Embracing FinTech – Opening up of Indian Banks

The Indian Financial industry is entering a period of radical change where everybody is trying to align their business strategies around digital innovations. Payment space is one of early pickers in the FinTech space in India creating a critical trigger among the banking verticals to take the digital path on a very serious note. Also, there has been an exponential increase in smart phones user base in India who have moved to Mobile banking directly from the traditional banking approach without even going through web based banking platforms. An exponential increase in net banking transactions across all major banks bears testimony to this fact. Moreover, with a rise in FinTech start ups focused exclusively on different aspects of Banking such as alternative payments platform, lending, capital raising, and Investment management have created significant new competition for the incumbent banks. 

The brighter side is Indian Banks are taking this direct threat in a very positive manner and working on aligning themselves to be truly digital and client-centric. Digital disruption is by no means a threat to traditional banks. Quite the contrary, it is encouraging collaboration among industry participants, driving cultural change. Major Banks in India are opening up and reaching outside their walls, joining and launching innovation platforms, working with start ups and collaborating on new ideas in ways that would have been unfathomable even few years ago. 

HDFC Bank recently concluded a two day Digital Innovation Summit where representatives from shortlisted 30 FinTech proposals out of 105 proposals where called to make presentations to its top management with their solutions that the Bank can adopt.

Similarly ICICI has come up with an event called ICICI Appathon where they have exposed diverse set of 50+ APIs across ICICI Retail and Corporate Banking, Payment wallet, Securities, Insurance and Loans along with APIs from NPCI and Visa for the shortlisted participants to build mobile based solutions which the Bank can adopt based on their assessment on different aspects.

 I have presented proposals both at HDFC Digital Innovation Summit and also at  ICICI . Post my winning prototype on paperless customer on-boarding for Banks using Aadhaar and e-Sign APIs, I have been doing lot of research on Indian Digital Banking landscape and what entails a true digital banking experience for an end user. The product path shared with both the banks have essence which completely captures what customer wants with following major themes:

1. Mobile is not just another distribution channel but it is a product or a complete business. Front-runners need to show maturity in the digital product development and rebuild their strategy and the organization accordingly. The exponential penetration of social platforms like WeChat in China or services like M-Pesa has shown the power of Mobile. It is not just a technology or a trend. As Paolo Sironi puts it "We are not in the 1990s: digital banking is not anymore a new channel but the essence of banking 2020." 

2. New age Digital Customer in India expect speed, simplicity and convenience above anything. The proliferation of e-commerce in India is a perfect example. Banks need to innovate to remain relevant in the Digital space. As Paolo Sironi puts it "Dressing up a bank, by adding digital on top of existing operations and organisational charts, does not automatically help to increase ROI, improve client-bank relationships, fix cost/income ratios. Nor the sole public recognition that a bank is de facto a technology company does help to move the innovation agenda forward".

3. Disintegrated distributions channels and isolated services in the Digital space will result in confusing products and will convey the internal complexity of the bank to consumers. Understand what the customer wants and build products accordingly.

4. Analytics powered by Artificial Intelligence/Machine Learning should fuel offering of different services in the Digital space providing competitive products to consumers and at the same time provide greater ease in accessing those services. 

To conclude, Indian FinTech ecosystem is picking up and there is an exciting future ahead. The new age FinTechs will provide invaluable elements and an ecosystem from which Banks can learn and push the innovation agenda forward.  No wonders, opening up of the largest private sector banks to collaborate with start ups is a very positive sign.