‘Lo­cal Lenders Must Adopt Dig­i­tal Tech to Stay Rel­e­vant’

Banks must cre­ate an en­vi­ron­ment to in­no­vate & be agile: RBI dy Guv Mun­dra

The Economic Times - - Economy: Macro, Micro & More - Joel.Re­bello @times­group.com

Mum­bai: One of In­dia’s top cen­tral bank of­fi­cials said lo­cal lenders must adopt dig­i­tal tech­nolo­gies to stay rel­e­vant in an in­creas­ingly com­pet­i­tive sec­tor that fi­nan­cial tech­nol­ogy firms are poised to dom­i­nate. “In­cum­bent banks have no time to lose: They would need to tap the req­ui­site tal­ent and cre­ate an en­vi­ron­ment where such tal­ent can in­no­vate and be agile,” Re­serve Bank of In­dia (RBI) deputy gov­er­nor SS Mun­dra said on Mon­day. “The banks must view the suc­cess of fin­tech (fi­nan­cial tech­nol­ogy) ecosys­tem as an op­por­tu­nity and not as a threat.”

Fin­tech com­pa­nies are dis­rupt­ing ev­ery facet of tra­di­tional fi­nan­cial ser­vices and up to 28% of the bank­ing and pay­ments busi­ness are at risk by 2020, Mun­dra said, quot­ing the 2016 Global Fin­tech Sur­vey re­port by au­dit and con­sul­tancy firm PwC. Fin­tech com­pa­nies have the ca­pac­ity to ad­dress spe­cific pain-points such as re­mit­tance, credit and sav­ings, and they could also dis­rupt bank­ing to mi­cro and small en­ter­prises in the next 5 years, Mun­dra said, quot­ing the PwC re­port. He also cited a Citibank re­port that has pre­dicted that fin­tech revo­lu­tion would wi- pe out about a third of all the em­ploy­ees at tra­di­tional banks in the next 10 years.

“This pre­dic­tion is es­sen­tially about the lack of growth and loss of busi­ness over time, though it may be dif­fi­cult at this junc­ture to ac­cu­rately gauge the pos­si­bil­ity of any par­tic­u­lar ben­e­fit or risk ma­te­ri­al­is­ing in the fin­tech uni­verse,” Mun­dra said.

He sug­gested that banks col­lab­o­rate with fin­tech com­pa­nies that are more ef­fi­cient and agile. “Banks would need to as­sess the likely im­pact of dis­rup­tion and re-ori­ent their busi­ness mod­els. As in­cum­bents, they may need to lever­age their com­par­a­tive ad­van­tage to im­prove their cus­tomer re­la­tion­ships, change their in­ter­nal pro­cesses, mind­set, and in­ter­nal struc­tures,” Mun­dra said, adding that the nim­ble-foot­ed­ness of fin­tech play­ers still eludes banks and alien­ates po­ten­tial bor­row­ers.

“More­over, ma­jor­ity of them are ven­ture cap­i­tal sup­ported en­ti­ties, which can’t ex­actly sub­sti­tute a wide cap­i­tal base. This is where the banks could cap­i­talise on the fin­tech ecosys­tem,” he said.

SS Mun­dra ET ARCHIVES

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