Can banking be as easy as ordering food online? | Economic Times

When India celebrated the golden jubilee of its independence, more than half the nation was without access to banks. Beginning 2014, in less than five years all the households were covered with a basic bank account. It was a dream come true not because bankers made it possible for the poor and illiterate to walk into a bank, but because the technologists made it happen.The agony of missing payments for college admissions or paying for hospitalisation due to bank strikes has given way to paying for pizzas on the move and tomatoes at the swipe of an app 24×7 which few advanced nations can boast of.The current generation no longer goes to branches to withdraw cash, while the next one will spend less time buying a home than it does buying vegetablesAs the ubiquitous black ledgers, passbooks and waiting with a bronze token to get your money from a frowning teller at the bank branches fade into history, the question is what will be left of banks when the nation celebrates its independence centenary.Probably bankers would vanish! So will the branches, ATMs, cards, and even cash when the central bank digital currency becomes a reality. Nerds have taken over banking.“Once the central bank digital currency comes in, cash may disappear,” said Saurabh Tripathi, managing director, Boston Consulting Group. “Once cash and cheques disappear the visits to branches would also be rare. In Singapore, Citi has just one big branch. That’s it.”If this generation stopped running to a bank branch on Fridays at 1.55 pm leaving aside all chores to ensure they had enough cash in their wallets to see the weekend through, the next one could spend less time to buy a home than it does to buy vegetables. 85281218Sounds nutty? Not at all! All that you need is to get banks, real estate builders, state registration centres and brokers onto a platform with facial recognition technology. Once you decide to buy an apartment all that you need to do is to open an app and show your face. The loan approval to registration could be as smooth as a hot knife through butter.Advancements in artificial intelligence and data analytics would make it possible assess a person's creditworthiness without human intervention and the back-end of banks that decide on whom to dish out loans would be done by algorithms rather than human beings.Banking transactions are set to transform just like food ordering did with a Zomato or a Swiggy.“The definition of a relationship is going through a transformation,” said Kunal Shah, founder of CRED, a fintech firm. “Consumers are going to prefer more modern apps. You may have used a bank for 20 different needs but in future, you may use 20 different apps for those needs.”Paying for milk and vegetables through the phone was inconceivable a few years back, so is banking without a branch. For retail users, more than 90% of transactions are already happening digitally. Payments becoming digital may have been the easiest part with even Google and WhatsApp playing a role. But what about the remaining financial services like investments and loans around which banks make enormous money in fees?“Artificial intelligence and blockchain would decentralise finance,” said Dilip Asbe, CEO at National Payments Corporation of India (NPCI). “We may move to programmable money. Just tell an app what is your financial goal, like buying a home, car or furniture, and based on that there could be automatic allocation of a person's income or search for a loan.”Data analytics and AI will assess a person’s creditworthiness and algorithms, rather than humans, will decide on loansThe sky is the limit for human aspiration, but when it comes to banking, regulations are the limits. Technology can facilitate financial functions, but can they be the custodian of nest eggs? Can they replace a bank? “Lending is not the same as getting customers for wallets,” said Arvind Kapil, head of retail assets, HDFC Bank. “There is the question of managing the risk.”Banking is a business that is the most tightly controlled. Any accident like the chit fund scam or a blow-up of a mutual fund gets more attention even if contracts are clear. A financial institution going down can become a lightning rod.That is why regulators mandate high capital positions and monitor them with half-yearly supervision and sudden inspections. It would not risk being blamed for letting Ponzi schemes flourish. If the Googles and Amazons want to do banking business, they need to become banks.Fintechs can facilitate the growth of banks, and banks can be more efficient with fintech, but any fight to get into each other’s space may be a losing proposition for both“The regulator will be risk-averse,” said Asbe of NPCI. “Because it is the hard-earned money of the people. There may be digital banks and neo banks, but they will still be banks.”Banks are not just for payments, they also perform a bigger role in the financial system. A fintech firm developing software cannot become a bank.“There is a clearing house function for banks,” said Jairam Sridharan, CEO, retail finance at Piramal Capital. “There is a saver/depositor. From there it goes to the borrower/receiver of funds. That is performed by banks.”Fintech firms can facilitate the growth of banks. Banks can grow quicker and be more efficient with fintech. Anyone fighting to get into each other’s space may probably lose because of their inherent strengths and weaknesses.“Banking is trust,” said Shah of CRED. “Trust is not something you wish for and get. It’s just being there for multiple generations… banks enjoy the trust which the fintechs should not attempt to do.Fintechs should think of themselves as new bank branches’’ When driverless cars looked like a possibility, some wrote epitaphs of automobile companies. William Ford Jr, co-chairman of Ford Motor Company said Google may make a car go around without a driver, but the car would still have to be built by the Fords. So would it be with banking.