I’ve long maintained that the “winner” in the “battle” for payments will be the conventional banking system, rather than one of the new “wallet” or “payment service providers”. This view is driven by the advances being made by the National Payments Corporation of India (NPCI) which is owned by a consortium of banks.
First there was the Immediate Payment System (IMPS) which allows you to make instant inter-bank transfers. While technology is great, evangelism and product management on the banks’ part has been lacking, thanks to which it has failed to take off. In the meantime NPCI has come up with an even superior protocol called Universal Payment Interface (UPI), which should launch commercially later this year.
There is hope that banks do a better job of managing this (there are positive signs of that), and if they do that, a lot of the payment systems providers might have to either partner with banks (the BookMyShow wallet is already powered by RBL (the artist formerly known as Ratnakar Bank Limited) ).
In the meantime, banks have started encroaching on FinTech territory elsewhere. One of the big promises of FinTech (and one I’ve participated in, consulting with two companies in the space) has been to ease the loans process, by cutting through the tedious procedures banks have to offer, and making it a much more hassle-free process for borrowers.
A risk in this business, of course, has been that if banks set their eye on this business, they can eat up the upstarts by doing the same thing cheaper – banks, after all, have access to far cheaper capital, and what is required is a procedural overhaul. The promise in the FinTech business is that banks are large slow-moving creatures, and it will take time for them to change their processes.
Two recent pieces of news, however, suggest that large banks may be coming at FinTech far sooner than we expected. And both these pieces of news have to do with India’s largest lender State Bank of India (SBI).
One popular method for FinTech to grow has been to finance sellers on e-commerce platforms, using non-traditional data such as rating on the platforms, sales through the platform, etc. And SBI entered this in January this year, forming a partnership with Snapdeal (one of India’s largest e-commerce stores).
Snapdeal, India’s largest online marketplace, today announced an exclusive partnership with State Bank of India to further strengthen its ecosystem for its sellers. With this association, Snapdeal sellers will be able to get approval on loans from financers solely on the basis of a unique credit scoring model. There will be no requirement of any financial statements and collaterals.
Sellers on the marketplace can apply for loans online and get immediate sanction, thereby enabling “loans at the click of a button”. This innovative product moves away from traditional lending based on financial statements like balance sheet and income tax returns. Instead, it uses proprietary platform data and surrogate information from public domain to assess the seller’s credit worthiness for sanctioning of loan.
Another popular method to expand FinTech has been to lend to customers of e-commerce stores. And in a newly announced partnership, SBI is there again, this time financing purchases on the Flipkart platform.
State Bank of India, the country’s largest bank, announced a series of digital initiatives on Friday, including a first of its kind partnership with e-commerce giant Flipkart, to offer bank customers a pre-approved EMI facility to purchase products on the retailer’s website.
The bank, which celebrates its 61st anniversary (State Bank Day) on July 1, said the objective was to provide finance to credit worthy individuals, and not just credit card holders. The EMI facility will be available in tenures of six, nine and 12 months.
Just last evening, I was telling someone that there’s no hurry to get into FinTech since it will take a decade for the industry to mature, so it’s not a problem if one enters late. However, looking at the above moves by SBI, it seems the banks are coming faster!