TIME TO REFLECT AND RENEW

July, 2024
Confidential and proprietary © Praxian Global Pvt.Ltd.
CONTENTS
01 Reflections on the
journey so far

02 A glass half full

03 Time to renew:
Emerging trends

04 Fintech reloaded

4.1 Niche plays

4.2 Value chain specialists
4.3 Re-engineering the tech core
4.4 Cutting-edge tech plays
4.5 Tech-Fins

05 Forging meaningful
partnerships

06 Action agenda for key

stakeholders
FOREWORD
Fintechs in India have emerged as a powerful force, driving
technological advancements, and revolutionizing the
financial services industry. By embracing innovation, these
agile and tech-savvy organizations have transformed how
financial services are accessed and experienced. They
have brought about greater financial inclusion, improved
efficiency, and enhanced customer experiences, shaping a
new era in finance.

While fintechs have achieved substantial success, they now

encounter fresh hurdles. This report lists the new challenges
that the incumbents are facing from different quarters and
the opportunities it provides to transform themselves. The
challenges are not insurmountable, but they require a
strategic and collaborative approach from all stakeholders
in the financial services ecosystem.

The recommendations put forth call for greater

collaboration between fintechs and financial institutions.
Fintechs have demonstrated their ability to innovate, and
financial institutions can complement this innovation with
their extensive customer base and established legacy.

Madhur Singhal Together, they can create transformative solutions that can
shape the future of financial services in India and this would
truly be a win-win situation for all.
Managing Partner - Financial Services
The report also underscores the role of regulatory bodies
and industry associations. As fintechs become mainstream,
it is crucial for regulators to foster an environment that
supports innovation while ensuring consumer protection – a
journey that is already underway as we speak. By striking a
balance between facilitation and regulation, regulatory
bodies can nurture fintech innovation and contribute to a
robust financial ecosystem.

This report serves as a call to action for all stakeholders. It is

a call to embrace innovation, forge meaningful partner-
ships, and create an ecosystem that fosters continuous
growth and transformation. Together, a future can be built
where fintech and traditional financial institutions work hand
in hand to drive progress and prosperity for all.
 04

EXECUTIVE SUMMARY
Fintechs have revolutionized the financial services landscape • Cutting-edge tech plays - Cutting-edge tech plays will
through technology-driven innovation, fostering accessibility, leverage new technologies like AI, ML, and blockchain to
efficiency, and inclusivity. Despite their success, they face revolutionize financial services.
challenges that require attention. However, certain learnings have
emerged that can form the basis of the fintech roadmap for India. • Tech-Fins - Tech-Fins, represented by tech companies, will
integrate financial services technology into their products,
Firstly, there is a need for fintechs to explore untapped sectors leveraging their existing customer base to offer seamless and
beyond the discovered stories in payments, digital wallets, lending, tailored fintech solutions.
and investment tech. Secondly, building deep and collaborative
partnerships with traditional financial institutions is crucial to These shifts will shape the future of fintechs, enabling them to
achieve the true potential of fintech partnerships. Instead of deliver innovative and impactful solutions that, eventually will
competing, genuine collaboration and trust can spark a more reshape the financial services landscape from what we know it to
profound trend of innovation. Lastly, as fintechs become be today.
mainstream, they also need to embrace principles and processes
demanded of financial services players with respect to governance To forge meaningful partnerships between traditional financial
and compliance. Regulators are actively engaging with fintechs to institutions and fintechs, FIs must adopt a collaborative, long-term
foster innovation while safeguarding consumer protection. These approach through an "Agility Centre" for partnership-led
insights and the recent landscape-shaping regulations present both innovation strategy. By identifying the right fintech partners,
challenges and opportunities for fintechs, calling for strategic understanding compatibility, and unlocking value realization, FIs
reimagining and greater responsibility towards governance and can offer comprehensive solutions tailored to customer needs. This
compliance. approach empowers FIs to embrace their transformative role and
drive the industry forward.
We believe that Fintech Reloaded or the next generation of
fintechs, will bring significant changes to the financial services The action agenda for key stakeholders in the fintech industry
industry. These fintechs will focus on five personas: involves embracing collaboration and innovation to drive the
industry forward. Financial institutions need to adopt an "Agility
• Niche plays - Niche plays will offer specialized products to Centre" approach to identify and partner with fintechs, while
cater to specific customer segments, meeting unique needs fostering a culture that accepts failure as part of innovation.
with highly customized offerings. Fintechs must navigate the regulatory landscape and build lasting
partnerships with incumbents, focusing on customer protection and
• Value chain specialists - Value chain specialists will focus on data privacy. Regulators and industry associations can promote
specific aspects of the value chain to address deep-rooted trust and education, facilitate collaboration through workshops,
industry challenges. and consider the creation of a self-regulatory body for the fintech
industry. By working together, these stakeholders can harness their
• Re-engineering the tech core - Re-engineering the tech core unique insights to shape a transformative and inclusive future for
involves prioritizing back-end transformation to enhance financial services.
operational efficiency.
1
REFLECTIONS
ON THE JOURNEY
SO FAR
 06

Over the past decade in India, fintechs have spearheaded a Neo-banks offer streamlined onboarding and a wide
revolutionary shift in the financial services industry landscape range of banking services through a single app.
of India. By embracing technology and introducing Customers can manage accounts, make payments,
innovative solutions, they have fundamentally transformed the access personalized financial tools, providing
accessibility and usability of financial services, streamlining convenience and control over their finances
the processes to make it easier & efficient, and enhancing
inclusivity. While incumbents, owing to their inherent structure Payment gateway providers offer user-friendly interfaces
remained focused on routine operations, fintechs, leveraging and customizable dashboards that enable MSME
on their strengths - inherent agility and the use of new-age businesses to manage their transactions, track payments,
technologies, introduced fresh ideas and products to and gain valuable insights for informed decision-making
transform the industry. A key outcome of such changes was
the rapid digitization across products and services and the Insurance aggregators leverage technology to simplify
impact is evident from the transitions they have brought in the the insurance purchasing process, allowing customers to
industry as seen below: compare and choose the best policies based on their
specific needs, resulting in a hassle-free and efficient
A few factors that have driven the impact & growth that experience
fintechs have been able to achieve are:
Investment platforms utilize intuitive interfaces and
1. Customer-centric approach: Fintechs have worked with advanced analytics to empower individuals to invest in
a customer-first approach that has helped them diverse assets, with features like goal-based planning,
understand customer needs and solve them with a unique portfolio tracking, and automated investment options,
approach. Examples include: making investing more accessible and user-friendly

