How Has Fintech Impacted India’s Retail Banking Ecosystem?


Every bank provides savings, investments, credit, and payment facilities to their customers across segments. While there exist several textbook definitions of financial inclusion, the most basic way to define it is to say that financial inclusion is an act of ensuring that every existing customer in the country has access to banking services.

Initially, financial institutions comprised a brick and mortar delivery model. However, it wasn’t a successful business model for many and hence, financial inclusion was mostly restricted to the public sector banks in the country. In the post liberalization era, new banks emerged and the new focus was on something that could benefit one and all – technology.

Having realised that technology could be a game-changer as far as financial inclusion was concerned, initiatives such as the IDRBT (Institute for Development & Research Banking Technology) and NPCI (National Payment Corporation of India) were the primary pillars that set the foundation for developing a fintech ecosystem in the country. With an aim to advance the agenda of financial inclusion, several innovations from institutions like NFS, UPI and Aadhar have successfully implemented the required digital infrastructure. These were the prerequisites of a flourishing fintech ecosystem in the country.

With the above backdrop in mind, it is essential to fathom the impact of fintech on the retail banking system in the country. Here goes –


When the fintech ecosystem took over, traditional banks were concerned about being upended by it. This led them to hunt for ways in which they can be flexible despite their size. This is exactly what led them to become an active part of the disruptive innovation rather than becoming a victim of it. When traditional banks started collaborating with fintech-driven digital lending, UPI was one of the most significant changes brought about in the retail banking ecosystem. Another such change was the introduction of applying for credit cards online.

Focus on customer experience

When it comes to digital banking channels, the level of customer experience is substantially better than that of traditional banks. That said, customer analytics clubbed with the traditional banking benefit of customer contact has been merged to introduce meaningful innovations. Anexample of this change is the simplification of savings, investments and payment systems.

Financial Literacy

Soon after, traditional banks realised that the greatest challenge in terms of financial inclusion was not limited to one’s access to technology, but the willingness to adopt the same. As soon as the banks kick-started their collaborations with several fintech players for different offerings, they identified the existing concerns of their customers in terms of security. Given their massive reach, the banks were successfully able to eradicate a lot of such concerns through financial literacy initiatives with their customers.

As far as retail banking is concerned in the country, IDFC FIRST Bank is among the leading banks. Going by IDFC FIRST Bank’s reviews, after its merger with Capital First Ltd. in December 2018, it has paved the way for the lender to become a retail oriented bank. Today, retail loans form over 64% of the total book. On the other hand, legacy infrastructure loans have been steadily reducing every quarter.

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