The banking sector in India has undergone a huge transformation in the past few years. Traditional banking practices made way for newer and more innovative ways of banking. Changing customer needs, a rising digital ecosystem and regulatory changes in the sector were at the forefront of this transformation and was further triggered by the Covid-19 pandemic that brought about a digital push in the financial sector.
As customers started relying highly on online services to minimise physical interactions, the banking industry also turned to innovate their services as a move to cater to the needs of their customers. This is where the role of fintechs came into play. With the digital expertise and product requirements, fintechs and banks started collaborating with each other to provide financial services to the masses. While fintechs were previously operational in the market, they were separately targeting customers of banks to get them to use the services they provided. However, now, with the digital expertise of fintechs combined with the huge database of customers of banks, it’s a win-win for both banks and fintechs.
A new era of banking
As the world is witnessing a digital revolution and people are leading smarter lives than before, the products and services available in the market are also evolving. The way banking was done 10 years ago – involving complex and tedious processes; to the ease and speed with which it's done today, has a huge difference. Banking functions that used to take hours to execute are now performed online within a matter of seconds.
The emergence of fintechs and neo-bank entities in the banking industry have contributed to this change. Although initially fintechs set out to replace banks and compete with them for providing financial services, over time this competition turned into collaboration. Banks realised the need to transform themselves to provide their customers with a seamless digital banking experience and hence, resorted to the services of fintech companies that provide them with a whole suite of banking services.
This collaboration between banks and fintechs is leading to massive growth in the banking industry. It has enabled banks to become more agile in their functioning and respond to shifting customer needs by embedding partner solutions into their own programmes while lowering their capital investment requirements and software development risk. Fintechs on the other hand, are also benefiting from this partnership by enjoying the large client base that banks provide along with establishing credibility for themselves in the minds of the customers.
Overall, it has successfully changed the perception of banking. Customers are now able to avail the services of their bank through a few taps on their screen. Banking has been made more fun and rewarding with third-party apps being able to connect directly with banks to securely transfer payments from one source to the other without any hassle.
The much needed revolution in the banking industry has finally arrived. With India having the highest fintech adoption rate in the world at 87 percent, the opportunities that lie ahead for fintechs and banks is immensely wide. While there are challenges that they might have to face, strategic partnerships are the way ahead for the banking industry to flourish and provide customers with a delightful banking experience.
The writer is CEO and cofounder of Zeta.
The thoughts and opinions shared here are of the author.
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