Home→View Points→Blogs→How banking and payments are changing India?
How banking and payments are changing India?
By Venkatesh Subramanian on 13/2/2015
Imagine a country of snake charmers, where just about 15 to 20 years back, the main stay of the labour movement was to oppose computerisation in governments and corporations for fear of job loss. And imagine in the same country today, where at the behest of a prime minister nearly 100 million accounts are opened within a span of 3 months covering some of the remotest and most difficult to reach locations.
All this was possible by the power of technology, no legacy to bother and smart regulations:
- Indian banks were late to adopt any automation technologies till the late 90s. Then a spate of liberalisation and privatisation opened a plethora of new banks whose only differentiator was technology. They were smart enough to attract the lucrative and tech savvy IT professionals that India was producing in large numbers as their clients. In fact as a personal user of both the Indian banks and European banks, I was amazed at the level of internet banking that was possible in 2002 with Indian banks, which still I find somewhat missing in Europe. The reason for this may be often security and regulation
- Not only where these banks testing the frontiers with low cost technology by use of simple but effective authentication mechanisms and SMS banking to prevent frauds, they made an existential threat to the government owned Banks. While regulations to a great extent held the foreign players at bay, these new banks ensured the few ones who were granted licenses in India could not really capture any market share in the mass retail segment
- These coupled with the smart moves by the RBI (Reserve Bank of India, the Indian Central Bank) ensured within a decade all the major commercial banks were forced to implement modern core banking systems and internet banking sites
- RBI and the Government further challenged the banks to reach to the remotest possible nooks and corners of the country by mobile ATM(s), where a person equipped with a GPRS based cash dispensing machine, could go around distributing and collecting cash from people who dealt with really petty cash
- This was capped by the Jan Dhan (Mass Rich!) program of the prime minister to have every Indian family access to a bank account
- Even today, India is in the forefront of mobile banking with nearly billion mobile phones and smart use of mobiles for security of both mobile and internet banking
- While all this was happening to reach a billion clients, the payment options in India have also dramatically improved to have a near instantaneous transfer of money at miniscule costs. What more many innovative Telco players compete with banks using their payment and mobile wallet options
Now the real question in everybody’s mind in India is can the rural Indian economy which is dominated by cash, gold (as savings and security instrument) and loan sharks (who always lend against gold) move to a more modern cashless economy and with a choice of professional lenders like the banks supplying them liquidity.
Share your thoughts.