Tag: fintechs

SBI CIO Pandey, BFSI News, ET BFSI

Banking & Finance

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FinTechs and banks are not competitors, they are collaborators creating an ecosystem that ensures customers are getting the best of what they deserve, said Ravindra Pandey, deputy managing director and chief information officer of State Bank of India.

“We assume that fintechs have the idea, while banks have the data and trust, and both are working on how to marry these three into the absolute product,” said Pandey at a fireside chat with Amol Dethe, Editor, ET BFSI, at the 2nd edition of ET BFSI Converge.

Shedding light on how banks onboard fintechs, he said that the basic model of engagement is to nurture fintechs by having an independent technical evaluation committee, a team of bankers to evaluate the concept of the idea, handhold in journey of engagement, among refinements. Additionally, the bank year marks a certain amount of money for fintechs to develop their products.

No fixed benchmark

“There can’t be a fixed benchmark for a fintech company to be able to collaborate with banks, since by nature, they represent doing things in a new and better manner. The engagement can vary from reactive sourcing, where the fintech approaches the bank or organizing talent hunts like hackathons,” Pandey said.

Highlighting the success and the extent of these collaborations, he said that since 2017, by collaborating with Singzy, there are now 11 fintechs working with SBI to create value for themselves, the bank and the ecosystem. “SBI is going all out, for instance, we are now tying up with an agriculture based fintech, and based on the satellite imagery, we can finance the consumer by knowing all about the land, which crop is what, what is the right bet etc. These are the new and fresh ideas that banks are willing to explore today,” he said.

FinTechs have ideas while banks have data, trust: SBI CIO Pandey

According to Pandey, doing business with fintechs does not necessarily mean creating a new asset or a product, but improving the operational efficiency is also a major reason to collaborate. He is of the strong opinion that banks when interacting with fintech firms need to carefully listen and understand their ideas in order to start brainstorming about how to fit it into the bank’s scheme of things. “Bank’s can’t expect fintechs firms to tell them where their ideas will work and if they do, they are no more fintechs but technology companies,” he added.

Challenges faced by larger banks in collaborating with FinTechs

“Banks are no more averse to receiving news ideas, we have been here for more than 200 years and the time speaks for itself we continuously evolve outside challenges. Initial challenges due to the rules and regulation have to be there since banks are depository of the public trust and money and they cannot just whittle it away without being thorough,” Pandey said.

There are four major obstacles that might occur, first one being the resource constraints because fintechs while initiating the journey usually think that a three man team can work on the project only to realize later that they need more hands on the job. Secondly, the discontinuous nature of fintechs might become problematic, because banking is a business where if invested and integrated in the system, continuity becomes important, Pandey highlighted.

“In today’s world, no idea or technology can be built in isolation. So if their product and services are not customizable, it creates a problem. The fourth problem, which may be very peculiar to larger banks like SBI, is the scale. Sometimes the case is that we like the idea, but when it comes to our scale of operations, it falters,” he said.



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Hiring in banks up 25% to cater to rising loan demand, BFSI News, ET BFSI

Banking & Finance

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Banks are stepping up hiring to cater to the growing demand for home loans. Hiring has gone up 22-25% in the last few months across urban and rural markets as demand for home loans has surged, according to various reports.

About 90 per cent of the requirement is in the sales function, with starting salaries of Rs 15,000 to Rs 20,000, along with incentives. Hiring is across the board at NBFCs, small finance banks and non-banking finance companies, and hiring costs are rising as employees are shifting jobs within the sector.

NBFCs

Shriram Group is hiring 5,000 across its many companies, while ICICI Home Finance is looking to onboard 600 employees by December.

The Shriram Group is recruiting mainly in south and north India, across tier 3-4 cities. Shriram City Union Finance is expanding its gold loan business,

while Shriram Housing Finance is expanding primarily in Andhra Pradesh and Telangana.

Banks

HDFC Bank is aiming to reach 200,000 villages in the next 24 months, and plans to hire more than 2,500 people in the next six months.

The bank aims to double its presence in the next 18-24 months through a combination of branch network, business correspondents, business facilitators, CSC (common service centres) partners, virtual relationship management and digital outreach platforms.

The bank will hire 500 relationship managers to expand the coverage of its Micro, Small and Medium Enterprises (MSME) vertical to 575 districts or more by the end of this fiscal. Out of these, half will be for the small and medium sub-vertical, which already has a headcount of 975. This hiring will take the private bank’s MSME vertical headcount to 2,500. India’s largest private sector lender had an employee strength of around 1.23 lakh as of June.

