Customers’ expectations are fast evolving in tandem with rapid advancements in technology across sectors, which evidently reflects on the trait towards accessing services online.
They expect the same level of convenience and frictionless experience when it comes to accessing banking services. According to a report by Facebook and The Boston Consulting Group, the number of users opting for online banking is expected to double to 150 million by 2020 from the current 45 million in India.
This rise in the number of online banking users can be partially attributed to the plethora of government-led initiatives. As part of its impetus to make India a less-cash economy, the government is encouraging both customers and businesses to switch to digital transactions by taking various initiatives such as Unified Payments Infrastructure (UPI) including BHIM (Bharat Interface for Money) which is a Mobile App developed by National Payments Corporation of India (NPCI), Bharat Bill Payment System (BPSS) and Aadhar Enabled Payment System.
Changing consumer behaviour, and fintech-friendly government initiatives have paved the way for tech giants like Google, Amazon, and Facebook to penetrate deeply into the Indian financial sector, infusing digital innovations in various dimensions of customer services. Silicon Valley-based tech giants are also betting big on factors such as customer satisfaction, unified customer experiences and financial inclusions.
Despite the growing number of internet users, and increased government focus on creating digitally enabled infrastructure, financial institutions in India are yet to completely harness the power of digitalisation. Modernisation of legacy banking infrastructure and successful deployment of advanced technologies can help banks remain ahead of the curve in the fast-evolving and competitive landscape.
A report by Avaya revealed 51 percent of Indians use online banking channels, 26 percent prefer to access services through their bank’s website, and the same number prefer to use a mobile app rather than talk to a human agent.
Will Silicon Valley’s tech giants pose a threat to Indian banks?
Non-financial tech giant Amazon is leaving no stone unturned when it comes to intruding into the various aspects of financial services industries, starting from payments to lending to insurance to checking accounts. In India, Amazon’s strategy in financial services is getting stronger by the day, with its increased investment and focus on building financial services products. Last year, the tech giant invested Rs 130 crore in its payment entity, Amazon Pay India. The intention was pretty evident – to strengthen its operations in the country and gain a competitive edge over home-grown fintech companies – Flipkart’s PhonePe, Alibaba-backed Paytm, Mobikwik and Axis Bank’s Freecharge.
The silicon-valley based e-tail giant reassured its intention by again infusing Rs 230 crore into its wallet Amazon Pay in India this year. Reportedly, the latest funding will be utilised to acquire more customers given Amazon India’s numerous cashback offers on its fifth anniversary in the country.
In its recent development, Amazon opened its online payment portal – Amazon Pay – for customers in India to track payments for merchants and customers associated with Amazon. In November of last year, Amazon India claimed to have registered 105 percent growth in revenue for FY17. Amazon is upping the ante to win the payments game in India. The new doorstep feature rolled out by Amazon now allows customers to load money into their Amazon wallet and avail digital services like food delivery, bill payments and mobile recharges.
Investment in fintech startups also appeared to be a lucrative approach for the Seattle-based ecommerce giant to grab a pie of the financial market in India. In 2015, Amazon invested Rs 375 crore in online financial services portal BankBazaar. In 2016, Amazon invested in prepaid gift card services company Qwiciklver. Post that investment, the gift card system was integrated into Amazon Pay to be used as a form of payment on Amazon’s India marketplace. Meanwhile e-lending firm Capital Float this year scooped up a funding of Rs 144 crore from the US-based e-retail giant.
Apart from this, the year 2018 witnessed two more investment from Amazon in startups. In May, Amazon co-invested $8 million with Mastercard in contactless payments hardware and software provider ToneTag. The integration of ToneTag into Amazon pay will expand Amazon’s reach to offline commerce in India. And lastly, an investment of $12 million was made by Amazon in Acko, which offers traditional car and bike insurance policies.
Google launched its payment app, Tez (build on government-enabled Unified Payments Interface) in September last year, and since then the app has been cashing on India’ thriving e-payment sector. In December last year, the app accounted for 52 percent of Unified Payments Interface (UPI) transactions in India, according to a Credit Suisse report.
The UPI allows users to transfer money directly from their bank accounts, minimising the steps to load money in e-wallets. Before the launch of Google Tez in August 2017, UPI transaction volumes were around 17 million, and the number grew to 145 million by December last year. Google Pay App is available in English and seven other regional languages (Hindi, Bengali, Gujarati, Kannada, Marathi, Tamil, and Telugu).
Google pay is now also enabling customers to pay at physical stores through the Google Pay app, thereby extending its payments facility to a large number of brick-and-mortar stores. What is more interesting is the upcoming feature that will enable banks to offer pre-approved loans to customers using Google Pay, for which the company is planning to tie up with HDFC Bank, ICICI Bank, Federal Bank and Kotak Mahindra Bank.
The internet giant has already partnered with State Bank of India to allow users to create an SBI UPI id, and avail exclusive offers for SBI customers, thereby helping the bank to gain an edge.
Facebook launched its WhatsApp payment services in India and is reportedly in talks with HDFC Bank, ICICI Bank and Axis Bank to process transactions. More than 200 million Indians are already using WhatsApp messaging, and the number in itself is an indicator that WhatsApp’s move towards the payments space will place it well in the race for the digital payments game in India.
It is time for banks to gear up for the digital war?
Emerging technologies like big data, artificial intelligence, data analytics and the availability of digitally-enabled infrastructure will enable banks to become competitive and efficient. Banks, by increasing their investment in technologies, can significantly reduce the cost involved in expensive human interactions and improve digitisation across the various aspects of customer services.
The transition from traditional banking to state-of-the-art digital banking will enable banks to stand at par with innovative tech giants. With the availability of a plethora of services accompanied with hugely competitive pricing model (offered by new age players), customers will not be happy with less. Factors such as customer satisfaction, unified and customised customer experiences, operational efficiencies, financial inclusion and increased digital transaction volumes define the potentiality of digital transformation.
Going digital has become more decisive than just the need for banks to eradicate the label of uncompetitiveness because digital banking solutions will help them meet both, business and technological goals, and sustain their position in the core market.
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