At first, traditional banks ignored the new-age financial tech companies. Then they dissed them. And now they are joining them.
In the next five years, almost 50% of the world’s financial services are planning to acquire fintech startups, according to a report by PricewaterhouseCoopers LLP. Collaborations, too, are expected to increase, with eight out of 10 companies waiting to partner with these new players, the report added.
Some 67% of senior Indian financial sector executives believe their business is at risk following the rise of fintech firms, and 95% of them were willing to explore partnership with them, a separate report by PwC released this April revealed.
And it has already begun.
On July 27, Axis Bank, the country’s third-largest private sector lender, acquired FreeCharge, a payments application and mobile-wallet company, for Rs385 crore ($60 million). This is the first such deal in the sector, potentially setting off more such transactions in the future, believe experts.
Axis Bank’s buying of FreeCharge from e-commerce firm Snapdeal will bolster the lender’s position in the payments space, giving it access to the e-wallet’s 50 million customers. The bank’s customer base could now more than double from the existing 40 million.
“We want to use digital payments as an entry point for these customers and, thereafter, help them open an account with us,” Rajiv Anand, Axis Bank’s executive director for retail banking, told Quartz.
The size of the Indian e-wallet industry is likely to shoot up from Rs154 crore in 2015-16 to Rs30,000 crore by 2021-22. Not surprisingly then, FreeCharge had other suitors, too, such as other fintech firms like Paytm, PayU, and MobiKwik, besides e-commerce major Flipkart.
So Axis Bank now gains access to a set of young, digitally savvy users, a segment that has been a key focus area for lenders. This acquisition comes at a time when the number of smartphones in the country has increased rapidly…