Credit Suisse has plans to hire over 1,000 staff in India this year for a technology innovation office, while Deutsche Bank is looking to hire 1,000 people in India, including 300 graduates and 700 lateral hires. Meanwhile, Kotak Mahindra Bank has resumed its hiring process, and has reached near pre-Covid levels.

Data analysts

From banking to FinTech companies, data analysts are in demand. These companies are looking for professionals who can handle data using technology and glean relevant information from it.

FinTechs are also beefing up marketing and sales teams and are looking beyond commerce and engineering backgrounds with a background in data analysis, artificial intelligence and exceptional soft skills. They are looking to pay higher salaries who have Big Data, advanced analytics and financial skills.



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Raamdeo Agrawal | Stocks to buy: PSU banks or private sector banks or fintechs? Raamdeo Agrawal explains, BFSI News, ET BFSI

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PSU banks are good trade but if I want to buy and hold for 10 years, I would go for private sector and some big PSU banks. But the real finance sector game is going to be private sector banks and that too some of the newer private sector banks where book is very small say Rs 20,000, 30,000, 40,000 crore, says Raamdeo Agrawal, Chairman, Motilal Oswal Financial Services.

Where would you put the entire PSU pack? Is it going to be a pool which is going to give you parabolic returns, is it a pool which is going to give you low return or no returns? The government’s conviction about Air India privatisation and how quickly the disinvestment secretary corrected the convenience fee faux pas in IRCTC in less than 12 hours, what is your view on PSUs?
Yes, that is a positive aspect of that entire incident. PSUs are wonderful companies — mostly monopolistic or duopolistic. They are dominant players in the economy and their underlying value is very high if there is a bit of entrepreneurship and hands off approach to these companies.

The PSUs as a basket should give at least the market return. I do not think it will underperform the way it underperformed in the last 10 years and there is a good chance that it might even outperform because the valuations have been completely pessimistic even till date so as the economy recovers because they are mostly not export oriented. They are proxies to the Indian economy. I think they will do well if the policy remains encouraging and there is no interference in their affairs. I am quite sure eventually some optimism will come back in their counters. A little bit of rerating from 7-8 PE multiple to a 9-10 can take care of their market performance or even a bit of outperformance.

Also Read: Bull run is getting bigger! There are 70 million bulls in the market now

What should be the best way to participate in the financial space? Currently there are two very diverse views in the market. One view is supporting the comeback in PSU banks and one view is favouring technology and fintechs?
Fintech has a niche typically in unsecured lending and mass lending — 5,000, 10,000, 100,000 buy today pay tomorrow or buy now pay later. Basically it is unsecured. The moment you talk about security, you have to go on the ground and become non-digital; taking care of the collateral is a non-digital process mostly. So, that is a one small segment.

I do not think mainstream banking is yet threatened by fintech companies broadly. In mainstream banking there is a public sector, there is a private sector. In the next two-three years, when the economy recovers and the credit cycle changes and credit cost cycle goes in the reverse, public sector banks will also do well. But they are a trade in the sense they are good till the recovery process is complete. That may be the next two years-three years. When the credit cost is the lowest, they will show the highest profit but after that, they will keep losing the market share to private sector banks. But private sector banks are not as cheap as the public sector banks right now.

So if I want to buy and hold for 10 years, I would rather buy private sector and at the margin some public sector banks like the big ones one. They are trading at below one book and then after that, real finance sector game is going to be private sector banks and that too some of the newer private sector banks where book is very small say 20,000, 30,000, 40,000 crore. They can grow at a rapid pace in a given opportunity.



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Union Bank MD, BFSI News, ET BFSI

Banking & Finance

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MUMBAI: With digitization gaining pace, close to 50 per cent of retail and MSME loans offered by banks will shift to digital lending platforms over the next two to three years, Union Bank of India’s Managing Director and CEO Rajkiran Rai G said on Thursday.

Rai said digital lending is changing the banking landscape in a big way because of the availability of data and many ecosystem partners collaborating with banks.

“I feel that at least 50 per cent of the loans under retail and MSME segments will move to the digital lending platforms, right from sourcing to documentation level, in two to three years,” Rai said while speaking at the Sibos 2021, an annual banking and finance conference.

He said the digital lending space is gaining traction and banks need to develop products that can deliver services online to customers. Rai said he sees a big revolution in MSME lending going forward.

