visimoney
Fintech has become a key player in India’s financial landscape, with a 30% increase in capital momentum in 2023. The collaborative approach between fintech and banks has shifted from competition to cooperation, with over 65% of fintech CEOs prioritizing partnerships. This trend reflects the recognition of the need for win-win models to drive inclusive growth and leverage the strengths of both sectors.
Traditional banking in India focused on developing conventional products tailored to specific target audiences in areas with physical bank presence. However, these products were largely standardized, and digital-first offerings were limited. Banking services had high overhead expenses, making them less accessible to lower-income individuals. Many customers had to align with the available products from banks, and customizations were not widespread.
The partnership between banks and fintech has opened up new opportunities for financial inclusion. Fintech integrates cost-effective solutions into existing bank infrastructure, making financial services more affordable and attractive. Banks, on the other hand, provide a solid regulatory foundation for fintech to navigate complex regulations.
Several trends highlight the enduring nature of bank-fintech partnerships in India. Open banking supports secure data sharing and enables personalized solutions through collaborative efforts among financial institutions, tech companies, and users. Leveraging APIs, open banking utilizes consumer data to provide a range of financial services. Another trend, embedded finance, is gaining traction, extending access to financial services for individuals underserved by traditional banking.
The collaboration between fintech and banks is instrumental in addressing the micro, small, and medium enterprises (MSMEs) credit gap in India. Traditional banking processes often discourage MSMEs from pursuing formal credit due to their protracted and cumbersome nature. Fintech firms bring efficiency through automated systems and digital platforms, offering user-friendly interfaces and streamlined digital documentation. They leverage alternative credit scoring models to assess the creditworthiness of MSMEs based on
