India’s fintech industry evolves towards increased innovation
The free-for-all bloodfest competition that has traditionally characterized the financial sector, has been replaced by competitive collaboration, in India’s developing fintech industry.
The new model is congruent with the open innovation paradigm that has revolutionized entrepreneurial culture worldwide. This ongoing phenomenon was first identified and structured in an influential paper published in 2009 by Carliss Baldwin, Professor of Business Administration at Harvard, and Eric von Hippel, Professor of Management of Innovation and Engineering Systems at MIT.
The rise of the internet has facilitated instant communication, which has enabled companies to find the inspiration for innovation from previously untapped sources, such as from their own product or service users, or through partnerships. This disruption of the classical model of business (which previously put the pressure of innovation squarely on the shoulders of individual companies) has in turn created a friendlier ecosystem among like-minded companies, particularly fintech startups.
The paradigm shift that has modeled Indian fintech
“The concept of open innovation has taken hold in the Indian fintech ecosystem, and I only see it becoming more widely accepted in the coming years. Collaboration is the need of the hour for startups and corporates,” said Adrian Johnson, Managing Director of the Startupbootcamp FinTech accelerator in Mumbai.
These and more findings are summarized in Startupbootcamp’s FinTech India Trends Report 2017, which points out that more and more Indian fintech startups are collaborating with other similar startups, receiving funding from interested financial institutions, and even providing quality services for other financial enterprises to place their name on, a practice called ‘white labeling’.
The fast-growing nature of blossoming fintech services in India, the world’s third-largest startup economy, makes it more advantageous to forge partnerships as a way to access a larger slice of the cake, the alternative being an energetic but doe-eyed newcomer to a deadly fight.
Further examples of how tailored, collaborative solutions benefit clients across fields, especially in fintech and other data-intensive application fields, can be found in The Sampler. This publication is maintained by Applied AI, a startup dedicated to showing how a single technology can be tweaked to fit the particular requirements of fintech companies.
The social value of open collaboration
“Open innovation generates innovation without exclusivity or monopoly, and so should improve social welfare, other things being equal,” Baldwin and von Hippel summarized, in clear alignment with the economic opening of India in recent decades and its current push for egalitarian entrepreneurship.
The authors added that “When it is technologically feasible, the transition from closed producer innovation or single user innovation, to open single user or open collaborative innovation is desirable in terms of social welfare and is worthy of support by policymakers.”