Digital lending market in India has grown at 33% Disbursement amount by fintech in India has grown
CAGR from FY19-23, reaching INR 2,905 K Cr in FY23 at 41% CAGR from FY21-23
Digital lending in India Disbursement by Fintechs in India
(INR K Cr, FY19-23) (INR Cr, FY21-23)

2,905 92,267
CAGR CAGR
33% 41%

913 46,616

FY19 FY23 FY21 FY23

Active NSE clients for digital players have increased Digital transactions has grown at 44% CAGR from
at 44% CAGR from FY20 to FY23 FY19 to FY23

Active NSE clients of digital players Volume of digital payment transactions

(# M, FY20-23) (# Cr, FY19-23)

CAGR 32.7
44% 13,462
CAGR
44%
11.0

3,134

FY20 FY23 FY19 FY23

 07

2. Enhanced Digitization: Fintech's digital transformation subsequent, larger loans depending on their credit
brought a modernized approach that offers enhanced history.
accessibility, convenience, and inclusivity. By leveraging
innovative technologies, fintechs have digitized processes 4. Agility: Fintechs have made a mark with their ability in
providing seamless and user-friendly experiences. quickly adapting to market demands and driving
Examples include: continuous innovation. Their nimbleness allows them to
stay ahead in the ever-evolving financial landscape.
• Claim management players in the insurance industry Examples include:
are transforming the way claims are handled,
particularly in auto insurance. Through innovative • Rapid adoption of UPI (Unified Payments Interface)
digital solutions, they enable policyholders to submit by fintechs, has revolutionized peer-to-peer
claims digitally, track the progress of their claims in payments in India. Fintech UPI players, such as
real time, and receive faster settlements. These PhonePe, Google Pay, and Paytm, have captured a
advancements are revolutionizing the customer >95% market share, showcasing their dominance in
experience, making it more convenient, efficient, and the UPI space and their impact on the digital
transparent throughout the claim journey. payments ecosystem

• PoS enablers leverage technology to simplify and • Fintech lending players have leveraged AI/ML
streamline payment processes across different technologies to incorporate advanced underwriting
modes, making it easier for merchants to accept models, enabling faster and more accurate credit
payments and reconcile transactions, enhancing assessments. These technologies have streamlined
efficiency and reducing manual effort the lending process, making it more efficient and
accessible to a broader range of borrowers
• Supply Chain Finance (SCF) fintechs have digitized
the process of invoice discounting, connecting • Fintechs have introduced API technologies that
anchor companies with lenders, and enabling facilitate easier integration between different systems
seamless and efficient financing solutions, improving and platforms. This has enabled seamless data
working capital management for businesses sharing, interoperability, and collaboration, leading
to improved user experiences and enhanced
• Financial statement analytics providers are able to efficiency in various financial processes
extract and analyze bank statements and other
financial statements, significantly reducing manual There is scarcely a Board room or leadership meeting in
effort and improving accuracy, thus providing any traditional financial institution today where fintechs
businesses with valuable insights for decision-making do not occupy a meaningful mindshare. This is testimony
to the edifice that has been built over the last decade by
3. Providing access to underserved segments: Fintechs fintechs.
have demonstrated remarkable agility in reaching out to
unserved and underserved customer segments with While celebrating the achievement of fintechs in the last
relevant, contextual product offerings. For example, decade, it is crucial to acknowledge the challenges that
digital lenders have built innovative risk assessment lie ahead. The very nature of a fintech’s functioning over
models to provide loans, even to individuals without the years has given rise to a fresh set of hurdles that
traditional documents, thus making them discoverable for demand attention.
2 A GLASS
HALF FULL
 09

While celebrating the achievement of fintechs in the last decade, similar opportunities. There is a need, once again, for fintechs
it is also fair to acknowledge the learnings from the empty half of to take the road less travelled!
the glass. With the wisdom of hindsight and taking nothing away
2. Building deep partnerships … at scale
from the deep-rooted impact that fintechs have made across the
financial services industry, we have identified three areas that On the face of it, it would appear that partnerships between
could form the basis of the fintech roadmap for India. fintechs and FIs have become common news - just in the year
2022, over 30 partnerships were announced in the BFSI
1. Taking the road less traveled sector. Traditional players have sought to meet four
objectives from these partnerships - customer acquisition,
Over the last decade, fintechs have made a significant
process improvement, banking-as-a-service and innovative
impact in a few sectors that were at the forefront of the
product design.
digital revolution in the financial space: payments and
digital wallets, alternate lending, and investment tech.
Yet the pertinent question is whether this is the true potential
Having said that, it is interesting to notice the remarkably
of these fintech partnerships. Were both institutions able
high concentration of fintechs in these sectors. For instance,
to effectively leverage each other’s resources, skill sets, and
in the payments and digital wallets segment alone there are
expertise to achieve the desired outcomes?
over 2,000 fintechs, similarly in lending where a large
number of fintechs are building out their business models. Fintechs have strived to establish themselves as players capable
Ironically, entrepreneurial interest has continued to focus on of owning the entire value chain, leveraging their agility and
discovered ‘top-of-the-funnel’ ideas, to a point when legacy-free tech stacks. This approach fostered a competitive
perhaps one could start seeing sameness and an onset of rather than a collaborative environment with FIs. While
the law of diminishing returns as more players crowd into partnerships have indeed been established, they have often
ended up akin to service contracts that allocate

