The rumour that fintechs will displace banks is a “misconception,” according to Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar, but lenders need to be more careful while implementing technological improvements.
He cited a few wasted opportunities from the past as well as examples of how the banks’ “resistance” to change revealed their ability to accept technology.
Speaking at an event hosted by the IBA, Sankar said, “Banks are here to stay, but banking is mutating rapidly,” adding that they should adapt quickly to the changes brought about by technological advancement.
He emphasised that it is erroneous to think that Fintech companies may take the place of banks, arguing that they merely facilitate banking and are in no way in competition with them.
The case of the wildly successful universal payments interface (UPI), where the majority of the business is held by non-banking organisations since banks missed the boat by not investing in the shift from the beginning, was brought up by RBI Deputy Governor T Rabi Sankar.
He added that when the central bank changed recurring payments last year to make them safer, larger organisations in the banking industry and beyond it showed resistance to the change.
Sankar claimed that organisations who oppose change claim that doing so will cause customers to be inconvenienced, but he added that customer surveys have shown that this is not the case, revealing the organisations’ reluctance to change.
According to him, the bank has the choice of collaborating, absorbing, or internalising new technology whenever the issue of adoption arises.
Collaboration provides banks with the most flexibility of the three, thus banks should consider pursuing it, according to Sankar.
According to Sankar, the RBI’s decision to launch its effort to create its own digital currency, which will be regulated and have some benefits of digital currencies, was motivated by the high interest in private cryptocurrencies.
Sankar noted that two experiments—one each on wholesale and retail central bank digital currency—are now underway and that the results so far have been encouraging in terms of the systems.
He added that as the experiment progressed, other factors, such as the technology employed and its architecture, will be examined in order to draw conclusions for the central bank.
Collaboration provides banks with the most flexibility of the three, thus banks should consider pursuing it, according to Sankar.
According to Sankar, the RBI’s decision to launch its effort to create its own digital currency, which will be regulated and have some benefits of digital currencies, was motivated by the high interest in private cryptocurrencies.
Sankar noted that two experiments—one each on wholesale and retail central bank digital currency—are now underway and that the results so far have been encouraging in terms of the systems.
He added that as the experiment progressed, other factors, such as the technology employed and its architecture, will be examined in order to draw conclusions for the central bank.
