Innovation, Umbrella apps to drive digital banking in new decade

Digital banking volumes in India are likely to grow on a higher trajectory in the third decade of the 21st century, if the strong momentum gathered in 2020 — during the pandemic — is anything to go by.

The 2020 experience brought forth the challenge of adequate infrastructure for online transactions and customer experience, even as bankers say high growth is imminent thanks to changing consumer behavior towards digital transactions.

The push towards innovation and additional investment made over the past year will help enhance capacities and make systems mature. Mapping growth trajectory of digital payments, a RedSeer Consulting report states they are expected to grow over 3x to Rs 7,092 trillion by 2025, on account of government policies around financial inclusion and growing digitisation of merchants. The digital payments market was worth Rs 2,162 trillion in FY20. The 160 million unique mobile payment users will rise 5x to reach 800 million by 2025.

Mrutunjaya Mahapatra, member (governing council), Reserve Bank Innovation Hub (RBIH), said: “Time has gone to think in terms of transactions or some instance with a particular bank (HDFC Bank) about the readiness of the ecosystem to handle the volume. But we will have to look from the total enterprise architecture point of view. That was lesson from 2020.”

Four trends are likely to shape digital banking. The first is enterprise architecture — weaving together business with technology.

The prevalent thought, including in RBI, is that innovation is key in the digital world, and not just mere automation of whatever was being done in the physical world earlier.

Considering the Cloud element of digitisation in 2020, it was earlier a mono Cloud arrangement where you go for Google Cloud or Amazon Cloud. Now, hybrid Cloud is in the works. As a result, anybody may use three or four Cloud systems.

The second aspect is that legacy applications for most banks will be up for renewal beginning 2021, as most of them will become a decade old. A lot of modernisation in banking took place during the wave of core banking in the early 2010s. Now, most banks are repositioning or reconfiguring data centres and legacy application stacks.

Adding to that is ‘platformisation’. Take the case of SBI’s YONO, where multiple customer conveniences are available through one app — making it a Superapp or umbrella app.

Spending in productivity and compliance-related areas is the third aspect, as the world witnessed between FY19 and FY20, the rapid rise in bad loans and tilt towards retail loans.

Retail loans are technology-centric but corporate loans are risk management-centric. Hence, regulators and others will push banks to spend money on compliance.

Fourth, productivity and gaining efficiency will take precedence once again, instead of the fancy concept of only having customer acquisition, etc.

This is because banks will be pushed to maintain a certain degree of profitability, said Mahapatra, the erstwhile MD and CEO of Syndicate Bank.