'Could not sense customer needs': SBI's ex-chief Rajnish Kumar points out what legacy banks missed that led to fintechs' rise

Rajnish Kumar, chairman, BharatPe and former chairman, SBI, on Friday said that fintechs are flourishing in the country because of advantage in terms of cost.

"In terms of cost arbitrage, fintechs are best placed today when compared to non-banking financial companies (NBFCs) and legacy banks. They are flourishing because legacy institutions could not sense what the customer needs. There was a gap which fintechs have very beautifully filled in," he said at BT’s Banking & Economy Summit in Mumbai.

He further added, "What a bank would do to acquire a customer in terms of cost, the fintech will do it probably at a 25-30 per cent cost."

Highlighting the positives of banks, he said that no one can beat banks when it comes to trust factor. "The trust factor when it comes to banks is very high. Their capability to gather liabilities is unmatched. NBFCs and fintechs don't have that advantage," he added.

"When it comes to NBFCs, they have done a wonderful job in terms of providing credit to that segment which otherwise legacy banks don't find it landable. That is their advantage," Kumar stated, adding that NBFCs have flexibility in terms of their HR policies, last mile connectivity, and recruitment policies.

Kumar also stated that there was a time when regulatory arbitrage existed between the NBFCs, banks and fintechs, but it's not the case anymore.

"Our lives revolve around smartphones today. Whatever you want to do, mobile is the solution. Banks, fintechs and NBFCs are doing a lot of similar things but not everything is common between them. There was a time when regulatory arbitrage between NBFCs, fintechs and banks," he mentioned.

Highlighting about each sector individually, Kumar further said that there is a room for every player. He added that they are not exactly competitors to each other but there is scope for collaboration between all three -- NBFCs, banks and fintechs.

The session saw Rajnish Kumar, chairman, BharatPe and former chairman, SBI, R. Subramaniakumar, MD and CEO, RBL Bank, Murali Ramakrishnan, MD and CEO, South Indian Bank, Sunil Mehta, Chief Executive, IBA in conversation with Sourav Majumdar, Editor, Business Today.

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