Question

What are the pros and cons of Costa's option for banks to convert current IT and strategy to become fintech company?

Answer 1

The major advantages of banks to convert into fintech company are:-

• Banks can leverage existing domain knowledge and IT assets to bring in more efficiency in the lending space.
• They can increase the scope of lending and can create better and innovative products which cater to a wider section of the population.
• Ultimately there would be lesser number of frauds due to technology intervention and the underwriting process would become more error free
• Greater efficiency in the banking system

The disadvantages are:

• With the lending and the technology platform being managed by a single entity, there could be possible malpractices that may lead to economically catastrophic consequences
• Chances of shadow banking and a parallel unregulated banking system goes up
• The credit analysis and underwriting process may get diluted