India's Alipay or WeChat Pay Could Be a Young Private Bank or Progressive NBFC

In many parts of the world, tech companies (TechFins and FinTechs) are beginning to dominate the FinTech scene except India. BATs (Baidu, Alibaba and Tencent) and Internet finance in China dominate the market now. PayPal (Braintree and Venmo), Stripe and the likes of Prosper/Lending Club/Sofi have made serious inroads in the US although not to the same extent as China where internet finance cos have more customers than traditional banks in some segments.

India is a bit different though. In FinTech, we see that everyone happily agreeing with everybody but what we need to do is to feel under the covers. FinTech is looking very different in India and the leader(s) that will emerge might surprise you. In this article, I take a contrarian view on FinTech here and analyze why young private progressive banks might not be so far behind as we usually think.

Tech as public goods

The Western world was different where proprietary systems were built in financial services and they proliferated over last so many years. India is following more of an App Store model – this is open innovation at a massive scale with interoperability built in. And this is available to the banks.

The financial rewiring in India has been a top-down process, led by visionaries like Nandan Nilekani and driven by government and central bodies like UIDAI and NPCI. India stack is public goods – not done the Alibaba way or Tencent (WeChat) where the keys to the kingdom are held by a few large players. Aadhaar and the keys to create new financial services experiences are available to everyone. And therefore, young private banks in India have a better chance than their peers around the world. As India (and many nations) is moving towards non-card payments, the NPCI, IMPS and UPI type of systems have become important weapons for these private banks.

Younger banks with less legacy

The source of funds would always be your bank account and so that is very important in India (and I would argue elsewhere as well). As you go from India (tier 1 cities) to Bharat (tier 2/3/4 and villages), you will see that non-banks have a challenge with managing trust. So that brings us back to banks. One thing to note is that in contrast to developed markets, Indian private sector banks are relatively younger ( ...


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