Last week, we had a chance to speak to Tarun Bhasin, the CEO of Kunai, a US-based company that is designing and building the next generation of FinTechs. Kunai’s history goes back to 2001 and they have an impressive resume, having built apps for industries ranging from entertainment to sports, including the NBA and Oscars. Today, we talk to Bhasin about the work Kunai does in the FinTech world, how the banking environment is changing, whether the Tier 1 or Tier 2 banks are in a better position to capitalize on the current business environment, the future of neobanks, how the pandemic was a catalyst for the FinTech industry, what we can expect in the industry in the next year, and why every company is becoming a FinTech company.
From The Oscars To The New Generation Of FinTechs
Bhasin took over the CEO role from Sandeep Sood in January after two and a half years as CFO. Sood was the founder of Kunai and ran the company since its establishment.
When Kunai was first established, they went under the name Monsoon and were primarily focused on building apps. In 2013, after they started building with Capital One, the company was so impressed with the team’s performance they decided to buy it through an acquihire. However, even though the team moved over to Capital One, the company that was back then known as Monsoon remained and has since been rebranded as Kunai. Since 2016, Kunai has been focusing on next-generation FinTech projects.
As Bhasin says, “We’ve been working with a number of the top ten banks, payment networks and now working with startups to help them launch their fintech products as well as focusing on the fact that every company can be a FinTech”
The transition from building the apps for clients like the Academy Awards to focusing primarily on the FinTech market may seem like a massive change. Having said that, as Bhasin points out, many of the early hires that Kunai made were in the financial sectors and focused on the idea that the digital revolution and the potential in mobile banking, neobanks, and other fintech projects was a long term transformational opportunity.
Tier 1 And Tier 2 Banks In Need Of A Revolution
Although the rebranding of the company only happened a few years back, Kunai already has an impressive list of projects going on. In the next five years, one of their goals is to continue assisting both tier 1 and tier 2 banks. Bank tiers is a method of grouping banks based on their size, as compared to the banking market in terms of total banking assets. While it may seem that tier 1 banks that are the largest will be in the best situation when it comes to adjusting their products. However, there are many that argue that it is the tier 2 banks that have the possibility for more flexibility in meeting the changing needs of the customers.
“Tier one banks have built such bespoke systems, given their size, that any time you touch any of their internal systems, it’s a massive project,” Bhasin says. “Tier two banks, however, have mostly utilized external products like Jack Henry and Associates but we’re also seeing that those are becoming outdated as well”
As Bhasin points out, only 28% of consumers are currently happy with their banks. That means that the majority of people are not satisfied, and both the tier 1 and tier 2 banks need to find effective solutions to build things from the ground up or risk losing their customers to more agile start-ups. The CEO of Kunai believes that the banks need to revisit what “ their needs are for core banking and move off of more legacy players”.
“What we’ll see is that tier two can actually be more nimble in the short term. Tier one, they really have to figure out a few things,” Bhasin says. “One is, every time I touch anything, it costs millions of dollars. How do we change that? And as more customers start to branch out, what does that mean for our core product offerings? What really remains to be seen is how consumers broadly engage in financial activities, whether it’s dispersed or is it still centralized.”
Pandemic Serving As A Catalyst For FinTech Integration
The pandemic has highlighted the need for a revolution in banking even more. The decline of bank branches was a trend that started long before the pandemic and will only increase over time. As people see the convenience of mobile banking and the ability to perform most of their daily life operations in a matter of minutes through a mobile app, bank branches become more obsolete. Bhasin believes that the pandemic is a catalyst for a drastic development of FinTech integration.
“I think there’s going to be a lot of opportunism in the market and we’re going to start seeing a race to the bottom in terms of fees, which is really going to set apart the businesses that are able to maintain their customers and acquire the greatest information on those customers,” Bhasin says. “So we see Apple, Google, Facebook entering the fray right now. Walmart’s been in the fintech space for a while, they started to launch a new fintech brand through Ribbit Capital, which was announced a few weeks ago”
Big Financial Companies’ Need To Keep Up With Startups
The CEO of Kunai also believes that we can expect a number of news market entrances as entrepreneurs will adapt to the demand of the customers. But according to Bhasin, it will not only be the startups doing the market entrances, but the big financial service companies and banks will start adjusting their services and partnerships in order to meet the changing demand of the clients and keep up with the neobanks or other alternative payment solutions.
Kunai partners with FinTechs on a daily basis, covering everything from startups to the biggest global banks. Thus, they clearly see the indicators of what the demand is, how the market looks like and how the products should be built.
“A lot of acceleration is about understanding where the market is going, where the consumer is going, and then being able to meet those needs head-on,” Bhasin says.
Every Company Can Be A FinTech
Bhasin believes that the FinTech revolution is not only limited to banks and payment institutions. In fact, he says that every company can be a fintech. Bhasin uses the example of Macy’s that a few years back was making more revenue based on their credit card partnerships than they were from the actual retail selling of apparel. As he explains, right now it is not about a “pure” FinTech entry but rather a more diverse perspective on how a business can be started and developed on the basis of fintech, while expanding in other areas.
“Macy’s was a fintech in some ways,” Bhasin says. “Do they have the technology itself? No. But they were a financing company at that point and so I think for people starting off, e it’s not about just bringing account and banking activities, it’s tying it to something else”
“You’re already seeing it in the marketplace with vertical SaaS type companies, Shopify, Toast,” Bhasin adds. “Those companies all have fintech that in many cases make up 50 percent or more of their revenue. And so fintech is a real thing that is going to be integrated just like software in the future.”
Apart from their continuously developing work in creating the new FinTechs, Kunai is also putting effort into educating people about banking and key terms that may seem confusing to the normal consumer. A while ago, the company started the Five-Minute FinTech series where they explain the crucial banking terms that may be confusing to a lot of people in the form of quick, easily digestible posts.
”I’m a big proponent of asking the dumb questions early on and so when you have that baseline understanding you have so much more ground to stand on as you level up your education,” Bhasin says. “Five-minute fintech is supposed to be the platform. It’s a place of learning, a place of encouragement and any question goes and so that’s kind of where five-minute fintech was born from and where we want to keep ongoing. So the Kunai brand is not just about Kunai what we do, but about fintech because we’re excited about its future.”
Kunai’s Plans For 2021
What does the future hold for Kunai? And what are their main plans for 2021?
“This year we are working with a lot of our partners to bring products to market,” Bhasin says. “The focus of the firm is accelerating the future of finance. And with that focus, we’re really looking at banking as a service, as the next big wave, and given the VC funding and, where the investment community is heading, startups are starting to proliferate. Companies need the vision to build on top of and so our goal is to be able to provide that vision along with the fundamentals.”