Banks, UPI and Carpe Diem

With the launch of UPI last week, time has come for banks to break out of their walled fortresses and jump onto the innovation bandwagon or risk being relegated to the second league

Breaking the Berlin Wall…towards a better future (Source:

Last week the Indian financial markets were abuzz with news of the launch of Unified Payments Interface (UPI), which many consider to be a game changer in terms of the cashless payments industry. It allows people to transfer and receive money across banks with the use of a virtual address. It is cashless, convenient, immediate and available 24x7! I will not really delve into how UPI works…you can get a good understanding of it over here.

But while the markets are abuzz about the payments industry undergoing a makeover…the broader banking industry should prepare for something big and scary coming their way!

The Future is Now! And it is scary…


Banks are now at a point where they are slowly being relegated to just being cash reserve fortresses…a situation similar to how telcos across the world are becoming dumb-pipes. More and more services are becoming digital and slowly moving out of control of the banks…primarily due to innovative new applications, technologies and in some cases aggregators. Cheques will soon be dead, Debit cards will follow suit and slowly but steadily most of the services will move out. The overall value that a bank adds is bound to get diminished.

Take UPI for example. There is nothing which stops an innovative payments company to come up with a sexy UPI application to facilitate payments, thereby relegating banks to just being the backend system. On top of that if corresponding services are integrated…then it becomes a one stop shop for customers and their financial needs, and the bank gets lost in translation.

Nobody really knows how the future of banking is going to evolve, but if current trends and the Telecom industry is any indication, then the future is scary. Banks have already started to move towards the ‘dumb bank’ scenario with the disruptions mentioned below

  • Technology advancements (Blockchain, NFC etc) and non-traditional players (Apple, Google, Facebook, Amazon etc) are taking the payment industry away from banks
  • With the introduction of Aadhaar in India, KYC and Authentication will get integrated and done through the smartphone and thus opened up to companies who provide the service
  • Regulators giving banking licenses to non-banking companies encourages more innovation and out-of-box disruptive thinking which is sure to impact traditional banks
  • Branches will lose focus with all services coming to the phone. The physical connect with a bank becomes totally digital
  • and many more…
Do banks counter these forces or embrace and work with them in the future?

It is imperative that banks break out of their walled fortresses and embrace disruptive innovation. Rethinking of entire services, processes and applications is the need of the hour. Banks need to decide if they want to be dumb backend cash fortresses or the sexy financial concierge which every consumer wants! There is a pressing need to do a complete user journey mapping keeping in mind the present day scenario and figure out possible opportunities to disrupt the market.

One possible path forward is that instead of customers reaching out to the banks, maybe banks have to be where the customer is. So for example, can banks have widgets which are available right where the customer is making a purchase on his e-commerce site? Can the bank have a widget which is there when the customer is purchasing an air ticket and needs travel insurance? Something to think about…(More on this in our next post)

Banks are at the cusp of an important moment which decides how they are going to be perceived in the future. Disrupt or get sidelined as a ‘dumb bank’ a.k.a dumb telco pipes. The choice needs to be made now and fast. It’s time for Carpe Diem!

What do you think?

P.S — Huge shout out to Aveejeet, Konark and Puneet…the braniacs at Moonraft for their contribution to this post.

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