The origination of the banking saga in
India dates back to the 18th century. Ever since, banks and their
processes have evolved, adapting to prevalent market needs and
sentiments. In comparison to yesteryears, banks have progressed and
revolutionized but, with the introduction of Fintechs to the equation,
banks are now facing the challenge to evolve further and adapt to the
dynamicity rather quickly.
Today, traditional banks are keen to
embrace a variety of tech solutions to enhance their user interface
and customer experience. Only in a theoretical sense can banks exist
in the digital realm, gain a vast market and penetrate underserved
areas on its overheads. Hence, several small banks like Federal Bank,
Equitas Small Finance Bank, etc., have allied with Fintechs to amplify
their retail network by combining finance with technology. For
instance, Federal Bank launched a mobile-first Credit Card for the
millennials and Gen Z in alliance with OneCard, a Fintech, to extend
services to their untouched database.
Traditional banks possess a sizeable
database of customer information in addition to a bulging purse but,
limited resources to channel it to their advantage. Fintechs have
leveraged this restraint and offer traditional banks the resources and
technology they require as the bargaining chip.
Traditional Banks Vs Fintechs
Traditional Banks are known for their
and while Fintechs can dent the dominance of banks,
they cannot reign the financial world.
Moreover, owing to the Indian
regulatory framework, banks are still backing most of the
transactions creating a sense of dependability for Fintechs. For
instance, although Fintechs have introduced the financial world to
Unified Payment Interface (UPI), traditional banks act as the alpha in
each transaction, therefore, barring Fintechs from operating solely.
In the financial world, a license
is a prerequisite to lending and hence, Fintechs are heavily dependent
on traditional banks when it comes to lending. However, there is a
huge gap between the rates offered by traditional banks and Fintechs,
creating an opportunity that seems more beneficial to Fintechs.
While Fintechs are doing away with
brick and mortar model, thereby reducing operational costs,
eliminating human intervention is a farfetched objective.
Elements like customer on-boarding, collections, etc., cannot be
digitized completely thereby, giving traditional banks the extra edge.
Looking at the Future / Shaping the Future-
Traditional Banks that are striving
towards an equal share in the future of the financial world should
create a bionic banking structure wherein Artificial Intelligence
supports and enhances customer experience and relationships. By
leveraging data and analytics, they should aim at serving a broad
range of customer needs that extends beyond traditional banking
products. This comes as a necessity when global brands like Amazon,
IKEA, Mercedes, etc., are eliminating traditional financial
intermediaries due to their limited service stack and plugging in
software from Fintechs to offer banking services to customers.
Furthermore, banks that allow ‘technoid’
counterparts to build a platform and engage people for them to create
a bionic banking structure, could end up being highly dependent on
these third party service providers, pushing themselves away from the
front end and thus, hazing their own brand recognition in the process.
The future of traditional banks largely
depends on how they collaborate and co-exist with Fintechs while each
maintaining its own value proposition. Today, though Fintechs can
challenge Traditional Banks in certain aspects, like digital payments,
it cannot eliminate or outweigh the whole structure.