July - September 2015

Technology Transforming Banking for Good

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The power of technology is transforming the Banking Sector at a fast pace in India. In the next few years, the country is set to witness more and more penetration of digital banking, completely changing the way people have done transactions over the ages, write Arpit Gupta and Subhajit Bhattacharya of Elets News Network (ENN)

Mobile-BankingPrime Minister Narendra Modi, while launching one of the most ambitious projects of the Central Government, ‘Digital India’, said, “I dream of a Digital India where mobile and eBanking ensures financial inclusion.

It means the banks are going to be mostly virtual and paperless, and in the next few years, a scenario might emerge when most of the citizens would not need to visit banks for their banking needs. Even at present, a majority of transactions are being done from desktops and ATMs, rather than bank branches.

Digital India aims to ensure a transparent and clean system of governance, wherein the citizens of the country would enjoy their rights and avail the citizen benefits in an easier and accountable manner. Through this coveted project, the Government is aiming to reach out to maximum citizens of the country and have their greater say in the affairs of the Government by bridging the age old gap through the Information and Communication Technology tools.

Experts believe that apart from some core sectors such as IT, health and education, the emerging banking domain of India will also witness a mammoth change, all on account of the Digital India campaign.

Banking on technology

The Indian banking sector is now sitting on the cusp of a big digital revolution and passing through a crucial era of transformation. The Pradhan Mantri Jan-Dhan Yojna (PMJDY) has brought a massive non-banking population under the umbrella of banking, which has further strengthened the demand and need for absolute digitisation of the Indian banking system.

Finance Minister Arun Jaitley, at the launch of the Digital India programme, said, “Our financial inclusion Jetliprogramme is the largest in the world. In less than five months, we have opened 160 million Jan-Dhan accounts…the direct benefit transfer (DBT) scheme has been extended to 130 million people in a few months.”

Today, most of the nationalised banks and private banks provide facilities of digital banking to their customers. In spite of that, a massive rural population of India is deprived of the benefits of digital banking. On one hand, the urban population of the country is empowered with eBanking, opening accounts online and transferring funds just at a click of the mouse, on the other, the villages of India are still an easy prey to unscrupulous money lenders, illegal financial nexus and ponzi schemes.

Recently, the Indian banking family expanded by 11 new members. The Reserve Bank of India (RBI) granted in-principle licences to these new members — nine for starting payment banks and two universal banks, which is definitely a great morale booster for the sector. These completely digitally-empowered banking bodies will reach out to maximum population of India and will provide them their best possible services. A crucial study of the PwC on digitization of banking, points out that the need of digitization will reach its crest by the year 2020 and all the organisations will be forced to adapt to digitization.

“The size of the economy is increasing every day and that must be complimented by proper banking infrastructure. Digitization can only turn this into reality which will soar the level of financial inclusion,” says Shinjini Kumar, Leader, Banking Capital Markets, PwC India.

Digital-banking age

There are a plethora of benefits of digitization of banking, which a developing country like India can reap.Digitization in banking will increase the scope of financial inclusion and it will also help the banks offer extremely tailor-made services to the customers.

Increased usage of Net Banking and technology in the modes of payments would reduce the frequency of unaccounted money that has been used as black money by traders, businessmen as well as politicians

Jaitley believes that increased usage of Net Banking and technology in mode of payments would reduce the frequency of unaccounted money that has been used as black money by traders, businessmen as well as politicians. This will surely keep a track of all the transactions making the system more transparent.

With maximum reach, the banks will also be able to bring in more people under the banking ecosystem. Further, with the eBanking system in place, the entire financial system will get a massive boost. “With proper digitisation, the entire banking process will gain momentum, which will definitely have a direct and conclusive effect on the economy of India,” emphasises Abhirup Sarkar, eminent economist.

Experts suggest that the Indian Android mobile market will grow manifold in the coming few years… This mobile boost will empower a massive nonbanking population and will bring them under the banking canopy

Further, the country’s largest lender, the State Bank of India, has committed to spending nearly Rs30 billion a year to expand its digital presence. Leading private banks such as HDFC, ICICI and Axis Bank have also launched several payment solutions.

