The wave of digitization has taken over and how. Once upon a time, known to be one of the most traditional institutions, banks are now breaking barriers and reaching out to the other side – the masses.
Innovation has altered the agenda of banks, forcing them to change their priorities and open their gates to start-ups.
Even the public sector banks, known for their rigid processes, have welcomed experienced professionals from the private sector or even ex-entrepreneurs to take seats in banks and run their innovation drive.
India’s second largest public sector bank, Bank of Baroda, too is leading innovation by partnering with fintech start-ups and launching consumer-friendly products. Entrepreneur India caught up with Akhil Handa, Advisor to MD and CEO and Head of fintech and new business initiatives at Bank of Baroda to know how fintech is redefining banking.
Banks Need Partnerships with Start-ups to Exist
The digital initiatives at Bank of Baroda, like at most other banks, can be broadly divided into three – digitization of the processes, launching of digital products and partnership with digital & fintech companies.
Under the umbrella of fintech, the bank has also launched various products, ranging from a wallet to a wealth management app and even refurbishing its mobile banking app. But Handa believes that not everything can be done in-house at the bank, especially if they have to keep up with the speed of the market.
“Currently, we have about 20 partnerships with start-ups – both big and small. We are working on innovative companies. For example, we are working with a payments company that does sound-based payments through your phone. We have also enabled cash on mobile, you don’t need to carry a debit card, you can just use your phone at the PoS (Point of Sale) for transactions,” says Handa.
Ask him the evident question, do banks need start-ups to exist, and Handa is quick to reply, “Absolutely. These younger teams can innovate at a much faster pace and are not bogged down by any legacy. They are untouched by regulations and are thus, free with their thinking.”
A thought process that is free of regulations also helps start-ups become more product-oriented, believes Handa. With banks, the product comes in later because of the hoard of regulations that they have to go through.
Start-ups Get Validation from Banks
While start-ups bring in the agility, banks give them the scalability. With their vast networks, the aged banks give the young start-ups a shot at growing and that too, at a fast rate. This has led to a partnership amid a win-win situation for the duo. Talking about how banks make a difference, Handa says, “The first part is the customer access we give to start-ups. We have a huge client base in retail, corporate and MSMEs and we open up the same for start-ups. The second is that we bring about some amount of interaction between start-ups and the regulatory world. The third is mentorship. When entrepreneurs come into banks, they see a different perspective, which helps them grow.”
Apart from the mentioned benefits, partnership with banks helps start-ups get a validation too. They can then go to the market with a proof that their idea works. “I have had many VCs walk up to me and ask if I believe a particular product proposition works or find a start-up useful. One of the biggest ways to gage the benefits is by seeing the market reception. Seven of the 10 start-ups that we had earlier announced partnerships with, got a series A funding within the next three months,” he says.
An earlier JP Morgan employee, Handa had also helmed two start-ups — one in the fintech space and another in the media sector. The government of India’s experimentation of bringing in private sector people in public sector banks saw the appointment of PS Jayakumar in Bank of Baroda and the same also brought about Handa’s appointment to drive innovation.
Fintech is the Rage, but it’s Not New
While it’s all about fintech now, Handa believes that fintech as a concept is not new. He cites the example of the ATM, as one of the first examples of fintech. But he believes what makes the difference is how fintech is progressing. “The focus has changed from core banking processes to front end services, it helps the customers and reduces the cost of transactions,” he says.
Fintech in India has been focussed on the payments sector. The talk about new companies in the payments sector while might seem overdone, Handa believes otherwise. He feels that we have a long way to go in the payments sector. What he realizes is that the problems that banks face are quite basic. With the boom of fintech, he also feels that companies need to be cautious and see the difference between wishful thinking and building a profitable business.
“The whole euphoria is unwarranted. Business doesn’t work that way, you have to have a measured steady approach, you have to build products, iterate them and create a sustainable revenue generation proposition,” he says.