Partnership themes Proposition Indian Global

• Fintech act as market place and

Serve as a refer the customers basis the X X
channel to requirements specified by the
increase institutions X X
customer • Apart from referrals, fintech and
acquisition Bank also work on co-lending
models X X

• Plug-in fintech APIs/services in

Leverage overall journey to enable digitization X X
technology to and increase efficiency/speed
streamline • Common use cases can be customer X X
onboarding, managing
processes collection/payments, and enhancing
the platform services X X

• Due to regulatory constraints or

Capitalize on
float by serving backing on bank’s reliability, X X
fintech deposits funds given by
as a banker to
the fintech and
customers to their bank account X X
• Fintech manages customers and
build brand(only their product interaction
banks) X X
• Create flagship product dedicated
to the customers of the platform X X
Co-creation and building products/offerings in
of product
•
collaboration with each other
Many global partnerships are to
X X
offerings
allow fintech players to enter and
operate in new countries X
X

Source(s) : Secondary research, Praxis analysis

 10

tasks. We believe that more could have been done to foster It is noteworthy that fintechs, now being acknowledged as
genuine collaboration and trust between the parties involved, significant players in the economy, are finally gaining
which could have sparked off a more deep-rooted trend of recognition from regulatory bodies. These bodies are making
innovation. deliberate efforts to ensure that innovation occurs in a manner
3. Deeper appreciation of the principles of regulation that benefits all stakeholders. This proactive involvement
signifies the importance of maintaining a fair and secure
As fintechs become mainstream, they are increasingly
financial ecosystem while fostering the growth of fintech
having to internalize and accept not just the principles but
innovation.
also the processes and procedures that enable adherence
The last year has seen the introduction of some
to the extant regulations. At the same time, the regulators
landscape-shaping regulations, especially in digital lending,
have started to embrace fintechs as catalysts of inclusive
broking & asset management as well as in insurance. These
and yet superior customer experience. Regulators have
discontinuous shifts present both, challenges and opportunities
adopted a proactive approach by recognizing the
for fintechs. As they prepare to navigate the new world,
importance of fostering innovation while ensuring consumer
fintechs have the chance to reimagine their strategies and
protection. They have actively engaged in shaping and
discover new avenues of growth. As they gain scale and
adapting regulations to accommodate the evolving
emerge as meaningful market participants, fintechs will have to
dynamics of the market. This collaborative effort reflects the
assume even greater responsibility towards building businesses
need to strike a balance between facilitating fintech
that meet the standards of governance and compliance
innovation and maintaining a robust regulatory framework
expected of them.
that safeguards the interests of all stakeholders.

2020 Regulatory sandbox

• A controlled environment for testing and experimentation of new technology solutions before they are
commercialized
• Intended to provide fintech’s framework for testing solutions and for RBI to monitor and assess their impact on
the financial sector

2021 Master directions on Prepaid Payment Instruments

• Prohibits the loading of PPIs by credit lines from non-banks
• Refrains co-branded entities from accessing the customer data, the core of their business to provide
customer-centric offers & differentiated products

2022 Digital Lending guidelines

• All loan disbursals and repayments will be executed only between the bank accounts of the borrowers and
the regulated entities
• Any fees or charges payable in the credit intermediation process will be paid directly by regulated entities
and not the borrower

2022 Broking limitations by SEBI

• Every broker has to transfer all unused funds lying with their clients on the first Friday of every month or quarter
• This move is expected to increase brokerage costs
• Brokers will have to use their own capital to execute trades the following Monday

2023 Foreign remittance tax

• The Tax Collection at Source (TCS) for foreign remittances has been increased from 5% to 20% of the
transaction amount
• It is applicable in some instances such as foreign tour packages, providing loans, sending gifts, and buying
stocks of foreign companies, among others

2023 Revived FLDG model

• Post the DL guidelines of 2022, the FLDG model was barred
• However, later the RBI decided to revive the FLDG model by capping the risk guarantee taken by fintechs
to 5% of the portfolio amount
• Backing required to prove the guarantee, like bank FD or cash deposit

Source(s): RBI website, News reports, Secondary research, Praxis analysis

3
TIME TO RENEW:
EMERGING TRENDS
 12

Looking at the investments happening in the fintech space in specializing in value chain (~12%), and serving the
the last 4 quarters, it is observed that the new age fintechs incumbents through back-end transformations (~17%), etc.
have already started seeing traction. More & more fintechs This sets the trend for future opportunities and further
are raising funds that are serving the niche sectors (~7%), strengthens our point of view on the matter.

# of fintech players and total funding received (till series B)

CY23

Non exhaustive
103 540
6%
Sector focussed
11% 20% financing Trade finance SME solutions

12% 7% Customer Data

acquisition Regtech protection
17% Open Virtual
banking account API

72%
56%
Payments Lending Investment
& wallets platforms management

# of players Total funding (US$ M)

Generic Backend services
Niche focussed Value chain specialists
4 FINTECH
RELOADED
 14

