Authored by Neelesh Kripalani, Chief Technology Officer, Clover Infotech
The world is moving towards digital experience. IT leaders across industries are increasingly adopting digital tools to create a 360-degree approach towards customer experience. The fintech industry has undergone a massive transformation since the pandemic.
According to a study by Invest India, India is one of the world’s fastest growing Fintech marketplaces, with 6,636 Fintech businesses. The Fintech business was worth $31 billion in 2021 and is poised to be worth $150 billion by 2025.
David vs Goliath
While the traditional financial institutions might have the backing of their legacy, wide-spread customer footprint, large operation base, wide sales reach and branch network, and low-cost deposit franchise, the fintechs have faster adoption of innovative technologies on their side. While the goliaths have a larger share of the market currently, fintech startups are gradually grabbing bits and pieces of the pie with digital first approach to customer’s financial needs. Fintechs offer unmatched convenience to their customers which attracts them and moves them away from traditional financial institutions who have stuck to their old-school methods of customer engagement.
SaaS acts as a Conduit
SaaS solutions act as a conduit between financial services and technology by offering solutions based on latest technology, meeting latest customer needs and preferences. SaaS offers a wide range of benefits to organizations such as flexibility in total cost of ownership, control over scalability, speed and agility in application adoption, and endless integration possibilities with robust and best-in-class security underneath. It also lets financial institutions to focus on their core operations and services.
Attract Investors with SaaS solutions
Fintech enterprises have always been favourite picks amongst venture capitalist investors. With a rising demand for digital solutions by the new generation, the onus is on financial institutions to attract investors by adopting SaaS-based solutions and delivering digital services to the end-customer. A recent study by RBSA Advisors stated that India had seen an increase in fintech investments from USD 146 million in 2020 to USD 919 million in 2021.
Faster time-to-market with SaaS
Organizations are getting rid of their on-premises IT loads for cloud solutions to control costs and increase agility, and to create an ‘anytime, anywhere’ solution. Application testing and deployment at various branches or location becomes redundant as SaaS solution becomes available on any device from the get-go. This reduces the lag from development to deployment, enabling CIOs with faster time to market, and ability to render services quicker.
Increase in fintech adoption
Today, the market has witnessed a huge leap in payments. Cash payments have almost become obsolete, and the world has seen a surge in UPI transactions. Fintech players have been increasingly enhancing their offerings to match customer preferences. Thanks to Fintech SaaS solutions, financial services such as loans and insurance are available in minutes, with the customer being onboarded digitally.
It is much easier for the goliaths of the financial industry to invest in innovative technologies and get ahead of the fintech competition, but it is far more challenging for fintechs to do the same. They can create innovative solutions, with faster time to market but they cannot create legacy, customer footprint, nation-wide sales and collection network, and most importantly, a robust CASA or low-cost deposit franchise which helps them to lend at attractive rates and yet garner very good net interest margins while keeping their Net NPAs to the minimum etc.
In December 2017, SBI launched Yono (You Only Need One) app (a digital banking platform) to enable its retail customers to fulfil their financial and lifestyle needs including payments, fund transfer, financial services such as mutual funds and insurance, and e-commerce digitally. It is a fintech offshoot from SBI that acts like a start-up to democratize financial services with hyperlocal offerings and alliances with more than 100 partners. Since then, the app has registered more than 450 Mn users across tiers. SBI hopes to mobilise INR 1 trillion worth of assets through Yono this year compared to INR 62,000 crore in FY22. SBI and Yono are a classic use case of David and Goliath working together to offer the best of both world to the end customer.
It is time for the Goliaths and Davids of the financial industry to come together and collaborate to leverage competencies and build next generation enterprises. While the goliaths can bring in their service expertise, legacy, and strong network, the fintechs can build and innovate faster with SaaS solutions, go to market faster and build scalable customer experience solution. Imagine the power of bringing the magnanimity of the goliaths with the agility of the Davids. Such a move is great for India which is still largely underbanked and credit starved.