The State Bank of India has recently launched new mobile wallet ‘SBI Buddy’. Similarly, HDFC has launched PayZapp, and ICICI Bank released ‘Pockets’ in the past few months. In the future, Yes Bank and Axis bank are also expected to jump onto the bandwagon with their own mobile wallets.

‘Digitise the payments’It took over a decade for customers to switch their preference from cash to card to online wallets. As per the predictions made by the Internet and Mobile Association of India (IAMAI), the Indian digital payments industry was expected to reach `1.2 lakh crore by December 2014.

Bhavin Mody, Director, e-Billing Solutions Private Limited

Bhavin Mody,
Director, e-Billing Solutions Private Limited

Despite this, the penetration level of digital payments in India is very low. Within the e-tailing segment, cash on delivery contributes to about 50 per cent of the payments. There is a need to digitise these payments. Tapping this segment alone can double the digital payment volume in that segment. One of the solutions to achieve this is Mobile Point of Sale (mPOS), which can help in collection of card-based payments at the time of delivery.

Further digitization of payments will happen with solutions like NFC-based tap and pay, which has the potential of revolutionizing the payments horizon. Digital payment instruments like e-wallet and m-wallet are already believed to be the next vehicle of digital payments growth story in India.

In view of this scenario, EBS, a leading payment aggregator in India, has on-boarded more than 11,000 businesses to accept online payments. It offers the complete gamut of payment options to its clients – right from credit and debit cards, net banking up to cash cards, e-wallets, m-wallets and IMPS. In order to further boost digital payments, it offers an integrated mPOS solution which will enable its e-Commerce clients to gradually replace the cash on delivery option. Various initiatives undertaken by EBS like EMI payment and Debit cards with PIN payment option are encouraging more and more customers to pay online.

It took over a decade for customers to switch their preference from cash to card to online wallets. As per the predictions made by the Internet and Mobile Association of India (IAMAI), the Indian digital payments industry was expected to reach `1.2 lakh crore by December 2014.

Despite this, the penetration level of digital payments in India is very low. Within the e-tailing segment, cash on delivery contributes to about 50 per cent of the payments. There is a need to digitise these payments. Tapping this segment alone can double the digital payment volume in that segment. One of the solutions to achieve this is Mobile Point of Sale (mPOS), which can help in collection of card-based payments at the time of delivery.

Further digitization of payments will happen with solutions like NFC-based tap and pay, which has the potential of revolutionizing the payments horizon. Digital payment instruments like e-wallet and m-wallet are already believed to be the next vehicle of digital payments growth story in India.

In view of this scenario, EBS, a leading payment aggregator in India, has on-boarded more than 11,000 businesses to accept online payments. It offers the complete gamut of payment options to its clients – right from credit and debit cards, net banking up to cash cards, e-wallets, m-wallets and IMPS. In order to further boost digital payments, it offers an integrated mPOS solution which will enable its e-Commerce clients to gradually replace the cash on delivery option. Various initiatives undertaken by EBS like EMI payment and Debit cards with PIN payment option are encouraging more and more customers to pay online.

Urban-rural digital divide

The inclusion of computer-related banking will help the banks reach a large number of customers and will facilitate the lowest strata of the pyramid. A recent study reveals that most of the customers do not get satisfactory services from banks and this makes them turn towards other financial organisations, which might be non-reliable and risk-prone. The Indian banks combat a massive challenge in reaching to the rural population, and digitisation will help them navigate through this challenge.

“To turn digitization of banking into a reality, the urban rural digital divide must be leveled through proper digital literacy,” asserts Shinjini Kumar, Leader, Banking Capital Markets, PwC India.

The digital database covers about 70 per cent of India’s population and eventually 800 million Indians will get government subsidies as direct bank transfers. A smart digitisation will minimise the need for establishing a branch in the remotest corners of India. Standard banking, including deposition of money and withdrawal of funds, will also be possible through mobile or an electronic kiosk or smart payment device.

