Something very exciting is happening in India.Several Payment Banks are about to launch their operations with a dream to provide banking & transaction services esp. to millions of rural and semi urban un-banked & under-banked households. This is expected to greatly boost domestic remittances, rural savings & reduce dependency on cash.
One of the most important questions these banks is how to achieve profitability faster & sustain it while maintaining a low cost structure & capturing volumes.
Using modern digital technology is the answer.
There are 5 ways technology can help a payment bank not just to be operationally efficient but also establish a competitive edge:
Mobility: Total number of mobile phone connections in India crossed 1 billion (1003.49 million) mark in Oct 2015. Out of this, 902,26 million connection were active. 42.39% are rural subscribers & 57.61% are urban.About 1 in 5 uses a smartphone (220 million) and rest use feature phones.This strengthens a key assumption that each & every prospective customer has a mobile phone & he/she will consume most of the banking services on mobile. So, the offering has to be mobile:
- USSD based for feature phones & app based for smartphones
- Easy to use & secure
- In local language
- Integrated with the ecosystem of Bank Mitra (banking correspondents), Aadhaar enabled payments (AEP), Aadhaar enabled KYC, digital wallets, real time payments (IMPS).
The recent introduction of Unified Payments Interface (UPI) is a very welcome step by NPCI (National Payments Corporation of India).
Analytics: Customers’ data is a gold mine. Their transaction behaviour (deposits, withdrawals, subsidy receipts, categorised expenditures) makes a case for offerings that are truly “personalized”. For example, if a customer has incurred expenses in a hospital, they can automatically be offered a health or a life insurance product. The schemes launched by PM Modi cost Rs 12 (for health) & Rs 330 (for life). If a customer regularly receive say subsidy payments, they can be offered a long term savings product e.g. Atal Pension Yojana. The amount can be directly debited and is totally paperless for customer.
Analytics tools (SAS, R etc) combined with “small data” harnessing abilities will make it possible.
In UK, the banking regulator is encouraging Open APIs which in simpler words means encouraging bank to open up data vaults to fintechs and others who can offer useful products to the customers. BBVA Bank (US & Spain) has made customer data available through APIs. (Note: I assume customer has consented for data sharing).
Cloud Computing: Cloud solutions offer unparalleled scalability, flexible pricing models (you grow – we grow) & tight security. If data privacy concerns can be handled, there is a strong case for using cloud when compared to investing in a private data centre.
Automate Business Processes: More and more back office processes need to automated reducing dependency on human resources. The digital offerings have to be such that they are fully integrated with bank’s core processes and leverage the modern work flow solutions.
Referral Engines: Though the payment banks can’t lend, it doesn’t mean their customers do not need credit. These banks can refer the customer to other ‘full service banks’/NBFCs and earn commissions. Value added data like banks opinion about the customer, risk profile, transaction patterns, income potential can fetch additional revenue for the payment bank. Smart referral engines can be deployed that share info, calculate and track commissions.
India needs these payment banks to succeed & sustain in order to achieve a true Financial Inclusion and bring the Bharat under a financial umbrella.
India’s IT sector’s tech prowess and their ability to innovate/execute is what the country needs the most.
Jai Hind.
Guest Post by Gaurav Singhai