Con­fer­ence Report 1

Bank­ing Fron­tiers or­ga­nized a con­fer­ence on ‘Perfect Storm’ in Mumbai. High­lights of the de­lib­er­a­tions at the con­fer­ence:

Banking Frontiers - - News - Manoj@bank­ingfron­

Manoj: Are there un­re­al­is­tic ex­pec­ta­tions about dig­i­tal trans­for­ma­tion?

Ashutosh Kha­juria: You may have niche banks like pay­ments banks, but I would not en­dorse the state­ment by Bill Gates that banks may not ex­ist, but bank­ing would. Banks would ex­ist, and the best part of hu­man in­stinct is how to sur­vive. Banks would con­tinue to op­er­ate with higher ef­fi­ciency. Man­age­ments and boards of most banks are aware that if they don’t change, they will go into obliv­ion.

Su­manta Panda: There is a chal­lenge within the bank to broad­base the ini­tia­tives among the cus­tomers. The staff re­cruited in the 1990s are well versed with dig­i­tal ini­tia­tives and are quite con­fi­dent, un­like the older gen­er­a­tion. The per­cent­age of cus­tomers on boarded is still not large. The gap be­tween dig­i­tally ac­tive cus­tomers and to­tal num­ber of cus­tomers is still huge, even com­pared to the ex­pec­ta­tions.

Kha­juria: We have opened zero branches in 2017 and only 6 in 2016. We are trans­form­ing from branch light to dis­tri­bu­tion heavy with dig­i­tal sup­port for dis­tri­bu­tion. Many banks are con­sol­i­dat­ing branches and in­vest­ing in tech­nol­ogy.

Ber­tram Dsouza: We view dig­i­tal as a hor­i­zon­tal within the bank, rather than as a chan­nel. All dig­i­tal ini­tia­tives are giv­ing di­rect busi­ness ben­e­fits. The ex­pec­ta­tions of dig­i­tal are not over­stated. A recharge com­pany would not be mor­ph­ing into a bank.

Vishal Kan­vaty: There is a big gap in the end to end cus­tomer ex­pe­ri­ence.

Manoj: How are banks re­mov­ing the si­los within?

Me­hul Mistry: In­ter­nally, we have the con­cept of BaaP, ie Bank as a Plat­form. We cre­ate APIs for most ser­vices such as ac­count open­ing, for ex­tend­ing a vir­tual card to a third party, etc. We use BaaP to ex­tend our as­sets and li­a­bil­i­ties to our part­ners and that is how we get cus­tomers. We have a ded­i­cated team to en­able this and en­sure that the part­ner­ship is suc­cess­ful.

Gau­rav Hazrati: We too are on the path of ex­pos­ing our APIs, in the be­lief that bank spe­cific APIs and de­liv­ery will be for a very lim­ited pe­riod, with Open APIs tak­ing over and fin­techs be­ing the main de­liv­ery play­ers.

Manoj: Would APIs give one bank and ad­van­tage over the other?

Del­e­gate: Dig­i­tal has cre­ated a level play­ing field for all banks. Star­tups are adopt­ing a dif­fer­ent method of deal­ing with a bank as there are si­los of CFO, CMO, CTO, etc.

Dsouza: Banks have been fairly com­pla­cent. Star­tups have been cap­tur­ing mind­share and face time on their apps rather than apps of banks. PSD2 be­ing in­tro­duced in Europe will make it easy for fin­techs to con­nect with banks and make bank­ing much more com­pet­i­tive.

Ankur Singla: With distrib­u­tors get­ting highly ag­gre­gated at places like Ama­zon and Flip­kart, nu­mer­ous banks will make a loan API to these distrib­u­tors. So, what then is the ra­tio­nale for in­vest­ing in such APIs?

Hazrati: Since some­one else is cre­at­ing a bet­ter ex­pe­ri­ence than the banks, the banks have no choice but to be part of that.

Del­e­gate: Banks don’t know who is go­ing to win. So, their strat­egy is to part­ner wher­ever there is an op­por­tu­nity. Even star­tups don’t know what they are go­ing to dis­rupt be­cause what they end up with can be dif­fer­ent from what they started with. So, this will evolve be­fore it set­tles.

Manoj: Is there a first mover ad­van­tage in the API ecosys­tem?

Del­e­gate: There are chal­lenges if the first mover has a half baked prod­uct.

N. Ra­jen­dran: At the mer­chant’s end, lot of re­di­rect­ion is cre­at­ing dis­putes and prob­lems for the cus­tomer. There could be a federated API model that gives a more re­li­able ecosys­tem. Bring­ing in the reg­u­la­tor would make it more com­pli­cated.

Manoj: What next do you ex­pect in your mo­bile strat­egy?

Su­manta: Cus­tomer adop­tion is grow­ing phe­nom­e­nally along­side the in­no­va­tions and things are mov­ing very rapidly.

Kha­juria: We were the first in the in­dus­try to of­fer ac­count open­ing in 3 min­utes with selfie and Aad­har num­ber. We en­abled our cus­tomers to write com­ments on their e-pass­book, which will be saved on our server and be vis­i­ble on cus­tomer’s mo­bile.

