As Indian banks and FIs welcome a gloom-free January, the first in three years, December offers a window to reflect on how the year fared and reformulate strategies to seize fresh momentum.
Banking in the post-COVID era
To revitalize a sagging economy, Indian regulators injected a slew of stimuli such as cutting the repo rate, offering unique refi facilities, granting term liquidity facilities, offering loan moratoriums, and allowing withdrawals across financial instruments. This fiscal prudence has paid dividends. Even with the Russian-Ukrainian conflict, and a global belt-tightening, India’s ongoing economic recovery evokes positive sentiment. Moody’s, the international rating agency, retained India’s sovereign credit rating as stable.
The resurgence of the innovative spirit in Banking
As the pandemic pushed FIs to evolve rapidly by stretching their IT capabilities, digital adoption surged. Case in point: 96% of Deloitte survey respondents say they will now use digital transactions for their day-to-day banking needs. The likely outcome? A stage set for value propositions that leverage deep tech across robotics, AI, NLP, and ML-led solutions.
India’s Banking System – Proving to be a Global Showcase.
Coming closely on the heels of India becoming the world’s fifth-largest economy in mid-2022, India’s banks are its most significant growth catalysts. For instance, India’s digital payments system is among the world’s top 25 systems. Its Immediate Payment Service (IMPS) is the only system at level five in the Faster Payments Innovation Index (FPII). More than being a flash-in-the-pan, progressive economic reforms have nurtured the banking sector for long-term gains. Below is a roundup of the crucial components of the changes.
The Central Bank’s Digital Currency (CBDC): RBI’s digital rupee, announced in this year’s budget, is expected to benefit customers with better liquidity and acceptance and bring convenience to transactions with anonymity.
Open credit enablement framework (OECN): A framework of APIs that mediates interactions between lenders, and loan service providers (LSPs), such as FinTechs and eCommerce players, and mainstream entities like banks and NBFCs.
ISO 20022: India is one of the earliest to onboard to this platform and looking ahead to integrate on the cross-border level. Starting March 2023, the open global standard for financial information will unlock opportunities for FIs, by delivering top-notch customer experience.
RuPay: With 628Mn RuPay cards issued across prepaid, debit, credit, and commercial cards, the RuPay revolution grows its 50% market share.
Unified Payments Interfaces (UPIs): The single Click 2 Factor Authentication enabled by the collaboration between the government and RBI aims to protect uninformed customers from fraud and threats.
- The Golden Year of Digital Transformation that Banking Beckons.
The last leg in 2023’s Banking transformation relay race is the crucial baton held by technology. Digital Banking is a sector poised to grow at a CAGR of 23.1% from 2022 to 2030.
Data sharing and cooperation among financial institutions through the OCEN will help banks better manage credit defaults and credit assessment. The number of FinTech’s specializing in AI/ML/NLP will further aid fraud prevention processes.
The Manufacturing resurgence augurs well for the credit offtake from banks. The core sectors are riding the shift of manufacturing base shifting from China to India.
The Big Data Analytics Blitz – From spotting shifting market trends and customer needs, preventing frauds, and offering frictionless operating models, banks are responding to all questions from revenue to risks to robotics with one answer – Data.
The Formidable Fintech 2.0 – By 2030, India’s fintech industry will have an output of $1 trillion and generate $200 billion in revenue. For a country noted for being a start-up hub (17 of 100 Indian unicorns in 2022 are FinTechs), the well-regulated and highly capitalized market is joining forces with increasing smartphone adoption and a younger demographic.
The 2023 Outlook for Bank Tech space is that the Indian BFSI ecosystem will be well supported by fiscal and capital market regulations and powered by the bullish FinTechs.
About the Author
As the Co-founder at Maveric, P Venkatesh (PV) leads the global core banking business that is now aligned with Temenos. PV and his solution architects successfully won 9 out of 10 engagements, having envisioned and launched industry-first test frameworks, automation, and contextual value-adds. A veteran of 30 years, consultant, and entrepreneur, across banking, financial services, retail, government, and urban services, PV’s deep competence in retail banking and regulatory compliance is sought across geographies.
Originally Published in The Times of India
