Public Sector Banking – Dutch Uncles

Neobanks Emerging As A Key Segment For Growth In Indian Fintech

Vaishali Das — Tue, 29 Jun 2021 03:35:04 +0000

With change in the financial landscape, shifting more toward customer satisfaction and experience, a gap has been created between the offerings of traditional banks and customer’s needs.

What is a Neobank?

Neobank is a digital bank without any branches offering multiple financial services to the tech-savvy customers. It works entirely on online mode, providing services from money transfer, payments, lending to opening a bank account in a hassle-free and smooth manner. Neobanks partner with traditional banks to provide bank licensed services and in return it helps traditional banks in expanding their customer base in a seamless manner.

What are the Advantages?

Neobanks, being completely digital, open up a wide window of advantages for customers and change their banking perception. Right from opening a bank account by following a few simple steps from the comfort of your home, it provides seamless and user-friendly experiences to its customers.

Neobanks’ apps are very much accessible unlike the glitchy net-banking sites. With being quick in responses and smart reporting, they also provide a customizable way of keeping a track of one’s finances and helps them in managing it combined with constant advice.

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Every now and then there are new players in the market whose essential goal is to simplify the financial sector.

India’s Top 4 Neobanking Startups

Currently there are 10 neobanks in India with a couple of more in-process to enter the market or in beta stages.

Niyo

It is a Bangalore-based neobanking startup, established in 2015, catering the blue-collared sectors, salaried employees and Indians who travel globally. Niyo is helping salaried employees with solutions to make the most out of their salaries.

Niyo has also launched a global card dropping the need to purchase a forex card during international travels. Collaborating with Upwardly, it is educating customers on investments and financial benefits.

Open

This Bengaluru-based startup, when started in 2017, partnered with ICICI bank. Presently it has almost 11 banks as partners. It offers startups and new businesses with an online bank account and a credit card that consolidates banking, accounting and payments in a single platform.

As a result, it is easing up hectic procedure of the current banking system. It also helps SMEs in automating bulk payments and digitising financial services.

RazorpayX

A startup within a startup is a neobanking platform of India’s Newest Unicorn Razorpay. It is simplifying and accelerating every aspect of financial operations from payments and management of cash flow to reconciling transactions and flexible payouts.

It also eases the refund process for e-commerce businesses with their API and dashboard payout platform. Also, with the help of opfin, a payroll and HR management software company, it manages tax filing and compliance through a unified platform.

InstantPay

The startup delivers hassle-free banking experiences by offering instant activation, money tracking and cash deposit features to individuals and businesses of all sizes.

With its API banking platform, which is a super scalable cloud platform, it auto scales from zero to a million transactions in a single day. It also provides users with a digital bank account and for startups and SMEs, a smart bank account.

Business Owners Who Aspire To Be In Neobanking

With RBI focusing on digitalization and financial inclusion, collaboration of Fintech and banks has become an emerging space in the banking sector in India.

Neobanks are taking over the Fintech industry by a storm on a worldwide level. Every now and then there are new players in the market whose essential goal is to simplify the financial sector.

India is moving towards an era of rising Fintech sector. With the increase in the number of people adapting the online mode of banking and bridging the gaps between traditional banks and customers, the potential of the neobanks market is very promising.

The post Neobanks Emerging As A Key Segment For Growth In Indian Fintech appeared first on Dutch Uncles.

Country’s Largest Public Sector Lender Joins the Investor Lobby

Anju Nambiar — Tue, 15 Jun 2021 08:35:04 +0000

State Bank of India (SBI) recently invested an undisclosed amount in a Bengaluru-based Fintech start-up making it India’s largest Public Sector lender to join investors like Apis Partners, SmileGate, and Y Combinator.

SBI is the newest entrant to the investors landscape and stands out among fellow start-up investors. SBI is India’s most trusted and a leading lender. Having them on board is a game changer for any start-up. SBI’s investment in Fintech start-up Cashfree is a strategic one which occurred at a post-money valuation.

Change in Start-up funding landscape in India

SBI’s investment was targeted at a growth strategy focused on customer experience and product innovation. The start-up funding landscape is changing thanks to the renewed interest from banks towards technological innovation.

Case in point is ‘PSB 59 minutes’, a fintech start-up where a number of public sector banks like SBI, Punjab National Bank, Bank of Baroda, among others have got into partnerships. The start-up disburses loans for SMBs in 59 minutes via the partnered Banks.

There is immense interest among banks towards the start-up community especially around fintech players who offer innovative technologies like AI chatbots. Also, these banks are now very open to explore new technologies like Blockchain to streamline traditional banking.

Potential for Accounts Aggregator Business in India

SBI’s Cashfree investment is not just about getting into the payment gateway business. The Reserve Bank of India (RBI) recently announced licenses for NBFCs (Non-Banking Financial Institutions) to venture into the account’s aggregator business. This move is set to transform financial services in India.

The accounts aggregator market is still growing but looks quite promising as a potential asset-light infrastructure business consideration. A number of NBFCs have already received RBI approval.

Soon, more public, and private sector banks will make their entry, empowered by regulations, innovation, and new-age technologies like Artificial Intelligence (AI) and Machine Learning (ML).

