Accelerating winds of change in digital payments
Demonetization and the Indian government’s push for digital transactions, customers have made the shift to digital payments. The cooperative banking segment has also witnessed a change like never before.
Digital payments have evolved from being viewed as a cost center to a revenue generator and a key catalyst for customer acquisition. Postdemonetization, digital migration has seen a signifi-cant spike; however, one should give credit to the global pandemic for the acceleration seen in digital payment growth in a short period. While digital migration was a natural process for the co-operative banking segment, they were apprehensive about migrating their customers to the plat-form. Surprisingly, in comparison tm the shift to using ATMs, customers transitioning to the digi-tal platform were quick at throwing all the apprehensions out of the window.
Ravikiran Mankikar, former GM-IT at SVC Bank and Founder of RVK Consultants, said: “Being at both sides of the table, as an implementer of digital technology and now guiding banks on im-plementation, the major shift is seen in the environment. And covid has brought in new norms. The new normal is steadily emphasizing the shift from physical banking to digital banking. Just like we have worked from home as the new norm, digital payment is the new norm for banking. The usage of a bank branch as a delivery channel has slumped. Other delivery channels like UPI, IMPS, net banking, mobile banking or WhatsApp banking have picked up tremendously.”
Sanket Zaware, Head of Digital Banking, Saraswat Bank, shared his observation: “We’ve seen a paradigm shift in the usage of digital platform. However, it is always going to be a mix of physi-cal and digital. Precovid, we saw 78% of transactions on digital channels and it jumped by 10%; during the peak of the pandemic, it went up to 92%. This reflects the shift. We have already crossed the pre-covid levels. For UPI, we are touching 5 million transactions and on cards we are crossing 1 million (PoS and e-commerce).”
3 PHASES
Swapnil Jambhale, General Manager, TJSB Bank, brought in a new perspective: “Divide this en-tire phase into 3, first the lockdown phase, second the new normal phase and three the new today. During lockdown, there was spike in e-Commerce transactions. In the new normal, small mer-chants were allowed to do transactions using QR based payments and UPI payments as people prefer contactless payments. We have seen 200% growth in UPI channel usage and the card usage has reduced. We are moving towards cashless economy, all thanks to the pandemic.”
For the retail segment, banks are looking at a lead-based solution moving ahead, he added.
Jambhale also feels that the userhostile applications that certain banks have developed have made customers prefer payment apps like Paytm, PhonePe or Google Pay over bank apps. Also, these apps have even given customers an opportunity to earn cash backs on routine transaction.
“Look at Amazon Pay. You scan and pay and you will get cash back. So, RBI has put a 30% cap-ping, which is going to play a major role.”
Ravikiran Mankikar elaborated further: “Digital payments are a recent phenomenon and the com-fort level is increasing. Banks were forced to use the digital payments. Customers will use those apps which they can trust. So, the trust factor and the user experience factor play a big role.”
Sanket Zaware spoke about how banks are now using WhatsApp for messaging to their customers. “Because of the penetration of smartphones, we have introduced WhatsApp banking and our cus-tomer base is increasing on the WhatsApp platform. So, I think India is the largest country contributing to the WhatsApp users. Right now, we have restricted it to non-financial transactions, but down the line, financial transactions will also be a part of the WhatsApp offering.”
NEWER OPPORTUNITIES
Swapnil Jambhale said: “For cooperative banks, the biggest challenge was to acquire new busi-ness. And cooperative banks have never been given a portion of it to acquire customers on to the digital platform. With UPI and being one of the PSP licensed bank, we at TJSB Bank got an opportunity to create a product portfolio on a QR platform, whereby we have started acquiring custom-ers. It is a hybrid model which is more of a phygital - the physical merchants are issued QR whereby the current account and CC holders are able to receive their funds on real time rather than coming through a typical POS channel, where the settlement was on the next day. This has actual-ly boosted us to acquire more CASA and people started opening up more and more accounts with us.”
Ravik iran Man kika radded: “Cooperative banks have the BC model or the BF model. And these also use the digital platform quite actively. Now, they’re also integrating that with the lending model. We could have the loan account openings, and the loan is also happening with the digital platform.”
Today, most financial frauds are primarily happening because of lack of awareness or lack of un-derstanding of the implications of using the digital platform. And most of the time private infor-mation
is disclosed unknowingly leading to frauds. Unless one is sure of the recipients and the links, individuals should not part with their information.
Swapnil Jambhale added: “Everyone should be more cautious while releasing a new application or any digital initiative. All are required to follow certain practices; before release, there should be multiple test cycles. We have created a campaign with videos that has helped in creating aware-ness.”
ATTENTION REQUIRED
Sanket Zaware reiterated that the merchant ecosystem is very important and there have been ma-jor breaches in this ecosystem over the last months. He says it is imperative that strong audits are required or a compliance body is set up to look into these merchant ecosystems. “There is a clear differentiation in terms of what the bigger banks (the commercial banks) can do and what the co-operative banks can do. So, there is a need for the lobbying of the cooperative sector. The sched-uled cooperative banks have the blanket approval to work in those areas, which are also allowed for the commercial banks. This I think ia one area, which I would personally like to see some kind of lobbying.”
Ravikiran Mankikar commented: “Out of 1500, banks, how many are really on digital platforms? If you don’t strike the iron when it is hot, you are going to lose the opportunity. We had the opportunity because of covid, or because of the changing scenario. Larger banks or banks in the private sector took advantage. There are about 100 banks that are in grade III and grade IV of 1500 coop-erative banks. What it means is that 1400 banks have yet to get into this platform. So, these banks need some handholding.”
Mankikar also pointed out that many of the cooperative banks are yet to launch mobile banking system. If banks do not compromise on security or governance, and with appropriate controls in place they will have better usage of the digital platform.
Most experts believe that digital transactions have taken over and there is a decrease in ATM withdrawals. However, Swapnil Jambhale believes cash is still king, but he is cooperating with the banking system that is working towards a cashless economy.
Sanket Zaware is of the opinion that customers should use digital payments, because that is the future. It is more important to make the customer understand which product suits in today’s digital payment ecosystem. It is key to make the customer aware of the functionalities. And Mankikar concludes by saying the ecosystem of mandis or the marketplaces has totally transitioned to a digital economy. “A clear shift is being observed and it will grow. So, it’s about time to bid goodbye to cash and say hello to payments,” he adds.