Equation between banks and fintech startups is symbiotic: State Bank of India's CTO
"The equation between large banks and emerging fintech ventures has evolved into a symbiotic relationship, where both know their respective potential and limitations," said Amol Pai, CTO of State Bank of India (SBI), on day 2 of TechSparks 2021, India's most influential startup-tech conference hosted by YourStory.
With the theme 'What's Next: Rethinking the future', TechSparks 2021 is providing a platform for the most defining conversations on how disruptive technology innovations can shape our lives post-pandemic.
Earlier, banks saw fintechs as challengers because the perception was they will shake up the way things function in financial services, Amol said. "During the COVID-19 pandemic, banks realised that they have to be nimble, and offer ease of doing transactions like fintechs, while fintechs realised they need to partner with banks to reach the mass of customers that banks already have," he explained.
Both sides now seek ways to collaborate in a way that it becomes a successful financial-services offering model, Amol said.
In June this year, SBI—the country's largest bank—invested in Cashfree, an open banking solutions venture that provides full-stack payments solutions to enable businesses in India to collect payments, and make payouts through available methods with a simple integration.
There are a number of factors that drive fintech ventures to work with banks, said Arun Tikoo, Senior Vice President of Business and Strategy,.
Banks have a stable customer base, large budgets to enhance their productivity using technology, and in-house experience on every regulatory and compliance aspect of financial services, he said.
"They also possess the trust value that a fintech is able to cultivate among customers once it starts working with a bank," Arun noted.
The COVID-19 pandemic revolutionised how people transact and spend money. This has also been a factor for fintech ventures and banks to innovate new solutions, and ramp up technologies to bridge the gap between their existing services and evolving customer expectations.
Both Arun and Amol agreed that APIs (application programming interface) have proved to be the biggest game-changers in technology for the financial services sector. An API is a set of programming code that enables data transmission between two unique software products.
Furthermore, the ease of data storage and convenience of accessing applications on cloud infrastructure —with robust governance structures in place—have benefitted both fintechs and banks, Arun noted.
“How secure your data is paramount of all innovations," he asserted. "More and more data is being generated by both banks and fintechs. We need to always ensure that the data of our customers is 100 percent secure, and build processes around data security, so that there is no breach,” he explained.
Arun pointed out the contrasting work cultures of fintech companies and banks. “In fintechs, you have innovation as a culture wherein you can take fast decisions, whereas in banks everything requires time and a due process to settle,” Arun said.
While acknowledging that speed of operation can be a friction point between banks and fintechs, Amol outlined other factors that are proving to be bottlenecks and the way ahead for the two sectors.
“Fintechs are often localised to a certain market, but a bank is spread across the length and breadth of the country. Every market has its own flavour. So, customising a product to suit every requirement across the span of the bank is vital,” Amol noted.
Banks also have a larger set of security requirements because they are regulated by the Reserve Bank of India. "So, a level-playing field has to come in where both fintechs and banks operate under the same set of regulations, and that’s where the harmony will come in,” Amol added.
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