Indian banks have enormous opportunities to develop new finance-related technologies to support its banking business as the country remains at the early stage of fintech development where digital services are offered across a large group of startups.
This is the view of Deepak Sharma, chief digital officer of Kotak Mahindra Bank, India’s second-largest bank by market capitalization, as he spoke to FinanceAsia in an exclusive interview about India’s fintech development.
“Indian banks now possess a lot of opportunities to develop non-bank digital product offerings because the fintech landscape is still highly fragmented without any company or institution dominating the sector,” Sharma told FinanceAsia.
Sharma was specifically pointing to China, a natural comparable to India in fintech development due to similarities around their huge population size, rapidly growing economies and an overall high receptiveness towards new digital technologies.
“In China, banks have little room to develop fintech because many startups are doing it very successfully,” Sharma said. “Besides Tencent and Ant Financial, there are also many large startups [in China] that have already built a mature ecosystem around digital payment, mobile wallet, peer-to-peer lending, and cross-border FX and settlement, among others.”
Indian banks are now tapping into the country’s relatively young fintech industry to explore opportunities that are not even imaginable to a traditional institution.
“Our long-term vision is to develop digital services that cater to the needs of consumers in everyday life,” Sharma said. “If they need to pay a school fee digitally, we make it happen. If they need to book a movie ticket, we make it happen. These are no longer pure banking services.”
India’s relatively young fintech history also offers banks a competitive advantage against startups because they already possess a large user base, most of which is also connected digitally through internet banking and mobile applications.
Close to 70% of Kotak Mahindra Bank's customers use its internet banking and mobile app. This makes it the primary channel to access banking services instead of branches, call centers and automatic teller machines, according to Sharma.
INNOVATIVE PRODUCT OFFERINGS
One of Kotak Mahindra’s biggest fintech developments is digital banking services offered through WhatsApp, Twitter and Google Assistant.
The Mumbai-headquartered lender is the world’s first bank to offer WhatsApp banking services, where users can use the app to check their account balance and transaction history.
After linking up with Kotak’s WhatsApp account, bank customers can see the list of services available. It is easy to use. They simply reply to the number which corresponds to the service they need.
Sharma said that the WhatsApp banking service, which has now some 30 to 35 features, is designed for the elderly who may find it difficult to use mobile apps that require more complex inputs.
Despite the edge that Indian banks have in fintech development, many still collaborate with technology startups to develop new products because these young companies are more flexible towards making changes to suit customer needs.
“Startups can respond quickly to customer demands, so many of them are tasked with developing client-facing technologies, while the banks themselves are working on technology innovation in their backend systems such as credit profiling, processing of documents, as well as enhanced security for IT systems,” Sharma said.
BLOCKCHAIN APPLICATION
Although still at a very early stage, Indian banks are already actively looking to apply blockchain technologies at various parts of the banking process.
Kotak Mahindra Bank already processes about 100,000 cross-border remittance transactions using this technology. Sharma says that it is the first large-scale application of blockchain in India’s banking sector.
It is conducted in partnership with Ripple, a real-time currency exchange and remittance network which uses blockchain.
When developed on a larger scale, the cost of cross-border remittance transactions could be reduced by 30% to 40% while the speed could be improved dramatically.
Kotak is also spearheading the development of a common blockchain platform across Indian banks and commercial entities to record trade activities across the entire value chain, including trade finance, fund flows and letters of credit, among others.
The bank is also collaborating with the National Stock Exchange of India to improve know-your-customer processes using digital channels, which allow it to fetch data and verify information without the need to visit its customers physically.
