In a conversation with Anagh Pal, Raj Nair, President - IMC Chamber of Commerce and Industry& Chairman – Avalon Consulting shares his thoughts on how Fintech will shape banking in days to come.
Fintech is and will disrupt conventional banking because traditional banks have a high legacy cost base, which technologies, available today will not entail. The longer traditional banks take to restructure their business model, the more room they are giving to Fintech start ups to disrupt them.
There will be smart banks, which will adapt to the new realities of the market place and will successfully wrest control from the newbies because they have the resources. While, others may team up with the new Fintech companies. Surely, there will be laggards amongst banks which will get hurt.
There is a huge number of people with low credit scores for reasons like ‘no formal job and salary’ and ‘No address proof’, but have places to stay and have income to support loans. This huge class is a target for NBFCs and now for Fintech companies, which have suitable algorithms to evaluate credit worthiness which conventional banks do not use.
Yes, their business model takes advantage to lower cost and speed to take away business from banks or take business that banks struggle to get
With GST in place and an array of data available, do we expect business lending to pick up in a way retail lending has done?
GST data certainly helps to quickly understand the genuineness, nature of business dealings, cash flows, the real need for borrowing and ability to repay. Hence, it will be easier to qualify an applicant.
Millennials are much more tech savvy than the older generations and less tolerant of inefficient manual processes that take too much time. There are also convenient apps offered by Fintech companies like micro lending, crowd funding of equity and debt, which banks don’t offer.
Many international banks are working on initiatives to remain relevant in the future. One major bank has created its own start up in Asia to provide technology based services at scale. It is designed exactly like start-ups, but with one major difference—Imagine, they have put $500 million as seed capital in this 100% owned start up! No Fintech start up can match that for resources.