Financial Innovation Can Bridge The Digital Divide In India: Arun Tikoo

The Indian fintech industry does not take innovations lightly. 

After all, the stakes are pretty high. Superior customer experience, increased digital financial penetration, higher accessibility points-  they are all equally important. 

But how can we ensure that these innovations drive digital adoption? 

A group of seasoned fintech experts discussed this question at the Global Fintech Fest Roundtable, conducted from 27-30 September 2021. Arun Tikoo, the SVP of Business and Strategy at Cashfree Payments, was a part of the esteemed group of panellists.

innovation driving digital adoption gff 2021

The group kicked off the roundtable discussion with one simple question:

What Does Innovation Mean For the Fintech Industry? 

Experts agreed that innovation in fintech can be defined under 3 main purposes.

  1. Product of meeting the evolving customer needs

For instance, Cashfree Payments launched the Autocollect product as a way of solving the reconciliation issues faced by Payment Gateway clients. 

  1. Reducing customer pain points and increasing customer satisfaction

Some examples of this can be simplified cross-border payment solutions, instant refunds, optimized recurring bill solutions. 

  1. Increasing accessibility of payment points

India has a large population of users that hold bank accounts. However, half of those customers face a lack of accessibility of payment points. 

Speaking of innovations and buzzwords…

Buy Now Pay Later: The Next Big Fintech Innovation? 

Buy Now Pay Later (BNPL) is the new “buzzword” in the industry. 

In fact, BNPL had managed to democratize small credit. In doing so, it has also increased customer satisfaction by miles. 

But can it be considered as the next big fintech innovation? Or is it just gaining recognition because of recent widespread adoption?

Experts agreed that BNPL has been around for a while. However, industries are now finding new uses cases and demand for the same.

Having said that, BNPL might have miles to go, as a product. For instance:

  • Using Big data to increase customer adoption of BNPL. (something Amazon is currently investing in)
  • Optimizing the partner/bank’s ability to underwrite customers
  • Reducing default and bounce rates of BNPL through notifications, reminders, ease of payment, etc. 
  • Fueling widespread acceptance of the BNPL as a payment mode/financial product

Interestingly, BNPL can be used to drive financial inclusion to the unbanked

This is all the more effective since it fits right at the payment stage of the customer journey. In other words, the customer does not have to make any effort to avail credit. 

Can Innovation Bridge The Digital Divide?

The use cases of BNPL are quite widespread. 

On one hand, companies like Amazon are aiming to provide BNPL as a payment mode through voice recognition through Alexa.

On the other hand, companies like Kaleidofin are looking to democratize credit for the unbanked section. 

The difference between these two cases might seem gigantic. 

However, experts brought out an insightful point: innovation by any player in any of these spaces can be used as a bridge the gap between the two

For instance, let’s assume that Amazon is successful in developing voice recognition services for BNPL payment checkout. 

Now, this same technology can be used on devices like mobile phones to further aid the penetration of credit in the unbanked sectors. 

However, achieving this goal is only possible with successful bank-fintech collaborations. 

Way Forward: Bank-Fintech Partnerships 

Experts agreed that banks are starting to consider fintech partnerships a core part of their business strategy. 

After all, the Banking as a Service and Open Banking API model has brought out a lot of advantages for both parties.

banking as a service illustration

Most importantly, Legacy banks have the trust factor of customers that proves indispensable. In fact, the involvement of legacy financial institutions help the widespread adoption of fintech innovations. 

Evidently, Fintech players are helping banks provide last-mile connectivity. It will be interesting to see how these partnerships will evolve in the future. 

Will fintech players start acquiring banking licences (much like Solaris Bank?) 

Will we achieve a UPI like infrastructure that facilitates interoperability between fintech services? 

Let us know your thoughts in the comments below!