Fintechs go retro: Companies bet on fixed deposits to boost topline

Companies offer up to 9.5% interest rate per annum on fixed deposits

Fintech companies are tapping into traditional forms of banking products such as fixed deposits (FDs) as they expand their financial services bouquet.

 

New age companies such as Stable Money, Flipkart-backed super.money, and MobiKwik have rolled out such services offering interest rates up to 9.5 per cent per annum across different tenures.

 

This is the first time that fintechs have evinced interest in FDs.

 

The offering is extended in partnership with small finance banks, deposit-taking non-banking financial companies (NBFCs), and commercial banks.  

 

These are private partnerships with no separate licensing required from the regulator. However, as the norm goes, FDs are insured up to Rs 5,00,000 by the Deposit Insurance and Credit Guarantee Corporation.

 

The move to add FDs to the financial services menu reflects a strategic effort to broaden revenue streams and demonstrate profitability even as the sector recovers from a funding crunch.

 

“Firms have started to offer FDs in the past year to ensure they do everything to add revenue to their top line and some may have to demonstrate profitability. Reasons why the trend is picking up is because the rates are good, (equity) markets are volatile and people would want to diversify their portfolio, and the integration of the product with banks is similar to a plug and play,” said Saurabh Jain, co-founder, Stable Money. 

 

The Bengaluru-based firm was one the first to only offer FDs as an offering and has partnered with eight banks and two NBFCs to extend the service. It has 1.2 million registered users on the platform.  

 

Fintechs act as distribution partners for banks enabling them to shore up deposits for which they take a cut. Compared to lending, take rates on fixed deposits can be modest, depending on arrangements with banks which factor in variables such deposit size and tenure.

 

“Take rates are standard varying between 0.5 to 1 per cent depending on various conditions. Some products contribute more to the revenue pie, and while FDs might not be a very large revenue contributing asset, we see it from a lens of selection of all banking products as an offering,” said Prakash Sikaria, founder and chief executive officer (CEO), super.money.

 

The company, which launched operations in July this year and rolled out FDs last month, has over 7 million customers and has partnered with five banks.

 

A take rate in this case is a portion of earnings that a company receives from its partner based on facilitating a transaction or a sale of a financial product.

 

Founders indicated that as the service scales up, they would look to partner with larger commercial banks even if these financial institutions offer a lower rate of interest to customers compared to small finance banks.

 

“It gives a lot of visibility and trust to the platform when you have any big bank on the platform. While SFBs would offer a better rate than banks, not everybody is looking for rates, some customers are looking for specific banking brands which may be lucrative to them,” Jain added.

 

Meanwhile, Sikaria explains that the Unified Payments Interface (UPI) as a foundational layer makes it possible to introduce a host of banking products on platforms and expand use cases for FDs.

 

“There are other ideations that we may look at such as how we do a systematic investment plan (SIP) on FDs, for instance. The value advantage layered with the distribution and experience is a good marriage which has not happened before. FDs have not been marketed for convenience and the return profile was traditionally seen as negative,” he added.  

 

However, as a wealth management offering, an FD competes with more lucrative sectors such as the stock market and mutual funds. Beyond portfolio diversification, founders are bullish on the product since it appeals to risk-averse customers seeking a secure place to park their capital.

 

“Now, with some of the hiccups that are happening in the market, people are also realising that they can't put all eggs in one basket. Because of stock broking and mutual fund platforms, people are used to new tech companies for investing. It is easier for them to do fixed-income investments,” Jain added.

 

The interest in equity returns is visible in the number of demat accounts opened since the pandemic.

 

With the widespread smartphone and data adoption, favourable market returns, demat accounts have more than quadrupled since March 2020; from less than 41 million to 182.05 million in 2024.  

Revenue push

 

> Companies offer up to 9.5% interest rate on FDs

> Teams up with small finance banks, deposit-taking NBFCs and commercial banks

> Appeals to risk-averse customers, helps others diversify portfolio