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Digital banking will become more intuitive

LiveMint logoLiveMint 02-04-2017 Vivina Vishwanathan

Shyam Srinivasan, managing director and chief executive officer, The Federal Bank Ltd, spoke to Mint on how banks have warmed up to technology, what retail customers can expect from banks and why ‘instant’ is the flavour when it comes to banking and payments. Edited excerpts:

How has banking industry warmed up to technology, especially for retail customers?

Most banks have embraced digital for some time now. Demonetization gave a great impetus on why digital is more valuable. We are continuously offering products to meet customers’ needs. Mobile banking transactions have moved from probably Rs50-odd crore a month to more than Rs1,000 crore within 12 months, driven by greater technology adoption. The current offerings are intuitive. For instance, we had launched selfie-banking. We are soon launching the next variant to go completely paperless. Customer will just need to enter the Aadhaar number to instantly open a bank account. Things such as Unified Payments Interface (UPI) have helped in increasing digital penetration. But all said, it is still only 20% of the base that is actively using digital. And therefore there is a long journey ahead.

How difficult is the digital adoption?

There is a natural transition process. The migration from one mode to another, particularly when it is related to finances, is never instant. Some kind of market event like demonetization increases the pace of adoption. For instance, starting with Rs50 crore initially, digital transactions rose to about Rs400 crore per month, till before demonetization. During demonetization it increased by 45-50%, which was driven by a catalyst. Now it is stabilizing. The next wave has to be driven by convenience. The adoption of technology is moving towards hand-held devices from desktops but about 65% of mobiles are still feature phones. Banks are working on many digital solutions that are mobile but feature-phone led. Reluctance is one thing, availability of devices is another. As we improve feature-phone facilities, digital will become more intuitive for the customers. It is not possible that the entire country will move to digital. For instance, though ATMs have been around for 20 years, 50% of the customers still withdraw cash from a branch. In the next 3 years, even if 60% of banking transactions happen on one device or another, it is a remarkable progress.

Why has instant become the flavour in banking?

We are living in a quick-service restaurant world. Whether it is an 80-year-old gentleman or a 20-year-old employee, the requirement is ‘here and now’ and banking can’t be an exception. Banking is not just equal to payments. Payments are an enabler—a platform to move money back and forth. That is where everything is getting automated. When a loan is available instantly, remember that behind it a lot of work has gone in, including analytics and (background) checks. Instant is an outcome of multiple efforts. In 2002-03 we used to have loan on phone, now it is on mobile. Now there are data and credit bureaus that give banks the capability to give loans instantly. There are two elements—one is availability of technology, second is the science behind it.

Which innovation do you think will change the way we do transactions?

Right now, the customer-side offering is very good. The merchant acceptance side has to improve. In the course of this financial year it will happen. The cumbersome swiping of cards will change.

From a payments point, UPI will be a game changer. It is moving faster than e-wallets. In a year or two, all issues that are open-ended will be sorted.

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