Digitisation, Big Data and Banking — Is it a recipe for Digitising Payments or a disaster?

The BFSI sector was never personally exciting to me but all that changed a few years back. I started my career in the ERP world and eventually landed up working with Indian Technological companies focused on the BFSI sector, not a welcome transition I so felt.

The transition from ERP world to the Banking world happened when I started to manage a foreign bank’s IT requirements as part of my sales role. The division I was working for, was later acquired by an Indian Technological firm looking to expand its offerings portfolio in the services side of the business.

As I got involved with the new organisations product and sales team, I felt something clicked for me, and my thought process after that about the BFSI industry completely changed and enjoyed my work like never before.

I come from the largest democracy in the world — India. It is complex, diverse in every way possible and a mystery unravelling itself ever slowly. This is what gives India its competitive edge specifically in the field of ICT where it has been ranked 10, the only emerging economy to be in the league of developed countries (Mckinsey, 2016, Pg 18).

Now, you might be wondering how does this relate to my BFSI liking/story. It is surprising that given the expertise India possesses in the ICT field, the financial side I would also read as BFSI sector (Mckinsey, 2016, Pg 18) of the country globally ranks low for an emerging power of the 21st century. The low ranking from my perspective can be attributed to the rate of ICT adoption in the country, Public Sector Banks (PSB) utilising technology, consumer coverage amongst other challenges.

The PSB (Government of India owned) i.e. 27 of them, make up ~70% of the assets in the Indian Banking sector country (The Economist, 2016). This excludes the private sector banks (Indian and MNC), the state-owned banks and the cooperative banks of the country. Yet the unbanked population remained at a staggering ~32% in 2014 which has been reduced to ~20% in the last 2 years with initiatives such as Jan-Dhan Yojana (PMJDY) — Prime Minister’s People’s Wealth Scheme launched in late 2014 (Harjani, 2015).

However, online transactions accounted for little over 14% of the total transaction volume of India (Nair, 2015). I feel the primary reason being the majority of the Indian population still live in rural India, digitally cut-off in most ways due to various reasons and fear from a majority of the consumers to utilise digital platforms. This is driving me to think why India who is a leading player in the ICT space needs to have a makeover ‘Digitally’ and specifically in the BFSI sector using technology!

I would be exploring in the upcoming blogs on how Digitisation followed by the adoption of Big data could enable India to reduce cash transactions.

Where banks in ethical and profitable way harness the power of big data (Kshetri, 2014) to focus particular banking services to sections of society. This could enable increased adoption of digital payment systems to reduce the dependency on cash-based transactions which cost India ~$3.5 billion, which is more than other key emerging economies like South Africa, Brazil (Shetty, 2015).

References

Harjani, A. (2015). One of India PM Modi’s biggest achievements, in a chart. Retrieved from http://www.cnbc.com/2015/10/15/india-sees-massive-drop-in-unbanked-population.html

Kshetri, N. (2014). Big data’s impact on privacy, security and consumer welfare. Telecommunications Policy 38 (2014), 1134–1145. doi: 10.1016/j.telpol.2014.10.002

Nair, R. (2015). Online Payment In India Accounted For 14% Of Total Transaction Amount In FY 2015. Retrieved from http://dazeinfo.com/2015/05/29/online-payment-india-accounted-14-total-transaction-amount-fy-2015-report/

Shetty, M. (2015). India’s love for cash costs $3.5bn a year.Retrieved from http://timesofindia.indiatimes.com/business/india-business/Indias-love-for-cash-costs-3-5bn-a-year/articleshow/45934597.cms

The Economist (2016). Of banks and bureaucrats. Retrieved from http://www.economist.com/news/leaders/21699911-proposed-reforms-indias-financial-system-are-welcome-insufficient-banks-and-bureaucrats

Mckinsey (2016). Digital globalization: The new era of global flows. McKinsey Global Institute. Retrieved from http://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/digital-globalization-the-new-era-of-global-flows