ET BureauOn wallet players morphing into financial service providers
As long as fintech companies are in the payments space, they are neither impacting the revenue pool of a bank significantly nor are they taking away customers. However, once they start offering loan and investment products, bankers will have to take cognizance of their presence. The challenge will increase as these companies move up the value chain.
On why payments players need to differentiate
As fintech firms move up the value chain, there is a reasonable probability that they will start impacting meaningful revenue pools of banks. But how will they manage it? They will have to differentiate themselves. The businesses that fintech firms are planning to enter already have dominant players. If they want to differentiate and create a strong database of customers, they can do this either through pricing of the product/service or convenience. It may be difficult for wallet/fintech companies to compete with banks on pricing, unless they subsidise. What may work in their favour is their ability to differentiate on convenience, for at least the run-of-the-mill products which require elementary levels of trust.
On whether banks have an edge
Banking encompasses a broad base of financial services and products. Fintech firms will take time to develop capabilities across multiple product verticals. In fact, a single fintech company may not become a strong competitor to a single bank for all products. However, a group of different fintech companies, each specialising in different product verticals, can pose a serious challenge to a single bank’s overall revenue pool. The big issue at the end of the day is that banking has a lot to do with the customer’s heart and not just the mind. The experience and learnings that a wallet or fintech company has so far derived are from small-value, no risk-transactions. These are not necessarily applicable on a broad set of banking products.
When you look at broad-based financial services, there is a significant emphasis on the trust factor, which banks have built over a period of time. It will be some time before mobile wallet players reach that stage.
As a bank, we are cognizant of the challenges that lie ahead of us. We are investing significantly in reinforcing the factors that matter the most — trust and convenience. Having said this, the developments in this space are not a matter of us (banks) versus them (wallet/fintech companies), but rather of a more collaborative ecosystem, where fintech firms will develop technologies that banks can offer to their customers.
As long as fintech companies are in the payments space, they are neither impacting the revenue pool of a bank significantly nor are they taking away customers. However, once they start offering loan and investment products, bankers will have to take cognizance of their presence. The challenge will increase as these companies move up the value chain.
On why payments players need to differentiate
As fintech firms move up the value chain, there is a reasonable probability that they will start impacting meaningful revenue pools of banks. But how will they manage it? They will have to differentiate themselves. The businesses that fintech firms are planning to enter already have dominant players. If they want to differentiate and create a strong database of customers, they can do this either through pricing of the product/service or convenience. It may be difficult for wallet/fintech companies to compete with banks on pricing, unless they subsidise. What may work in their favour is their ability to differentiate on convenience, for at least the run-of-the-mill products which require elementary levels of trust.
On whether banks have an edge
Banking encompasses a broad base of financial services and products. Fintech firms will take time to develop capabilities across multiple product verticals. In fact, a single fintech company may not become a strong competitor to a single bank for all products. However, a group of different fintech companies, each specialising in different product verticals, can pose a serious challenge to a single bank’s overall revenue pool. The big issue at the end of the day is that banking has a lot to do with the customer’s heart and not just the mind. The experience and learnings that a wallet or fintech company has so far derived are from small-value, no risk-transactions. These are not necessarily applicable on a broad set of banking products.
When you look at broad-based financial services, there is a significant emphasis on the trust factor, which banks have built over a period of time. It will be some time before mobile wallet players reach that stage.
As a bank, we are cognizant of the challenges that lie ahead of us. We are investing significantly in reinforcing the factors that matter the most — trust and convenience. Having said this, the developments in this space are not a matter of us (banks) versus them (wallet/fintech companies), but rather of a more collaborative ecosystem, where fintech firms will develop technologies that banks can offer to their customers.
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