The inevitable result of the above discussion is the B. Value chain specialists
changes in the business models of the existing and Instead of attempting to own the entire value chain, we
upcoming wave of fintechs that will solve for these believe that fintechs focusing on a specific aspect of the
challenges. The next generation of fintechs will have a value chain will emerge as a dominant persona. By
different focus, centered on the following five personas: doubling down their innovation efforts in specific areas,
A. Niche plays fintechs can offer specialized and customized products or
services allowing them an opportunity to delve deeper to
Fintechs will focus on niche products and target specific solve deep-rooted and persistent issues that plague the
customer segments to meet unique needs with highly industry today. This shift towards specialization is an
customized product offerings. In the crowded fintech important development in the fintech industry and is
landscape, fintechs will offer specialized products to driving impactful changes in how financial services are
allow them to differentiate themselves from the delivered.
broader, more generalized offerings of their
competitors. Fintechs have numerous opportunities to Several changes have already been set in motion, with
focus their innovation efforts in specific areas. Here are many more expected to unfold in the near future,
a few industry examples: including:
▪ With the growing ▪ With the recent
demand for education loans in India, fintechs can FLDG regulation, we can anticipate the emergence of
play a crucial role in streamlining the process. They fintechs solely focused on assisting financial
can offer platforms that help customers find the best institutions (FIs) in loan processing as Loan Service
loan options across multiple financial institutions, Providers (LSPs). These companies will enable FIs to
simplify document collection, and provide reach a wider audience and streamline customer
personalized repayment solutions. acquisition
E.g. – LendKey (United states) is a lending platform E.g. – Chime neobank (United States) partners with
that connects borrowers to partner lenders. Its traditional banks to offer its mobile banking services.
partners include banks and credit unions It acts as a customer acquisition channel, enabling
nationwide. Through LendKey, borrowers can apply traditional banks to reach a broader customer base
for private student loans for undergraduate and and leverage Chime's user-friendly platform
graduate programs, as well as student loan
▪ Regtech: Fintechs are dedicated to helping FIs
refinancing.
streamline their customer onboarding processes and
▪ Fintechs can ensure compliance with key regulatory requirements
cater to the growing demand for sustainable and such as Know Your Customer (KYC). These Regtech
impact investing, offering platforms that connect solutions will contribute to more efficient and
investors with socially responsible investment compliant operations for FIs
opportunities and tools to track the environmental
and social impact of their investments. E.g. – ComplyAdvantage (United Kingdom) is using
AI, ML, and natural language processing to assist
E.g. – Kiva (United States) is a P2P lending platform regulated organizations in managing risk and
that allows individuals to give out loans to combating financial crime. Their AML technology
underserved individuals and communities helps detect suspicious transactions, including those
worldwide from high-risk locations and involving unusual
currencies or account behaviour
▪ Trade finance: Blockchain technology can empower
trade finance by enabling secure transactions of LCs ▪ Customer excellence: Fintechs can greatly
and BGs. It reduces reliance on physical documents, contribute to customer excellence by streamlining
streamlines verification, and enhances trust processes such as request raising and service
between banks across countries. Real-time visibility processing, enabling financial institutions to
and transparency lead to smoother cross-border efficiently resolve customer inquiries and issues.
trade and greater global commerce efficiency Through innovative tools and technologies, fintech
solutions integrate with various stakeholders across
E.g. – IBBIC (India) Indian Bank’s Blockchain Infrastructure Co departments, facilitating seamless collaboration,
Pvt Ltd, is a joint venture by 18 banks in India to revolutionize real-time information sharing, and coordinated
efforts to address customer needs. By leveraging
digitize and automate the processing of inland letters of credit these capabilities, financial institutions can enhance
(LCs). By leveraging blockchain, IBBIC plans to address the operational efficiency, reduce errors, and deliver
challenges of legacy systems and paper-driven processes in exceptional customer experiences through optimized
processes and seamless interactions.
among stakeholders E.g. – Snapsheet (United States), a digital claims
management company, has helped improve the
customer experience for FIs by streamlining and
 15

digitizing the claims process, enabling faster and more providing a comprehensive digital banking solution,
efficient resolution of insurance claims, ultimately competing with prominent players in the market.
enhancing customer satisfaction using a cloud-based ▪ Open banking: Back-end services for open banking
claims processing software platform facilitate secure data sharing and collaboration between
▪ Data protection: Fintechs can also play a significant financial institutions, fintechs, and third-party developers.
role in enhancing customer information security by These platforms provide API gateways, developer portals,
implementing encryption technologies across various consent management, data privacy controls, and security
platforms. These measures will bolster customer protection mechanisms to enable the secure exchange of financial data
and ensure the secure handling of sensitive data
E.g. – Plaid (United States, UK & Europe) offers open
E.g. – FortifyData (United States) assists FIs in securing banking APIs that enable FIs to securely connect with their
their data through cybersecurity solutions and services, customer’s bank accounts and access real-time financial data.
helping identify vulnerabilities in assets, implementing By integrating with the platform, FIs can enhance their digital
threat intelligence, and using patented & configurable banking services by providing features like account
scoring models that accurately account for threat verification, transaction history, and balance inquiries
vectors and risk tolerance, all the while ensuring
regulatory compliance. FIs can enhance their data ▪ Virtual account solutions: Fintechs enable banks to offer
security measures and protect sensitive customer virtual accounts and implement functionalities like Payment
information from cyber threats. on Behalf Of (POBO) and Collection on Behalf Of (COBO).
They provide the necessary infrastructure and technology
C. Re-engineering the tech core solutions, allowing seamless digital transactions, centralized
payment, and collection activities, and improved financial
The digital transformation of the past decade had its
operations. This collaboration between fintechs and banks
focus on front-office & middle-office transformations.
enhances customer experience and drives operational
Inevitably, the back-end transformation was relegated
efficiency.
to the back burner. But that so much innovation having
been unleased on the front-end customer experience,
the tech core of most incumbents is becoming the new E.g. – Sila (United States) offers an API platform for
bottleneck of the assembly line. Very similar to what developers to build financial applications, including virtual
Alex Rogo, the protagonist of Eliyahu Goldratt’s book account services. FIs can integrate with Sila's API to enable
on the Theory of Constraints ‘The Goal’ discovered, virtual accounts for their customers, facilitating seamless
addressing one part of the assembly line does not yield transactions and fund management.
the desired output since the bottleneck simply shifts to
another node. We believe that something similar is likely D. Cutting edge tech plays
to happen in financial services, unless a back-to-front While some level of digitization has already been
approach is adopted by the entire ecosystem. accomplished, there is still a scope of leveraging the power of
Opportunities lie in the following fields: technologies. With the advent of new-age technologies such
as generative AI, ML etc., which can fundamentally transform
SaaS / enterprise tech players: SaaS and enterprise businesses, the adoption becomes paramount. Two critical
tech companies are essential partners for fintech firms, aspects to consider while dealing with new tech are the
offering ready-to-use software applications that speed of development and its seamless integration
seamlessly integrate into existing platforms, providing into financial processes. Fintechs excel in bringing in new
scalability, flexibility, and cost efficiency. By leveraging technologies in an agile manner, enabling them to become
Saas offerings, fintechs can achieve rapid experts in these innovations and efficiently apply them to
time-to-market, benefit from continuous innovation, and financial services. Some key areas that have started to see
focus on their core competencies while relying on reliable meaningful traction are:
partners for technology infrastructure and support. These
collaborations empower fintech firms to optimize Moreover, the integration of new technology in financial
operations, enhance customer experiences, and establish processes is pivotal for making them more inclusive and
a strong presence in the digital finance landscape. easier to access. Fintechs have a distinct advantage in this
area as they prioritize the adoption of emerging
E.g. Zeta (India) – Zeta operates as an enterprise technologies, aiming to enhance the accessibility and
technology provider, offering its ACS (Advanced inclusivity of financial services. By leveraging their expertise
Clearing Solution) for high-volume transactions in the and agility, fintechs can effectively utilize these new
financial services sector. It serves banks and fintech technologies to revolutionize the financial industry, providing
businesses with innovative tech-based products. With a efficient and user-friendly solutions to a broader range of
strong presence in India and expanding into the US individuals and businesses Some key areas that have started
and UK, Zeta aims to disrupt the banking industry by to see meaningful traction are:
 16

