The Pattern #10: Of RBI’s matchmaking, explorer banks, and innovation beyond BNPL

Mayank Jain   /    Head - Marketing and Content    /    2022-05-20

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    Bank of Baroda recently announced the launch of its co-lending platform in partnership with several non-banking financial companies (NBFCs), including U GRO Capital and Paisalo. With this initiative, the public sector lender is targeting an INR 10,000 crore co-lending loan book in just two years. However, the long-term objective of this co-lending platform is to reduce the end interest rate for borrowers, who have been borrowing at rates between 18 and 24%. Co-lending could bring this down to as low as 8 percent.

    Days after Bank of Baroda’s announcement, State Bank of India (SBI) revealed its own plans to enter into co-lending partnerships for loans to agriculture and small and medium enterprises (SMEs).

    It sounds great - two entities coming together for the benefit of the end borrower. Each one brings its own strengths to the table for a strong partnership. NBFCs have the underwriting technology and distribution model, banks have the customer base and the capital. But, as my colleague Anna puts it, the coming together of banks and NBFCs is like an arranged marriage - “for the partnership to stand a chance, banks and NBFCs must be prepared for constant reconciliation of their distinct personalities, traits, and dispositions."

    In her piece, she delves into the challenges and benefits of this collaboration, and the role FinTech can play to enable smooth communication between these partners. Read it here.

    In keeping with the theme of financial inclusion, HDFC Bank recently set up a rural banking function - and they’re leaving no stone unturned. The lender has partnered with the Institute of Rural Management Anand to develop a user-first strategy and understand rural consumer dynamics and service design and delivery. As part of this initiative, HDFC is set to open 1,064 branches in semi-urban and rural areas in the current financial year.

    It’s heartening to see the more traditional lenders take up the cause of financial inclusion - but to truly make a difference, what we need is a conscious mix of technology, socialization, consumer education, and bank-FinTech partnership. Check out the FinBox point of view here.

    Going from banking to traveling, there’s good news for those of you waiting for those ever-elusive Goa plans to materialize - MakeMyTrip has partnered with 15 banks, NBFCs and FinTechs, for its 'book now pay later' option while booking flights or hotels. This means more flexibility and attractive terms for those looking to put their passports to use. The travel portal has already witnessed a 60 percent growth in BNPL transactions quarter on quarter over the last year.

    It’s no secret that we at FinBox are huge proponents of BNPL in the B2B space - be it E-Commerce or healthcare (check out our Content Marketing Specialist Shamolie’s piece here). But it is encouraging to see it making its way into different kinds of B2C transactions as well. All signs clearly point to it becoming the preferred payment mode for many - especially millennials and Gen Z.

    Clearly, the FinTech tsunami is just getting started. 

    That’s a wrap from me this week, and before I go, here’s my list of reading recommendations to get you up to speed with all that’s happening in the worlds of finance and technology.

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