Digital Banking – Would it lead the Banks and Fintech to Merge or Conquer?:
The world is in the digitization game! Just a decade ago, when people were skeptical of online transactions, recent reports point to the mass adoption of technology in their lives.
• According to statistics, Omni-digital bank customer growth increased from 27% in 2012 to 46% in 2017.
• According to a report by Yourstory, in India there is an increase in the use of services like mobile banking, mobile wallets, other digital payment solutions like Sodexho, prepaid cards, and POS debit card transactions.
• This huge growth is a joint effort by fintech companies and banks.
So, can we say that Digital Banking depends on fintech companies? Or do banks depend on their technology providers? Can our banks see more in the future than regulators and fintech companies as an operating wing? Would the bank merge with concepts like branchless banking, evolving contactless banking? Do we expect the expansion of fintech activities to lead to bank evasion? To answer many of these questions, we decided to create this post.
• What is digital banking?
Simply put, all banking services/activities used digitally/electronically are called digital banking. Therefore, if you use your electronic wallet or are connected to the bank’s website to make electronic transfers or online purchases. For banks like e-KYC or bank account automation, there are also examples of digital banking.
• The current state of digital banking in India
In India, according to Oracle J.D. In the Power India Retail Banking 2017 study, 94% of retail banking customers visited the branch/store at least once in the last 12 months, indicating how the services are being used digitally. Only 51% of retail banking customers have reliable online banking services with their main financial institution.
Individuals, on the other hand, specify security aspects as the main reason for using digital channels. The most surprising data that emerged is that around 94% of urban customers prefer to go to the branch to use banking services, a sign of a lack of confidence in digital channels.
Although these are statistics, we can monitor the health meter of banks and fintech companies and their contribution to digital banking.
• Banks and Fintech companies: go hand in hand
Well, this is our current situation! Banks and fintechs do not compete with each other, there is no overlap. Banks are learning to adapt to digitization and fintech companies are offering solutions to make life easier for bankers and their clients.
Traditional banking processes are evolving as people now have the ability to:
• Send money electronically and by check/order check
• Buy through a mobile wallet
• Pay salary directly into the employee’s bank account
Therefore, the bank has to offer traditional products, but also modern ways of managing money, so that they need fintech.
Fintech companies, on the other hand, have hands-on experience with the latest technologies, but to build a customer base, build trust, and be accredited by regulators, they need to prove their worth. That’s why they need banks. The two entities need each other to move forward, strengthen their customer base, build customer trust, and beat the competition.
According to a report by CB insights, these 78 fintech companies in India are building the ecosystem to support the digital India shift. While the solutions are offered in multiple categories such as payments, loans, insurance, trading platforms, and taxes, experts believe the streamlined yet intuitive UX design has helped fintech companies capture customer attention and gain loyalty.
Many fintech companies, such as Teknospire or ElectronicPay, partner with banks to use their fintech solution for greater transparency and growth for their customers. Other companies, such as FundsIndia, NukkadShop, or Veritas Finance, deal directly with their customers as intermediaries between banks and customers.
In short, we can say that banks and fintech companies are working in parallel to build a rich customer base in every corner of India. While it may seem like healthy competition, what if you win everything and establish yourself as a brand? What if your product is important but you can’t reach the masses?