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SBI is the newest entrant to the investors landscape and stands out among fellow start-up investors.

What’s in it for me?

It’s interesting how SBI chose a digital payments and banking technology start-up for investment which opens up avenues for more start-ups in this sector. It demonstrates how SBI is rooting for digital payments despite being a traditional financial institution.

Public sector banks supporting the growth of fast and easy payments ecosystems is huge for the Fintech sector. SBI has a keen eye on fintech start-ups and Cashfree is just one among an upcoming list of beneficiaries. SBI is currently an active investor in Fintech start-ups and its associate company SBI Capital Ventures Ltd. Is tasked with the disbursal of funds.

SBI is also interested in investing in blockchain start-ups with a specific use where the bank has a pivotal role to play.

Lending and Insurance fintech start-ups are very much capable of taking on large banks through their technological innovation. But these fintech start-ups need collaboration with banks for their customer base and their legacy of trust. The best way forward is through partnerships or investments between fintech start-ups and banks (both public and private sector).

Fintech start-ups have been offered an open field for pitching their ideas with SBI for potential procurement, partnership, or investment. Even HDFC Bank, India’s biggest Private Sector Bank became open for collaboration with third-party players in Fintech instead of competition against them.

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Exit of Citibank from Consumer Banking Business in India: How will it impact MSMEs?

Aakash Sharma — Sat, 24 Apr 2021 05:35:04 +0000

After nearly three decades in India, American banking giant Citibank has decided to exit the Indian consumer banking segment as part of its renewed global strategy. Although the reasons for the withdrawal of consumer banking services by Citi are not yet clear, retail banking has always been a challenge for foreign banks in the Indian market.

Consumer retail banking services primarily include credit cards, retail banking, mortgages and asset management. Citibank has 35 branches across the country and employs about 4,000 people in the private customer business.

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Citibank has faced the challenges in the local retailing market for many years and has lost its share substantially.

Over the years, Citibank’s involvement in retail has decreased substantially, and internal competition has intensified. In March 2020, the bank had approximately 33 million private customers, 2.2 million credit cards and 1.2 million bank accounts; these figures are much lower than the bank’s initial days. As of December 2020, about 6% of credit card spending was on the market. But that percentage continues to decline as of 2021, according to bank officials.

Impact of Citibank’s Exit on MSME and SMEs

The Citi group entered the Indian market in 1902, and its private banking operations began in 1985. As of March 2020, Citibank had offered loans worth Rs 27,911 for agriculture, affordable housing, renewable energy and small businesses.

Over decades, Citibank has provided capital assistance worth Rs 4,975 crore to the weaker business segments in India under loan commitment campaigns. In addition to banking services for institutional investors, the bank has also supported global financial activities in Mumbai, Pune, Bangalore, Chennai and Gurugram.

Post its announcement to withdraw from India, Citibank is actively looking for buyers to buy its consumer retail arm. So far, the decision has had no impact on existing customers and employees in India. Bank officials have outlined that Citibank is only exiting the consumer market in India and not closing it down.

There will not be any adverse effects on Citibank India’s existing consumers and staff due to this decision. The banking major will continue to concentrate on the commercial business in India and will maintain investing more into it.

Citibank’s Exit is an Opening for other Banking Players

Analysts say Citi’s exit from Indian retail banking could pave the way for other private banks to stabilize India’s financial sector. Banks such as ICICI, Axis and Kotak are seeking significant market shares in the corporate sector. Citi’s credit card operations are pegged to be the most sought after acquisition among various arms of the bank. This business plumb in the retail division of Citi can get the banks a premium valuation.

Besides, banking professionals and major players will have more opportunities to provide services to micro, small and medium businesses by expanding their business and providing assistance through loans and massive capital injections.

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These are the Latest Public-Private Partnerships in Fintech

Naina Sood — Thu, 01 Apr 2021 00:35:03 +0000

Financial Institutions (FIs) have been collaborating over the past few years to harness the technology offered by Fintech players to offer a plethora of more efficient, secure, digital-first financial products to customers. Fintech partners, on the other hand, are benefiting from the significant financial resources, valuable data on customers, and market insights that banks have to offer and create disruptive solutions. We evaluate some of the latest public-private collaboration trends and future opportunities in the same:

Blockchain

Public lending institutions and insurance companies have been paying increasing attention to blockchain and drawing on the technological expertise of blockchain-focused Fintech companies so they can continue to focus on their core business. Application of blockchain is in three forms: Cross-border payments, settlement of securities and trade finance.

Recently, a consortium of top Indian banks was formed for the purpose of collaboration on blockchain initiatives. As many as 11 Indian banks, including ICICI Bank, Axis Bank, Yes Bank, HDFC, Kotak Mahindra, Standard Chartered, RBL, and South Indian Bank, have aligned in the consortium to introduce and execute a blockchain-based loan system for small and medium enterprises (SMEs) in India. The FIs are looking to collaborate with blockchain developers/ Fintech start-ups which can demonstrate the use case and what is the role for the bank in that use case.

