Banking in India, up until a few years ago, was somewhat like visiting a distant relative. You had to set aside anywhere between four and six hours for the visit. The process was designed to inculcate a healthy respect for patience in every individual; you just had to wait patiently to conduct a financial transaction, with your own money, as the professionals being paid to assist you decided what their lunch menu would look like.
Thankfully, the situation today is very different, and rapidly changing for the better. Payments and transactions are being conducted seamlessly through mobile apps while banks increasingly go global, multi-service, low-cost and digital. We live in a world where blockchain has progressed from being a notebook sketch to an established technology in a fraction of the time it took the Internet to be accepted as a standard tool. The fin-tech sector is closer than ever to banks with agility and low footprint, which are equipped to prototype new services as well as transparently manage regulatory compliances, hedge currency risk using cryptocurrencies, use artificial intelligence to limit fraud losses, and embrace data as their new currency.
The vision of technology as a key driver of financial service enablement also received a major push from the government’s recent demonetisation drive. One of the boldest moves by the Indian government in recent memory, the crackdown on black money has become the single-biggest lever to digitise the economy. It helped in overcoming the three major roadblocks preventing broader financial inclusion in India–lack of financial and digital literacy, lack of platform interoperability, and a cash-led culture.
Demonetisation fostered conversations about a cashless economy across multiple consumer segments, from the centre table of kitty parties to the boardroom table of large corporations. The government went into an overdrive to promote digital platforms like BHIM, Aadhaar-enabled money transfers, Unified Payments Interface, USSD, etc to enable interoperability, creating the perception that the cashless economy is here to stay. This rides on the claim that almost all Indians now have an Aadhaar card and a bank account linked to their mobile numbers – the combination of which will facilitate India become a predominantly cashless economy.
This wave of innovation, driven by the interplay between technology, consumer needs, and government regulations, will fundamentally alter the banking industry in the next five years. The latest 'Global CEO Survey' conducted by PwC highlighted that the speed at which breakthrough financial technologies became mass-market applications concerned 70% of leading financial services organisations. What this implies is that, in the next few years, public sector banks, which have traditionally had a very high-handed approach to financial services, will be facing the music. With years of non-performing assets piled up, they now have a new challenge in digital disruption, forcing them to either innovate and adapt to the changing paradigm or fade into oblivion.
Given the rate at which the fin-tech sector is evolving, it isn’t too far-fetched to imagine mobile-first banks without physical offices, payments conducted through wearable devices, and AI engines automatically relaying savings to an ETF portfolio based on the user’s risk appetite and savings goals. But technological innovations are usually a double-edged sword, often bettering the world in one way while destabilising it in another. Because of its paradoxical nature, there is a serious need for Indian politicians, policymakers, industry leaders, and domain experts to come together to discuss how to best implement technology to enable seamless and secure financial services to each citizen.
The unfolding of the digital revolution in the country presents an opportune moment to contemplate, understand, and discuss the implications and applications of fin-tech innovations for our economy, for the society, and for our democracy as a whole – especially the most underprivileged – over the next five years. As Nandan Nilekani, chairman of UIDAI, said, "The future will belong to those who show speed, imagination, and the boldness to embrace change."
Vaibhav Lodha is co-founder of Mumbai-based payments and lending startup ftcash.
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