The role of fintech in digital transformation of SMB’s

By Jaya Vaidhyanathan

Zero Mutual Bank is creating history and the world is watching. Zero Mutual Bank is making onboarding a bank as easy as consumers create their WhatsApp account and in fact challenging the very founding principles of banking. Low banking fees, protection from defraud, much needed relief to the business and entrepreneurial segments, access to technology, sounds too good to be true. So, makes us wonder who is India’s Zero Mutual Bank that SMB’s can leverage? Well, major banks in India are extending credit lines to small business under various brand names. The Government’s Mudra Yojana for easy access to credit for small businesses is a big step towards this. While Bank Zero may be an instance of a specific bank taking the lead, in India the lead has been taken by the public-sector banks under the Mudra scheme, while private banks are operating in niche spaces in addition to this, like vendor financing for say a Flipkart.

What does this disruption mean for India SMB Inc?
This disruption means that India SMB Inc, the informal sector of the economy that has probably not got its due yet, that is completely absent from the stock market, will become more and more visible and get recognized. The NSE Emerge platform on the NSE is seeing more and more SMEs listing on the exchanges to become the large corporates of tomorrow. This in my opinion will bring sustainable, well rounded growth to the economy which has until recently hinged on a few cities like the metros.

FinTech and digital transformation for SMB’s
Fintech players are definitely the right players to help SMB with technology for accessing markets and capital through technology. Fintech players provide light weight solutions that help small businesses take care of things like accounting, procurement, CRM etc. In the case of SMBs which require extreme focus on their core business, in-house development of such applications is indeed a drain of resources in terms of people, finance and time, that can be invested in growth. With the advent of cloud solutions, the subscribe options outweigh the merits of buy/build.

Many of the SMB’s now have access to technology and are online; The SMB’s leave a large amount of technology footprint of themselves and of their customers and fintech’s are in a position where they can help SMB’s take advantage of this information. Useful information can be at two levels – individual customer, and aggregate. In the case of online SMBs, it is possible to slice and dice individual level information, while in the case of brick and mortar SMBs aggregate level data can be of great use. Take agriculture for example, farmers are not very much in the technology space. However, there is a plethora of information available today for fintech players, like satellite data on rains, supply chain and logistics data from government and private commercial sources, etc., which can be used for commodity pricing at an aggregate level. This in turn can be used to make a decision on a particular customer, by extrapolating the category wide characteristics to the individual customer.

There is a high level of correlation between access to credit and access to the digital world whether this correlation implies causation is still anybody’s guess, but we believe that digital transformation will happen inevitably given its huge benefits. However, FinTech will strongly support the growth of SMB’s is undisputed.

(The writer is President at Bahwan CyberTek)