Former State Bank of India (SBI) Chief and current Chairman of Mastercard India Rajnish Kumar stated that when it comes to money collection, no one can compete with banks. However, he claims that they don't know how to deploy that money, which is where fintechs come in.
Speaking to Business Today TV regarding the divide between banks and fintechs, he stated, "When it comes to gathering money, nobody can compete with banks." That is abundantly evident. Banks are doing an excellent job, but they don't know how to deploy that money, which is their issue. There, fintechs can play a role in assisting them in expanding their reach and assisting in what we call intermediation and financial inclusion." He also discussed the spaces where fintechs may make a difference.
"Banks nowadays are very happy to give housing loans and car loans, but there is a large segment of the population that has high credit needs and is served by the informal sector." That is a gap, and that is where fintechs or digital lenders come in," Kumar explained.
Kumar has discussed why fintechs are thriving in India, as well as the advantages they have over non-banking financial businesses (NBFCs) and conventional banks.
"In terms of cost arbitrage, fintechs are currently better positioned than non-banking financial companies (NBFCs) and legacy banks." They are thriving because legacy institutions failed to recognise client requirements. "There was a gap that fintechs very nicely filled," he remarked at BT's Banking & Economy Summit in Mumbai.
"What a bank would do to acquire a customer in terms of cost, the fintech will do it probably at a 25-30 per cent cost," he said.
He also stated during the occasion that no one can beat banks in terms of trust.
"When it comes to banks, trust is very strong. Their ability to collect obligations is unparalleled. "NBFCs and fintechs do not have this advantage," he explained.
