New Delhi, March 17: India’s major banks have significantly beefed up their digital product offerings and can withstand the competition from fintechs, Moody’s Investors Service said in a report on Thursday. The report said that fintech payment companies in India have led the rapid growth of digital payments in the country but their dominance may not translate to competitive advantages to expand into other financial services. Privately owned fintechs have spearheaded the creation and growth of digital payments in India, particularly with the introduction of the Unified Payment Interface (UPI) in 2017 that allowed funds to be transferred instantaneously.
“However, their dominance may not lead to significant advantages over banks, because the UPI’s open architecture means that a large user base does not necessarily make a particular service provider more competitive than others on the system,” says Srikanth Vadlamani, a Moody’s Vice President and Senior Credit Officer. In addition, the report noted, large private-sector banks and the industry leader State Bank of India have ramped up their digital product offerings in other areas, which their customers are adopting widely. “This will help the banks fend off competition from fintechs outside the payment segment. That said, public sector banks other than SBI have relatively weak digital offerings and will be negatively impacted by the rising competition,” said Moody’s Investors Service.
Banks’ margins will come under pressure as many fintechs will continue venturing into other financial services, in particular personal loans and loans to small merchants. “However, the overall market will also expand as technology creates more opportunities, allowing banks to counter the pressure on margins with business growth,” said the report. UNI
