Fintech companies have been successful in the payments space, but may not be able to replicate that success in the lending space, and so may not pose as big a threat to banks as the market is worried about, said a report by Kotak Institutional Equities (KIE).
Since the outbreak of COVID-19 in February last year, the NSE Bank Index has underperformed Nifty-50 Index by 19 percent, mainly because of the common perception that traditional banks everywhere are ill-prepared in the emerging environment versus fintech companies and Big Tech (Amazon, Google, Apple, FB), the report said.
KIE feels there are two issues with this narrative in the Indian context.
“The standalone payment business is not very remunerative and secondly, lending space is already quite crowded; fin-techs have no real advantage in lending,” said the report.
KIE has listed four reasons why fintechs will find it tough to compete with banks in the lending space. Here are those:
(Edited by : Anshul)
First Published: IST