Saikat Das & N Shivapriya, ET Bureau | Feb 11, 2015, 11.56AM
Cash at a click on your mobile. Train tickets at a swipe of your bank's card. Technology is set to transform the way banking is done
A look at the list of applicants released by the Reserve Bank of India for small banks and payments banks can easily lead you to believe that some of them are toy shops or neighbourhood provision stores, selling small, daily-use items. Among the applicants are names like A Little World, Belapur and Aamcol Trexim & Mackmorn Commodities, Kolkata.
That may well become the case with regular banks too given the current pace of technological change and the RBI's progress.
A time may come when State Bank of India or ICICI Bank may hawk sweaters, refrigerators or even i-pads either at their branches, or on their websites as the Sygma Banque of Poland does.
The thing to remember though, is that it is not bankers who are transforming the customer experience. Those with technological power are changing the way Indians transact.
In Delhi, a passenger and an autorickshaw driver are in acrimony on a windy winter morning over Rs 20 change payable by the driver in exchange for Rs 100 towards the fare. Suddenly, they both realize the solution fits in their palms, in the form of the Paytm wallet. The driver will use the Rs 80 in his digital wallet to recharge his mobile.
Direct Channels
In the past decade, more transactions have been done from desktops and ATMs than bank branches. And in the next 10 years, many may not even go to banks. Instead, the mobile — which has already doubled up as a movie hall, music system, camera and game console — may come in handy. The telecom service provider or the neighbourhood kirana store may well be your bank.
"They (mobile and internet) are no longer alternate channels, but direct channels," says SK Mishra, deputy managing director, corporate strategy and new businesses, State Bank of India, which has seen 60% of transactions shift to mobile phones and the internet. "Now, it is the branch that is the alternate channel."
State Bank of India and the country's largest private bank, ICICI Bank, will soon help you travel by the metro across cities without your having to buy a ticket, through their contactless cards. All you have to do is show your card and walk into the metro station at Mumbai and if you're taking a flight to Delhi, show the card when you land and hop on to the metro there.
The ticket price will automatically be deducted from the balance on the card.When the balance goes below Rs 100, ICICI Bank will automatically replenish the funds from your credit or debit card. On social media, ICICI Bank's Facebook app also allows you to book movie tickets and split the tab with friends even as you post your newest selfie on the social networking site.
Similarly, HDFC Bank's offer locator is an app that not only helps you locate the nearest branch or ATM but also the restaurants where it has the best offers. "The mobile gives banks the ability to reach out to customers in real time," says Nitin Chugh, head, digital banking at HDFC Bank.
Life is plastic
Plastic in the pocket has no doubt reduced the amount of cash a person carries. In future, the RBI may not have to spend much in printing currency, work overtime to prevent counterfeit, or pull out soiled notes. You may not even need a bank account number to transfer funds.
"If you look at the amount of cash you carried in your wallet earlier and what you carry now, it would definitely have come down," says AP Hota, MD and CEO, National Payments Corporation of India, whose next big initiative is to make all bill payments electronic and standardised across providers to reduce cash and cheque transactions.
If splitting the tab for a movie earlier meant cash changing hands, it can now be done using an app like ICICI's or a digital wallet on your mobile. Falling smartphone prices and power-packed phones are making the changes more widespread even as regulations facilitate them.
ICICI Bank, which launched funds transfer on Twitter earlier last month, makes it possible for customers to pay by only knowing someone's Twitter handle. So the next time you shift house and are using packers and movers' services, you don't have ask for a bank account number and IFSC Code for the funds transfer or make the payment by cash. You can just DM "#pay @shivlink_3000" if the firm's Twitter handle is @shivlink and the amount you need to transfer is Rs 3000.
Soon, wearable devices such as a fitness band may be enough. "It is all about how simple and convenient you make it," says Amit Lakhotia, vice-president business, Paytm, showing off the digital wallet that looks simpler than a calculator on his mobile
Will ATMs vanish?
Does it mean that those with the technology will be the drivers and not banks? Telecom companies are campaigning that they have solved the puzzle, citing the example of Kenya where mobile transactions have soared. But the question is, do they have other markets to showcase?
"Mobile phones will be the best last mile, and can be both beneficial as well as disruptive to existing banks,'' says Pramod Saxena, CMD, Oxigen Services, which has applied for a payments bank licence. "They can cut costs and grow business but to do that, they have to learn to work the new way. Those who empower the customer will win."
In fact, many believe that even the need for more ATMs will fall given that people won't need as much cash as they do now. "Over a period of time, ATMs will be like dinosaurs," says Lakhotia of Paytm.
Fewer cash transactions is also a thrust area for the government. Nearly 90,000 of SBI's Point of Sale machines even dispense cash, which means you can get cash of up to Rs 1,000 after paying your bill at a provision store. Aadhaar will also play a big role in reducing cash transactions. In addition to direct benefit transfers, the Aadhaar mapper, maintained by NPCI, enables you to transfer funds to anyone, knowing only their Aadhaar number. The account mapped to the Aadhaar number gets automatically credited with the amount transferred.
Do these developments make banks into provision stores, and mobile phone players into banks?
Not necessarily.
In fact, banks internationally are investing time, money and people in developing their digital offering. Barclays, one of the biggest UK banks, has a programme titled Rs Digital Eagles,' It trains a set of people on digital technology and they travel across branches to teach other staffers who, in turn, do it for their customers.
The training is not just restricted to bank transactions, but also on how to use technology for other purposes too. Banking expertise alone won't help a bank survive, but how well it adopts technology which could do what Uber Technologies did to the world of plying taxis.
"Like everything else, banking will be affected," says Ashok Vaswani, chief executive of Personal and Corporate banking divisions at Barclays. "Now we can either try and struggle and say, 'Hey, we are going to try and hold back. I am going to try and find ways to stick to the old model', or we can embrace technology. And our sense is that we should embrace it. We should embrace technology as fundamentally we believe it can make our customers' lives much, much, much easier."
