Although rapid digitization in banking and finance is disrupting the traditional industries, it is bringing in immense opportunities along with it. Almost four years ago, the government launched the ‘Digital India’ programme for promoting new progressions and innovations in every sector to endeavour for GeNext. The idea behind the programme was to remodel our nation into a more knowledgeable economy and a digitally empowered society. One industry, if we can pinpoint which benefitted the most from the Digital India programme is the financial services industry.
According to the Executive Director of India’s largest private bank — ICICI, Anup Bagchi,“When it comes to person-to-person transactions, mobile banking is the highest”. With such a huge scope, the financial services industry is exploring new opportunities while embracing digitization. The industry is looking at how it can increase internal efficiencies so that it could provide value addition services to the customers while minimizing the hassles.
“With the country making rapid strides in mobile technology, consumer preference has shifted towards doing everything ‘on-the-go’. This insight has motivated us in leveraging upon data analytics and technology and introducing a bouquet of instant products,” says Anup Bagchi.
With equal participation of the people in digitalizing of the Indian economy, banks are trying it hard to offer faster, simpler and better banking services with their mobile apps. In this direction, the largest lender in India, SBI is planning to replace all its debit cards with the YONO digital banking soon. SBI launched its YONO service in 2017 and has been continuously pushing its customers to make their banking life easy.
To eliminate debit cards, the bank is planning to establish around 10 lakh YONO Cash Points across the nation over 18 months. “A customer can make bill payments and can-do digital transactions by using the YONO cash feature. We are considering establishing close to 10 lakh YONO Cash Points in 18 months. Nearly 70,000 Cash Points have already been established,” said Rajnish Kumar, Chairman of SBI.
ICICI at present offers multiple banking services under its iMobile app. Using algorithms into labels, the iMobile app is trying to include auto-tagging of transactions to help customers understand their financial health by showing their transactions based on their past transactions.
The bank, through its mobile app, is offering instant services such as instant personal loan – ‘Insta PL’, where the customer is not required to produce any collateral or security to apply for the loan. The bank also offers Insta credit card, Insta saving account and several other Insta services through its app. “We believe that bringing all of these instant products and services to the Bank’s iMobile app will further enhance customer convenience and make their banking experience hassle-free,” says Anup Bagchi.
Under a recent account aggregator (AA) model ‘Sahamati’, individuals and small businesses can safely and securely share their digital financial data with third parties. Under this, the users can quickly share their bank statements and other required details for loan approval to the lending institutions digitally through their choice of account aggregator.
Former chairman of UIDAI, Nandan Nilekani said, “If Indians can leverage their footprints to get better loans and other financial products, we will have taken a step towards true data empowerment. Thanks to AA and other digital infrastructure that we built, India will become a leader in empowering individuals and small businesses with their own data.”
Anup Bagchi claimed that the use of AA would reduce the infrastructure cost and credit cost, which will help transmissions. While Rajnish Kumar said that lending to SMEs and personal finance would become relatively easy through AAs.
When India is witnessing a steep decline in the auto sales, ICICI has managed to increase its auto loan portfolio at 18% year on year basis, which is double the 8.8% growth recorded by other banks in the vehicle loans category. ICICI stated that its ‘Insta’ loans are driving loan growth. Under this, the appraisal and sanction are done without human intervention, with the help of analytics software.
“Because we have the borrowers’ deposit accounts, we know the steadiness of their income and their outgo. This, coupled with credit bureau information, which provides their repayment track record, enables us to instantly score the customer and sanction the loans without human intervention,” says Anup Bagchi.
The bank is reported to have approved instantly and digitally final sanction letter of car loans to its 20 lakh account holders up to Rs 20 lakh for a tenure of up to seven years. It has also approved 1.2 crore customers instant and digital two-wheeler loan up to Rs 2 lakh for a tenure up to three years. Anup Bagchi said, “The Insta auto loan has removed congestion in the credit delivery process and has actually shifted the power to the customers.”
Recently, the RBI constituted a committee under the chairmanship of UK Shukla, with seven other members, including Anup Bagchi as a member. In its recommendations, the committee focused on the digitization of the SMEs. The recommendations were made in the light of enhancing the lending processes, mitigating the risk, and preventing the misuse related to the industry.
Many experts believe that not only expanding digitization in the financing service and banking sector, but the digital linkage of digitized finance and banking industry with the other industries can bring the upside-down to the slowing Indian economy. Experts believe digitization can deliver better credit delivery to the SMEs, a not visible sector which is the strength of Indian economy.