Building a Symbiotic Relationship Between Banks & FinTech
This week’s newsletter is a quick snapshot of our co-founder, Hemant Vishnoi ’s recent panel discussion at the India Digital Summit 2023. He and other industry experts discussed an important topic i.e., Building a Symbiotic relationship between Banks and Fintechs
The relationship between banks and fintech has been an ongoing debate for years. There is a vast scope for collaboration between fintechs and banks. Banks are ideally placed to provide infrastructure and an extensive distribution network.
Fintechs, on the other hand, can innovate on top of and within that infrastructure at a much faster speed to provide seamless experiences, personalization, and innovation solutions demanded by the new-age customers. Fintechs are basically creating anytime, anywhere experiences at a relatively low cost. Let us further discuss how banks and fintechs reshape the entire financial ecosystem.?
FinTechs Over Banks or Banks Over FinTechs?
The current time should be referred to as Fintech 3.0. Fintech 1.0, where fintechs built solutions with very limited tech stacks and restricted participation from banks & other ecosystem players.? Fintech 2.0 was when tech stacks like India stack came into the picture, and banks started opening up their APIs for fintechs.
Now, Fintech 3.0 is seen as a world of ecosystems where banks and fintechs work together to develop innovative solutions and meet the ever-growing demands of customers. For example, the fintech market opportunity will reach USD 2.1 trillion, and the payments industry is expected to grow from USD 165 billion to USD 253 billion by 2030.
Even today, in the digital era, banks control the money and are licensed to carry out most aspects of financial services. They also have a huge client base and distribution network required, which is imperative to fulfill many business needs.
Banks and fintechs, together, are developing innovative solutions for personal finance, embedded finance, financial inclusion, solving challenges around the accessibility of financial products, and more. Indeed, banks have built a relationship of loyalty and trust with their consumer base, but the new-age customers are keen to look beyond what traditional banks offer. Today’s customers want a completely new, nimble & fast experience. They want end-to-end digital and DIY experience.
Can Banks and FinTechs Really Build a Symbiotic Relationship?
Founder’s Insights
“There is a symbiotic relationship between the two, which is incumbent. Both banks and fintechs, when come together, have the potential to fill each other’s gaps.? Moreover, the partnership between the banks and the fintechs will enhance learning opportunities for both and bring out the best experience for the customers.†said Hemant Vishnoi , at the India Digital Summit ( Internet and Mobile Association of India ). He further said, “Banks and FinTechs have different core competencies that cannot replace each other.â€
Neither banks nor fintechs will ever disappear in fact, they will always co-exist and can result in the following:
- Best of Class Customer Experience:
Traditional banks have historically provided a highly service-oriented approach to their customers’ banking needs by relying heavily on face-to-face interactions to build and retain relationships. FinTech, on the other hand, drives a customer-first strategy and, as the name suggests, are tech-first companies. They have the potential to win customers a lot faster by meeting their ever-growing demands.
- Tapping Untapped and Niche Segments:
Banking solutions are primarily built to address problems of large corporates/businesses, whereas Fintechs focus on creating products and solutions for untapped and niche segments, such as small and medium business segments (SMBs), which are limitedly served by banks.
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SMB is the most ignored and untapped segment. Entrepreneurs lose significant time in paperwork, manual banking operations, and customer support. They need fintech-powered solutions to cater to their needs, like a smart business account, B2B payment services, and digitizing their B2B spends to improve cash flows, accounting, lending, and round-the-clock customer support.
The symbiotic relationship can help scale the customer base and solve for the ecosystem as a whole.? Today, customers expect a lot more from their banks and anticipate having a completely contactless experience.
Their collaboration has fostered many business solutions, such as co-branded opportunities, invoice-based financing, etc.?
- Bringing Product Innovation & Additional Revenue Streams:
Due to innovative ideas, cost reduction, and technology for products, fintechs are revolutionizing the entire banking ecosystem by improving their technological infrastructure to meet the expectations of new-generation customers.
Moreover, they are proactively working towards reducing costs by testing different revenue streams via low-cost services to solve the existing customers' pain points.
- Creating Seamless On-Boarding Experience for Customers:
Fintechs have the tech capabilities to create a seamless customer onboarding experience that reduces time, hassle, and friction. From Paper-based onboarding to Digital KYC/API-based onboarding experience for merchants and end customers.
- Leveraging Data to Improve Engagement and Customer-Centric Growth Strategies:
Banks and Fintechs together are better at leveraging data to supplement customer experience to enhance their product range and innovate in a timely and relevant manner. Banks must engage with fintechs to leverage their advanced technologies, whereas fintechs need the expertise of banks to understand customer behavior.
In Conclusion
Hence, with customer demands staying firmly placed, banks and fintech need to align their business goals to where their customers will win this battle against each other. They can fulfill each other’s gaps and create a more efficient and effective financial ecosystem when partnered.
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