Vi­raj Shah: These apps do more trans­ac­tions than en­tire In­dia. Our app has 10-12 trans­ac­tions per month per user and it has opened al­most 20-25 times in a month. So, cus­tomers come back to our app again and again for or­der­ing food, pay­ing bills, etc. We would be happy to part­ner with What­sapp.

Mistry: What­sapp will have to part­ner with a bank to par­tic­i­pate in the pay­ments ecosys­tem. I am not sure What­sapp will be able to on­board mer­chants eas­ily. Cus­tomers are shared. If I am ex­tend­ing an API and am able to un­der­stand what the per­son is do­ing and where he is trans­ac­tions and us­ing that to ex­tend some kind of loan, then I am mak­ing him a cus­tomer.

Manoj: The hu­man brain forms habits in app us­age. Is that a way of own­ing the cus­tomer through habits?

Hazrati: We got in fin­ger­print bank­ing on the mo­bile app, given that peo­ple don’t re­mem­ber pass­words. This drives more trans­ac­tions as well as larger bank bal­ances.

Akhil Handa: There are so many propo­si­tions out there that it is dif­fi­cult to pick win­ners. The most ef­fi­cient way to par­tic­i­pate in these mul­ti­ple propo­si­tions is to have APIs that gives you a leg into these doors. These plat­forms have 200 mil­lion users in In­dia, banks can­not af­ford not to be there. ROI can­not be com­puted on this.

Manoj: Are CFOs ask­ing for an ROI or do they have an open wal­let?

Del­e­gate: The mind­set has changed so

much that there are banks will­ing to lend to a loss mak­ing en­tity, think­ing like a PE that some day they will make a profit.

Manoj: What was the in­sight for Tapzo to ag­gre­gate these dif­fer­ent ap­pli­ca­tions.

Ankur Joshi: We were do­ing some­thing else when we got the in­sight that peo­ple find it dif­fi­cult to dis­cover and man­age so many apps. The app unin­stall rate in In­dia is the high­est in the world – about 75% of all apps get unin­stalled in 60 days. That is when we de­cided to ag­gre­gate us­ing APIs. API man­age­ment across 45 dif­fer­ent play­ers is a night­mare. To be part of the daily life of cus­tomers, we have to map out the in­ter­net econ­omy, viz how many daily trans­ac­tions for cabs, recharges, etc, and how to be­come a part of those.

Dsouza: Tapzo is an ex­am­ple of how fin­techs re­ally work. Banks don’t see them as IT ven­dors. They are solv­ing a tech­nol­ogy prob­lem for the bank, but the in­tan­gi­ble el­e­ment is that they are also hav­ing some skin in the game, which a tra­di­tional IT com­pany that does not do.

Manoj: Are banks be­com­ing more flex­i­ble to part­ner with or­ga­ni­za­tions whose chem­istry is com­pletely dif­fer­ent?

Panda: We are look­ing at that and are go­ing ahead with many so­lu­tions with many fin­techs.

Joshi: We have met 20-25 banks and seen that de­ci­sion mak­ing is a bit slow. It could be a cul­tural chal­lenge. There is also an ad­van­tage that it sifts bad de­ci­sion mak­ing. We are say­ing that fin­techs are very fast and banks should com­pete on speed.

Handa: The met­ric I look at for part­ner­ship is how crit­i­cal is the propo­si­tion to the bank’s strat­egy and IT sys­tems. The other met­ric is time to mar­ket – is it im­me­di­ate or can it wait. I have seen propo­si­tion of fin­tech com­pa­nies chang­ing com­pletely in 6 months. So there are mer­its in de­lay­ing.

Manoj: Is dig­i­tal a tsunami or a wave?

Panda: It is not a tsunami…it did not come with­out warn­ing.

Kha­juria: You can­not choose whether it will be a tsunami or a wave, be­cause you will never know for cer­tain. So. you need rapid re­sponse teams ready.

Mistry: Dig­i­tal had be­come a tsunami in Novem­ber 2016 for about 45 days. Then cash came back into the sys­tem.

Manoj: As and when Google or Face­book or Ama­zon get a full-fledged bank­ing li­cense, what will be the re­sponse of the banks? Could some banks face a Ko­dak/ Nokia mo­ment?

Kha­juria: The re­verse can also hap­pen. We have seen Ya­hoo. If these tech gi­ants get hit by one fraud and then there is in­spec­tion and com­pli­ance re­quire­ments, I am sure they will spend more time fix­ing and los­ing the flex­i­bil­ity they have.

Panda: The tech gi­ants have cre­ated a huge cus­tomer base and are now in the process of mon­e­tiz­ing. Banks know the threat and are work­ing on it.

Dsouza: With APIs, it might just be which bank can pro­vide the best rate.

Kan­vaty: We have seen enough ex­am­ples of telcos and other get into bank­ing and pay­ments, but it did not work out. Bank­ing is a dif­fi­cult busi­ness to be in.

A view of the par­tic­i­pants in the con­fer­ence

A par­tic­i­pant mak­ing a point

A query be­ing raised

A pan­elist rais­ing a point

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