How Fintech Will Change The Way PSU Banks Operate In 2019…
PSU Banks will adopt an agile outlook for applications in niche areas including the biggest of them all – credit creation. In corporate banking, fintech can address issues related to new market entry, security and regulatory compliance amongst others
CY2018 was the year of the biggest disruption for Indian PSU Banks but CY2019 will be the year when they will leverage the fintech to stimulate structural changes for a transformational functional makeover. And a new era in financial inclusion will begin…wherein PSU banks emerging as ‘financial superstores of the future’ will be ‘as necessary as banking’ irrespective of what doomsday predictors say. PSU Bank’s proprietary platform and fintech partners’ individual platforms will co-exist in an open architecture ecosystem.
In CY2019, even as mobile banking further empowers the middle of the population pyramid, PSU Banks will start deploying other fintech tools such as open banking, data analytics, artificial intelligence (AI), blockchain and robotics amongst others. As the emphasis shifts towards Design Thinking for digital customers, relationship management tools will witness a lot of traction. Personalised information based on intelligent information will be disseminated to customers after taking a 720-degree holistic perspective.
According to a KPMG-NASSCOM report, banking sector will account for 17% of the total global AI spending of USD19.1billion in 2018. Applications of AI in the banking sector are immense, ranging from customer acquisition, KYC and on boarding, Accounts and Loans, Customer Service, and credit etc. PSU Banks will indulge in deep introspection and move towards predictive AI to engage customers.
PSU Banks will adopt an agile outlook for applications in niche areas including the biggest of them all – credit creation. In corporate banking, fintech can address issues related to new market entry, security and regulatory compliance amongst others. In MSME banking, it will reduce 'funding gap' of around USD 500 billion, which exists for all formal and informal MSMEs. In retail banking, fintech can work wonders in grappling with issues related to reducing time, costs and space for the customer. The benefits accruing from the same should touch the lives of migrants, domestic helps, agri-labourers, women, small time entrepreneurs and micro establishments amongst others.
Blockchain has the potential to redefine open and shared economy across areas such as payments, trade finance, know your customer, frauds reduction, clearing and settlement. • In India, it is estimated that blockchain has the potential to generate up to USD5 billion in business value over the course of the next five years (Source: KPMG-NASSCOM). Blockchain based system provides improved trust and transparency and due to its regulatory application, the adoption of Blockchain or Distributed Ledger Technology (“DLT”) in the Indian banking sector is getting support from the market entities . Major applications of the DLT in the coming future could be: (i) Efficient payments transfer infra; (ii) Enforcement of smart contracts; and (iii) Digital identity.
PSU Banks will take the lead in partnering with fin-tech companies to stimulate agri-tech revolution resulting in Farming 4.0. The process of targeted loans for farmers and agricultural sector using fintech innovations will usher in a new era of financial inclusion in the country. Fintech partnerships will help digitally empower the existing network of business correspondents and create new avatars of agri-business correspondents.
The culmination of all these efforts is that credit creation will reach such astounding proportions that PSU banks will have to take the lead. They will get to know their credit supply chain so well that they will choose which ones they seek to control to what extent! PSU Banks will have to embrace open application program interface (API) as this is the new reality leading to an open digital economy.
Other elements such as India Stack will accelerate the process. With the introduction of India Stack, which is basically a set of APIs that allows governments, businesses, start-ups and developers to utilise a unique digital infrastructure. The government has tried to introduce a world-class technological framework to the start-ups, innovators and MNCs which would, in turn, accelerate the growth of the fintech space in the public banking system.
Installing proactive banking services—use of cloud for services such as storage of receipts, data analytics for generating insights, social interactions, tools for budgeting, user experience, and customized offers based on location and transaction history is the high need of the hour for the public banks to empower the economic bank bone of the country.
The Indian Fintech market is forecast to touch $2.4 billion by 2020 as per NASSCOM. The transaction value for the Indian fintech sector is forecast to reach $73 billion in 2020 growing at a five-year CAGR of 22%. Fintech and digital finance can create 21 million new jobs. PSU Banks recognise that Fintech innovative products and services will emerge as the strong backbone of the banking and payments infrastructure of the country.
PSU Bank financial superstore will co-create interoperable fluid e-platforms to bring multiple private and government entities together and create value beyond the traditional financial processes. Automation in the banking ecosystem through the fintech revolution will lead to the reduction of infrastructural cost and improved efficiency in all major public banks. Hence allowing a greater scalability, accountability and better cost-efficient customer experience!