As banks and financial technology (fintech) startups continue to collaborate and build tech-enabled financial products for India, they need to start reimagining their business models around customer trust and privacy. There is also a need for strong laws to enable creation of financial products without compromising user trust, said banking and fintech experts during a panel discussion at the Mint Fintech Summit 2019 held in Bengaluru last month.
The panellists were Deepak Sharma, chief digital officer, Kotak Mahindra Bank; Jayanth Kolla, founder and partner, Convergence Catalyst; Mahendra Nerurkar, director, Amazon Pay; Nitin Gupta, CEO, Ola Financial Services; Praveen Hari, author, ProductNation, iSPIRT; and Sharath Bulusu, director, product management, Google. The discussion was moderated by Leslie D’Monte, editor-south, Mint. Edited excerpts:
According to Nerukar, around 90% of consumers in developed economies have access to digital payments and credit products but when it comes to India only 10% of the entire population has access to digital payments and credit. “So the fundamental backbone to support an e-commerce business doesn’t exist in India. India has a mix of consumers who are comfortable with only credit, some comfortable with only digital payments and some who stick to only cash payments. So we have to create products that cater to each of these segments. Since each user segment portrays different levels of trust, consumption pattern, etc." added Nerukar.
Not only English
India’s fintech players and banks are waking up to the reality that the next set of Indian users do not understand English, which is the biggest challenge today, according to the experts on the panel. Companies operating in the financial space apply different strategic lenses to solve the problem. According to Sharma, it’s only the first 200-250 million users in India who understand English. Beyond this, there is a complexity of building apps and services for different languages. “We have already started looking at tech like voice recognition in vernacular to incentivize these next set of users, and to even understand their preferences, demand patterns, etc.," he added.
Importance of data
Experts on the panel also agreed that both banks and fintech firms will have to bring their own strengths to enable the next set of user adoption in India. On one side, banks have started focusing on mobile-first strategies to acquire new Indian users. Banks are also handling large amounts of user and transactional data across several distributed systems, which is likely to be of interest to fintechs as well, they noted.
Need for an anchor
Today, there are multiple fintechs that are turning to aggregation of e-commerce and other hyperlocal services as they look to capture the share of customer’s spending. However, the value chain still needs a solid anchor player to bind everyone, said Kolla, founder, Convergence Catalyst. “For the foreseeable future, banks are going to be those (anchor) players. And they have the opportunity to evolve into this multi-dimensional marketplace (across mutual funds, insurance, etc.) where they can bring together all the players to a single value chain. Today they (banks) still own the customer, and going forward they have the opportunity and continue to do so," added Kolla.
Innovation is the key
Gupta said that when the company introduced a postpaid option to pay for their rides this year, Ola’s postpaid usage quickly became the preferred user choice. Till then, users either paid in cash or frequently loaded Ola Money wallet to prepay for rides. “Today Ola Money postpaid is 50% bigger than Ola Money (prepaid) wallet. And in this process, we converted many cash users into cashless users," added Gupta.
Apart from Ola, even big tech companies like Google and Amazon are making a noticeable dent in the Indian fintech space. However, to date the majority of products in the space are focused on people with a smartphone, said Bulusi, director of product management at Google. “Cheap data and phones are not enough to penetrate the next set of Indian users who are coming to the internet. We have to look at running products on feature phones, and even provide financial services to those who don’t own a phone using offline business models. We have to figure out a way to make this inclusive," Bulusu said during the discussion.