Top bankers never retire! Fintechs rope in veteran bankers to build brand, trust

Experts suggest that when fintech companies hire a veteran banker, a certain goodwill also comes along.

Indian fintech companies are aggressively hiring former top bankers and central bankers. In the last 24 months, at least 10 former bankers have joined the boards of fintech companies. Experts attribute this to a bigger corporate strategy to gain the trust of investors and customers, besides seeking smooth relations with regulators on compliance issues.

Such moves assume significance as fintech companies are facing tighter regulatory scrutiny on a range of issues related to corporate governance, lending norms, and the array of activities these companies can participate in.

For example, recently Bengaluru-based-Razorpay appointed N S Vishwanathan, former deputy governor of the Reserve Bank of India (RBI), as an advisor to the board. Also, the fintech company hired the former managing director (MD) of State Bank of India (SBI) and the former chairman of HDB Financial Services, Arijit Basu, as an advisor. Razorpay is one of the largest fintech companies in the country with operations in the payments segment. According to the company’s annual financial report, its operating revenue jumped 76.1 percent to Rs 1,481 crore in financial year 2021-22 (FY22) from Rs 841 crore in FY21.

Similarly, Bengaluru-based slice roped in former executive director (ED) of RBI, Eugene Emmanuel Karthak, as an independent director. The company also hired S Vishvanathan, ex-MD, SBI, for an advisory role, in March 2023.

Perhaps, one of the biggest such moves in the fintech space took place when BharatPe hired former SBI chairman Rajnish Kumar, and former RBI deputy governor B P Kanungo as non-executive chairman and independent director, respectively, in September 2022. Kumar is also an advisor to Gurugram-based digital lender Indifi Technologies.

There are other examples too. Delhi-based fintech company Stashfin appointed former MD and CEO of SBI Card, Vijay Jasuja, as a non-independent ED in September 2022, while EbixCash roped in Uma Shankar, former ED, RBI, as an independent director.

That apart, Qwikcilver, a digital gift card fintech company based in Bengaluru, appointed former RBI ED G Padmanabhan as an advisor in August 2016.

Also read: Budget 2023: Fintechs demand more allocations, tax reforms and bank partnerships

In March 2020, US-based cloud-service provider Salesforce hired former SBI chairperson Arundhati Bhattacharya as its India CEO.

Why are retired bankers in demand?

So, why are fintech company running to hire former bankers? According to experts, such hiring is part of a bigger corporate strategy to gain the trust of investors and customers, besides seeking smooth relations with regulators on compliance issues.

“Fintech companies have issues with regulatory requirements and business operations compliances. Industry experts can help mitigate these issues,” said Chandan Sinha, former ED, RBI.

Fintechs are a booming market. According to data from the government's Invest India portal, the Indian fintech industry's market size is expected to grow to $150 billion by 2025 from $50 billion in 2021. The sector is also expected to have $1 trillion in assets under management (AUM) and nearly $200 billion in revenue by 2023, data from Invest India said.

Also, the government has plans for growing and expanding the reach and innovation in the fintech sector.

Also read: India has highest fintech adoption in the world, says Rajeev Chandrasekhar at India Fintech Conclave

The appointment of former bankers on the boards of company as advisors can help fintech companies get clarity on the business and operations aspects of the sector, experts said.

“Fintech companies are young and they have creative ideas. They need guidance on several issues,” said Rajnish Kumar of SBI.

Sinha said the experience of veteran bankers can help fintech companies formulate policies in the short to medium term.

Dealing with regulatory challenges

Over the last few years, the regulator has upped scrutiny on fintech companies.

RBI, in August 2022, introduced new guidelines for fintech companies operating in the digital lending space. Under the guidelines, fintech companies are required to disclose all costs upfront in a digital loan product to the customer, even as they are not allowed to scrub or read borrowers’ smartphones. In August 2022, ratings agency CRISIL highlighted that the new rules will raise the operational intensity and compliance costs for lenders in the near term.

Also read: Budget 2023: Fintechs, NBFCs look out for a liquidity booster from FM for financial inclusion

Ajay Kumar Choudhary, ED, RBI, highlighted that the regulator has to keep a watchful eye on fintechs and the associated risks.

"Regulators need to keep a watchful eye on the risks by fintech companies and big techs. The risks posed by fintech start-ups and big techs are different," said Choudhary at the Moneycontrol Fintech Conclave.

For fintech companies, experts highlighted, the appointment of veteran bankers can help formulate operational tactics around regulatory issues. Ram Rastogi, Chairman of Fintech Association for Consumer Empowerment (FACE) said that fintechs earlier did not look at governance and corporate aspects of the business.

“After the buy-now-pay-later (BNPL) crisis, some of the major fintech players had to take a second look at their governance and compliance work. This is where they are looking at making policies clear and hiring banking sector experts,” Rastogi said.

Sinha said that sector experts can guide fintech companies on macro policies. “Fintech companies need to know what is permissible under their sector. They need a regulatory perspective on how to look at business,” Sihna said.

Former bankers in advisory roles

When former bankers join the boards of companies, they do not have a day-to-day role to play in the business of the fintech company. Instead, these former central bankers and chiefs of banks act as guides to these fintech companies.

According to experts, these bankers attend weekly or monthly meetings where major issues around the company’s operations are discussed.

Also read: Increased scrutiny of bank-fintech alliance puts start-up ecosystem at risk

“As an advisor or member of the board, they are not required to come or participate in the daily running of the company. They have to work as advisors or consultants discussing macro and major issues related to the company, such as scaling operations, regulatory aspects, etc.,” said Rastogi.

Sinha said the 30-40 years of sector experience of the bankers help them work around the bigger issues concerned with fintech companies.

“Veteran bankers have seen the ups and downs of business. Their experience can help fintech companies decide their growth plans,” said Sinha.

For instance, Kumar's tenure as the chairman of SBI ended in October 2020, following which he joined BharatPe, and later in 2022, also became an advisor to Indifi. Kumar, while highlighting his role as the advisor, said that most of the fintech companies are young at less than five to six years.

"As an advisor, we give them guidance. Especially, at this stage we give them advice not only on regulatory issues but also on compliance and other growth operations," said Kumar.

Alok Mittal, CEO of Indifi Technologies, said that hiring veteran bankers who have witnessed industry evolutions through the years help the fintech companies in adapting the business to new paradigms.

“Hiring former bankers and fintech experts can lead to a powerful combination towards growth. Our experienced bank heads provide insights on how to scale responsibly and mitigate risks,” Mittal added.

Also read: Why is RBI’s Payment Aggregator License significant for fintech companies?

Brand-building

Some experts also suggested that when fintech companies hire a veteran banker, a certain goodwill also comes along.

“A veteran banker has a name and reputation in the industry. Hence, when they join a fintech company, there are chances that the fintech company develops a certain goodwill,” said Sinha.