HT Business: August 22, 2016
Mumbai: The adoption of mobile wallets to do recharge and e-commerce transactions has seen an increase among customers with an annual growth rate of 180%, while mobile transactions have been growing 80% per annum.
A survey report of over 3000 respondants tilted ‘Digital and Beyond: New Horizons in Indian Banking’ reveals that a mere 23% of the people with internet access do digital banking (internet and mobile). Of the 470 million banking customers in 2015, about 60 million or 13% did online banking transactions. This is set to increase to 173 million by 2020. MSMEs (micro, small and medium enterprises) and shopkeepers still use cash and cheques for majority of their transactions, despite almost all of them having access to the internet.
This is clear evidence of substantial disruption in Indian banking, said the report by Boston Consulting Group. “With the advent of payment banks and some of them being run by wallet companies, it will be challenging for banks to guard their customer pool against the ‘attackers’…Thus banks run the risk of losing their most digital-savvy customers who are actually their most profitable customers,” the report added.
Eight entities including India Post, PayTm, Reliance Industries in-tie up with State Bank of India, Airtel M Commerce with Kotak Mahindra Bank and Vodafone M-pesa will soon set up payment banks. In August last year, after RBI gave in-principle licence to 11 applicants to set up payments banks, three entities dropped out citing viability issues and lack of a sustainable business model.
It remains to be seen how the digital disruption by these new players aids transformation of the banking sector even as it may increase competition to existing banks. In terms of existing banks, getting customers on-board digital platforms needs to be prioritised; banks should be open to incentivising potential customers and seek to bring them on-board at the time of account opening itself, said the BCG report.
Foreign and nationalised banks have lost share of primary banking relationships to new private banks.
With MSMEs and shopkeepers still using cash and cheques, there is a strong business case for engaging them on different channels, in addition to branches, as the current account balances of MSMEs can increase by as much as 10 times if activation of alternative channels is higher. However, awareness remains a key concern. About 50% of MSMEs do not recall Regional Managers explaining their bank’s digital offering to them.
In terms of corporate banking business, banks with high advocacy had 15% more share of wallet than those with low advocacy. While corporates are well aware of banks’ digital offerings and are willing to adopt them, it needs persistence from their relationship managers. A three-fold increase in corporate banking activities on mobile devices over the next five years is projected by some 475 respondents.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.