 "BS Banking Round Table: 'We are disrupting the disruptors'")
Riding on the digital wave banks are swiftly morphing into technology companies. This comes at a time when the banks have been facing stiff competition from digital wallet companies, who have a first mover advantage in the space. However, banks remain unfazed with the rising competition.
"Banks have tremendous ability to disrupt the disruptors. For example the payments company can provide a plain, vanilla digital wallet, but banks have so much data and can provide other services. In fact, technology companies becoming banks may not happen because there are regulatory barriers but banks becoming technology companies has already happened," said Mrutyunjay Mahapatra, deputy managing director & chief information officer, State Bank of India, speaking at the Business Standard Banking Technology Round Table 2015.
The rising number of smart phones in the country, rapid growth in e-commerce and the shift in consumer behaviour has prompted several players including-banks, technology companies, telecom players and pre-paid instrument companies to launch their mobile payment solutions.
Wallets, which till last year were domain of non-banks, have been growing at a faster pace than mobile banking. In 2014-15, the number of transactions via mobile wallet stood at 255 million, compared to 172 million banking transactions on mobile phones. Though the size of transactions on mobile wallets remains smaller than mobile banking, wallets have managed to surpass the latter in number of transactions.
With the increase in the number of players, competition has become intense. In order to create a new niche for themselves, lenders are increasingly focusing on customisation. "The consumer is no longer looking for a product but for a proposition and that is a big change," said Kartik Kaushik, country business manager, Global Consumer Bank, Citibank.
Considering that a whopping 96 per cent of all retail payments, or $2 trillion (about Rs 133 lakh crore), in India are still cash-base and according to some reports this will go up to $8 trillion (about Rs 532 lakh crore) in the next few years, there is a clear opportunity of moving towards digital payments.
However, the banks have made a clear improvement in getting consumers to adapt to digital money. As per the Reserve Bank of India data, the total value of transactions via mobile phones stood at Rs 26,960 crore in the month of September, up from Rs 7,730 crore in the same month a year ago.
In fact, lenders believe that digital can play a significant role in reaching out not only to the urban consumer but also to the financially excluded client base. "Technology is also important for reaching financial inclusion and not for only for reaching the financially savvy," said group executive and head-retail banking, Axis Bank.
Recently, RBI has granted payments banks licence to 11 applicants that have also been directed to rely on technology to achieve financial inclusion. Even payments banks players do not see the other technology players as a threat. The technology players do accept that the competition has increased but they believe that there is enough room for all the players in the market. "Some banks did take the lead. But, a lot of banks about 10-15 years back saw technology as a backroom operation. Cut to today, changes are happening in the last one year than we saw in the last ten years. As technology providers, we are having to adapt," said Ramaswamy Venkatachalam, MD, India & South Asia, FIS.