According to the Telecom Regulatory Authority of India (TRAI), the country had nearly 970 million mobile phone subscribers in May 2015. This number is expected to increase to 1.4 billion by 2020, driven by the rise in affordable devices and services.

Experts suggest that the Indian Android mobile market will grow manifold in the coming few years. By 2019, the market will achieve a galloping growth and will have more than 650 million users. This mobile boost will empower a massive non-banking population and will bring them under the banking canopy. It will also fuel the growth of Indian economy and will iron out the creased areas of Indian financial infrastructure.

 Bridging the gap

With the advent of newer technologies in banking, multiple modes of collection have emerged, with payment gateway being the biggest one. The Kotak Mahindra Bank works very closely with top municipal corporations in Madhya Pradesh, where payment gateway is set up. We also have mobilebanking app and cash-deposit machines.

V Swaminathan, Senior Executive Vice President- India, Kotak Mahindra Bank

V Swaminathan,
Senior Executive Vice President- India, Kotak Mahindra Bank

In keeping with the changing times, we have come up with a technology for the Provident Fund Trust banking and the model has been adopted in a few states. We work closely with the eGovernance projects at the national level, i.e. the Prime Minister’s Relief Fund, Mahatma Gandhi Swachhta Mission, remittance services, etc. In addition, the solutions that we offer to the government, include payment collection, communication and technology, etc. For electronic payments ,we have Kotak Remit. Kotak Mahindra Bank has been contributing to the eGovernance initiatives of the Central Government and state governments in its own way. It is the fourth largest bank having reasonably vast presence across the country and abroad. We have a global footprint in the US, the UK, Dubai and Mauritius.

Talking specifically of the financial inclusion, we help the Beej Nigam in Gujarat to ensure delivery of bulk subsidy. We also help in tax collection in the States of Goa and Maharashtra. Further, we help in Central Sales Tax (CST) collection in Delhi, Bihar, Punjab, Andhra Pradesh and Telangana. We work at talukas and panchayat level through rural centres too.

Bridging the gap

With the advent of newer technologies in banking, multiple modes of collection have emerged, with payment gateway being the biggest one. The Kotak Mahindra Bank works very closely with top municipal corporations in Madhya Pradesh, where payment gateway is set up. We also have mobile banking app and cash-deposit machines.

In keeping with the changing times, we have come up with a technology for the Provident Fund Trust banking and the model has been adopted in a few states. We work closely with the eGovernance projects at the national level, i.e. the Prime Minister’s Relief Fund, Mahatma Gandhi Swachhta Mission, remittance services, etc. In addition, the solutions that we offer to the government, include payment collection, communication and technology, etc. For electronic payments we have Kotak Remit. Kotak Mahindra Bank has been contributing to the eGovernance initiatives of the Central Government and state governments in its own way. It is the fourth largest bank having reasonably vast presence across the country and abroad. We have a global footprint in the US, the UK, Dubai and Mauritius.

Talking specifically of the financial inclusion, we help the Beej Nigam in Gujarat to ensure delivery of bulk subsidy. We also help in tax collection in the States of Goa and Maharashtra. Further, we help in Central Sales Tax (CST) collection in Delhi, Bihar, Punjab, Andhra Pradesh and Telangana. We work at talukas and panchayat level through rural centres too.

Security concerns

To provide services to the customers, the banks are relying not only on smart banking, but also on safe banking.20-23-D Cyber experts think that excessive reliance on digitization might affect the customer’s safety. It is with regard to the presence of digital revolution in banking that more and more banking customers are falling prey to a gamut of white collar crimes.

An expert on white collar crime from an elite police force says, “Digitization in banking should be properly cushioned with a robust vigilance system, which will monitor all the account-related activities of the customers and will further prohibit any acts of money laundering or account-hacking activities by unknown hackers who are prowling in the darkness of the cyber world.”

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