FINTECH EXPANSION A THREAT TO BANKS

The financial technology (fintech) sector is rapidly expanding in India, which could pose a potential threat to retail banks. There have been a wave of start-ups in India in the fintech space aiming to capitalise on the country’s growing economy, rising incomes and gaps in the market, such as a large unbanked population.

One of many such companies, LoanTap, based in Mumbai, which launched last year, is completely online and specifically targets salaried professionals with loan products that are customised using minimal human interface behind its algorithms.

“We felt a constant need for credit solutions in the upwardly mobile salaried segment for acquiring assets or for personal consumption,” LoanTap’s founders Satyam Kumar and former tech professional Vikas Kumar said. The company is targetting millennials.

A report released by Tata Consultancy Services and Clayton Christensen Institute for Disruptive Innovation, said that new entrants posed “a competitive threat to banks” but that if banks “are incentivised to adopt these solutions, rather than ignore them, disruption could be less of a factor”. Aroop Gupta, the co-author of the report said, “The consumer lending space is where we see the most significant threat today, with the current wave of innovation and new entrant competition having the most impact.”

Indian banks are also pushing to make use of the latest technology.

India’s fourth biggest private sector bank Yes Bank, is using digital technology and an artificial intelligence backed chatbot for retail loans to reduce the time it takes to issue a loan and save costs for the company through automation.

Veerchand Bothra, the chief innovation officer at Netcore Solutions, a marketing technology company, said the use of data analytics was helping banks to “position themselves as a financial supermarket”, so they can “upsell their various products”.