Banking veteran Rajnish Kumar's 5 big commandments for fintech to survive and thrive

Former State Bank of India (SBI) chairman Rajnish Kumar knows a thing or two about the old world of banking, having worked in the country's largest bank for nearly four decades, as well as the fintech world, which is in the news for all the wrong reasons.

Kumar is part of both the worlds. He currently serves as the chairman of BharatPe, a fintech that enables merchants to accept payments from any UPI app, and as an advisor at Indifi, a leading online lending platform offering business loans to small businesses.

However, the 66-year-old Kumar is also known for taking the fintechs head-on during his tenure as chairman of the bank for three years until October 2020. During his tenure, the bank developed YONO (You Only Need One), a digital platform, which created a stir in the market as the app emerged as a new tool for banks to onboard young customers.

In a conversation with Alok Mittal, Co-founder and Managing Director of Indifi Technologies, at a Digital Lenders Association of India (DLAC) Conclave in Mumbai, Kumar outlined the key factors for fintechs to establish sustainable points of differentiation, especially as banks rapidly adopt fintech strategies and products.

First, for every organization, it's not solely about fintech. They must carve out a niche, says Kumar. The commoditization of financial products has occurred rapidly. If you take examples of housing loans, card loans, or mutual funds, there isn't much to distinguish between them. However, each organization has its strengths. Ultimately, for any organization to survive or sustain itself over time, customer centricity is key. "Does it actually happen on the ground? That's always a differentiator – how you treat your customers and whether your organization is truly customer-centric, "ask Kumar.

Secondly, rapidly changing technology necessitates frequent rewrites, he says. In fact , the Gen AI is already creating a disruption as well as the uncertainty about the tomorrow's world as well as the business.

Thirdly, cost competitiveness is crucial, he stresses. In the fintech world, attention wasn't paid to cost competition initially, as money flowed in and profitability wasn't top priority. Now, there's a shift. "Investors demand profitability, asking when the break-even point will be reached," says Kumar.

Fourth, there's limited control over pricing. Even an institution like SBI doesn't have control over pricing; its always market determined, says Kumar.

Finally, success ultimately depends on how you utilize technology, your cost competitiveness and efficiency, and your connection to the market's pulse, identifying and addressing gaps effectively, advises Kumar.

Kumar said that the advantage of SBI, or any bank for that matter, lies in the trust they have built over centuries in handling finances. This trust is pivotal when dealing with money. However, in terms of innovation, agility, and decision-making, smaller and newer organizations, like fintech companies, often outperform.

"With fewer bureaucratic layers, they can make decisions swiftly and implement them quickly. Large banks like SBI, on the other hand, are bound by extensive processes and bureaucracy due to their scale and size," he says.

"The emergence of fintech fills a gap where traditional institutions struggle to meet consumer needs. Fintech companies, capitalizing on this gap and a conducive environment, have carved out a niche for themselves. Fintech's scope extends beyond lending; it encompasses a broad spectrum of financial services," he says.