Something rather unprecedented happened at the Nasscom India Leadership Forum 2017 in Mumbai, on 17 February 2017. Aditya Puri, who has been leading HDFC Bank, India’s largest private sector bank, for nearly a third of his life, said: “Wallets have no future.” New payment banks were making chicken curry without any chicken in it, said the 66-year-old Puri. The chickens he was referring to are the customers. “You get me the chicken and then I’ll tell you how much competition they [payment banks] will be,” he said nonchalantly.
Nothing says you have arrived when the largest incumbents in the business trash talk your future. Remember the former Microsoft chief Steve Ballmer laughing at the launch of the first Apple iPhone?
While this is the side banks want to show to the world, the curiosity and, possibly, fear within is getting the better of them. Many bankers have reportedly been visiting China to understand how the fintech revolution has transformed the ecosystem there. While trips to China may help in future gazing, right now banks must deal with pint-size fintech firms that have emerged as ‘disintermediators’. Wallets, digital lenders, payment solution companies and, of course, payment banks are piecing together a fintech ecosystem that will be held together by data, an open regulatory environment and cost structures that are very different from those of banks. Even if most of the fintech firms perish in a way that startups usually do, they would have still altered the way business is done forever.
Who cares about fintech firms?
Question: Why did the banking chickens cross the road?
Answer: To discover a world beyond the staid and slow world of banks; to experience dazzling things like experience and ease of use.
PPI stands for Pre Paid Instruments or wallets
PPI data is from 8 non-banks
Mobile banking data is from 5 banks
Fintech firms have been quite sneaky in their run-ins with banks. Because they appeared to focus on financial transactions that brought people back to the banking fold, like helping choose the best insurance policy or loan products, banks paid little attention to them over these last five years. And in areas like payments, largely left to card companies, banks didn’t bat an eyelid as they considered it a low-margin business.
“We used to consider payments as a subset. Five years ago, no one would have thought of payments as a product by itself. Think about it realistically, will you sell one large loan or one lakh wallets,” asks Ritesh Pai, the country head for digital banking, Yes Bank Ltd, rhetorically.