“The working capital lending to MSME will move from open credit like working capitals and cash credits, to very-targeted lending such as very specific invoice discounting and supply bill discounting,” he said.

Speaking about the entry of fintech in the banking space, he said initially it was thought that fintech will compete with banks, but now the relationship between the two has become more symbiotic.

“Now, fintechs are helping us (banks). They are no longer competitors to us. The digital lending space will be nothing but fintech tie-ups,” he said.

There are many products where fintechs are already working with banks, he added.

Rai believes banks need to continuously invest in technology and upgrade themselves.

He said the management bandwidth in the public sector space, at least on thinking about innovations and digitization, is quite less.

“We have the traditional people who are good in handling technology and managing the core banking system, but they are not in the space of innovation and developing new products,” Rai said.

He said public sector banks need to get new talent from the system who are adept in technology and can bring in innovations.



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Fintechs need to be regulated, says RBI deputy governor T Rabi Sankar

Banking & Finance

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Systemic risks, operational risks and risks affecting competition are of importance when dealing with large financial market infrastructure and Big Tech.

Banks perform the core service of intermediation in the financial system and fintechs should be seen as enablers, Reserve Bank of India (RBI) deputy governor T Rabi Sankar said on Tuesday. Fintechs which offer liquidity services — the exclusive domain of banks — must be subjected to regulations and supervision on a par with those applied to banks, he said, speaking at the Global Fintech Fest organised by Internet and Mobile Association of India.

Banks bridge temporal gaps in requirement of money by providing liquidity services, Sankar said, as they are uniquely placed by dint of their ability to create money and credit. Similarly, in the field of payments, banks are uniquely placed since all digital payment transactions are transfers of money from one bank account to another.

All other payment service providers facilitate this transfer of money and in that sense, play a supporting role, he said.
“While financial technology can improve the efficiency of intermediation, they cannot replace the core nature of financial intermediation,” the deputy governor said.

For that purpose, there will always be a need for a bank to provide liquidity services. “Put another way, this means that if any fintech entity provides liquidity services, it is effectively functioning as a bank and, therefore, should be subjected to the same legal, regulatory and supervisory regime that a bank is subjected to. This is one reason why in almost all countries, entities other than banks are not allowed directly to deal in deposits or deposit-like money,” Sankar said.

Even as he acknowledged the various ways in which the use of financial technology has improved the delivery of financial services, Sankar said that fintechs by their very nature pose a challenge to incumbents. The ideal approach is for fintech companies to be considered as enablers and partners in synergy with banks or similar financial institutions, he said. “So there is this normal talk of competition to banks from fintech companies. I think the proper way to look at that is that competition to banks and other financial institutions is not really from fintech companies,” Sankar said, adding, “The competition remains within banks — between banks which can leverage fintech better and banks which are not as good at leveraging fintech.”

Sankar observed that the nature of regulation has to necessarily adjust as fintech transforms the financial landscape. “The regulatory perimeter needs to widen. The approach to regulation also needs to adapt to the type of entity being regulated,” he said.

Normally, similar activities should attract similar regulation in most cases. But, Sankar said, such activity-based regulation may be less effective than entity-based regulation when one is dealing with Big Tech firms or large infrastructure entities in the financial or fintech sector. Cybersecurity risks are likely to overshadow financial risks in fintech because of the dependence on technology. Systemic risks, operational risks and risks affecting competition are of importance when dealing with large financial market infrastructure and Big Tech.

Countries need to overcome the regulatory and legislative deficits in dealing with concerns surrounding privacy, safety and monetisation of data, Sankar said. “By definition, legislation will lag behind financial progress or technological progress. Regulation will probably be better off in catching up, but in essence it will still be catching up that needs to be done,” he added.

Therefore, Sankar said, regulations pertaining to data issues need to adapt to a world where boundaries between financial and non-financial firms are getting increasingly blurred and geographical boundaries are no longer a constraint.

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Millennial users want Netflix, Amazon experience in broking apps, says brokerage honchos, BFSI News, ET BFSI

Personal Finance

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The pandemic has forced the brokerage industry to reassess all the business models and their respective go-to-market strategies, which is leading to either an extreme or a moderate disruption, said Bhawna Agarwal Country Head, India – Strategy & Growth, Enterprise Group, HPE India.

