The Story Behind SBM India’s Growth Strategy and FinTech Collaborations

Following a long tradition of developing their own proprietary platforms to deliver services to customers—banks are now increasingly open to joining forces with FinTechs and taking advantage of their emerging digital technologies.

The dialogue has shifted from “us vs. them” to “partnerships with a purpose”. Collaborating with FinTechs that have products tailored to customers’ every need, is helping banks reap the full benefits of innovation and remain relevant in a rapidly changing marketplace. According to the reports, nearly 65% of banks and credit unions have entered into FinTech collaborations. With FinTechs gaining massive popularity in recent years, these FinTech-Bank collaborations are only going to get stronger.

In the last few years, we have seen thriving bank-FinTech collaborations in India. SBM Bank India, a subsidiary of the State Bank of Mauritius (SBM) Group, has been at the forefront of these promising collaborations. Let’s take a closer look at SBM’s rising number of FinTech partnerships.

SBM’s FinTech-first growth model

SBM Bank India has registered robust growth within the first three years of its operations. By working towards the goal to be world-class in every aspect of their business, SBM Bank has approached partnerships with FinTechs as a cost-effective strategy to acquire more customers.

With partnerships at the heart of the bank’s growth strategy, SBM along with Federal Bank, Equitas Small Finance Bank, and RBL Bank is among the leading banks that have tied up with the most number of FinTechs in the country.

SBM Bank received a banking license from the Reserve Bank of India (RBI) through the wholly-owned subsidiary route in December 2018. SBM has only eight branches all over the country in cities like Mumbai, Hyderabad, New Delhi, Bengaluru, and Chennai. That said, the bank claims to have reached customers in nearly 500 cities in the country owing to its multichannel digital product suite. Rather than opening more branches, SBM has a clear-cut strategy of relying on bank-FinTech partnerships to increase market share and expand its network in India

How FinTech alliances work for SBM

Though corporate banking was SBM’s core offering, the bank has taken the FinTech ecosystem by storm by partnering with 40+ FinTechs in the country. The main goal behind these partnerships is to reach a customer base, closer to that of some of the largest banks in the country.

Here’s a look at some of the key FinTech alliances of SBM bank.

While most Indian banks have been choosy when it comes to partnerships, SBM has tied up with FinTechs across verticals such as payments, investment, and credit. With the belief that digital is the new normal, SBM’s co-branded cards with leading FinTech startups are making card-related transactions hassle-free and enabling the growing base of tech-savvy customers to experience the ease of top-notch expense management solutions.

Given how digitisation is having far-reaching implications for the corporate, household, and public sectors in the country—SBM has adopted an asset-light distribution strategy. As a result, these tie-ups with some of the fast-growing FinTechs in the country have been an affordable and quick way for SBM to onboard more customers and expand its reach.

As building all the tech stacks in-house takes time, these value-creating collaborations have helped SBM reach a premium segment of FinTech customers. While SBM serves as a backbone for many FinTech startups in the country, the FinTechs on their part, have acted as a key enabler to package SBM’s propositions with a new-age factor.

The deal balanced between Boeing and Airbus was done with a central goal of expanding Air India’s footprint in the fast-growing Indian aviation market that has recently witnessed the rise and fall of many airlines.

Regulatory developments impacting the FinTech sector

The collaborations between FinTechs and banks have been instrumental in furthering RBI’s vision of revolutionising last-mile lending and improving financial inclusion. That said, with the rise of cyber risks and a goal to safeguard the interest of customers, the FinTech sector is now subject to increased regulatory efforts that have been introduced to bring in a formal framework for consumer data protection, infrastructure resilience, and dispute resolution mechanisms.

As a part of the regulatory push, RBI recently passed a direction to SBM India to stop all transactions under the Liberalised Remittance Scheme (LRS) until further orders. This regulatory initiative will have an immediate impact on the FinTechs partnering with SBM.

Closing thoughts

With India being one of the fast-growing FinTech hubs in the world, regulatory authorities are looking to maintain the balance and create a level playing field for innovators so that compliance does not hamper the growth of the FinTech industry.

For FinTech companies, the regulations have been light when compared to the incumbent entities in the financial services sector. Considering the regulatory arbitrage which is now being plugged in slowly, the onus is on the FinTech companies to closely monitor and navigate through the regulatory and compliance requirements.

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