▪ Customer acquisition in lending: With the recent FLDG By leveraging their existing user base, they can enhance the
regulation, we can anticipate the emergence of fintechs sophistication of interactions and create a seamless customer
solely focused on assisting financial institutions (FIs) in loan journey with the integration of fintech services.
processing as Loan Service Providers (LSPs). These
companies will enable FIs to reach a wider audience and One of the key factors that make this approach lucrative is
streamline customer acquisition access to a vast amount of customer data. Through this data,
tech companies gain insights into their customers' specific
E.g. – Tractable (United States) utilizes AI technology to
needs and pain points. This access to customer data enables
assist FIs in streamlining claims processing operations.
them to develop tailored solutions that address the unique
By leveraging AI algorithms, Tractable enables FIs to
requirements of their user base. This new ‘persona’ of players,
automate and expedite insurance claim assessments,
dubbed “Tech-Fin”, have launched their services in India, but
improving efficiency and customer satisfaction
haven’t really been able to achieve the intended scale yet,
▪ Data Analytics: Fintechs are utilizing data analytics to given the competitive and regulatory context in India. Some
assist FIs in various ways, including risk assessment, fraud recent examples include:
detection, customer segmentation, personalized marketing,
and improving operational efficiency. By analyzing vast • Amazon:
amounts of data, fintechs help to gain actionable insights,
Global context: Amazon has been slowly but steadily making its
enhance decision-making, and deliver innovative financial
way into the financial services sector in the United States, through
services to their customers
various products/ initiatives like Amazon Cash, Amazon Lending,
& Amazon Pay. A lot of these services are developed in-house and
E.g. – Belvo (United States) utilizes data analytics to fulfilled with partnerships with FIs in the US.
help companies by providing access to users’ financial
Indian context: Amazon collaborated with several fintechs to
data and provide valuable insights. This empowers
provide financing solutions to their sellers. This partnership enabled
companies to make informed decisions, improve risk
Amazon sellers to access working capital loans and streamline their
assessment, and enhance their financial services data operations especially during the peak season. Amazon has also
analytics capabilities. worked with credit card issuers and other digital lenders to provide
financing to buyers on its platform. It launched Amazon Pay even
▪ Distributed Ledger Technology (using blockchain):
before Meta launched WhatsApp Pay, but has not been able to
Fintechs involved in blockchain offer back-end solutions for
scale it up at least as far as standalone payments are concerned.
digital asset management, blockchain network integration,
smart contract development, and secure transactions. These • Meta:
solutions handle the complexities of blockchain protocols, Global context: Meta is playing a leading role in the development
wallets, private key management, and blockchain consensus of the metaverse, through its popular platforms like Decentraland &
mechanisms. Sandbox. By creating immersive and interactive experiences,
developing new payment methods, and building a community of
E.g. – Veem (United States) utilizes blockchain technology
developers, Meta could help to transform banking in the metaverse.
as one of its multiple rails to enhance the efficiency and
A recent example of the same is JPMorgan Chase’s announcement
security of payments. By leveraging blockchain, Veem of opening a virtual branch in the metaverse on Meta’s Decen-
eliminates the need for intermediary banks, resulting in traland platform.
faster settlement times and reduced costs associated with
wire and FX fees. Through its blockchain route, Veem Indian context: Meta has entered the financial services space
streamlines the payment process, providing businesses on through WhatsApp, its widely popular messaging platform. Meta
its network with quicker processing speeds and cost expanded its services by introducing WhatsApp Pay, a digital
savings. payment feature. WhatsApp Pay integrates with the existing
messaging interface, making it convenient for users to send and
receive money within the same platform they use for communica-
E. Tech-Fins
tion. While WhatsApp Pay hasn’t made a dent in the market yet, the
Tech companies recognize the importance of increasing promise is immense!
customer engagement and expanding their share of the
customer's wallet. As a result, they have started • Apple:
incorporating financial services technology into their Global context: Apple has established itself as a fintech player with
products by developing the technology in-house. Their aim its digital wallet offerings, including Passbook (now Wallet) and
is to create an ecosystem powered by these new fintechs, Apple Pay. Apple Pay enables secure transactions using NFC
seamlessly integrated into their existing offerings. These tech technology, prioritizing user privacy through encrypted data
companies hold a significant advantage over other players transmission and biometric authentication. With a significant market
due to their already established customer base. share and two billion active devices, Apple dominates the mobile
wallet space.
 17

• The launch of the Apple Card introduced unique security It is also reportedly in discussions with leading Indian banks to
features and sharing options, targeting a diverse customer base. issue a co-branded credit card.
Additionally, Apple entered the BNPL market with Apple Pay
• Reliance Jio: Jio Finance, currently known as Reliance
Later, offering interest-free instalment payments. Partnerships
Strategic Investment Ltd, is an RBI registered non-banking
with Stripe, Adyen, and GoDaddy demonstrate Apple's focus
finance company and has been driving the financial services
on in-store mobile wallet transactions
franchise for the Reliance group. By transforming it into a
• Indian context: Apple is exploring tie-ups in India, including a standalone fintech entity, Reliance is capitalizing on the
UPI-integrated Apple Pay app. Previously interested in bringing growing digital ecosystem in India. The company has a
its payment service to India, Apple faced regulatory challenges. massive subscriber base of over 440 million. With these
However, recent efforts have resumed, with discussions ongo- initiatives, Reliance is actively venturing into the fintech
ing with the National Payments Corporation of India (NPCI) to landscape and poised to make an impact in India's evolving
launch Apple Pay on the UPI platform. If successful, Apple Pay financial services sector
will offer UPI payments to Apple users without third-party apps.

