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Fintech Partnership: The Next Phase of Growth

“To thrive in fintech, don't chart your course in isolation; partnerships fuel innovation”

In the past few months, the Fintech industry has witnessed many partnerships which makes us think about what these players want to achieve out of these partnerships.

Before we get into the details of the partnership, let’s see a few headlines that made the biggest news.

These are just a few examples of the partnerships but we need to delve deep into the bigger picture. Let’s look at a few major partnerships and what the partners are getting out of each other

Pay via Chat: WhatsApp - Razorpay/PayU Partnership

Synopsis:

WhatsApp has joined hands with Razorpay and PayU to make shopping and payments easier for users in India. This means that people can now pay for items directly within the WhatsApp chat using different methods like UPI, cards, and more.

Additionally, WhatsApp has introduced a new feature called Flows. This allows businesses to create special forms for services like booking appointments or ordering meals right in the chat.

How It Will Benefit Businesses?

For businesses, this partnership means they can provide more convenient payment options to their customers. They can also offer specialized services without the need to leave the chat window. Moreover, WhatsApp has introduced a "Meta Verified" badge for businesses. This comes with extra benefits like enhanced account support and protection against impersonation. It also allows businesses to create a custom WhatsApp page that can be easily found through a web search.

What Is in It for WhatsApp?

WhatsApp has around 660 million users in India. Even if it taps 10% of these users to pay via chat, it will be around 66 million. According to the report by Worldline, a global leader in payment services, the average ticket size (ATS) for UPI P2M transactions was Rs 687 (by December 2022).

This can result in a minimum gross transaction value (GTV) of Rs. 45.34 billion or USD 621.78 million on which WhatsApp can earn a commission or some fees from businesses per transaction.

We still have to wait to see the commission distribution between WhatsApp and PG, but we can clearly see an increase in earnings and the synergy of the partnership

Stable Money Partners With Banks and NBFCs for Wealth Management

Stable money was recently in the news for launching India’s first digital fixed-return investment platform. The concept is similar to Paisabazaar.com which compares products like different lending products, credit cards, insurance, etc. across multiple financial institutions.

Stable Money is an online marketplace specializing in secure fixed-income investments like fixed deposits (FDs), debt mutual funds, and bonds. It compares FD rates from 200+ banks and provides digital tools for easy FD management.

How a User Will Benefit?

  • Access to Reliable Investments: Users gain access to a wide range of reliable fixed-income investment opportunities, including FDs, debt mutual funds, bonds, and low-risk assets, providing them with diverse avenues for wealth growth
  • Transparent and User-Friendly Platform: Stable Money offers a transparent and user-friendly platform, empowering users to manage and track their investments efficiently through digital tools
  • Innovative Features: The introduction of features like Break FD, FD Laddering, and Switch FD provides users with greater flexibility and control over their investments

What Is in It for Stable Money and Its Partner?

Stable Money:

  • Expanded Offerings: Partnering with banks and NBFCs allows Stable Money to offer a broader range of fixed-income products to its users, enhancing its value proposition
  • Increased Credibility and Trust: On-boarding reputable financial institutions adds credibility and trustworthiness to Stable Money, instilling confidence in its users.
  • Strategic Growth: The funding from Matrix and Lightspeed, coupled with strong partnerships, positions Stable Money for strategic growth and market leadership in the digital fixed-return investment spa

Banks and NBFCs:

  • Extended Reach: Partnering with Stable Money provides banks and NBFCs with access to a larger user base, allowing them to showcase and distribute their fixed-income products to a wider audience
  • Participation in Financial Education: Participating in panel discussions on financial topics during the launch event demonstrates the institutions' commitment to financial education and empowerment, fostering positive brand perception
  • Innovation and Flexibility: Collaborating with Stable Money exposes banks and NBFCs to innovative features like Break FD and FD Laddering, showcasing their adaptability to market trends and customer preferences.

Well, we have seen two successful examples of partnership but not all the partnerships are fruitful. For example, SBM Bank's partnerships with multiple fintech startups in India hit a major roadblock when SBM Bank blocked millions of credit card customers on the Re-KYC issue.

This brings us to our next section on how to build a successful partnership

How to Build Successful Partnership?

Successful collaborations between established financial institutions and fintech startups can lead to convenient and innovative finance solutions for customers. Large banks like Visa and Santander have set examples by partnering with fintech entities to expand their customer reach.

Clear communication, flexibility, mutual respect, and trust are crucial elements in building and maintaining successful partnerships. Focusing on common goals and leveraging complementary strengths are essential for mutual success.

Strategic and measurable KPIs play a vital role in ensuring balanced investment and commitment from both parties. Additionally, fintech partnerships offer access to valuable data for driving strategic decisions and enhancing customer experiences.

Well after seeing how to build a successful partnership, one can question why we need a partnership. Doesn’t it seem like a no-brainer? No company can do all the things on its own. It has to focus on it core operations and depend on others to help it expand its business. Let' explore more in the next section

From Disruption to Collaboration: The Lender-Fintech Renaissance

It requires a collaborative approach involving banks, regulators, and fintechs to diversify product offerings. The integration of digital infrastructure like UPI, Aadhaar, and eKYC is seen as vital for India's economic growth. The fintech can help big lenders and NBFCs in quick turnaround and faster release and lenders can help fintech in accessing capital.

Current Theme of Partnership

The current theme of fintech partnerships is largely centered around technology and digitization. These collaborations enable institutions to tap into previously untapped customer segments, particularly millennials and SMEs. Fintech firms are also helping in the digitization of backend processes and the development of portals and applications

Where Does the Problem Lie in the Current Partnership Model?

There is a tendency for fintech partnerships to replicate existing offerings, with a primary focus on customer interaction and acquisition. Exclusivity is often lacking, and the co-creation of products has not been a prominent feature in recent Indian banking partnerships. Despite the transformative impact of fintech partnerships, there is a question of whether digitization is the sole objective, or if there is untapped potential yet to be explored.

What Will Be the Future of the Partnership?

It looks like the silo functioning of fintech startups is no more a way to go and partnerships are the future. Collaborations between established financial institutions and fintech startups have demonstrated their potential to offer innovative financial solutions to customers. Notable examples include large banks like SBI and HDFC partnering with fintech entities like Paytm and PhonePe to expand their customer reach in India.

In India, we've witnessed significant partnerships, such as HDFC Bank's collaboration with PayZapp, resulting in a 51% increase in transaction volumes. Additionally, SBI's partnership with YONO has led to a 48% surge in digital banking users. These examples underscore the potential of synergistic partnerships in the fintech landscape

Clear communication, flexibility, mutual respect, and trust form the bedrock of successful partnerships, while common goals and complementary strengths are pivotal for mutual success. Strategic and measurable KPIs are crucial for ensuring balanced investment and commitment from both parties, with fintech partnerships offering access to valuable data for driving strategic decisions and enhancing customer experiences.

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Fintech Partnership: The Next Phase of Growth

Ankit Abhishek
,
Yatharth Chaudhary
,
  • January 23, 2024
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