Amit Bhatia, Managing Director, Head – Private and Commercial Clients, India, Deutsche Bank told Mint in an interview that the bank is exploring tie-ups with a few fintechs who will help it in risk assessment, risk management and early warning signals for their loans to micro, small and medium enterprises (MSMEs).
“As of now what we are looking at tying-up with fintechs to reduce time in terms of processing, making our risk management more rigorous and realtime. All the investments and partnerships that we will do are mostly for providing services for MSME loans and also our wealth management business," said Bhatia.
Fintech is an umbrella term coined in the recent past to denote technological innovations that have a bearing on financial services.
The bank’s total advances stood at ₹48,269 crore in FY19 and its total deposits stood at ₹56,159 crore in the same period. Bhatia said that of the total advances, around ₹15,000 crore is towards MSME loans in FY19. The total size of outstanding MSME loans in India stood at ₹4.71 trillion at the end of June 2019, showed data from Reserve Bank of India (RBI). Bhatia said, from a lending perspective there is far more scope in the MSME segment than probably in the corporate side.
“About four-five years ago, everyone took fintechs as disruptors and now everyone has realized that they are collaborators. While banks have the strength of balance sheet, capital, risk management and compliance, they have scale and agility and so there is no better time than now to tie up and do business with them," he said.
He added that today apart from credit bureau checks, bank statement analysis banks also check for veracity of the documents and the prospective borrower from databases like the Income Tax department, Registrar of Companies (RoC).
“Fintechs companies will give these information to us on a realtime basis," he said, adding that the process of collaborating with the fintechs is likely to be completed within the next five to six months.
Bhatia said that although half of the customers in the consumer finance segment are acquired digitally, that is not the case with MSME clients. For these small businesses the bank gets loan leads through relationship managers, chartered accountants and also through consultants who work with these MSMEs.
“We do a lot of activities with chartered accountants because they are the auditors of MSMEs. We also participate in a lot of trade meets where MSMEs participate as well. We also have consultants who would have helped these MSMEs in taxation and in setting-up a factory," he said.
According to him, for foreign banks in India and other banks with small footprints, it’s the fintech tie-ups that will give them the required scale and distribution.
“Post onboarding also, it is important to monitor the health of the account and there are fintechs that give early warning stress signs. For instance, they can track court cases against the promoter through external databases and predict stress in the portfolio," he said.
At present, the bank caters to small businesses with turnovers of ₹50-100 crore and as part of the new strategy it is gradually moving to ₹500 crore. “Today our average ticket sizes are anywhere between ₹2-2.5 crore and it will gradually move upwards. We do loans upto ₹20 crore now and might move to ₹30 crore," said Bhatia, adding that the bank has been increasing its average ticket size for the last six to seven years.
“I remember in 2012, our average ticket sizes used to be about ₹60-70 lakh," he said.
There are instances of Indian lenders as well, taking the fintech collaboration route. Fintechs like Paizabazaar and Bankbazaar have a host of banks on their platforms for whom they source loan and credit card customers. That apart, tie-ups also include those in the unified payments interface (UPI) segment where these fintechs act as intermediaries between the consumer and the bank. For instance, Google Pay has State Bank of India (SBI), ICICI Bank, HDFC Bank and Axis Bank as its partners.