Persona Case study Example

Education loan aggregators: Fintechs LendKey (United States) connecting

streamlining education loan processes borrowers to partner lenders for private
student loans and refinancing.

Niche plays Sustainable investment platforms: Kiva (United States) enabling P2P lending to
Fintechs connecting investors with impact underserved individuals and communities
investing opportunities. worldwide.

Trade finance: Fintechs leveraging blockchain IBBIC (India) digitizing trade finance processes
for secure trade finance transactions. and enhancing transparency among
stakeholders.

Customer acquisition in lending: Fintechs Chime (United States) partnering with banks to
focused on loan processing as Loan Service provide mobile banking services and widen their
Providers (LSPs). customer base.

Regtech: Fintechs helping FIs with customer ComplyAdvantage (United Kingdom)

onboarding and compliance. using AI to assist organizations in managing risk
and combating financial crime.
Value chain
specialists
Customer excellence: Fintechs improving Snapsheet (United States) streamlining digital
customer support processes for FIs. claims management and enhancing customer
experiences for FIs.

Data protection: Fintechs enhancing customer FortifyData (United States) offering

data security for FIs. cybersecurity solutions to protect sensitive
customer information.

SaaS / enterprise tech players: These are Zeta (India) offers its ACS (Advanced Clearing
companies that provide ready-to-use software Solution) for high-volume transactions in the
applications and technology infrastructure to financial services sector, disrupting the banking
fintech firms, enabling rapid time-to-market, industry.
scalability, flexibility, and cost efficiency while
enhancing customer experiences and optimizing
operations in the digital finance landscape.
 18

Open banking: This is a financial practice that Plaid (United States, UK & Europe) -
enables secure data sharing and collaboration Provides open banking APIs that enable secure
between financial institutions, fintechs, and data sharing and real-time financial data access
third-party developers through API gateways, for FIs.
consent management, and data privacy controls.

Re- Virtual account solutions: These are Sila (United States) Offers an API platform for
engineering fintech-enabled platforms that allow banks to developers to build financial applications with
the tech core offer virtual accounts to their customers and virtual account services.
thereby enhancing customer experience and
operational efficiency.

Artificial Intelligence / Machine Learning: Tractable (United States) using AI for faster
Fintechs automating processes, fraud detection, and efficient insurance claim assessments.
and personalized finance.

Data Analytics: Fintechs providing insights Belvo (United States) offering data analytics
for risk assessment and customer services to help companies make informed
segmentation. decisions.
Cutting edge
tech plays
Distributed Ledger Technology - Fintechs Veem (United States) streamlining payment
offering back-end solutions for secure processes and reducing costs through blockchain
transactions and smart contracts. technology.

Tech companies understand the value of Tech giants like Amazon, Meta and Apple:
boosting customer engagement and expanding Amazon, Meta (formerly Facebook), and Apple
their share of the customer's wallet. To achieve lead the way in incorporating fintech into their
this, they integrate financial services technology ecosystems, elevating customer experiences.
in-house, aiming to build an ecosystem Amazon offers Amazon Pay, Amazon Lending,
empowered by fintechs seamlessly integrated and financing solutions through collaborations
Tech-Fins into their existing products. Leveraging their with FIs. Meta integrates fintech into the
established customer base, these tech giants gain metaverse with WhatsApp Pay and JPMorgan
a significant advantage, enabling sophisticated Chase's virtual branch in Decentraland. Apple
interactions and a seamless customer journey enhances mobile payments with digital wallets,
through fintech integration. BNPL options, and potential expansion on
India's UPI platform. These tech giants are
shaping fintech's future and revolutionizing how
customers interact with financial services.
5
FORGING
MEANINGFUL
PARTNERSHIPS
 20

In the evolving landscape of fintech 2.0, imagine a tapestry capacity and bandwidth to take on this new role.
where each thread represents a unique financial service. With
The question now is: How FIs can truly be prepared for the
new companies entering the picture, it becomes vital to have a
transformative role that awaits them in the evolving fintech
strong foundation that brings these threads together to
landscape?
revolutionize the industry. Traditional financial institutions (FIs)
will play a significant role in this transformation. Unlike in the Agility Centre for partnership-led innovation strategy to make
past, their partnerships with fintechs will be truly collaborative, FIs ready for the new role:
resulting in disruptive and innovative solutions. Together, FIs and The way to move forward is to move together. The partnership
fintechs will shape the future of finance, combining stability and relationship between fintechs and institutions is a mine of
innovation to drive the industry forward potential opportunities that many times go untapped because
Are FIs ready for this new role? of the rush to catch up. The utilization of these partnerships and
understanding the true potential that these alliances possess is
Over the last decade, traditional financial institutions (FIs) have
also important.
not been able to adopt partnerships as an effective innovation
strategy. While FIs and fintechs have collaborated in the past, To drive these partnerships to their full potential, a dedicated
these partnerships often revolved around service contracts, with internal team called Agility Centre would have to identify
FIs earning commissions or float income. The focus was on the right fintechs based on the need of the institutions and their
short-term gains rather than jointly strategizing to build customers, forge those partnerships, and work closely with the
long-term innovative solutions. As a result, FIs have primarily stakeholders from the ideation of the new products and
been engrossed in their day-to-day operations, lacking the services till their implementation would be the road to success.

