Remarkable isn’t it, how fintech has reconstructed payments and financial services, changing how payments work?

UPI has become one of the most preferred payment modes for both P2P and P2M transactions, kicking most other payment modes to the curb. Online commerce has become a child’s play because of payments solution companies and their products.  Accepting payments from any part of the globe has become accessible. 

What more?

Money lending is growing phenomenally that we don’t even wait for our salaries to make a big purchase anymore. Incredible reward systems have emerged in the payments realm, making credits all the more appealing to every Indian consumer. 

Neobanking is taking over the financial services sector, offering customers more than they ever imagined. 

And, while all of this is going on, what’s really happening to banks? Are banks finally growing out of their shell to realize the contention? Are they able to cope with the towering change that fintech has given birth to?  Are they intimidated by the change, or are they able to see the contingent collusion with fintech to empower themselves?

So many questions. 

These are some critical questions. They most definitely need to be answered.  Surely, we’ve seen prominent banks stepping up to the exigency of the situation. These banks have joined hands with some of the most disruptive fintech companies out there. 

Now, the next question is, why aren’t all banks doing so? If you’re thinking along these lines, let’s break it to you. It’s not easy.

Collaboration means change. Collaboration means dispute. And, more than anything, collaboration means challenges. Let’s talk about the collaboration of banks and fintech, and try to interpret what these challenges are and how they affect the overall financial system.

Consumers’ lack of exposure to tech can negatively impact banks and fintech working together

Consumers these days are tech-savvy. While we agree with this fact, it’s also important we address consumers who aren’t all that acquainted with technology. Millions of people from tier 2 and 3 cities hold bank accounts. And, several everyday bank transactions can seem complicated to these consumers. 

Also, having a bank account doesn’t compensate for the financial and technological knowledge that is expected of a consumer. So, this may be a significant challenge for banks and fintech to work together. 

Collaboration between banks and fintech can create trust issues

Considering the past collaborations of banks and fintech, it’s easy to say that the result is often a solution that simplifies the underlying problem. And, the solution is not immediately accepted by many. 

Banks have gained the trust of their consumers over the many years they’ve operated, and this trust is something that cannot simply be sidelined.  For example, we’ve spoken about UPI and its adoption in many of our reports. And, the observation has always been the same.

Although UPI apps incentivized transactions to push adoption, gaining the trust of millions of consumers did not come easy. Customers still prefer traditional banking methods over UPI to perform larger value transactions. 

Banks will face increased dependency on tech

Let’s talk about traditional banks. Over the years, we have seen a number of manual efforts being translated into automated processes. But at the core, manual processes still thrive. These processes, along with legacy systems and their regulatory framework, make it stiff for banks to adopt newer tech. 

It’s not impossible to implement changes, but it does require a ton of effort. Consider that the partnership works out better than we thought. This would mean automating the entire bunch of processes that traditional banks have worked with for ages. 

Not that we’re pessimistic about it, changing traditional means to modern methods are always great. But let’s remind you this change cannot happen overnight.

Speaking of fintech bodies, they’re mostly customer-driven. They want to make it as easy as it can be for a customer to perform all of their financial activities. This means the partnership can result in a complete transformation of how traditional banks work while increasing tech dependency for the banks. 

The result will bring about big culture changes

Banks and fintech work together to bring about changes across functional verticals of financial services. With the past collaborations, it’s not wrong to say that the culture of traditional banks has turned out to be slightly modern or innovative. 

On the other hand, banks have built a systematic culture over the many years of their existence. The collaboration can create somewhat of a culture shock to banks because the culture of a startup can be very contrasting. 

It’s definitely not wrong for banks to adapt to the change. But we are talking about highly skilled finance professionals who have their own views as to how things should work.

Banks and fintech working together may bring about new risks

Like we mentioned earlier, banks adhere to a set of traditional systems and legacy frameworks, unlike startups. A fintech startup intervening with the banks’ legacy systems can cause the emergence of new, unforeseen risks like strategic risks, compliance risks, operational risks, cyber risks, and more.

To overcome these risks, thorough strategic business planning should be carried out while constant monitoring risks, and deferring them before occurrence is the way to go for successful collaborations.

The Solution

Yes, the challenges are many. But the most innovative solutions emerge when banks and fintech work together. As many there are challenges, solutions to these challenges are not impossible.

It may take a little extra elbow grease to make things work at times, but finding a way to surpass these challenges and more, will contribute to the era of rising fintech the country is experiencing. One such example is our very own RazorpayX Banking Suite for Businesses.

We created an entire API and dashboard payouts platform over a RazorpayX Lite setup that merchants could use during the early access in 2018. As we scaled, we realised current accounts are the heart of the product to support higher volumes of transactions.

We built RazorpayX with Current Accounts in partnership with RBL Bank and included all standard banking services like cheque book, debit cards, and accounting statements. For payroll, we acquired Opfin, a payroll and HR management software company, that also manages tax filing and compliance via a unified platform, without having to hire any external vendors.

We also launched Payout Links, the easiest and fastest way to disburse funds into your customers’ preferred bank account via IMPS, UPI, NEFT, and RTGS.

[ Read more: Payout Links – Automate Money Transfer Without Bank Details ]

We’re partnering with banks and networks to build corporate credit cards from the ground up that offer immense flexibility with limited-time credit period and auto-repayment for businesses. These cards powered by our credit intelligence engine can be used to make payments towards Google Ads, Facebook Ads, AWS, Business Travel, and so much more.


Harshitha is a marketer at the future-forward RazorpayX. She has an insatiable love for travel and culture, rock music, and the work of Neil Gaiman.

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