The banking sector has changed for the better. With proliferation of technology and innovation, offering and availing banking services have both become economical and convenient. Banks have benefited immensely from digitisation of services and adoption of new-age technologies like artificial intelligence, big data, machine learning, etc. So have banking customers.
Using technology and tying up with fintech companies, banks have been able to deliver services at lower cost to areas and regions which were considered unviable for banks to expand into. So, banks are reaching everywhere without having to spend too much on infrastructure.
Fintech Revolution
While digitisation has helped banks bring down cost and expand its reach, the Fintech revolution has helped banks become agile and innovative in their product offerings. The fintech fever has caught all banks – old and new generation, public and private sector.
Even banking behemoth like State Bank of India (SBI) now prides itself for ‘embracing technology disruptions’. YONO, its flagship all-encompassing digital platform, has attracted millions of customers. In its annual report for 2021-22, the bank says that its YONO platform has close to 50 million customers. As of 31 March 2022, YONO has set a record with 111.74 million downloads, 26,000 new digital Savings Bank accounts per day and 48.35 million registered users.
ICICI Bank, the largest in the private sector, says in an analysts call after its third quarter result that growth in digital offerings leveraging digital and technology across businesses is a key element of its strategy for growing the risk-calibrated core operating profit. “We continue to see increasing adoption and usage of our digital platforms by our customers,” it said. The bank claims that it has 8.6 million activations of iMobile Pay by non-ICICI Bank account holders as of end-December. “The value of transactions by non-ICICI Bank account holders in Q3 of this year was 2.3 times the value of transactions in Q3 of last year,” it says.
Banks have been developing in-house fintech apps like the YONO and iMobile Pay or tying up with fintech start-ups to ride the fintech revolution. For example, South India-based Federal Bank in its Q3 investors presentation recently revealed that they have tied up with more than 50 fintech start-ups to onboard new customers, disburse loans and offer credit cards. The bank said that 10-12% of its Rs 20,000 crore loan portfolio originated from fintech companies.
Pros and cons
Even the regulator – the Reserve Bank of India – is bullish on the fintech revolution in the banking space. In a recent event at IIM Ahmedabad, RBI deputy governor MK Jain said that the FinTech revolution presents us with a unique opportunity to drive financial inclusion, improve the efficiency of the financial sector, and create new economic opportunities for millions of people.
There are several benefits as well as risks of the fintech revolution. Adoption of Fintech has allowed unbundling of financial services in a manner that is economically viable even at a lower scale of operations. Consumers have benefited by better customer experience and convenience. The payment sector innovations in India are a great example of the fintech revolution in the country. But while the adoption of digital banking and fintech innovations have benefitted the banking sector, it has also exposed it to new risks, the scale of which is much bigger than ever witnessed earlier by the sector.
The risk involved is both in terms of security and data breach, operational risk from cyber threat as well as regulatory issues from ever-changing technology landscape that allows unscrupulous players to destabilise the financial ecosystem of a country.