FIs can leverage fintech partnerships to become industry trendsetters if they

approach innovation by building solutions from the ground up

Key propositions

Innovation Focus: Dedicatedly identifies areas for

improvement and leverages fintech partnerships to deliver
FIs needs to build a dedicated in-house tailored solutions
team, to drive innovation via fintech
End-to-End Partnership Management: Drives the entire
partnerships
lifecycle of fintech partnerships, from ideation to successful
implementation
Collaborative Approach: Works closely with
stakeholders across verticals to identify and implement
solutions that address organizational needs
‘Agility Centre’
Enabler for continuous Inside-Out and Outside-In Perspectives: Combines
innovation internal expertise with external market insights to foster
ground-up solutions and capture key market trends
Continuous Innovation: Conducts recurring activities to
Appointed team-members foster ongoing innovation, staying ahead of emerging
trends and capturing new opportunities
 21

To utilize each partnership and to assist and enable the more efficient and partnerships. A stage to understand the
fintech-enabled life cycle of innovation, partnerships, and value ideal partner for each use case and then to see if this
realization 4 key steps form the core. partnership would be compatible for both stakeholders
The creation of an innovation funnel to identify the areas where and finally unlock the value realization of this exercise for
there is the prospect for change, making the current processes both the customers as well as the stakeholders.

Innovation Funnel Value Realization

Set-up innovation office to Evaluate ongoing / newly built

identify problems & upcoming partnerships to assess potential
trends, ideate solutions and help v/s performance and diagnose
prioritize innovation initiatives steps to maximize the relationship

•Ideation & solutioning •Gap assessment

•Use-case prioritization

Appointed
team-members

Partnership Enablement Partner Finalization

Make organization “Partnership-ready” Zero in on the right partner by
i.e., equipped for collaboration by assessments and diligence on
Identifying & implementing the right tech various parameters
and people infrastructure along with
processes • Scouting
• Partner assessment
• Partner diligence

Process implementation

Legend Key initiatives

 22

Innovation potential: The following are some illustrative customer acquisition & product buildout agenda, especially in
examples of innovative and comprehensive solutions that an niche segments where they are trying to make a mark
Agility Centre create for the bank can provide through fintech Federal Bank: Federal Bank has leveraged fintech partnerships
enablement to meet the end-to-end requirements of to drive its digital transformation and enhance its banking
manufacturers: services. By collaborating with fintech startups, the bank has
• Cashflow management: This suite can include working been able to expand its customer base and improve customer
capital lending offerings and software-based analytics experience. The bank's open banking platform, which has over
solutions to better manage operations and inventory, 100 APIs and more than 100 partners, enables seamless
enabling manufacturers to efficiently manage cash flow integration with various fintechs like Jupiter, Paytm, Pine Labs,
• Invoicing solutions: This solution provides customers with PayU, and Zest Money.
tools to generate, send, and track invoices, integrated with These partnerships have allowed Federal Bank to offer
payment gateways to facilitate online payments, allowing innovative digital services and tap into new customer segments.
the seamless generation of payment instructions For example, the bank has partnered with Digivridhi to provide
• Vendor financing: The bank can extend financing to micro ATM services and a digital channel to dairy farmers in
vendors by offering anchor-based loans and invoice Gujarat, enabling them to make digital payments and become
financing, providing immediate payments and boosting the part of the formal banking system. Through these collaborations,
manufacturer's supply chain efficiency Federal Bank has increased its business and cross-selling
opportunities while maintaining a focus on digital literacy and
• Logistics management: FASTag-powered applications frictionless customer experiences.
that allow companies to manage fuel and toll payments
and garage repairs, and GPS functionalities enable Equitas SFB: Equitas Small Finance Bank has proactively
tracking of vehicles to create visibility of the distribution adopted fintech partnerships to strengthen its digital capabilities
network and drive its customer acquisition growth. The bank is actively
adding new fintech partners to enhance its digital offerings.
• Employee management: Provide solutions to process Equitas Small Finance Bank has existing partnerships with
payroll, tax management, and employee benefits neobanking platforms Niyo and Freo for current and savings
administration services, making it easier for manufacturers accounts and is in talks to close two more partnerships for
to manage their workforce liability customer sourcing. Additionally, the bank plans to add
• Customized insurance products: The partnership can fintech partners for prepaid card distribution, targeting tie-ups
lead to the creation of customized insurance products to with companies like Neokred, BankIT, and Paymint. By
cover potential risks such as equipment failure, supply collaborating with fintechs, Equitas Small Finance Bank gains
chain disruptions, factory hazards, etc access to a pan-India customer base without the need for
We are already seeing early signs of these partnerships wherein extensive branch networks. These partnerships help enhance
banks have forged alliances with fintechs to help them with their customer experience and provide a tech layer above traditional
banking services.

Cashflow management Invoicing solutions

Working capital lending and Generate, send, and
software-based analytics track invoices,
integrated with
payment gateways
Bank
To develop products for all
Vendor financing steps of the supply chain, Logistics management
Anchor-based loans partnering with suitable Manage fuel and toll
and invoice financing fintechs to manage the payments and garage
financial needs of the repairs, and GPS
industry functionalities enable

Employee management Customized insurance

Process payroll, tax management, Insurance products to cover
and employee benefits potential risks and, insuring
daily operations
6
ACTION
AGENDA FOR KEY
STAKEHOLDERS
 24

