Trends in banking part-VIII

Trends in Banking(Part-VIII)

Total No. of Jan Dhan Accounts opened 2015-16

182 Million

117 Million+ Indians use “SMART Phones”

100 Million+ Indians are active on Facebook

50% of the total internet population will be constituted by rural residents by 2018

160 Million RuPay users are conducting 20 Million transactions per day

Approx.70-80% of Indians will use their mobiles to access Internet-enabled services by 2018

Some Facts on Banking & Technology

E-Wallets face a big challenger in Unified

Payments

Transaction on Mobile Phones

(YoY Growth)

NPCI has launched UPI that is set to make transferring money as simple as sending text messages-some fear that mobile wallets

may become obsolete

The fear stems from the fact that only banks are

allowed to be part of UPI. The wallet players have

been left out of its ambit. NPCI currently operates the Immediate Payment

Services(IMPS)that allows people to make online txns & transfer

funds from one bank to another 24*7.UPI will

allow its customers to do the same on a

SMARTPHONE

Unlike IMPS or other similar payment systems where one needs to add One-Time-password or the IFSC Code of the bank, UPI txns will be

linked to a unique identity generated by the user himself which will act as his virtual address for all online txns. The

address could even be the users mobile number or Aadhaar number. This

means people can make online payments with far greater ease than they can

today

At the same time, using UPI could also make it

easier to directly transact with a seller for a buyer. Wallet payments services

allow people to make payments only to those

who have also subscribed to the same wallet

servicesEx: A consumer can pay for say, a taxi ride using his e-wallet only if the driver is also using the

system but UPI does not have such barriers & one

can send money to any account

As UPI gears for its launch, e-wallet players are worried that they won’t be able to keep-up with its sweeping reach & the ease of use of its technology

The existing bank-led wallet offer their products to only those who have an account with them.UPI is open to account holders of all banks. This significantly increases the pool of customers UPI can tap into, compared to banks which have a limited universe of customers-as per the research report by Centrum WealthAn added feature of UPI is that “it allows users to send reminders to their creditors by raising a “Debit Request”. While the payment is made only after the user has accepted the request, it is expected to come in-handy for transaction between e-commerce players & merchants

The convenience factor which

was being taken care of by some wallet players

will get completely replaced by

introduction of UPI & hence some of these players might

find themselves irrelevant

Some players have started to work as check-out service providers by allowing users to link their Credit & Debit Cards to their mobile wallets. Such service providers usually earn up to 1.5% of the transaction value as revenue which is higher than the commission earned if consumers transact from their digital wallet

Some of the bank promoted wallet system such as SBI

Buddy, ICICI Bank's Pockets

& HDFC Bank’s Chillr will be

affected

Wallet players can help India move a step closer to becoming a cashless economy if they are also allowed to join the UPI Platform according to Mr.Naveen Surya, Chairman-Payment Council of India & MD of ItzCash, a mobile wallet. He is of opinion that “wallet players can tie-up with Offline retailers & merchants & get them to transact via UPI that will not only eliminate cash but also the need for Point-Of-Sales terminals. In other words, Digital Wallets could play an intermediary between a seller & a customer who wants to transact via UPI”

Murugappa Group surrenders its in-principal approval for payments bank citing the reasons that the “Payments

Bank is not a viable business model for the group”

The 30,000 Cr Murugappa Group has

surrendered its in-principal approval for payments bank .The decision was taken because the basic

concept of payment bank has changed & they do

not make business sense for the company

The Group finds it no longer like a Financial Inclusion ..The group requires huge capital

& long gestation period

The objective of setting-up the

payment bank was to further Financial

Inclusion .Cholamandalam was to use its subsidiary “Cholamandalam

Distribution Services Limited(CDSL)” to

establish the payment bank

The company was expecting to invest

about Rs.100 Cr in the business & make a sustainable business

in 2-3 years whereas it found later that it has

to pump in more money to meet the losses for at least

6-7 years

The Group believes that companies which are

going into the “payment bank “ space will be only telecom companies. The base of Payment Bank has changed very fast.

The Group have to burn a huge amount of capital

even to stay in the business

Only 4-5 players will enter into the market

Anup George RebelloManager

The Catholic Syrian Bank Ltd([email protected])

http://www.slideshare.net/anuppresentations