Digital Collaborations: Putting User At the Center
The biggest shift for fintechs has been to put the end-user at the center, and collaborations between providers to give a 'one-stop' solution, rather than companies working independently and the client needing to go to different places
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The digital landscape in India has undergone major changes over the last decade with usage growing exponentially, fuelled by mobile penetration, data costs coming down and the innovations done by the vibrant ecosystem. The COVID-19 pandemic has accelerated this adoption, with fundamental habit changing, causing a seismic shift in both knowledge and acceptance.
The ecosystem itself has changed. In infrastructure, the impact of Jio, which fundamentally got India data enabled, is very well known. Together with this, the digital start-ups have shifted in their behavior as well.
The biggest shift is around the end-user being put in the center, and collaborations between providers to give a "one-stop' solution, rather than companies working independently and the client needing to go to different places.
Phase I: Copy and Paste
In the initial days of the digital revolution, all the "new' companies followed mostly the FCTI model—first copy then improve. The models were essentially copying what was done in offshore markets, and launching in India, with/without any modification customized for India. This phase was of course fuelled by the huge amounts that were poured in by the VC firms—where cash burn to acquire clients was the mantra. As one of the famous founders said, it was "go big or go home'.
Client habit changes were nothing more than cash discounts—experience and profitability be damned. The surviving players from this era are of course mega size at present—valuation notwithstanding.
Phase II: Search Niches
The next phase were players who were trying to solve for genuine India-centric issues. But each of them were solving a narrow problem, a slice.
In fintech, the biggest change here was of course around digital payments, which was not brought about by the startups, but by the introduction of UPI.
So while you do a transaction through multiple interfaces (apps), the backbone is really UPI. These of course has meant that a lot of players working on "digital wallets' pretty much do not have a business model anymore—but they are loath to admit and continue to burn VC money.
Phase III: What ALL Can I Do For You?
We are now seeing the third phase—collaboration that puts the client (end user) firmly at the center, and various companies working together to give seamless solutions. Putting needs together and offering solutions to the bundle.
This is especially true for the fintech companies.
Let's take a very recent example to illustrate this.
As an investor, what you want is a seamless way to interact with your advisor, and execute everything that will fulfil your goals. As per most advisors today, diversification, and accessing opportunities offshore, is a must—to not only reduce risks, but also improve on returns.
The great example of collaboration is by a fintech called Smallcase. They are using the superb infrastructure built by Zerodha to link active equity advisors that help retail investors access specific "stock baskets' and execute on the same rather than depending on tips, or worse still, the constant barrage of some of the business news channels propounding the deal of the day.
Simply put, it allows companies to work on their respective strengths—this provides a cheaper, more resilient, and of course more innovative and adaptive solution.
An example of this is cloud computing—the services that AWS or Azure offers allow a user to focus on experience, rather than worry about the infrastructure. You want to see the content on Netflix—not worry about where they are hosting, or how they can get it to you seamlessly on demand (by the way, Netflix is hosted on AWS).
The above actually helps end users—quality improves, while costs and risk reduce. Solutions being provided means better adoption, and long-term habit changes (like, will you ever go back to cable television now?).
Which actually leads to companies creating value—being able to generate cash, and not burn cash by throwing money and discounts. And this virtuous cycle results in further improvement for end user—you!