FinTech Integration into Indian Banking System
With the changing times and the technological disruption, the banking sector has been transformed in its own capacity. With modern banking, starting in the 18th century with Bank of Hindustan, we have transitioned to a point where we have Fintech Companies like Paytm, winning the roost. Customer preference has been steadily shifting towards digital payments and online financial services, which has caused the traditional bank to suffer cut-throat competition. As per Business Standard, almost 300 million digital transactions were made in the year 2021 in the Indian subcontinent. With the government legalizing the validity of 30% tax on crypto transactions, the fintech, and cryptosystem are set to boost.
Furthermore, RBI moving forward with a CBDC will bring in more players in the financial sector. Even though the traditional banks have a huge and loyal customer base, they seem to be outdated in keeping up the pace with the modern consumer. In the Budget, the government announced full the integration of post offices in core banking infrastructure. According to the World Bank’s Global Financial Inclusion Database or Global Findex Report 2017, 80% of Indian adults (age 15+) have a bank account. This further translates into government initiatives like e-rupi and Pradhan Mantri Jan Dhan Yojana.
This makes it clear that the financial industry is walking up to an era of the financial revolution. COVID-19 further enhanced the mobile banking channels by almost 20 to 50% in the early months itself. According to McKinsey, this is a trend that is going to continue for a very long time. fintech tech companies are rising up to the occasion to meet customers’ demand for speed efficiency and a better user experience which is enhanced by a better user design. This will further lead to a frictionless atmosphere for both consumers as well as the customers. Retail giants like Amazon help with making a transaction within seconds, that is the speed traditional banking structure needs to get onto. Even though it might seem competitive in nature, fintech companies are actually building the gap between traditional banks and the modern consumer. According to the business research company, the fintech market globally has seen an annual growth rate of nearly 25% through 2022.
Even though both fintech and traditional banking infrastructure aim at building a sound monetary system for its consumers, fintech is generally seen as the future of banking. The traditional banking structure has been maligned by traditional and returned practices and procedures. Traditional banks in India like SBI have been creating an infrastructure that caters to technologically savvy consumers. However, the fault lies in the execution of schemes. According to statistics, in the gap of four years from 2015 to 2019 consumer adoption rates of fintech grew rapidly which led to almost 75% of consumers using online money payments.
Even though the fintech scene of the competition, can walk hand-in-hand with traditional banking infrastructure and make it a collaborative experience. While the robust customer base of the traditional banking infrastructure can help the fintech a lot. Fintech in hand can bring more technological upgrades to the banking system. Even though finfintechmpanies have operated long without a particular regulator, they need the rules and regulations of a traditional banking ecosystem. Traditional banks can benefit from the innovation and agility that is represented by fintech. There are some advantages to it such as banks having huge deposits which can lead to better financial systems if used in cooperation with fintech. Partnerships in the past like HDFC Bank-Paytm, ICICI Bank-Niyo, Kotak Mahindra Bank-Pine labs have showcased the potential such enterprises and collaborations hold.
This will further lead to an overall improved financial system with advanced technology brought to the banking system. However, in order to meet the technological demands of the consumer of today banks have to impress the modern ways and lose some traditional practices. A win-win situation occurs for both the intermediaries if they work on a long-term partnership that combines the support and trust of the banks with innovation fintech.
