Veteran banker KV Kamath has lauded fintechs for creating a wave of innovation in the financial services arena, as he tracked the evolution of India’s banking sector — from commercial banks working on straight pass-through of transactions to money landing directly in a customer’s account or wallets through UPI.
“The whole payment space in India has metamorphosed in the last four years. It started with, in a way, Covid, and accelerated post-Covid. It only shows to me that innovation is still possible, and we could innovate in a whole set of areas beyond financial services,” Kamath said in an exclusive interview with Moneycontrol.
He expressed confidence that innovation would show the way to a lot of other things that the digital economy could do for India.
Recalling how the face of banking and transacting has changed, Kamath said, “When I started commercial banking, we were looking at, how do you go straight through. Today, everything is straight through. The next level will be how do you make that straight through on your device. That is happening with UPI”. The next level of innovation would be to see how entities take the learnings from Unified Payments Interface (UPI) and overlay it on other areas of operation, which may not necessarily be confined to banking but other aspects of the financial services, he said.
“This is where the fintechs come into play. They are the innovators,” he said.
Alluding to the fact that banks may have been complacent in adopting technology, Kamath said banks have a lot to learn from fintechs.
“I think the incumbent or older players will have to learn how to drive this (innovation) forward, he said.
These entities may have not been able to quickly innovate, as it would require them to take some bold steps, which they may not be well-positioned to do at a rapid pace, he said.
“Any technology change is a courageous decision, and it has to be done with a great degree of courage and caution,” he said.
He also agreed that large Indian banks lost to global players-backed entities such as PhonePe and Google Pay and even to home-grown Paytm. “Fintechs are more nimble in terms of identifying technology opportunities and leveraging those opportunities. Banks are playing a catch-up game but incumbent players are fairly deeply entrenched,” he said.
Fintechs though have been pulled up for being lax on operational fronts. When asked if this should be a matter of concern, Kamath said, “Innovation always means that you have to be at an edge.” He also said in the financial services space, one would have to recognise where that boundary line is and make sure not to cross or slip across it, which is the mantra for survival in the sector.
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