Banks and Fintech to compete and collaborate

It is time for fintech and established financial institutions to work hand-in-hand and Banks should not feel threatened by fintech companies. You cannot expect people to switch away from the banks they have trusted for generations to something completely new. There will be partnerships between banks and fintech firms, but there will also be areas where they will be direct competitors. Fintechs have niche kinds of products...clearly banks can't do it all.

Apart from fintech, there is a new trend of pure digital banks. Fintech has long been considered to be the future of financial institutions and banking, this is why it’s not a surprise that the top 50 Fintech companies in Europe have collectively raised over $16 billion in venture capital funding and are now valued at about $92 billion. Having said this, traditional banks too, have been evolving rapidly, in the way they function, owing to newer technologies such as Machine Learning, AI, analytics, etc. Additionally, Fintech start-up accelerator programmes too are gaining success, some of which are managed by global banks such as JP Morgan, ING, etc.

It is important for banks and fintech firms to join hands to marry the data and signals that the latter brings with the balance sheets that the former has to make financial services available to the masses. The expertise, fintechs bring to the table, in terms of technology and the domain knowledge banks have, can be used in a collaborative manner to reach the last mile. An expert said, what we need our banks and bankers to do is to partner more deeply with platforms such as ourselves in order to marry the data, signals that we can bring with the balance sheets that they have.

Banks, fintechs, payment platforms -- all of these coming together is what will result in game changing moves that we want to see in the industry and which will benefit the end user. The industry is going through a platform evolution, wherein on top there is the core stack of banks, we have seen the impact of technology and how India is going through massive transformation as we speak be it in payments, micro-credit, insurance, wealth management, etc.

Finally, we can’t deny the fact that there will be partnerships between banks and fintech firms, but there will also be areas where they will be direct competitors. What has caused this is the entry of non-banking entities (fintechs, big-techs, e-retailers) and their collaboration with banks. Scalability will be driven by digital platforms and not necessarily by brick and mortar.