Unless you have been living under a rock, chances are you have come across terms like FinTech, Blockchain, and neobanks being liberally spewed around in the news. Our financial system has come a long way from its sole focus on traditional banking institutions to the current overhaul with various FinTech companies vying with each other for the top spot, including Protium, but we will come to that in a bit.
According to the World Retail Banking Report 2022, 75% of customers surveyed are attracted to FinTech’s cost-effective and seamless services, whereas traditional banks are struggling to meet the higher delivery expectations over concerns of insufficient data analysis capabilities.
So, what exactly is causing a surge in FinTech’s popularity, and how is Protium bringing a revolution in the financial system? Let’s find out.
The Banking Model
Banks typically function as licensed financial institutions that can accept deposits, make loans, and offer other financial services, such as wealth management, currency exchange, and safe deposit boxes. They can be further categorized into corporate banks, retail banks, and investment banks based on their final customer specialization.
However, banks are restricted in their operations by their branch presence. Depending on the licence extended, banks are constricted in the number of customers that they can serve at a time. They are also subject to stringent government rules and central bank regulations that require a minimum amount of capital buffer to be maintained at all times, hence leading to blocking of capital and reduced profitability. These limitations are now being exploited by FinTech startups to provide best-in-class service to customers. So, what exactly is FinTech?
Financial Technology, shortened to FinTech, refers to the new technology that has been disrupting the traditional banking business by automating and improving the use and delivery of financial products and services. It emerged in the 1990s with the advent of credit card issuance and the establishment of internet banking and e-commerce business. Over time, its usage has evolved to refer to the newly-launched startup companies that leverage technology to cater to specialized financial verticals, such as lending, payments, back-end solutions, etc.
The recent startup innovation is primarily focused on unbundling banking services and developing a niche in a targeted vertical, for instance, front-end retail business, where the emphasis is on providing better customer service, pricing, and branding. So far, lending has been the most lucrative area to usurp, due to its higher revenue earning potential. But FinTech involves a range of services such as InsuranceTech, RegulatoryTech, Cryptocurrencies, Blockchain Technology (Smart Contracts, Open Banking), Buy Now Pay Later, P2P Lending, etc.
The need for a financial disruption has been felt in the backdrop of the banks becoming dated and incapable of meeting consumers’ ever-evolving expectations of a flexible digital experience. This became all the more imminent during the covid crisis, which mandated the presence of remote human assistance for bridging the gaps in the financial pipeline. In fact, the rise of FinTech has forced banks to reimagine their core business around data and digital platforms and an open architecture to promote efficiency and security.
How is the FinTech Model Outdoing Banks?
While both the banks and FinTechs focus on providing seamless financial services to consumers, the FinTech startups have outdone the banks in terms of convenience, speed and efficiency. The differences in their lending models have been enumerated as follows:
1. Organisational Structure
Banks are saddled with huge infrastructure costs, especially when they rely on brick-and-mortar branches to grow and establish their network. FinTechs, on the other hand, have a lean and flat organisational structure that can be easily changed and rebuilt as per the evolving customer trends. For instance, neobanks completely do away with the requirement of any physical infrastructure, as they solely depend on functioning digitally.
FinTechs leverage technology like AI, machine learning, big data, and cloud computing to provide a frictionless experience to consumers, while banks are slow at innovation, thanks to their legacy infrastructure. Such legacy systems are limited in their ability to establish an interface with other systems, thus slowing any attempts at streamlining processes.
3. Customer Service
Traditionally, banks have been focused on offering a plethora of services to their customers at their branch networks, which would make the cost of switching to another financial institution high, thus depriving the customer of choice and flexibility. Whereas FinTechs, due to their virtual nature, provide 24/7 remote access to their consumers for availing all kinds of services at their convenience.
4. Regulatory Compliance
Banks need to adhere to strict rules and regulations established by the central bank and government, as they serve as the backbone of the economy. FinTechs, on the flip side, are subjected to comparatively lenient guidelines and have a lower compliance burden.
5. Growth Potential
The pandemic managed to bring a lot of consumers online, who are now savvy at using digital technology. This has been successfully leveraged by FinTech companies to build their customer base. However, banks are now trying to catch up by either launching their own digital financial services, such as mobile payments and P2P lending, or by collaborating with existing fintech startups.
6. Lucrative Pricing Options
Since FinTechs require leaner structures for operating virtually and face lower compliance burdens, their costs are lower, which allows them to offer financial services at competitive prices on terms more congenial to the customers, unlike banks.
7. Better Branding of Financial Services
Decisions regarding savings, budgeting, investments, etc., have been considered monotonous and complex by all customers. FinTechs have managed to rebrand this decision-making exercise by introducing gamification to mundane tasks to make it palatable for customers.
And yet, despite all the advantages, the majority of FinTechs continue to struggle to grow their customer base beyond a limit. Why has it not managed to outpace the banks despite the availability of a large customer base looking to be serviced? And why we at Protium have excelled where others have failed. Let’s get into the details.
The Protium Way
Protium functions as a full-stack lender that leverages not only its pre-eminent engineering technology but also its physical branches, in order to serve those with credit requirements. Our pan-India presence, established through 65 branches in 50+ cities across 13 states, gives us an edge over other FinTechs that are solely tech-driven by expanding our visibility.
Protium primarily operates under three segments:
1. Protium Finance caters specifically to MSMEs by extending secured as well as unsecured loans between Rs. 1 lakh to Rs. 5 crores. These loans can be utilized by small enterprises for capacity expansion or for meeting working capital needs.
2. Protium Money caters to consumers situated across tier 1, tier 2, and tier 3 cities. Flexible loan offerings are provided to consumers so as to empower them to make quicker purchase decisions.
3. Protium Sakshara offers customized loan products to edupreneurs and educational institutions. These loans assist in funding both operational and capital requirements.
All of these customers, MSMEs, consumers, and educational institutions are catered to through our omnichannel capabilities that span digital interfaces, dedicated sales teams, platform-based partnerships, and DSAs.
Additionally, Protium gets a leg up over every other fintech company because of the application of its proprietary models that can assess revenues and growth to timely lend to our customers as per their requirements. We have scalable, secure state management systems in place that ensure top-notch lending APIs and underwriting capabilities. This means that due to the secured nature of most of our loans, the probability of them going bad is small, thus, ensuring higher profitability margins, which is something other fintech companies struggle with during scaling up. In fact, Protium has disbursed over Rs. 3,000 crores worth of loans at an NPA ratio of < 0.2% to date.
Therefore, Protium, through its fundamental thinking-to-engineer finance capability, has created powerful proprietary fintech solutions to service consumers all across the country at convenient and flexible terms.
Are you interested in applying for a business loan? Apply at Protium or call 8828827800 to get in touch with our customer representative!