The age-old riddle, “who came first — chicken or the egg?”, seems to have been replaced by, “will fintech exist without banks?”. And just like the chicken and egg’s existence, most experts now believe that both need the other to exist.
For banks to grow and innovate, they need the agility of fintech start-ups and for the start-ups to sustain, they need the scalability factor of banks. The financial institutions have already started upping the game, by offering specialized services to start-ups.
Entrepreneur India takes a look at the services that banks are offering to start-ups without partnering or acquiring them, to help them scale.
Branches Only for Start-ups
Giving start-ups a preference and realizing their ever-growing financial needs, banks have opened up branches that deal specifically with start-ups. Both Ratnakar Bank Ltd (RBL) and SBI have gone ahead to launch these branches. State Bank of India’s branch for start-ups is called SBI Incube and was launched in Bengaluru. Following suit, RBL too opened a branch in the start-up city, saying that the branch would take care of all banking facilities needed by entrepreneurs.
APIs to Solve Problems
An interesting aspect of banks that has opened up avenues for start-ups is API or Application Program Interface. Giving way to open banking, the declaration of APIs allows third-party developers to come up with smart solutions for a bank’s problems. This is even referred to as one of the most crucial aspects of financial technology. It will give access to start-ups to the real-time data of a bank, giving the former power to innovate and solve a real-time issue. This will also let the third-party know more about a consumer’s history of transactions.
Online Advisory Platforms
With a bank’s expertise, most of the mentors for fintech start-ups come from banks, making it obvious for a bank to open up advisory services for entrepreneurs. From smart tools to the right alliances for mentors in technology and banking, these platforms also offer digital and cash management facilities. While HDFC bank has launched SmartUp, Yes Bank has launched YES Headstart programme that offers entrepreneurs assistance in registering and even incubation services.
The Next VC: Funding Start-ups
While the investor network is growing at a rapid speed in India, banks too are joining the herd. And with a bank’s vested interests in the financial technology space, the institutions don’t just invest money into start-ups but also give them access to the bank’s customer base.
SBI has earmarked a Rs 200-crore fund for start-ups. SBI’s CEO Arundhati Bhattacharya has also been reported to say that the bank would offer financial and legal assistance to the start-ups under its hood.
Meanwhile Kotak Mahindra Bank’s Kotak Business Boosters helps entrepreneurs in gaining access to funds right from the seed stage to series B.
With the presence of many alternative lending platforms that cater to small and medium business or start-ups, banks too are making the financial world easier by doing away with the rigid structures one needs to go through to get a loan. From loans to run your everyday business to long term loans, most banks these days offer loans specifically for start-ups.
Hassle-free Account Opening
When you are a start-up, there are just too many documentations, financial and management issues to take care of. All of this, apart from the main vision of the start-up that they set out to do — solving a problem that exists in our day to day life. So, making it one step easier for start-ups, banks offer them an easy and hassle-free process to open accounts. ICICI Bank even has an option called Shubhaarambh current account aimed at entrepreneurs that lets them have zero balance for the first six months.
Payment Gateway Partners
With the boom of payment gateways or digital wallets or the increased involvement of the fintech aspect in each start-up, which requires a transaction, banks come in handy for most start-ups by offering payment gateway services. Even Axis Bank offers the service for a smooth cash flow under its business banking solutions scheme.