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December 15, 2018 Saturday 01:16:32 PM IST


Cover Story

When you want to speculate on what banking will look like in a decade and beyond, you have to necessarily be prepared for an inversion of your imagination. The conventional brick and mortar bank branch may not be the preferred vehicle for banking transactions for a majority of the next generation.

 Banking will continue as a medium for finance but as Brett King — one of the thought leaders of our times in the field of Technology— believes, banking may be everywhere but never at a bank branch.

In a fascinating book, ‘Bank 4.0’ which upturns so many of our conventional beliefs about banks, he postulates that commercial banks will have to depend on non-bank media to enable transactions. Payments for daily transactions between individuals and businesses will be done through non-bank channels with banks coming in only for the fund settlements.

 Data revolution

The mobile phone, with computing powers, is bringing financial access to billions of people, especially in China and India, who were never served by bank branches. “Data revolution is the most democratising force in the history of finance,” says Brett King and draws attention to the quiet payment revolution taking place in the Chinese market today which is a pointer to the shape of things to come.

 By the end of 2015, more than 350 million Chinese were regularly using their mobile phones to purchase goods and services. This number rose to 750 million in 2017. The Chinese have taken to mobile payments with gusto. Even card-based payments are losing out to the mobile oriented payments which use just the QR code.

In 2015, Visa, the leader in card payments worldwide, reported 9,000 transactions per second across the globe while Chinese mobile payment platform Alipay had 87,000 transactions per second.

 Fintech tsunami

Fintech companies are going to change the way banking is done, at least as far as ordinary transactional banking is concerned. Banks should diligently prepare for the onslaught of a Fintech tsunami.

“When the automobile was invented, the dominant form of urban transportation was horses — within 30 years that had all changed….Just take one small area of the smartphone’s impact — photography.  Of the 1.2 trillion photos taken in 2017, only 10.3 percent of them came from digital or conventional cameras: 85 percent of these photos came from smartphones,” writes Brett King.


Interestingly, countries like China and India seem to be having a competitive advantage in riding this wave of digitisation. They have a large segment of population which does not have the burden of legacy. For people who have never used a bank chequebook all their lives, it will be easy to leapfrog to mobile payments. There is no mindset problem to overcome, unlike, say, even the United States.

 A system immersed in legacy

Two-thirds of the world’s cheques today are written in the United States because of a system immersed in legacy. When it comes to mobile payments, even Kenya is more advanced than the United States.

Even Singapore, widely perceived to be an advanced country with driverless metro trains and other high-tech conveniences, feels it is way behind China. In his 2017, National Day speech, the Singapore Prime Minister Lee Hsiang Loong lauded China for its pathbreaking payment revolution and floated the idea of a “smart nation”. 

 He narrated the experience of one of his ministers who had gone on a trip to China and tried to pay a wayside hawker of chestnuts in Shanghai with cash. The hawker did not say anything — just gave him a quizzical look and pointed to the QR code!

 Integration of systems

Prime Minister Lee added: “In major Chinese cities, cash has become obsolete. Even debit and credit cards are becoming rare. Everyone is using WeChat Pay or AliPay. To pay someone money, just pick up the phone and scan his QR code….In Singapore we too have e-payments but we have too many different systems and schemes that do not “talk” to one another….we must simplify and integrate our systems….Next time I am at a hawker centre, I look forward to paying for my meal with PayNow….”.

India too is adopting digital technology for payments. Paytm has acquired nearly 350 million users and 10 million small businesses. Banks too are changing. The country’s largest bank, State Bank of India, has recently launched a very friendly mobile app called YONO ( You Only Need One) which is gaining in popularity. YONO can be used for banking, payments and shopping.

 The Union Government’s Digital India campaign launched in 2015 aims to expand the scope of digitisation and the use of technology across the country. But it has to be admitted that there are still large segments of people who do not have smart phones and are outside the ambit of what we are talking about.

 They are also part of our nation. Our challenge and mission will be to ensure that the pace of development and the spread of digitisation reaches everyone, irrespective of rich or poor, urban or rural.  Bridging the digital divide and digital inclusion is perhaps more important than financial inclusion.

 In a sense, both are interlinked and both have to be given equal emphasis and thrust so that we as a nation do not miss out on the digital journey, where China, as of now, is powering ahead.


( The writer is a Senior banker.The views expressed are personal )

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