Community

Christopher.. Your post brings out an important point about the effectiveness of branch as a channel in providing advisory services that inspire confidence in a bank's brand especially if it is outsourced. With bank branches having become retail stores, carrying acute focus on sale of routine banking products, the depth of expertise in the personnel dispensing guidance that influence customers's financial decisions, has seen sharp erosion. Multi bank nature of the Post Office branches could overload its staff with finer details of product features, nuances related to bank specific procedures. This could quickly become a disservice morphing into a channel of diminished value where banking activity of sensitive nature cannot be accomplished. It could provide an unintended push for customer interactions to digital channels, questioning the merit of investment in such an attended channel.

Hi Sunil, Great post. I would further extend the thought to propose creation of a wider corelation matrix that covers ownership of physical assets such as refrigerators, cars, washing machines that are becoming digital assets in the rapid realization of the IOT scenario, capable of originating owner not present purchases. Imagine each of these transactions requiring the owner to provide 2FA through the day forcing her to forego few precious moments of attention from office work to understand the context of the transaction

I concur. There is a solid measure of enabling regulations buried under DFA that are meant to do a world of good. I cite two examples: DFA1033 has led to the emergence of consumer banking data aggregators such as Mint, Proper that have created beautiful apps that bring about an amazing convergence of transaction data, card balances, DDA balances, fetching them from bank sources, on the strength of the authority granted to them by the customers owning the banking relationships..This has unleashed the spirit of PS2 in the US environs. Similarly, DFA1073 has provided the ability for consumers to back out of a cross border transfer within 30 minutes of having placed the payment order. They can do this on the basis of another powerful guidance carried by the section i.e the visibility of important attributes of the transaction which previously where unavailable - value date, exchange rate, amount expected to reach at the other end of the transfer, cost of the transfer broken down into own bank fees, other bank fees. This feature sought to be enforced by the regulation is unprecedented in its reach and needs to be protected. Your post is on spot - broad brush repeal / consolidation of a full bodied regulation such as DFA could be detrimental.

I feel identification of customers sitting on the fence, thinking of making a switch, is cumbersome. The sophistication it calls for in the use of data science, is significant. There are numerous challenges such as whether current system architecture is data driven, does it lend itself to such a churn of data ( assuming such data is possible to be captured ). Agree with you a 100% that energies should be focussed on continuous competition analysis. It is easy to gather the basis of such analysis. Banks could through surveys ask new customers who moved over from other banks, why they moved and to customers who have remained with them for long, why they have stayed on, it would throw up a list of factors. Focussing on those factors and comparing yourself with other street banks / fintech providers on those factors, would provide astounding insights on where you stand in the market place. Fully agree of the suggestion around case management - going through the issue log, paying close attention to the turn around time on issue closure, active classification of issues as communication related, service linked, competency related and others could pay rich dividends. These issues represent grievances and carry the true tone of experiences gone wrong. It is absolutely critical to not let this go social through tardy response times and less than satisfactory resolution outcomes.

Here is a well formed comment The comparison of BHIM with established wallets, that have been in existence for some time, is a tad unfair. With BHIM, the focus is weaning people away from cash and make it an easy and routine mode for monetary settlement against owned balance. Credit card is in no way dominant instrument in the country and hence it DID NOT figure in the first wave of access using UPI. That is not to say that it will remain that way. It is important to note that BHIM has been enabled for feature phones. That in itself is a giant leap from a value store access standpoint and underscores the will in enabling the previously unbanked, underbanked to get acquainted with an innovative way to make micro withdrawals contributing to the cashless journey. Imaginatively speaking (probably subject of a new post, Ketharaman), if the card based access to a credit card account (assuming debit cards have already been dealt a body blow) is kept aside for a moment, there is nothing stopping a DDA platform vendor from replicating a credit card module and all the essential ingredients of processing - min balance, statement cycle, due cycle, EMI etc (most of which are capabilities already available in a DDA solution). No dealing with an extra 16 digit number. From a bank's standpoint, if a core banking platform can interface with the NPCI switch, so can a card solution. With the UPI interface, the new card module in a core banking solution can avoid ISO 8583 based interfacing with card switches opening up the credit card accounts that the module houses.. Pardon my deviation here.. Cashless volumes can come from the vast hinterlands. With a no frill bank account that does has no min bal stipulation, that is enabled for electronic benefit transfer, carries an insurance cover, biometrics for authentication, enabled for direct access, we have not seen the last of the measures for stubbing out cash addiction (This is probably another deviation from the main theme of the post..) BHIM, UPI, Payment banks, no frill accounts, India Stack are parts of the common theme envisioned to deliver on digital roadmap on an incredible scale. All in all another great, well researched post from Ketharaman, that has stirred the mind and got the creative juices flowing.. Thank you Sir !!!