Learning from past experiences is essential for growth and proactively prioritize these considerations from the outset. By
development. The financial services industry is no exception. implementing robust data protection measures and complying
Fintechs, investors, financial institutions, regulatory bodies & with relevant regulations, fintechs can build trust, reputation,
industry associations all play an important part in shaping the and long-term customer loyalty. Making data privacy a top
industry’s trajectory. Each stakeholder has unique insights and priority differentiates fintechs , attracting customers who value
experiences that can provide valuable learnings to the entire the security and confidentiality of their personal and financial
ecosystem. By understanding and reflecting on these information
learnings, stakeholders can make informed decisions, adapt
to changes, and capitalize on opportunities. The key Regulators and industry associations
responsibilities of each stakeholder group of the fintech Customer education and trust-building: Regulators and
industry are: industry associations play a crucial role in customer education
and trust-building within the fintech industry. Through clear and
Financial institutions: transparent regulations, regulators can establish standards that
Embrace innovation: Financial institutions as custodians of protect consumers and foster trust in fintech services.
public money have a key role to play in the continuous Additionally, industry associations can collaborate with
innovation that the industry must necessarily undergo. Hitherto regulators to develop educational campaigns that inform
they have tended to keep the fintech community at an arm’s customers about the benefits and risks of fintech services,
length, treating them either as competitors or customers or empowering them to make informed decisions. By working
channel partners, but never really as true partners. This needs together, regulators and industry associations can promote a
to change, and change quickly. culture of trust, raise awareness about the value of fintech
innovations, and ultimately enhance customer confidence in
Learn to fail: Failure is the stepping stone to the industry.
innovation-at-scale. Traditional players are by nature
circumspect, and afraid to fail. They need to create Collaboration workshops and platforms: Collaboration
acceptance of failure as an inevitable part of innovation, and workshops and platforms organized by industry associations
reward those who fail fast and pick themselves up to test the play a crucial role in facilitating collaboration between
next idea. financial institutions and fintechs. These platforms serve as a
Capability building: What got us here won’t get us there! space for knowledge exchange, fostering collaboration and
Assimilating relevant talent which can act as a bridge addressing regulatory challenges effectively. By bringing
between fintechs and incumbents is a vital part of the stakeholders together, including policymakers and regulators,
transformation that incumbents must undergo. And this is industry associations enable the industry to collectively tackle
perhaps the most difficult piece in the entire puzzle. common issues, promote innovation, and drive industry-wide
growth. In addition, regulatory bodies should prioritize
Fintechs: involving fintech players and industry associations in regular
discussions to gain valuable insights into industry intricacies
Understand the canvas defined by regulations: Perhaps the
and consider their perspectives while formulating regulations.
toughest ask of innovators is to play within the contours
defined by someone else! One of the key learnings of the Creation of a self-regulatory body: The establishment of
fintech journey in India ought to be that in order to be self-regulatory bodies in industries such as the securities and
successful, fintechs will have to understand and internalize the telecommunications sectors, has demonstrated how
regulatory context and nuances and drive their innovations self-regulatory organizations (SRO) can effectively enhance
within the boundaries thus defined. Dichotomous as it might industry standards, promote consumer protection, and foster a
seem, this, perhaps is the right way forward. culture of compliance. By setting standards for conduct and
acting as a bridge between the sector and regulators, the SRO
Build partnerships that stand the test of time: One of the
can ensure that fintech entities operate with integrity,
essential ingredients of innovation going forward is to weave
transparency, and accountability.
in the vastly different incentives that drive incumbent vs
fintechs. As much as the customer problem that is sought to be
This SRO would monitor the conduct of member fintech entities,
solved, this is also a puzzle to crack. Fintechs who can crack
addressing the unique risks introduced by fintech innovation
this code will be able to build lasting and win-win
while fostering a balance between innovation and regulatory
partnerships with incumbents.
oversight. Through this collaborative approach, the
Greater focus on customer protection: In the dynamic and self-regulatory body can encourage responsible practices,
ever-changing regulatory environment, it is imperative for protect consumer interests, and maintain the trust and
fintechs to place paramount importance on customer confidence of stakeholders in the evolving fintech landscape,
perception and trust, particularly in areas concerning data ultimately contributing to the growth and stability of the
privacy and transparency. Even in sectors where specific industry.
regulations may not be in place, new FinTech ventures should
 25

ACRONYM LIST
Acronyms Description Acronyms Description

AI Artificial Intelligence ML Machine Learning

API Application Programming Interface NFC Near Field Communication

ATM Automated Teller Machine NPCI National Payments Corporation of India

BNPL Buy Now Pay Later P2P Peer to Peer

COBO Collection on Behalf of POBO Payment on Behalf of

FI Financial Institution RBI Reserve Bank of India

FD Fixed Deposit SEBI Securities Exchange Board of India

FLDG First Loan Default Guarantee SCF Supply Chain Finance

FX Forex SRO Self Regulatory Organisatoin

MF Mutual Funds UPI Unified Payments Interface

We have expertise across diverse areas and have
consistently delivered superior outcomes for clients

Transaction banking
• Help banks robust their GTM models, build
capabilities in product development
• Enable banks reimagine their tech stack
Empowering the CFO
• Enable CFOs & Treasurers to step up their
contribution to the strategy & sustainability
• Expertise in tools such as transfer pricing,
liquidity strategy & capital management Outcome-centric analytics
• Help institutions derive insights & achieve the
desired outcomes
• Ideate and identify problem statements &
design analytics-led solutions
Customer advocacy
• Assist companies make customers their
ardent advocates
• We leverage our proprietary toolkit based
on our previous work Wealth management
• Assist WM firms in identifying the right
customer segments and the product and
service capabilities
Digital transformation • Help develop the right business model and
GTM strategy to stay on top
• Support digital transformation journey from
strategy design to implementation and
oversight support
• Work with organizations as ‘one team’ to
ensure faster and better execution in creating Customer service excellence
an outcome-oriented digital journey.
• Deliver tailor-made, efficient customer-centric
solutions that precisely meet individual needs
• Assist in implementation of customer-centric
processes, targeted improvement
Commercial banking initiatives, and innovative solutions
• Facilitate banks & financial institutions in
defining their operating model, product
proposition, GTM strategy
• Revamp organization structure & tech-stack
required for winning in this space
Fintech partnership strategy
• Support in establishing an agility centre to be a
catalyst and hub for continuous
innovation
• Involved in ideation & solutioning, partner
scouting & assessment and enablement to
ensure value realization
Acknowledgements

Madhur Singhal
Managing Partner
Financial Services

Sandeep Ghosh Mit Parag Desai

Senior Manager Senior Manager
Financial Services Financial Services
CONNECT WITH US
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