“One common theme across all business adoption or acceleration of digital is that it has become completely pervasive. So, all across the section of clients for us, especially the stock brokers, we’re adopting this fast digital way of interacting as well as investing,” she said at the panel discussion on Brokerages Fighting Disruption Digitally at ETBFSICXO

Rising expectations

Sandeep Bhardwaj, CEO, IIFL Securities feels that after using Netflix or Amazon, people don’t differentiate between a banking application or a broking application. “They feel like a broking apps should be like that. This is where it becomes challenging for any brokerage to bring that experience. UI, UX gives millennial users an experience of their taste,” he said.

Millennial users want Netflix, Amazon experience in broking apps, says brokerage honchos
The whole ecosystem we’re working on for catering to the needs of the new generation needs everything to be faster, quicker, better and simpler, said Jaideep Arora, CEO, Sharekhan.

“Our entire digital platform team has an average age of 26 years, so when they know for whom they are making a product, they end up creating the same scenario for them. So that is what we are trying to do to get that seamless experience,” Bhardwaj of IIFL Securities said.

Millennial users want Netflix, Amazon experience in broking apps, says brokerage honchos
A lot of data is being used to really understand how we give the right advice to the right customer in the best manner possible. So basically there’s a digital innovation happening in the account opening onboarding process, said Arora.

“Mixing behavioural science with the technology to leverage is what the entire solution is all about at the end of the day. How we create a user experience, leveraging AI and ML will define the user lifecycle throughout his life,” said Bhardwaj.

Collaboration with FinTechs

Digital is all about collaboration with FinTechs. Rather than building everything in-house and spending money, it’s all about collaborative work. So it becomes far easier to implement those solutions which are readily available, says Bhardwaj.

Having a very collaborative opensource and working with FinTechs and even smart customers and coming with a lot of solutions can help the whole system, and it will be a win-win across the industry, said Arora of Sharekhan.

Millennial users want Netflix, Amazon experience in broking apps, says brokerage honchos
“In this ecosystem, the learning is that you are not alone, you have to collaborate with FinTechs, you need to have rich API’s, engage with other partners and customers as well. You have to cover all aspects of digital transformation at all levels and really immerse into it, and then you truly grow. This is what our belief is,” he said.



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BFSI CEOs look to unlock business value as pandemic ebbs, BFSI News, ET BFSI

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After almost two harrowing years of the pandemic, bank chief executives are looking ahead for a period of stability and growth with predictions of an uptick in credit demand.

Sanjay Singh, Deputy CEO, BNP Paribas India

Sanjay Singh, Deputy CEO, BNP Paribas India

“All the factors are favouring the capex revival. Low interest rates, lower leverage, efficient ecosystem, and demand uptake. All are indicating that capex will resume in next six months,” Sanjay Singh, Deputy CEO, BNP Paribas India, said at the CEO Panel discussion BFSI Leaders: Unlocking Business Value at ETBFSI Summit.

Singh said his bank’s focus is to embrace the best of traditional banking and a mix of new-age technologies.

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank
Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Rajeev Yadav, MD & CEO, Fincare Small Finance Bank

Focus on risks

Along with growth and revival, bankers are also focused on risks.

Risk taking in the post pandemic world is a very important factor for all. Retail lending is a safer bet than corporate, said Rajeev Yadav, MD & CEO, Fincare Small Finance Bank. “Being a retail bank, we are taking retail risk. Retail lending is stabilised and fear of incremental lending is no more there,” he said.

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services
Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services

Sunil Prabhune, Chief Executive-Rural & Housing Finance and Group Head-Digital, IT & Analytics, L&T Financial Services said that the business metrics have changed and the vaccination of employees is now an integral factor.

“Liquidity is not a problem anymore. We are extra conscious about risks and are focusing on how to retain customer franchise by maintaining the relation without meeting the customer. The strategy is to use data intelligence rather than conventional wisdom or rule of thumb for decision making,” he said.

During the pandemic it’s okay to miss top-line success because survival is the major objective, Yadav of Fincare said. “Shouldn’t worry about any loss of GDP or growth. As compared to 2019 data we are doing better,” he said.

On growth

Bank CEOs see a lot of pent-up demand.

“On an average credit demand is muted but there are pockets where demand is thriving. Use of behavioral analytics, machine learning, tailoring asset strategy etc. has helped us to recover faster, said Prabhune of L&T Financial Services, adding that his company’s disbursement this quarter was 3-3.5 times of the last quarter.

