[Matrix Moments] Rajeev Ahuja, Executive Director, RBL Bank, on discovering fintech religion

Rajeev Ahuja, Executive Director at RBL Bank, has a career spanning 30 years across banking and financial services, including Citibank and Deutsche Bank. He was instrumental in transforming Ratnakar Bank into RBL Bank. He has spearheaded the fintech initiative at RBL and made it one of the best partners for most fintechs. 

“In 2010, we had so many priorities - to modernise the bank in many areas. But our emphasis on technology as a big anchor and driver of new business was not even in our realm. We always viewed technology as a core support function,” says Rajeev.

He explains, they didn’t have this epiphany that technology could be the way to drive things. However, in 2013-14, this changed as the bank started building its branch network and retail. It found out that by just following the playbook of successful institutions in the private sector, they will never be able to make a dent.

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The need for a change

Rajeev says, something had fundamentally changed, and they were yet to establish their brand and be consistent in their product services. It was a like an internal challenge and drive about what was happening. 

“And then you see announcements of significant investments by Matrix Partners or global companies in payment products and services and ecommerce, and you just wonder what’s really happening,” he adds.

At the same time, there were people on the board who were deeply engaged in the tech space, and Rajeev reached out to them. The tech leaders in the space suggested that the team should learn what was happening around. Rajeev explains, they spent two days every week for six to 12 months in Bengaluru meeting VCs and startups. 

“We focussed on hearing things out as to what these guys were trying to do and what was the big agenda they had, and the challenges they were seeing,” he says. This gave us a broad picture of what was forming, he adds. 

It also gave them some insights that there was a real change in the way customers were approaching financial services, and how businesses will approach financial services in future. 

“I don’t think we got it right the first time. But this ability to actually listen to people, absorb, and mull over it was damn confusing initially.” 

“We were lucky because we as a bank built our technology in 2012-13. But then we had to unlearn everything and I understood how an API works,” says Rajeev. 

He explains they started peddling on their API engines and put it on a developer platform, and that brought them a lot of insights. 

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Learnings from the dotcom era

“I used to be a tech banker in ALEX BROWN in Asia, and this was the first dotcom era. Sometimes, when you have been through that painful process, the aftermath of the dotcom, you tend to disbelieve anything happening around,” says Rajeev. 

While his earlier experience did leave him wary, Rajeev says he is a chastened person today.

But he still believes that one needs to be careful while using business models and journeys of countries like the US and China as they have very different starting points and very different legacy developments. 

“I think in India we have tried to crash almost like 15 - 20 years of history in three years. It happened in ‘99 to 2001 in India. But the interesting thing is online consumption and the consumption of modern services has been growing. I think it’s just the business model to what you build, what you avoid and how you make money that matters eventually,” explains Rajeev. 

With his learnings and experience, he says while he doesn’t particularly like the word ‘fintech’, he likes the philosophy of fintech. 

The growing need for fintech 

“The space for financial services companies is enormous. You think about merchants where you have Mswipe and we bank them. And those markets are so underserved by the large institutions. How many large institutions do you have in the country in the banking space? I think NBFCs are marvelous because they bring focus, access to capital and services for customers who are not yet in the scale zone of large banks,” says Rajeev. 

He adds it is a great advantage sometimes in not being so steeped in traditional banking or traditional lending because these have never been customer centric. He says just being purely tech oriented is enough. 

“Some of these founders have a very keen eye on consumer experience, and what customers really want. Sometimes, we are just papering over things which we have inherited 20 years ago and making modifications to that. So I think this is a good time to start with base zero."

"But you need to add talent rapidly in your team. See if there is somebody with collection experience, risk management experience, and somebody who has seen cycles of credit,” added Rajeev.

He says what worries him in the lending business is not only how the fintech startups project a growth of 30, 50, 70 percent, it is also when you have a large chunk of equity, the true economics of your business are tested.

“What you need to do is build these capabilities very early on. And if you do that right, I think you have the chance of actually building out a much healthy business because there will be cycles of credit,” says Rajeev. 

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Have you seen a credit cycle?

Rajeev says, the logic most fintech startups follow is - if of the 100 million households they get 10 percent to move online it will be a big market. 

“But the problem is all of this works in step functions, which means you have to step down and up at different parts, especially in the lending market. The problem happens when you have 15 players providing small value consumer lending on an app and they don’t meet the borrower. They are lending below Rs 50,000 to Rs 60,000. You are taking income tax, aadhaar, bank, and all, you think you have conquered it. But then the borrowers get so used to the fact that it’s available just like I can order a coffee.”

The reason this becomes a problem is because many youngsters with 5-10 years of experience haven’t seen a credit cycle. They are just lucky because they got a job in one of the large tech firms. 

“You put a lot of money at stake with these young founders on financial services. It’s a huge responsibility. It becomes very important to have people who have seen credit cycles. I do think that one of the trends I am seeing is that many experienced people are stepping into this business with 10 - 15 years of having done the hard work. To me, that’s a great start because my firm belief is there is nothing called fin, there is nothing called tech,” says Rajeev. 

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