Digitalization of Banks is Incumbent, else they might turn into History, as warned by RBI Deputy Governor, SS Mundra
The digitalization of Financial Technology Firms is a continuous process and is here to stay. It will be challenging task for the present Banking system to keep upgraded. Banks that do not become digital might become a history, Reserve Bank of India (RBI) deputy governor SS Mundra warned on Monday.
Banks have no time to lose. They would need to tap the indispensible talent and create an atmosphere where such talent can upgrade their skills and be responsive. “The banks must view the success of fintech ecosystem as an opportunity and not as a threat,” Mundra said.
Fintech companies are overriding the facet of traditional financial services to a greart extent and upto 28% of the banking and payments business are at risk by 2020, Mundra said quoting the 2016 Global Fintech Survey report by audit and consultancy firm PWC. These companies are having the potential to take care of remittances, credit and savings in an efficient way and change the banking system to micro and small enterprises in the next 5 years. SS Mundra also gave an example of Citibank report saying that the fintech revolution will takeover nearly a third of employees at traditional banks in the next 10 years.
The forecast is basically due to the lack of advancements and loss of business overtime, all though it may be tough at this stage to accurately track the possibility of any specific benefit or risk materializing in the fintech universe.
Mundra advised Banks to cooperate with fintech firms. “Banks would need to assess the likely impact of disruption and re-orient their business models. As the incumbents, they may need to leverage their comparative advantage to improve their customer relationships, change their internal processes, mindset, and internal structures,” adding that the nimble-footedness of fintech players still eludes banks and alienates potential borrowers.
However, as fintech firms expand, they could be working under equivalent regulatory framework. Most of the Fintech Firms are venture capital supported units, which can’t a wide capital base.