Nitesh Ranjan, ED, Union Bank of India
Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India

Nitesh Ranjan, ED, Union Bank of India said credit demand is subdued right now but definitely recovering from what is seen in the last six months across the spectrum. “Push from the government will help. The demand is high in Agri, renewable energy, Infra and warehousing,” he said.

“In the new normal world, we look at data and decide business operations. We are a rural bank and our rural business is shaping up better than pre-Covid,” Yadav of Fincare said,

Covid didn’t have any impact on businesses that are part of essential services, i.e. agri, dairy, he said, adding that credit demand is reasonably strong.

Future trends

The focus is on the next 3-5 years, how to better leverage digital and data, how to build capacity to manage people and continuously invest in the right risk architecture, said Ranjan of Union Bank of India.

Can banks build their own super app since they have a large customer base, asked Anand Dalmia, Co-founder, Fisdom. “With a super app, banks can offer more service to customers,” he said.

Prabhune of L&T Financial Services said “Monitoring is not something when it’s going wrong. Our focus is to detect what is something like to happen rather than what has happened. Can we predict if a customer is going to delay his payment for a day?”

Yadav of Fincare wants to focus on basic banking objective which the bank missed due to the pandemic. “We would like to have in-house talent rather than depending on the others,” he said.

Learnings from Covid

Ranjan said the PSU bank merger was a major challenge along with Covid. “Overnight we doubled the size. But we are seeing a much better period than what we have seen. With vaccination, we will be in a better place and business continuity is also improving.”

All of us had plans for 3-5 years. Covid taught us to accelerate the plans to one year.

Dalmia of Fisdom said during the pandemic FinTechs gained a lot due to digital adoptions by banks. We focused on getting more partners onboard. “We have collaborated with 10 banks. Banks have many retail customers, which is beneficial for FinTechs.”



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Fintechs attract record $2 billion in H1: Report

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The first half was a record with fund flows totalling USD 98 billion, compared to USD 121.5 billion in 2020.

Attracting a little over USD 2 billion in the first half this year, the domestic fintech sector has almost matched its total funding in the entire 2020, making it the best run ever, according to a report.

The record investments have been led by merchant platform Pinelabs’ USD 285 million from private equity funding round, USD 100 million venture capital funding rounds, Cred’s (USD 215 million), Razorpay (USD 160 million), Kreditbee (USD 153 million), Ofbusiness (USD 110 million) and Bharatpe (USD 108 million), a KPMG report released on Wednesday said.

Most of the money has flown into the digital banking space and the second biggest was insurtech, wherein the first half saw several such startups, including Turtlemint (USD 46 million), Renewbuy (USD 45 million), and Digit Insurance (USD 18 million) raising funds from the mid-sized private equity and venture capital funds, it added.

According to the report, four of the top ten deals in Asia were into domestic companies during the period under review. While the Noida-based Pinebabs’ USD 285 million was the third-largest in Asia, the USD 215 million in a Series D round by the Mumbai-based financial software firm Cred was the fourth largest in the continent. Bengaluru-based payments app

Razorpay’s raised USD 160 million in the series E round, making it the eighth largest, and lending app Kreditbee’s mopped up USD 153 million in series C round, the tenth-largest in Asia. The report, which did not give any sector-specific total numbers, also said the exits are going to increase in the country, both in terms of IPOs (Policybazaar has filed for a Rs 6,500 crore issue), while Paytm has filed for a Rs 16,500 crore issue, making it the largest-ever IPO in the country; and also in terms of acquisitions.

On the M&A front, fintechs could be targeted by banks, larger fintechs or even a fintech services conglomerate. The report expects leading fintech unicorns to try to tap into the strong capital market by looking at IPOs over the next 12 months. Banks are also keen to partner with fintechs, especially neo-banks and wealth tech platforms, as per the report.

Globally, too, the first half was a record with fund flows totalling USD 98 billion, compared to USD 121.5 billion in 2020.
Of the total investments, the Americas were the most robust with over USD 51 billion investments, followed by the EMEA region with USD 39.1 billion, but the Asia-Pacific region saw a dip to USD 7.5 billion from USD 13.4 billion a year ago.

Merger and acquisitions continued at a very healthy pace, accounting for USD 40.7 billion across 353 deals globally against USD 74 billion across 502 deals during 2020.

The report expects the second half to remain very robust in most regions. While the payments space is expected to remain a dominant driver of fintech investments, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract more investments.

Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely be high on the radar of investors, the report noted.

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