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The Right Partnership
Fintech, insurtech startups are leveraging on the millennial wishlist and revolutionising the BFSI ecosystem. They are thinking ground-up and borrowing design ideas from other digital, customer-savvy offerings
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A significant portion of a financial financial services company CIO’s time these days is now spent on evaluating the fintech and startup ecosystem to establish whom to compete with and whom to partner with! As competition increases, there is a need to create mindshare among customers as more and more financial products and services are bombarded onto them. On one hand, being a heavily regulated industry, products are largely “me too” with little apparent differentiation in features. What separates firms is the way their products are positioned and serviced. And on the other, there is a “Uber-like” expectation growing among customers, mainly the millennials, in terms of instant access through smartphones and proactive notifications on service reminders.
Traditional ways of selling financial products meant reaching out to customers through intermediaries, filling out lengthy acquisition forms, understanding complex and legally worded product brochures and waiting for weeks for underwriting approvals, for products like a loan or an insurance policy. The existing core IT Infrastructure and applications were built to support such a business model. In the last few years however there has been tremendous shift with companies investing in modernizing their IT stack to digitise processes and bring in cost and time efficiencies. While the backend IT has been revamped, the frontend interfaces (websites, mobile apps) are still not measuring up to other verticals like retail e-commerce, online travel and lifestyle offerings. And there emerges the fintech opportunity.
Fintech, insurtech startups are leveraging on the millennial wishlist and revolutionising the BFSI ecosystem. They are thinking ground-up and borrowing design ideas from other digital, customer-savvy offerings.
There are two distinct value propositions that a fintech can bring to a BFSI company: a) Reduce IT costs by optimising processes; and (b) Propagate digital business by enabling new revenue streams. Both are high on CIOs and business leaders’ agenda. The issue is to choose the right fintech partnerships given the proliferation of new players and high failure rate of existing ones. There are other challenges of fintechs getting acquired or doing platform and capability changes which may not be in line with the partnered BFSI companies.
Culture mismatch is yet another issue to contend with in India – fintechs have small teams of young, high calibre employees with flat hierarchies while the BFSI companies are large organisations with a multi-layered employee hierarchy. Fintech offerings are mostly hosted on public cloud infrastructure, while traditional BFSI systems are housed in private data centres leading to a costly integration exercise while maintaining information security controls in managing customer and business data.
This mismatch is leading to new ways of partnerships – Indian BFSI companies are setting up incubation labs to co-create new business solutions with fintechs, often ending up investing in few. They are working with startup accelerators and top academic institutions to shortlist fintechs. This partnership is helping the fintechs in giving them access to business domain knowledge, data and insights as well as increasing their network with key corporate IT and business leaders.
The brave new digital world is forcing Indian BFSI companies to think outside their own environment and open their IT architecture to partner fintechs in bringing new business models, products and services to market.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.