It may be time to be ready for a revolution in the making, as the credit lane welcomes the crowd of fintech startups, partnering with NBFCs to shape the future of finance!
Yes, that’s right!
It is no secret that the digital revolution, driven by fintech entities, completely changed how consumers access financial services.
Now, taking it a step further, many fintech startups and companies are looking to collaborate with NBFCs to further their growth and foster a symbiotic relationship. You may ask why? Now, fintech firms bring advanced technology, digital infrastructure and robust data analytics to the table. On the other hand, NBFCs hold better regulatory frameworks, risk management and customer relationships.
Now, imagine combining the best of both worlds!
That is exactly what we are talking about in this blog! To know more, read below.
What is the rationale behind the fintech and NBFC union?
It is worth exploring the rise of fintech in India before diving deep into the growing collaboration between fintech and NBFCs.
In 2022, Indian fintech startups emerged as the second most funded sector within the country, securing an impressive USD 5.65 billion in investments. At the onset, fintech was a disruptive force, leveraging AI, data analytics, and cutting-edge technology to reshape traditional banking. Fintechs facilitated speed, convenience, and innovation in the financial services sector and captured the attention of consumers and financial institutions alike. NBFCs, on the other hand, had more focus on regulations and client building.
Keeping in mind the individual merits, experts feel fintech and NBFCs together are a win-win.
You may ask why. Well, combining fintech’s tech skills with NBFCs’ regulation and risk control has helped offer better efficiency, lower costs, and wider reach! In fact, fintech giants like Pune’s OneCard and Bengaluru’s WintWealth are eyeing NBFC licenses to cement customer loyalty and fuel expansion. Many other large pocket fintech firms are in talks or already have collaboration with NBFCs.
Not just that, recent RBI amendments have put fintech companies under added pressure (maintaining higher capital adequacy ratios and other compliances). To address these challenges, too, many fintech are opting for collaboration with NBFCs.
What does the fintech-NBFC collaboration bring to the market?
The holy union, as many see it, may completely revolutionise the way lending and payments work in the country. Here are some benefits the collaboration brings to the markets and consumers as well –
- Expanding financial services: By embracing NBFCs, fintech ventures can extend their financial offerings to loans, investments, and more. This alliance paves the way for innovative revenue paths and caters to different consumer segments.
- Enhanced credibility: Aligning with NBFCs adds authenticity to fintech startups. Meeting compliance adds trust, solidifying their position as accountable and dependable partners in finance.
- Market penetration: Fintechs and NBFCs together can bridge the gap to areas underserved by traditional banking, providing financial assistance to far-flung and marginalised areas.
- Competitive edge: In a bustling financial environment, standing out is key. Uniting with NBFCs furnishes fintech firms with unparalleled features, drawing both tech enthusiasts and traditional clients and setting them on a unique pedestal.
- Regulatory compliance: The regulatory oversight provided by NBFCs safeguards fintech startups and fortifies their standing, even in fluctuating market scenarios.
Challenges ahead for the fintech-NBFC merge
While fintech firms are actively seeking collaboration and vice-versa, it is not really a cakewalk!
The path to obtaining an NBFC license is peppered with obstacles like intricate procedures and considerable capital demands. Protecting against cyber threats and ensuring data privacy are additional complexities.
However, the benefits of such licenses outweigh the obstacles and can make this a wise move for fintech firms aiming for growth and reach.
The dance between fintech startups and NBFCs is indeed transforming the credit landscape with innovation and inclusion. Though the path forward is lined with challenges, the promise of a technologically advanced future in credit is too appealing to resist. So, will this fintech-NBFC collaboration reshape the world of credit? – Only time will tell, but the signs are promising!