Please overlook the grammatical boo boos in my last comment..

fast but fat fingers at work :)

The comparison of BHIM with an established wallets that have been in existence for some time looks premature. Credit cards solutions where expected to interface with a card switch and communicate using ISO 8583. With BHIM, the focus is weaning people away from cash and make it an easy and routine mode for monetary settlement against owned balance.

Credit card is in no way dominant instrument in the country and hence it did figure in the first wave of transformation using UPI. That is not to say that it will remain that way. From a bank's standpoint, if a core banking platform can interface with the NPCI switch, so can a card solution. BHIM has been enabled for feature phones. That in itself is a giant leap from a value store access standpoint.

Imaginatively speaking (probably subject of a new post Ketharaman), if the card based access to a credit card account (assuming debit cards have already been dealt a body blow) is kept aside for a moment, there is nothing stopping a DDA platform vendor from replicating a credit card module and all the essential ingredients of processing - min balance, statement cycle, due cycle, EMI etc (most of which are capabilities already available in a DDA solution). No dealing with an extra 16 digit number.. Pardon my deviation here..

With a no frill bank account that does has no min bal stipulation, that is enabled for electronic benefit transfer, carries an insurance cover, biometrics for authentication, we have not seen the last of the measures for stubbing out cash addiction (This is probably another deviation from the main theme of the post..)

All in all another great, well researched post from Ketharaman, that has stirred the mind and got the creative juices flowing.. Thank you Sir !!!

Online DDA does not push adoption of the electronic payments. Lots of factors explain why cash is still the king in the country (availability of online DDA is definitely not one of them). If a wallet acts primarily as a container for card data that avoids rekey during a transaction, one can imagine its longetivity / ability to remain relevant..In fact one should start to get nervous about the safety of the card data given the upward swing in breaches beginning to be seen in the country. It would be enriching to compare the percentage of the growth in wallets accounts for a provider with prior periods, to gauge if the momentum.

Surviving, when along side a faster payments scheme in a country could be on account of smart business strategies such as

- like a neobank, provide competitive interest rates on the wallet balances,

- be part of a main story say stock trading, buy / sell of goods, risk participation in crowd lending where the cash leg settlement is not just instantaneous but retains all the richness of the transaction context, which a DDA based debit cannot match

The NPCI did not prohibit banks from launching their own UPI enabled apps that led to such a proliferation from banks that had the resources to lauch them on a quick time basis. With the unveiling of BHIM (that is seeing record number of downloads) these bank specific UPI apps are likely to take a backseat. Banks clearly understand that these revenue streams linked to swatiching fees / interchange (however you term them) are temporal in nature..Even card associations have read the threat from the emergence of Instant Payments, API based DDA access, R-RTPS. So it is not an India based trend alone. The MDR rates of today will see a scale down in days to come.

What we see and interpret as a steady amble for a provider might well be the start of a tapering down of a trend.

For account access based transfers to be viable it is critical to have real time DDA platforms in place. This is largely the case in most of the banks in India unlike the home market in which PayPal operates (Lack of real time DDA is also the reason why 'api'zation of payments and DDA services is still in the infancy there inhibiting account access).

Value does not need to be loaded on to these wallets but post transfer of a credit to the wallet, it lingers on for quite some time due to the intimidation posed by a cashout charge. With some wallet providers getting banking licence, the cashing out to the DDA account present in a 'wallet provider turned bank' may become free but may continue for other bank accounts. This backend load is a form of friction that you did not mention in your post in relation to the use of a wallet.

I guess the main reason for not going full throttle with widespread marketing of UPI and its mandatory embrace, is the realization and acknowledgement of the huge vulnarabilities in the Indian banking ecosystem to cyberattacks. There is a stark contrast in the awareness levels on the models of attack, the preventive measures and the resiliency from such attacks, between the top tier banks and those at the co-operative banks and even a number of national banks. Once these get addressed, likely to happen through the whole of 2017, direct transfers to accounts would become a widespread reality.

Ketharaman.. Excellent take on the success story of the leading wallet provider in India. I feel that the disintermediation brought about by wallet providers in India is a transient story. Once UPI based access to bank accounts gets full steam, especially with the increased focus on rapidly moving towards a cashless economy, the need to store value outside of ones' bank accounts would go away. This coupled with the cost of UPI enabled transaction acquisition coming down, the country is likely to witness a phenomenal uptick on direct account access based transactions. Digital vault (one of the highlights of India stack ) is expected to accelerate merchant onboarding for banks, allowing them to be more aggressive in scaling up on merchant relationships through mobile onboarding. With the wide use of data science,leading banks are showing the path forward on contextual banking, emphasising on quality and depth of merchant relationships (through frequent weeding of unscrupulous accounts) more than quantity.