What Made Me Leave Banking to Start a Fintech Company?
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Fintech, “the kid next door”, creating ripples in the start-up ecosystem, has today earned the status of being both an enabler and a disruptor. Several verticals such as payments, deposits, credit/lending, credit scoring, treasury management, wealth management, forex, etc. put together, forms the vast fintech ocean, which has the potential to change the existing banking ecosystem. You may not be familiar with the term “fintech,” but you’ve almost certainly been introduced to financial technology’s applications. In fact, you’ve probably been using fintech without even knowing it - paying without an actual wallet, moving money with ease, investing on your own terms, keeping tabs on your money or as complicated as financially protecting yourself and your belongings. From car insurance that allows drivers to pay by the mile to health insurers that enrol patients digitally, fintech is helping make the finance and banking world more responsive to users’ needs. However, the situation was very different in the early 2000s.
MAKING THE DECISION
Several factors came together when I was a part of the banking industry which showed me that the time was right to build a fintech company.
Traditional formal credit channels in India were largely driven by constraints such as elaborate procedures and compliance checks—which are mostly rigid and lack accuracy. The outcome is poor credit growth and delayed credit disbursement, which leaves credit-seekers in a lurch.
In India, SMEs are considered suboptimal borrowers due to their small size, information asymmetries and cost of credit delivery. Since lending is very subjective for SMEs, they have difficulty in finding the right loan product which suits their requirements based on need-based assessment. They might not understand the multiple products available to them only the requirement and may apply for incorrect products leading to high discovery timelines. The applications are often rejected due to improper paperwork, credit history evaluation and incorrect credit profile.
UNDERSTANDING THE NEED
There was a dire need to create an ecosystem where customers could have a one-stop solution to their financing needs, and a platform for financial institutions to reach out to and evaluate borrowers and distribute credit and other financial products using technology. We know that for every borrower, there is lender willing to lend. However, the customer today has no sure shot way of finding that bank. Fintech is a step forward towards digitization of Indian banking infrastructure. By integrating unique technology, fintech companies bring in the capacity to modernize and technologically upgrade the lending market place by lowering the cost of booking loans and increasing transparency & most important of all, reducing the rejection rates.
The biggest differentiator between working at a big bank and a fintech firm is the broader exposure you get at the latter. Everything must work together, starting from billing, servicing, tech, resource planning and price –whereas, at a large financial institution, you specialize in your own silo, so you tend not to be as day-to-day aware or concerned about those other aspects. Understanding the industry and the customer perspective gives you a strong foundation for engaging with your fintech customers, and it also helps to understand the business workflows and operations.
FINTECH - A WELCOME DISRUPTION
Today, Financial technology is about to witness a paradigm shift that will define how customers perceive the banking system. It is all set for its gen next evolution, where it is no longer confined to aiding operational efficiencies at the back end but more towards meeting customer expectations. Finance is inherently a service-based industry. However, in an effort to create the right ﬁnance solution in the SIMPLEST, SHORTEST and SPEEDIEST way, we need to incorporate technology thinking into financial services. The real disruption will be when, banking services are rearranged in amalgamation with other non-banking services leading to a completely different user experience.
There will be a time, when banks will go completely virtual and payments can be sent/received in a blink of an eye, (I mean, quite literally!). We need to be ready, in order to accept such disruption; and fintech will play a major role in creating the new order of finance in the country.