Banks and non-bank financiers are collaborating with fintech companies to offer new-age digital products to their customers in spaces they would otherwise have to invest significantly more if developed in-house.
While the drive is on retail products, banks are also working with these nimble-witted fintechs companies on business products. Areas of partnership includes buy now pay later (BNPL) for retails and merchant credits, trade finance for small businesses and commodity financing.
For instance, public sector lender Bank of Baroda (BoB) is implementing a project for digitization of both the liabilities and the asset side, particularly when it comes to retail products.
Chief Executive Officer of Bank of Baroda, Sanjiv Chadha said that they are collaborating with fintechs companies and believes that half of all the retail loans will get processed digitally with the help of fintech partners.
SBM Bank India had collaborated with Drip Capital in July. Last week, on 12 August, non-bank lender IIFL Finance said it has collaborated with Bengaluru and Gurgaon-based FinBox to offer digital credit products to its customers.
An anonymous source who is aware of the development said Mint, “It is much cheaper for lenders to invest in a fintech startup or simply partner with them for new products than hire a team to build it."
The anonymous source also said that some of these fintech companies work on artificial intelligence and machine to subvention credit risk and therefore offer a beneficial addition to legacy models used by banks.
BNPL will initially offers around 15 days of interest-free funds to small borrowers and as per the experts, these legacy will act as the first step towards assessing the creditworthiness of a borrower.
When fintech companies have started arriving on the financial services space, it was though they would compete with traditional banks and non-bank lenders for a share of the credit piece.
However, lenders have taken the opportunity to use their lending muscle in partnering with the new-age expertise of fintech companies.