The rise of Fintech revolution from Silicon Valley to India has been fast. Millennials are consuming more data and are active on the virtual world because of smartphones. These are the signs of an impending technology upgrade that will impact our future lives and disrupt the current pattern of living. But is it that only the IT industry needs skill upgradation? Isn’t it as important and relevant to the banking system in India? It sure is, as Banks are at the heart of the economy and are the catalysts for economic growth and development.
A decade back, banks were making money by providing other value added services such as brokerage, commission by selling mutual funds, shares, bonds since they had the competitive advantage of the availability of the data. In fact, many public sector banks have larger number customer accounts even today, when compared to the private banks.
Nowadays, young Fintech entrepreneurs are targeting millennials by integrating bank accounts to link with wallets, payment apps, etc. It’s a revolutionary experience. Many private banks have pioneered in adopting and implementing latest technologies and trying hard to compete with global firms such as Amazon pay, Google TEZ, etc. This era of Banking is not restricted to only banking operations like loans, deposits, and withdrawals since the banking business model have become more dynamic and are drastically changing on a regular basis. A decade back, banks were making money by providing other value added services such as brokerage, commission by selling mutual funds, shares, bonds since they had the competitive advantage of the availability of the data. In fact, many public sector banks have larger number customer accounts even today, when compared to the private banks.
But there's little to prove that Banks are ready for this disruption. The recent PNB fraud along with other nationalized banks in the latest case of Nirav Modi and similar experience with Vijaya Mallaya has happened to a large measure because precautions were enforced. The two examples stand out, as they have been immensely discussed and highlighted in the public forums. However, we cannot get our hands on a decent estimate if we start tunneling our way into the RRBs, UCBs, SCBs and other smaller banks. The aggregates can be mind-blowing. One definite thing is the fact that these rural banks or the cooperative banks are not at all ready for technology disruption, and face the threat of close down with the advent of technologies such as blockchain or AI.
The PSBs must train their executives on a regular basis to adapt to and implement new technologies faster to provide quality services. They must not outsource their IT division to third-party operators.
Only a few PSBs are providing services at par with private banks such as ICICI, HDFC, and others. Many PSBs are required to adopt various technologies to provide quality services to retain customers. We have seen how technology disrupted the Indian Postal services, i.e., email replaced the postcards, letters etc. Similarly, NEFT, RGTS replaced traditional forms of money transfer. Disruptive technologies are going to disrupt the business of banking, telecom and postal service of public sector enterprises.
On the other hand, technology adoption in the Banking space, will, in fact, lead to more jobs being created, as issues of cybersecurity, software optimization etc. will assume importance. This is similar to the time when smartphones replaced the conventional CDMA handsets; a whole lot of jobs were generated due to continuous innovation taking place in the smartphone space. Quite undoubtedly, technology is going to play a crucial role in redefining the banking sector. Banking personnel need to be well equipped and trained to sail through the change.
The leading trends in the Banking space in India are being shaped by Private players, mainly in order to accommodate the changing needs of the customers. These trends are characterized by rapid expansion of the telecom network, pro-digital regulatory changes; widespread innovation led by fintech and in essence a strong digital revolution in the country. There is a lot more to come in the world of banking, including novel technologies like blockchain/AI.
Here are some measures that Public Sector Banks need to focus on:
- Adopt latest technologies in banking transactions
- Train employees to adapt to the new tech system
- Make the service fast and customer-friendly
- Make the banking services beneficial to employees
- ICICI Bank Ltd is the first bank in India to use blockchain technology to complete a banking transaction. It successfully executed transactions in International Trade Finance and Remittances in partnership with Emirates NBD. Also, a total of 30 banks and NBFCs in India have given their assent to the use of BankChain (in December 2017), a blockchain consortium (set up by Fintech firm Prime chain Technologies), which can be used for cross-border remittances and peer-to-peer money transfers. Sadly, SBI is the only PSB that figures on the list. Yes Bank, Axis Bank, and ICICI Bank are among others.
The NBFCs have been clocking higher growth rates than the PSBs mainly on account of better usage of technology. The personnel there are adequately trained and aware of how to use what, starkly in contrast to the PSBs. However, PSBs have the benefit of a wide customer base, unlike many other banks in India. Calculated tweaks in the technology adoption process by way of empowering the personnel with its usage can bring about a sea change in the way the PSBs run.In conclusion, the idea of digital banking is comforting, but immense discomfiture is caused to banking personnel on account of continuous vigilance. However, as we lead ourselves into the future, technology is what will take up the reins, and thus we need to be ready so that we don’t fall behind.