© 2016 KPMG, an <strong>India</strong>n Registered Partnership and a member firm of the KPMG network of <strong>in</strong>dependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
F<strong>in</strong>tech <strong>in</strong> <strong>India</strong> - A global growth story 42 Learn<strong>in</strong>gs from global experience: Opportunity for <strong>India</strong> to solidify its position as a global f<strong>in</strong>tech hub The render<strong>in</strong>g of f<strong>in</strong>ancial services is chang<strong>in</strong>g at an accelerated pace, as f<strong>in</strong>tech start-ups emerge as enablers for the bus<strong>in</strong>ess of extremely large traditional f<strong>in</strong>ancial <strong>in</strong>stitutions. While start-ups seem to be <strong>in</strong> the spotlight for the most part, government bodies and market players across the mature markets have been robustly serv<strong>in</strong>g their part to establish an environment for the growth of <strong>in</strong>novation and technological advancement <strong>in</strong> the f<strong>in</strong>ancial services sector. A cont<strong>in</strong>ued strong commitment from the government, the <strong>in</strong>dustry and the f<strong>in</strong>tech firms is critical to allow the f<strong>in</strong>tech revolution dig its roots deep <strong>in</strong> any f<strong>in</strong>ancial system. Firstly, it is important to study the potential impact of all the market participants <strong>in</strong> the thriv<strong>in</strong>g <strong>India</strong>n ecosystem to harvest the f<strong>in</strong>tech opportunity. In our earlier approach of study<strong>in</strong>g mature markets where we draw out the most impactful growth drivers, the standalone impact potential was assessed. We aim to <strong>in</strong>culcate these learn<strong>in</strong>gs <strong>in</strong> our recommendations ahead. Secondly, the complex <strong>in</strong>terplay of these factors is important to understand and plan for, to enable holistic growth of the ecosystem. Two approaches are notable <strong>in</strong> this regard: • Market-driven approach: In many key markets around the world, <strong>in</strong>clud<strong>in</strong>g the UK and the US, <strong>in</strong>cumbent F<strong>in</strong>ancial Institutions (FIs) have sought to emulate the best features of f<strong>in</strong>tech <strong>in</strong>novations with<strong>in</strong> their exist<strong>in</strong>g bus<strong>in</strong>ess l<strong>in</strong>es. This approach clearly benefits consumers overall, as they get improved offer<strong>in</strong>gs from their exist<strong>in</strong>g <strong>in</strong>stitutions, spurred <strong>in</strong>to action by the competitive threat from f<strong>in</strong>tech. However, for FIs to do this successfully, it is important to have very strong IT leadership and build capabilities that are not always found immediately with<strong>in</strong> FIs. • Collaboration-driven approach: For the emerg<strong>in</strong>g f<strong>in</strong>tech markets, strategies focused on collaboration may offer a susta<strong>in</strong>able change <strong>in</strong> the market, and may be easier to implement. However, it will need a deeper commitment from the stakeholders to allow a suitable gestation period for collaboration to come about between stakeholders across the spectrum. Thirdly, it is important to identify and plan for the <strong>in</strong>flection po<strong>in</strong>ts - those key checkpo<strong>in</strong>ts <strong>in</strong> the evolution journey where the risk of failure for the nascent f<strong>in</strong>tech firms are the most prevalent. We found that top <strong>in</strong>flection po<strong>in</strong>t <strong>in</strong> this market is when a f<strong>in</strong>tech firm is seek<strong>in</strong>g to collaborate with FIs, and thus is cross<strong>in</strong>g the chasm from be<strong>in</strong>g a small, successful bus<strong>in</strong>ess <strong>in</strong>to potentially scal<strong>in</strong>g their solution for a very large customer base with<strong>in</strong> an FI. A common (and critical) approach taken by FIs when seek<strong>in</strong>g to <strong>in</strong>tegrate and test new f<strong>in</strong>tech solutions is to run a Proof of Concept (POC) project. Successfully runn<strong>in</strong>g a POC requires very skilful leadership and a robust approach, and this is often the po<strong>in</strong>t at which f<strong>in</strong>tech/ FI collaborations break down. FIs need to build or outsource the capability to run robust POCs which is where real bus<strong>in</strong>ess value is tested. If well managed, they create the foundation for a bus<strong>in</strong>ess case and eventual roll-out. If not done correctly, they br<strong>in</strong>g about delay and missed opportunities. <strong>India</strong>n f<strong>in</strong>tech firms need to play their part <strong>in</strong> the POC process, by be<strong>in</strong>g will<strong>in</strong>g to subject their <strong>in</strong>novations to the k<strong>in</strong>d of test<strong>in</strong>g and report<strong>in</strong>g that is required by many large FIs, but they need support (often from professional services firms) to do this. Successful POC projects will have another measurable benefit for <strong>India</strong>n f<strong>in</strong>tech firms. Every successful POC creates proof po<strong>in</strong>ts and metrics that will make it much easier to offer their f<strong>in</strong>tech <strong>in</strong>novation to FIs <strong>in</strong> overseas markets, e.g. the UK, the US. Another <strong>in</strong>flection po<strong>in</strong>t for the f<strong>in</strong>tech firms is the transformation of a successful POC <strong>in</strong>to a large rollout to the FI customer segments. This massive up-scal<strong>in</strong>g exercise is a challenge faced by FIs work<strong>in</strong>g with f<strong>in</strong>tech firms around the world as the enormity of an FI customer base often puts the f<strong>in</strong>tech solution viability to the ultimate test, lead<strong>in</strong>g to a po<strong>in</strong>t of no return. To prepare for this crucial stage, there is a golden opportunity to leverage the traditional IT strengths of big tech firms <strong>in</strong> <strong>India</strong> to help smaller f<strong>in</strong>tech firms to make their solutions robust enough for the FI market. F<strong>in</strong>tech <strong>in</strong>dustry players <strong>in</strong> <strong>India</strong> should seek to use the exist<strong>in</strong>g IT ecosystem to create a few examples of successfully scaled <strong>in</strong>novation for FIs. These use cases could potentially open the door to global sales for both <strong>India</strong>n IT firms and <strong>India</strong>n f<strong>in</strong>tech © 2016 KPMG, an <strong>India</strong>n Registered Partnership and a member firm of the KPMG network of <strong>in</strong>dependent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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