Fintechs should partner with banks, not try to replace them: CEO NSDL

For years, banks have enjoyed a monopoly on financial services. But that is changing. The banking industry is struggling to keep up with the pace of change. On the contrary, fintech companies that are nimble and agile, and not encumbered by legacy systems, can innovate at a much faster rate. In addition, fintech companies are appealing to consumers as they offer lower fees and better customer service in the digital age.

However, Padmaja Chunduru, MD & CEO, National Securities Depository Limited (NSDL) questioned at the Techcircle Finserv Innovation Summit on Thursday, “are these capabilities enough for customers to build the trust which they would have had on traditional banks?”

She said, as digital is getting more and more embedded into our lives, chatbots and other automated services can provide banking services 24/7, however, there are situations when users need to connect with a ‘trusted’ banker – perhaps for more complex issues such as loans and mortgage – that’s where the “human interaction is missing” in the new-age banks and fintech companies. 

“The customer connection builds trust,” noted Chunduru, who believes that despite fintech companies posing a threat to the traditional banking sector, the latter will not die anytime soon.

That said, there is no denying the fact that fintech companies, with their new and innovative financial services are challenging banks' dominance in the financial sector.

The win-win situation is a partnership between banks and fintech companies and that is the way forward in India’s financial ecosystem to bring value for customers. Every player in the ecosystem whether it is a bank or NBFC (non-banking finance company) or a fintech company, should bring to the table its own strengths.

Chunduru said that fintechs can gain from banks as they need access to bank's humongous data in order to flourish, besides the credibility, compliance and sustained development. At the same time, she feels banks have to partner with fintech firms "simply because they have no choice – legacy banks don’t have momentum, they aren't nimble to innovate on the product front".  The biggest advantage of fintech is their expertise with digital technologies such as artificial intelligence (AI) and data analytics that gives them a complete 360-degree view of the customer, she said at the event held in Mumbai.

Already the banking industry is facing a pivotal moment, with uncertainty surrounding future profit growth. Regulations and growing competition remain a concern, the risks of cyber security and much more. 

"While new-age banks often talk about the metaverse and other technology, the priority should be on financial inclusion," she said, adding that even today, banking 'super apps' are not designed based on gender, and on different strata of the society."

At this juncture, Chunduru believes that there is a need for fintechs and banks to collaborate and come up with innovative and agile products and services of fintech and also imbibe conventional banking attributes like trust, safety and managing risks at scale, so as to create a more holistic and inclusive financial ecosystem.