RegTech

FIs have also started partnering with RegTech companies to strengthen their identification verification and background checks, financial crime surveillance and fintech risk management. Tech ventures, such as Mumbai-based CogNext Analytics, are collaborating with FIs, which are regulated bythe Reserve Bank of India (RBI), to help them comply with regulations for transaction monitoring, fraud and risk management, identity management, among other functions.

On the other hand, regulators are also benefiting from RegTech companies by using their artificial intelligence and other technologies to streamline resources, understand rogue consumer behaviour and to prioritise and maintain market stability.

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The FIs are looking to collaborate with blockchain developers/start-ups which can demonstrate the use case and what is the role for the bank in that use case.

Open Banking Partnerships

Open banking is slowly growing in the Indian financial services with several Fintech partnerships happening in this area. During COVID-19, several banks adopted open banking via Open APIs and have started offering a major chunk of their banking services outside their firewalls. Fintechs are able to use data from banks using secure protocols built on sharing models via API. This trend is expected to magnify in India through 2021 as more and more customers demand digital financial services.

Fintech players, however, need to keep in mind the security challenges and bring in a tighter system in open banking platforms.

Cloud-Based Technology

A recent example of this is the ICICI Bank’s collaboration with cloud-based accounting software solution provider, AlignBooks, to add accounting technology to their system and strengthen its SMB services. Current account holders at ICICI Bank can now link their bank account data into AlignBooks software to automate data entry and streamline reconciliation. The partnership will enable SMBs to access their account information even when they do not have an internet connection. FIs are looking for similar tie ups, especially with the ones that utilise secure cloud-based technology, to find unique solutions for better user experiences, personalisation and automation.

Neo Banking

Neo-banking in India is expected to see a huge spur in 2021, attracting investments from global players as well. Indian Neo Banks like NiYO, RazorPayX, Instant Pay etc., have already collaborated with traditional banks and support them with customer acquisition as well as new-age digital services. The Neobank model is a little different in India as the RBI presently does not allow pure-play digital banks to operate yet. Therefore, collaborations are the win-win case scenario.

What is in it for me?

Fintech players/start-ups looking for successful collaborations must evaluate how their new product and service is bringing something new to the FIs—a new segment of customers the FI could not access earlier, or a new service to existing customers, or a new way to approach existing problems and workflows. FinTechs challenges revolve around areas like performance of systems, speed, security and vulnerabilities. Hence, they must standardise the systems performance, user authentication and security controls for a successful tie-up.

The post These are the Latest Public-Private Partnerships in Fintech appeared first on Dutch Uncles.

Privatising Public Sector Banks: Putting the Genie back in the Bottle

DU Desk — Fri, 26 Feb 2021 12:30:47 +0000

The long-standing banking reform, Privatisation of public sector banks finally saw the light of day with this year’s budget, recently announced by the Finance Minister. The most notable privatisation of 2 public sector banks namely ‘Bank of Baroda’ and ‘Punjab National Bank’ is particularly noteworthy for investors.

Privatising the two banks which have been singled out as well as other banks will be a herculean task, especially since clear guidelines have been issued for investing firms:

An acquisition will not occur solely on the pretext of saving the bank from ruin but must be in the interest of the investor as well as the customers of the bank.
The acquired bank and the acquirer will under no circumstances break pension commitments made to the bank customers.

The truth about Public sector banks:

Most public sector banks are hanging on a thread. Thanks to the government’s uplifting hand, these banks manage to function.

When the hand of the government is withdrawn, the little ground that they stand on will crumble.

Without capital from the government, these banks will fail to meet their capital adequacy norms.

They suffer from stressed-assets and non-performing assets, the clear picture of which has remained hidden in the shadows.

Under these conditions, there is no proof to show that a public sector bank on its way to become privatised, is a potentially viable asset.
There is also a very slim chance that the tables on a public sector bank can be turned to make it profitable, once privatised.

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The most notable privatisation of 2 public sector banks namely ‘Bank of Baroda’ and ‘Punjab National Bank’ is particularly noteworthy for investors.

What is enraging bankers regarding the privatisation move- The arguments:

Bankers don’t want to hear a word about taking a perfectly good national bank and going back to making it private. They understand what they stand to lose. Hear their arguments at a recent protest:

Public sector banks are viewed as national assets and cannot be tainted by privatisation.
Privatisation means aggressive profit chasing and bankers who were basking in the glory of ‘serving the public’ will now be forced to prioritise profits.

The two investment-worthy, privatised banks currently:

Bank of Baroda and Punjab National Bank have directly come into focus. Here’s why these two banks are investment-worthy:

The withdrawal of the government’s stake has granted a better structure to both the banks.
Both banks have assimilated premier institutions including Vijaya Bank and OBC which further elevates their positions, respectively.
These privatised banks will steadily attract higher and better investors, and this is the right time to make an informed decision.

Conclusion:

The dilemma here is that this decision will only backtrack from an earlier move by former finance minister Indira Gandhi who nationalised private banks. Now madam Nirmala Seetharaman will re-privatise them and not everyone is able to understand the logic. The truth is that the cat is already out of the bag and some of the concerns as already highlighted raise questions about the undoing of what has already been done.

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