‘Local Lenders Must Adopt Digital Tech to Stay Relevant’
Banks must create an environment to innovate & be agile: RBI dy Guv Mundra
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