Tata Digital to add neobank to its 'super app' arsenal | Economic Times

Mumbai: Tata Digital is likely to offer financial services—including credit, insurance, and mutual funds—on its soon-to-be-launched ‘super app’. This will be through partnerships with licensed financial institutions, sources said, as the digital arm of India’s largest conglomerate gears up to take on established players like Amazon and Flipkart.Tata Digital has set up a neobank vertical and is trying to rope in industry veterans to set up this business from scratch. It’s scouting for strategic tie-ups with licensed banks and insurers to offer financial intermediation. These may include services such as credit card applications, insurance distribution, micro loans and even merchant management, said fintech industry sources privy of the discussions.A 'super app' is like a digital megastore where a user can buy anything from groceries to fashion apparel and medicines. The model was first perfected by China’s Ant Group and has since been emulated by Amazon, Walmart-owned Flipkart and Paytm in India. Tata Digital may even acquire a neobank, one of the sources told ET on the condition of anonymity. The discussions are at an early stage, the person added. Tata Digital and Tata Sons, the holding company of the group, did not respond to ET’s detailed queries.In the West, entities that aggregate financial services through digital-only platforms are called neobanks. India’s banking regulator is yet to recognise them as a separate class of banking intermediaries.ET reported on Wednesday that an internal RBI team is studying this space closely and may come up with the scope and definition of such entities soon. Nevertheless, India’s neobanking sector has seen considerable action in recent months.Startups such Razorpay, Open and Niyo have all raised funds and are scaling up in tie-ups with licensed lenders, a practice allowed by the Reserve Bank of India. The world’s largest neobank, UK’s Revolut, is also setting up a team in India to offer neobanking services.ET has reported that Open, a leading neobank in India, is in talks to close a $100-$120 million round led by Amazon, Google, and Visa. Flipkart and Amazon too have set up separate fintech and neobank divisions and are actively offering users an assortment of banking and insurance services on their platforms.While Amazon has tie-ups with ICICI Bank for co-branded credit cards and Acko for health and motor insurance, Flipkart has partnered Axis Bank for co-branded cards and ICICI Lombard for buying personal insurance through its app.Tata Digital would be at an advantage as Tata Group already has a licensed NBFC, Asset Management Company (AMC) and insurance ventures such as Tata Capital, Tata AIA, Tata AIG and Tata Mutual Fund. It can potentially bring all these offerings under one roof for customers with its Tata Digital ‘neo banking’ arm.The Tatas are also believed to be eyeing a banking licence in India once RBI opens the window for large corporate houses to apply.Separately, the Group has also tied up with HDFC Bank and Kotak Mahindra Bank as well as Flipkart, Mastercard and NABARD to apply for a New Umbrella Entity (NUE) license from RBI to set up a pan-India retail payments network.“The Tatas want to aggregate all financial and consumer-facing offerings under one umbrella and a “neo-bank” is expected to be a larger play on its whole expansion plan in the financial services arena,” a source said. “This will work in tandem with its game plan to develop a super app and potentially secure a bank license if and when the RBI opens the gates for corporates.”As far as Tata Digital is concerned, Tata Sons chairman N Chandrasekaran had previously said the group’s ambition was to launch a super app by the middle of 2020, but the Covid-19 pandemic delayed the timeline.However, the company has aggressively closed some high-profile acquisitions in recent months, including those of e-grocery platform BigBasket and e-pharmacy startup 1mg, as well as purchasing a minority stake in Mukesh Bansal’s Curefit.