Conference Report 1
Banking Frontiers organized a conference on ‘Perfect Storm’ in Mumbai. Highlights of the deliberations at the conference:
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