Thinkpad: Viva La Vida
♫ I used to rule the world...
Seas would rise when I gave the word...
Now in the morning I sleep alone...
Sweep the streets I used to own...♫
That Coldplay song Viva La Vida could very well be telling the story of old finance and new finance.
So what if good 'ol banks still hold most of the deposits and keep economies moving with the loans they make. They no longer rule the world. At least not right now. Not if attention, funding and valuations are anything to go by.
This week, again, saw a string of interesting developments in the world of new finance. Thinkpad refuses to call the space Fintech. Tech is all pervasive. What is unique about new finance is not the tech but the approach to finance and the delivery of it.
The account aggregator ecosystem was formally launched this week. Unlike a number of innovations that fall in the "why-do-we-need-this-again" category, the idea of account aggregators sounds like salvation from all the personal finance paper work we have all suffered.
In simple terms, the account aggregator will act as a bridge between financial information providers and financial information users. Provided a consumer has given consent, a few clicks can allow a financial service provider to access your data and decide whether you should get a loan, an insurance policy etc. No print outs. No photocopies. No trips to the bank branch.
Lest you think this architecture was easy to build, remember that it has been in the works since 2016. Apart from banks, data sources like GSTN and telecom service providers will hopefully join the ecosystem eventually.
You can get an overview of how account aggregators work in this piece. Account aggregators will gather the "digital crumbs" for people to share their own data in a machine-readable format for a bank loan application, wrote Bloomberg's Andy Mukherjee in this piece explaining how this, together with other ongoing developments, can transform credit.
In another eye-catching development, Google Pay, using APIs from Setu, has formally introduced a functionality where you can book FDs via the app. While Thinkpad remains skeptical about how quickly deposits will flow in and out of legacy banks, here's a contrary view from Andy Mukherjee. He wonders whether banking will, eventually, go the way of news publishing courtesy such innovations.
Two other noteworthy announcements came in this week.
Billdesk, one of India's oldest digital payment firms, was bought out by PayU for $4.7 billion. That's some Rs 32,000 crore, almost at par with the market cap of Bank of Baroda, which incidentally was Billdesk's earliest backer. The sale netted the company's low-profile promoters a cool half a billion each.
Billdesk is now a celebrated success story but here is one possible story to watch.
On Monday, the RBI released names of two applicant for a small finance bank licence. Among them was the group that offers the popular accounting software Tally to small and medium enterprises. Incidentally, the group's promoters have old associations with the Reliance Group. That aside, Tally's interest in banking reinforces that tech will play a larger and larger role in shaping finance.
No, banks aren't going away. Neither is their business. But it is changing fast.
♫I used to roll the dice...
Feel the fear in my enemy's eyes...
Listen as the crowd would sing...
Now the old king is dead! Long live the king! ♫
Till next week.