Mumbai: Innovation in fintech will be spurred by customers’ search for “frictionless solutions" as they demand seamless movement between transactions with their banks and other financial institutions, concluded the panellists participating in the discussion on Finnovate: Fintech five years hence at the Mint Fintech Summit held recently in Mumbai. The panellists were: Rajesh Sehgal, angel investor, and managing partner at Equanimity Investments; Rajeev Arora, chief operating officer at Fino Paytech Ltd; Naveen Surya, managing director at ItzCash Card Ltd and chairman of Payments Council of India; Manish Shah, head (digital bank) at Nainital Bank (a subsidiary of Bank of Baroda); Venkatesh Hariharan, director (fintech) at Indian Software Product Industry Round Table (iSpirt); and Navin Chandani, chief business development officer at BankBazaar.com. The session was moderated by Leslie D’Monte, national technology editor of Mint. Edited excerpts:
Arora: Can we enable byte-sized banking for people who want to do banking but with a smaller quantum? For all of these technology companies, we want to see how we can make that possible. Does that happen overnight? No. Trust is the big denominator when you give someone your money. To begin with, there will be branches, which will be trust points for customers. But the touchpoints will be digital—mobile phone, websites and others.
Chandani: Millennials are looking for solutions that are frictionless. For instance, if you want to take a credit card, can you do it paperless? The India Stack is disrupting everything. Our business model is paperless, and the experience the user gets is superlative, not just for millennials but for everyone. We have been using fingerprints for over a decade in our banking system. Aadhaar-based authentication eKYC and eSignature—these still need some applicability as per law. Once that is settled, however, it will become omnipresent.
Hariharan: Change is under way, especially by way of the Unified Payments Interface (UPI)—a component of the India Stack, which aims to bridge the digital divide in the country. UPI was going to become a driver of data on which future fintech innovations could be created. Paytm has already said that, in the next few months, it will come on UPI; WhatsApp will also come on UPI. The next version of UPI will have a button that will allow users to download their transaction data, which will have a digital stamp. This will become the basis of lending to small and medium enterprises. UPI and Aadhaar-linked bank accounts will open up huge opportunities in the next few years.
Sehgal: Most fintechs in India see themselves as enablers and disruptors. Most entrepreneurs are focused on addressing that small problem that everyone else is also looking at. If you really want to disrupt the space, you need to think of not just India but also Bharat. You have to make a material change. After payments, lending—particularly to small and medium enterprises—is a major area of interest for investors and companies in the fintech space. We are still keen to put our money in fintechs—it’s a key thing we are looking at in our portfolio.
Shah: In the next five years, there will be some customers who will say, “I do not want to go anywhere" (for my banking needs). The point is, we are never “One India": over a period of time, these same 20 India(s) would have progressed even more.
For instance, for a driver, the innovation is getting his salary credited to his account—so for him, agreeing to have his salary directly credited is also a big (deal). Until you have physical cash in the system, you will need (physical) touchpoints. Until the regulator can start a digital currency, issued through banks or non-banks, there will be these touchpoints.
Surya: We’re still at 93-94% physical payments. What is the real growth and the real change? Most fintech start-ups see banks as the “centre" of all their innovation and try to create solutions around them. By keeping their attention focused on banks, these fintechs continue to compete for a small part of active bank accounts in India.
I urge the companies to target those accounts and customers who are not active—what is there to disrupt in 2-4% of the penetration?
The existing financial sector is like the early days of telecom, when a couple of state-owned companies ruled the roost. The problem lies in the euphoria around fintech because of the market opportunity.