Collaboration between new-age fintech startups and traditional banking to win (customers) the market

Digital transformation has revolutionized the way people interact and transact. Digital payments have caused massive disruption in the lending and payment space. The digital age is the new normal, from cash in wallets to cashless transactions via e-wallets, from cumbersome loan process to instant digital EMIs. The tech-savvy millennial customer segment is looking for contemporary digital solutions. Collaboration between new era fintech startups and traditional banking systems can help meet ever-changing consumer demands and build a robust digital ecosystem. Traditional banks have strong processes and regulatory compliance framework in place, while fintechs have the technological savvy and agility; a combination of the two creates a win-win situation for all parties.

Fintechs and banks can partner to offer innovative and user-friendly products in various sectors such as wealth management, insurance aggregation, lending, account opening, etc. The goal is to come together to create solutions that improve the customer experience.

Coping with changing dynamics

Over the years, digital payments have responded to changing consumer behavior. Millennials and Generation Z have quickly embraced digitalization for discretionary and non-discretionary spending. With the popularity of smartphones and e-commerce platforms, new-age consumers are yearning for on-the-go mobile payment solutions and seamless, faster credit availability. Conversely, the merchant community is embracing digital payments to drive big sales. Flexible and transparent payment options help them attract and convert customers. The credit model of paying in monthly installments has been well accepted since the launch of credit cards. Going a step further, new-era payment options offer on-the-go credit when checking out at e-commerce portals or making a purchase in-store and don’t require physical cards or memorizing pins. While shopping offline in stores, instant and flexible digital payment systems create a great win-win situation for both customers and merchants. New era technology solutions have eliminated the tedious documentation process and can provide real-time access to credit with better risk assessment methodologies. Digital KYC, electronic signatures, chatbots, etc. These are cost effective and fast processes for lenders, borrowers and retailers.

Trusted by thousands of merchant partners and direct links to India’s largest banks, new era digital platforms ensure that customers can now afford to buy through EMIs in seconds, even without a credit card.

Embracing a Future of Digital Transformation in Traditional Banking A PWC Indian Payments Report indicates that the digital payments market has grown at a CAGR of 23% in volume and 21% in value since 2018. It is estimated that the volume of digital transactions will reach INR 167 billion, and the value will touch INR 238 trillion by 2025. With the upward trend, traditional banks are transforming and adopting partnerships to digitize their offerings and cater to the broad base of consumers. They are more open to digital partnerships along 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 customer experience and mitigate risk. Therefore, Bank-fintech partnerships have the ability to add value to the entire ecosystem.

The path to follow

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 Unified Payment Interface (UPI) have brought the large unbanked population into the formal ecosystem of the bank and credit.

As more people begin to embrace digital financial services, RBI is also taking steps to ensure a stable ecosystem and protect customer interests. Fintechs can partner with banks to ensure they offer the best product on the market while using technology to improve convenience and transparency over current offerings. Collaboration between traditional banks and fintechs can help overcome each other’s shortcomings and use each other’s strengths to help unlock unmet demand and create a bigger and better market.



The opinions expressed above are those of the author.


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