinity and Aadhaar-enabled payment systems (AePS), and the Unified Payments Interface (UPI) have introduced the large non-bank population to the formal banking and credit ecosystem.

As more and more people start using digital financial services, RBI is also taking steps to ensure a stable ecosystem and safeguard customers’ interests. Fintechs can work with banks to ensure that they bring the best product to market while using technology to improve usability and transparency compared to current offerings. The collaboration between traditional banks and fintechs can help to overcome each other’s shortcomings and utilize their respective strengths to help unlock unaddressed demand and create a larger and better market.

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