With a slew of new banking options suddenly available to the Indian consumer, the battle for banks is hotter than ever. Engaging users with better experiences and personal finance tools is increasingly becoming a critical factor in deciding which bank the Indian consumer will choose.
$230 million in funding has been raised by Niyo, FamPay, Jupiter and Fi in 2021 alone. These neo-banking solutions, and many more to come, will reach over 10 million Indian consumers from here the end of this year ().
The Indian consumer is now surrounded by a variety of banking options, from incumbents to the new neo-banking experience. The payment page of every mainstream app in India is flooded with discounts and rewards from all new and old banks in India. This comes at a time when the average consumer is looking for personalized and holistic personal finance management to improve their financial habits and health.
We believe building capacity around personal finance will be key to market share as incumbents and neobanks compete. Neobanks, with technology as their core competency, are slowly building personal financial experiences that drive growth from acquisition to engagement and revenue.
But incumbents, with a majority market share, cannot act quickly on personal finance as a strategy, due to weak technological capabilities. But the cost of that will manifest itself in customer churn, at a time when retention is key for incumbents.
Personal finances become a priority
With the socio-political landscape pushing for financial inclusion and growing awareness among Millennials and Gen Z, financial literacy is changing faster than ever. Indian consumers, who are aggressively opting for digital banking, are now more aware of personal finance than ever.
Consumers are looking to understand and control their spending, find instruments to save and invest, and stay on top of their overall financial health. All of this was inaccessible to consumers until recently, when the account aggregation framework made possible a range of personal finance experiences.
Since then, there has been an increase in venture capital funding for personal finance mandates and then a subsequent increase in the number of personal finance apps and their downloads in India. The modern Indian consumer has made personal finance a priority.
Personal finance as a strategy
Neobanks leverage technology to create engaging personal finance features, such as summaries and analysis on spending, budgets and savings, recommendations on investment options, and more. This is in line with the fundamental principle of neobanking – client satisfaction.
These experiences impact the entire customer lifecycle for neobanks:
1. Acquire by offering new personal finance features such as spending limits, budget tracking.
2. Engagement across financial journeys by offering features like rounded savings at checkouts.
3. Monetization tracking cash flow and financial behavior and recommending savings and investment instruments.
Neobanks have built rich experiences powered by multiple technologies like machine learning where users can search for information such as “How much money did I spend on food last month?”.
Technology – The Achilles heel of historical banks
In a world where most app store reviews are filled with complaints about poor user experience, incumbent banks have a lot to play for in this battle of the banks. Banks are traditionally slow organizations and lag far behind neobanks in terms of digital experiences and offerings.
1. High time to market with any new digital experience is a massive threat to incumbents.
2. Poor fintech skills prevents banks from deploying advanced technologies and seamless experiences.
Incumbent banks however have a huge gap in the form of historical data close to digital experiences. But unless they overcome the Achilles heel of technology, they won’t be able to extract value from their data.
Building Integrable Personal Finances
Backed by leading fintech players in the industry and some of India’s top venture capital funds, , a Chennai-based startup is building a solution for traditional banks. By bundling most of the engineering and technology overhead involved in delivering personal finance experiences, they can significantly reduce time to market for traditional banks.
While solving technology addiction, Fego’s experiences can be easily integrated by traditional banks into their existing digital presence. With a range of modular personal finance experiences optimized for customer delight, these experiences can help incumbents replicate growth through the funnel that is currently limited to neobanks.
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