Fintech start-ups, traditional players join hands to target millennials

The digital drive in the country coupled with increasing smartphone penetration and data usage has created a huge market for fintech start-ups which are targeting young salaried professionals. 

The traditional financial services providers are partnering with these start-ups to jointly address business opportunities. These partnerships are being expedited as there is a feeling among the majority of incumbent players of being left behind by technologically savvy start-ups.

"Fintech is going to get much bigger than what it is with UPI, demonetisation and smartphone usage driving digital money adoption. Payment and lending space will see lot of action due to a huge unbanked population here," said Vidhya Shankar, executive director Grant Thornton LLP. "Banks and NBFCs need to come on board as strategic investors to capitalise this trend because while the startups have revolutionary algorithms, they still need data to fine tune it."

Shankar further states that consumers are looking beyond getting credit cards to being able to afford expensive travel and gifting options which will set these financial institutions apart from each other. The on-demand money market is gaining traction and it will depend as much on strong analytics as on understanding the customers themselves.

PWC recently partnered with robo-advisory firm Mintwalk for building the core platform to help guide them with their technical requirements.

"From an investment perspective we look at investing a percentage of our efforts on startups by scanning scouting and mentoring them. We work with incumbents like Nomura or different banks in identifying potential. We also work with accelerators to mentor startups," said Vivek Belgavi, partner and fintech leader at PWC India.

Start-ups are more interested in supplementing the offerings of existing institutions through plug-and-play solutions that dramatically improve the user experience said the PWC report, which also stated that 80 per cent of incumbent players in India's financial services markets feel threatened by new-age startups.

MintWalk, is a financial advisory firm focused exclusively on catering to users in the 25 to 40 year age group. The app offers investment solutions for aspirational goals like designer clothes and travel plans apart from the usual cohort of home, car, marriage and retirement plans.

"Fintech platforms like ours bring specific skillsets like an 'investment experience' in our case to the consumer. Banks will target certain services to people based on their potential to invest. We can provide the same experience to people irrespective of their investment size," said Shiv Negi, MintWalk co-founder.

While startups bring in the business idea and data analytics, having a bigger organisation, like PWC, helps them navigate the regulatory and compliance requirements which would be difficult for them otherwise.

Short-term lender CashE founder V Raman Kumar saw similar opportunity in a market of young salaried professionals who had income but not the credit score to access small and short term loan amounts. CashE, recently partnered with Paisabazaar.com to widen their user base. His target consumers are people who require anywhere between Rs.10,000 up to Rs.2 lakh, possibly at the end of the month with the capacity to repay it within 15 to 180 days.

"While we do share our data with credit assessment firms like CIBIL we don't use the CIBIL score as criteria to disburse loans. People borrow for travel, emergency medical expense or even festive shopping and school fees," said Kumar.

In the past six months SBI, YES Bank, Axis bank, RBL and HDFC are just a few of the incumbents that have established acquisitions and tie-ups with start-ups ranging from wallets, UPI platforms to hackathons and accelerator programs to ensure a steady presence in the start-up ecosystem.