Exclusive | Axis Bank's Amitabh Chaudhry says fintechs not just taking customers but also share of banks' revenues

Amidst the ongoing fintech versus bank debate, Amitabh Chaudhry's insights offer a roadmap for adaptation, innovation, and partnership. Traditional banks must leverage the strengths of fintech while embracing regulatory compliance to thrive in a financial landscape undergoing a transformation. This debate continues to be a defining narrative in the financial industry, shaping its future contours.

Additionally, data from the FACE-Equifax Fintech Lending Trends Report recently revealed the growing prominence of digitalised fintech players. In the fiscal year ending March 2022, these fintech entities disbursed a staggering 71 million loans, amounting to Rs 92,267 crore. This represents a 21 percent year-on-year increase in value and a remarkable 49 percent surge in volume.

The FACE-Equifax report mentioned that personal loans dominate digital lending products, accounting for a commanding 83 percent in disbursement volume (nearly 6 crore loans) and 72 percent in disbursement value (nearly Rs 66,432 crore).

As the fintech versus bank narrative unfolds, these trends reinforce the pivotal role of fintechs in shaping the financial industry's future, with their appeal extending to a diverse and increasingly younger customer base.

Addressing the fervor around fintech competition, Chaudhry while speaking to CNBC-TV18 at the Global Fintech Fest underscored that fintechs pose a genuine threat by enticing customers away from traditional banks. The decisive factor in this rivalry is the ability of fintechs to present customers with precisely the right blend of innovation and financial products.

Since the Reserve Bank of India (RBI) instituted new regulations for fintechs, Chaudhry noted a paradigm shift in the industry. Fintechs have had to revise their strategies and, crucially, recognise that regulation isn't an obstacle but an indispensable element of their operational models.

Compliance and regulations now take center stage in fintech business models. Fintechs are executing swift pivots to ensure alignment with regulatory requirements, understanding that this is fundamental to their long-term viability.

Chaudhry highlighted the emergence of formidable fintech entities delivering services to customers on a grand scale. These entities have the potential to reshape the financial services landscape, intensifying the ongoing fintech versus bank discourse.

Acknowledging the substantial competition posed by fintechs, Chaudhry emphasised that traditional banks must relentlessly innovate and actively draw in customers to maintain competitiveness in the ongoing fintech versus bank saga.

He underlined the imperative for banks to explore collaboration prospects with fintechs, recognising that fintechs can bring not just customers but also valuable strategic alliances, enriching the overarching financial ecosystem.

Apart from fintech competition, Chaudhry discussed the evolving competition landscape with the resurgence of Public Sector Banks (PSBs), the prominence of fintechs, and Jio Financial Services' entry too. He remained optimistic about the vast growth opportunities in India, emphasising the need for banks to focus on growth rather than worrying about competition.

Amitabh Chaudhry touched on the Net Interest Margin (NIM) and interest rate outlook. He mentioned that NIMs might remain under pressure for some time due to ongoing deposit re-pricing. He also noted the bank's aim to maintain NIMs around 3.8 percent and the potential impact of interest rate cuts on NIMs.

The CEO expressed concern about the need for deposit growth to match credit growth to sustain the bank's pace of lending. He highlighted the steady growth of term deposits even though CASA (Current Account Savings Account) growth has been slow.

Chaudhry defended the pricing of the Max Deal, stating that the bank adhered to regulatory guidelines for determining share prices. He emphasised the consistency in the formula used for such transactions and the requirement for approvals from RBI and IRDAI.

He clarified that the recent news regarding SEBI seeking information is related to previous queries, indicating ongoing discussions among regulators.

"No new developments have occurred in this regard," he told CNBC-TV18.

Regarding concerns about shareholder losses, Chaudhry underlined that all transactions have been conducted with the approval of shareholders, and transparency has been maintained throughout the process.

Amitabh Chaudhry provided insights into the successful completion of the Citi Deal, highlighting that it played out as anticipated. The bank managed risks effectively and witnessed positive outcomes in terms of employee retention and customer satisfaction.

The CEO congratulated Neelkanth Mishra on his appointment as the chairman of UIDAI, showcasing Axis Bank's ability to attract top talent and encouraging its employees to engage in government and policymaking issues.