Equitas SFB launches fintech accelerator programme

Equitech, an accelerator programme launched recently by Equitas Small Finance Bank (SFB), marks a first among the new-generation specialised banks in India.

Equitas SFB is the second-largest SFB in India (after AU SFB), with 15 percent market share in fiscal year (FY) 2020. Small finance banks are using a digital-first approach to grow rural India's access to credit.

With Equitech, Equitas SFB wants to attract startups across fintech, agritech, government-tech, and clean energy, and provide them access to its technology infrastructure, and API Sandbox (an environment to test their products).

"The fintech ecosystem is experiencing exponential growth in almost all segments, ranging from payments and reg-tech, to robo-advisory and blockchain," said Murali Vaidyanathan, Senior President of Equitas Small Finance Bank.

"This growth is driven by innovative fintech startups that were able to create unique banking trends," he added. Equitech has opened the field for fintech startups in areas like digital lending, payments, banking, governance and regulations.

In 2018, HDFC Bank had launched an Accelerator Engagement Programme, through which it partnered with startup accelerators around the world to get access to early-stage fintechs that addressed banking problems using artificial intelligence, analytics, and process automation.

In the same year, ICICI Bank launched Innovation Centres to hunt for technology-driven ideas, and stay ahead of competition by harnessing fintech startups for the banking sector. Other banks that have led such digital initiatives include Kotak Mahindra.

But for a small finance bank, the Equitas SFB accelerator is a significant move.

Equitas SFB's net profit grew 57.4 percent to Rs 384 crore in FY 2021, as revenue from operations rose to Rs 2,216 crore, up 24.6 percent over the previous year. Its net interest income grew 20 percent to Rs 1,798 crore.

"In-line with its ‘digital first’ approach, it adopted a collaborative approach to leverage the best available technologies to improve and enhance banking experience," noted stock brokerage ICICI Securities in a research report dated July 22, 2021.

Equitas SFB has indeed partnered with fintech startups in recent years to leverage digital opportunities. In March, it partnered with Niyo, a neo bank (a bank without branches) that led to 280,000 new accounts.

It has also partnered with fintech startups like Groww and Setu, apart from DigiPe, Bijlipay, Novopay and Bankit in the past.

Equitas SFB has been quick to adopt technology. It was one of the first six banks in the country to launch FASTag, a toll collection system, about three years ago. It has a convenient app to open savings accounts in under 22-clicks. Its mobile banking system can authorise transactions based on facial recognition.

It created “digital” as a separate channel in July this year, through which it has opened 10,000 new accounts without any staff involvement, according to the company in an earnings call after the first quarter results for FY 2022.

However, the second COVID-19 wave impacted its June 2021 quarter results, which disappointed equity analysts.

"Equitas SFB reported a big miss on PAT (profit after tax) at Rs 10 crore versus an estimate of Rs 80 crore, mainly due to higher opex (operating expenditure) or provisions," noted brokerage Emkay Global in its research report dated August 1.

The provisioning of bad loans and other contingencies due to uncertainties in loan payments between April 2021 and June 2021 amounted to Rs 150 crore, up 54.8 percent sequentially.

With Equitech, the SFB is assisting startups as they build their products, providing guidance from industry experts, and offering the resources and infrastructure to scale and get a larger audience.

Equitas SFB will provide mentors for the shortlisted startups, which will be divided in specific categories. A panel of experts will help the companies to build on their ideas into "outcome-driven partnerships'', and prioritise their product development and customer acquisitions, Equitas SFB said in a statement.

The SFB's experience of legal and regulatory frameworks in the banking space will be an added advantage for fintech startups.

Equitas SFB can gain early and cheap access to emerging ideas as well as unique solutions that cater to its audience—rural India.

In 2020, the number of active internet users in rural India grew faster at 13 percent, compared to 4 percent growth in the number of active users in urban India, according to a study by consulting firm Kantar. The active user base in rural India was 299 million in 2020, compared to 323 million in urban India, the KantarICUBE 2020 Report added.

Fintech startups are creating solutions specifically for the rural population. "The space is on a dynamic path of growth,” said Vaidyanathan. And small finance banks that have a mission to be financially-inclusive want to partner with them. Equitech can “assist and nurture the future unicorns in upgrading the banking system for the next level,” he added.