The Pattern #16: RIP Partnerships, Long Live Partnerships

Mayank Jain   /    Head - Marketing and Content    /    2022-07-01

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    Hello everyone! 

    Hope you have had a good week. For us, it’s been a week of reflection and taking stock. With good funding comes greater responsibility and our business and product roadmaps reflect just how exciting the upcoming few quarters are going to be. 

    For me, equally exciting this week was to read in the news that Axis Bank has more than 300 APIs hosted on its developer portal, according to the bank’s MD and CEO Amitabh Chaudhry.  

    "We are leveraging our inhouse product, design, and engineering teams to create proprietary digital products, the impact of which is now visible across the business segments. The bank now has over 80 partnerships across the ecosystem and has over 300 APIs hosted on API Developer Portal,” he told Business Standard. 

    It’s interesting because it’s rare. Not just rare because it’s an Indian bank talking about the API economy but also because it speaks to the power of partnerships and ecosystem banking - something that’s in dire straits these days given the recent regulatory action - and a thesis that we have spent thousands of hours building, defining and executing here at FinBox. 

    This is relevant because partnerships continue to be the source of value for most traditional financial institutions venturing out into the new-age digital world while FinTechs built on certain kinds of partnerships are under an existential threat. The likes of RBL Bank, IDFC First, and others seem to be pulling the plug on their partnerships with FinTechs post the recent RBI circular on credit cards working on PPI licenses. 

    Currently, the State Bank of Mauritius in India seems to be the only one actively open to partnerships with a new one announced just this week with corporate expense management solution Volopay. 

    It’s exactly what our co-founder and CEO Rajat Deshpande tackled in his newsletter yesterday. Writing about the problem of constantly innovating and building new FinTech products from thin air, he predicted that the future of financial services will be determined by distribution plays that take advantage of partnerships but to unlock access to a newer set of customer segments rather than banks, fintechs, and other players just exchanging each other’s customers. 

    Guess the business model 

    In what seems to be a confirmation that the current state of fintech players is strenuous at best, a detailed report emerged that suggests that BharatPe is taking a ‘u-turn’ on its lending ambitions and instead of looking to become a marketplace that connects buyers and sellers of financial products. 

    The company has investments in multiple NBFCs which are being evaluated for their relevance and it’s pruning its portfolio of lending products in a bid to not catch the regulator’s eye as it prepares to revamp its banking operations and prepare for a potential IPO. Here’s an interesting piece of information from this story that quotes insiders anonymously. 

    “BharatPe is still contemplating on what can be done with this product," said the second person aware of the matter. The idea is to become a lead generation platform and offer an investment marketplace, where users can put in money either in a P2P, or bank, or mutual funds, this person added. The company is also in talks to sell off its stake in both Mamta and Hindon. “BharatPe is giving options to these NBFCs to buy back their shares," the first person cited above said.

    This isn’t the case with BharatPe alone. Reacting to the regulator’s clarification, Slice and LazyPay have updated their terms (and potentially business models?) - Slice is no longer offering Pay-in-3 installment facility and instead charging a 36% interest if a user pays for a transaction in parts. 

    Meanwhile, the government is pushing public sector banks to find new business opportunities by the way of exploring the use of technology, data analytics, and co-lending partnerships. It said that the banks should actively consider tying up with FinTechs to expand their horizons and prospects. 

    We recently published a comprehensive guide to co-lending that might be useful if you are looking to make sense of the maze that is a co-lending partnership and wondering about the role a FinTech can play in making this happen. Click here to access the FinBox guide to co-lending. 

    The stage seems beautifully set for a wave of new partnerships, restructuring of the old ones, and a wave of new FinTech use cases to hit the shelves. Never a dull day, am I right? 

    This is all from me this week. As always, find some reading recommendations below. 

    Reading list

    1. Banks Are Going To Lose Customers To Neobanks And That’s Exciting: TV Mohandas Pai

    2. Under the hood: The secret science of predicting credit risk

    3. Neobanking: It’s now JP Morgan vs Goldman Sachs vs Fintech

    4. A Fintech Horror Story: How One Company Prioritizes Cybersecurity

    5. Deep dive: How risk-based pricing can help lenders save billions in credit losses

    6. Consumer fintech is out. Embedded finance is in.

    Thank you for reading. If you liked this edition, do forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to never miss any of our updates. 

    See you next week! 

    Cheers, 

    Mayank

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