On CNCBC-TV18's special show India on the Move, watch a panel discussion on digitisation, disruptive technologies, innovations and their impact on the banking sector in India.
On CNCBC-TV18's special show India on the Move, watch a panel discussion on digitisation, disruptive technologies, innovations and their impact on the banking sector in India.
Below is the transcript of the discussion.
Standard Chartered Bank organized the second edition of its annual conference, ‘Banking on Digitization’, in Mumbai recently. Experts, thought leaders and clients from across industries came together to discuss digitization, disruptive technologies, innovations and their impact on the banking sector in India.
Zarin Daruwala (CEO, Standard Chartered Bank): We’re in the midst of a digital revolution, led by a slew of projects being run by the government, around technology and digitization, ably supported by a willing population and industry. Key initiatives around Aadhar, GST and digital payments have created a significant push towards better adoption of digital, and the fast-transforming way we do our business. We are also in the midst of an exciting, challenging period in the Indian economy, where we’ll see a huge shift in the overall infrastructure and the landscape of the country. Within the first year of demonetization, we’ve seen the number of taxpayers in the individual segment increase, the number of digital transactions multiply, and new technologies, applications and instruments emerge. Our government, banks, fintech companies have been innovating and changing the way India spends its money. At Standard Chartered, our endeavor is to be at the forefront of this cutting-edge technology, and be the digital bank of choice. We are invested in this ambition and are continuously looking to enhance our digital capabilities. We were the first foreign bank to launch UPI in 2016, and have seen a substantial growth in volume since then. On the retail side, we have launched UPI, Bharat QR code, Bharat Bill Payment and many, many other initiatives. We’ve also made strategic investments in Ripple and SWIFT to facilitate cross-border transfers for our corporate clients. Our new age corporate banking platform, Straight2Bank NextGen, is being built around API infrastructure. We’ve introduced paperless imports and document preparation services using technology. We’re also looking at leveraging further new age technology, such as Internet of Things and Blockchain, to develop new and better supply chain financing solutions. We are committed to proactively offering innovative banking solutions to meet and exceed the evolving business needs of our clients.
Sanjay Jain (Chief Innovation Office, CIIE): I want to walk you through this acronym, JAM. The ‘J’ is, of course, the Pradhan Mantri Jan-Dhan Yojana, which was launched about three years ago. About 300 million bank accounts have been opened so far, and this number is interesting, because we have about 300 million households in the country and the idea was to be able to take banking to each and every household. We think we’re at a point where almost 90% of households have access to a bank account today. And then, we have Aadhar. Aadhar went from a launch in 2010 to currently about, almost 1.2 billion people have an Aadhar number. So, that was the ‘A’ of JAM, and then, the ‘M’ is mobile phones. And not just in terms of mobile phones – we already have over a billion SIM cards, but because many people have two SIMs, multi-SIM phones, we think the market penetration is around 650-700 million people. This number is interesting, because 750 million is also the expected number of adults in the country. And so, if every adult has one smartphone, or almost 1:1, then I think we’re going to get to a very interesting point in the future. And whatever pace of innovation we’ve seen so far can only grow much stronger. The last piece is that we’re really heading into this world of data, where we’re going to be very data rich, and we want to make sure that, from a privacy perspective, we take this into account. So, the broad-thinking – and this is now, of all of the systems so far, this is the only thing that we are at the proposal stage, where we’re trying to figure out how we can make sure that people are in control of their own data. And so, the proposal is that we have a consent layer, which allows a user to control what data about them is shared for what purpose with whom. And that really brings us to the India Stack, because this gives us a layer of presence-less, where I can open a bank account without being at a bank. I can do paperless transactions. I can do digital signatures without… I can exchange an ID document digitally. We can do cashless transactions, and we do it all with the consent of the user. And then, on top of this, we’ve built many applications, whether it is for credit or investments or scaling. Many, many different use cases, financial and non-financial, are going to be sitting on top of this. And this is the evolution over the years of the Stack, starting in 2010, with the launch of Aadhar, and then, ending with UPI and the consent piece. This is really… you know, earlier in this year, February, Raoul Pal – and you know, we never knew who this gentleman was, till he tweeted about India Stack – and he compared it to what railroad did to the UK or what the national highway system has done for the US. Clearly, we are at this point where India is moving fast; it’s not going to wait for anybody, it’s not going to just… we’re going to build technology, solve the needs of our people and move on. So, that’s really what I wanted to present today.
Diverse panels comprising of leaders of specific industries addressed different challenges of transforming and conducting business in a more digitized economy. CFOs and treasurers from multinationals discussed the changing landscape of payments in India, and the transformation to digital payments through initiatives like UPI, led by the government. India’s fast and ambitious transformation to digital, a year after demonetization, was also on the agenda of the panelists, who exchanged views on the sustainability and the impact of new technologies like Blockchain and Internet of Things on documentary trade, treasury management and supply chain, among other things.
Ashutosh Kumar (Region Head, ASEAN & South Asia, Standard Chartered Bank): So, let me start with what is happening in various areas and what is India really driving, not just from the government side, but overall from an industry side. So, maybe, let me start with you, Ramanan, to talk about what you’re seeing in the insurance industry and broadly, some of the other industries as well.
SV Ramanan (CEO, CAMS Insurance Repository Services): The idea is that digital is just not limiting to certain parts of the value system. So, we were discussing that, I mean, in a lot of industries and schemes, you have part of the system which are digitized. You still have paper pre or post, okay. So, in the case of insurance, the paperwork starts after the issuance process. You get a physical document, which you have to preserve to make a claim; if you want to make any changes or servicing done, you still have a paper-based process. The idea of the insurance repository is to change the post-issuance process, so that it can be completely digital.
Ashutosh Kumar: Divyesh, from your side, you know, GST is one of the things, which is maybe not initially part of the India Stack, but some of the things which will help in terms of digitization, it will make the India Stack real. So, maybe, how does this change the whole digitization journey from a company perspective? Is it really driving more digitization or is it just simplifying the tax aspect?
Divyesh Lapsiwala (Partner, Indirect Taxes Services, Ernst & Young): A cross-state-mapping of transactions is phenomenal. And yes, we’ve had our share of hiccups in the beginning. Any such rollout of this scale, you know, I don’t think anybody expected it to stabilize overnight. So, I’m sure we will go through the motions for the next 6 to 12 months, but this is again fundamentally impacting the fact that you can’t dodge the system. You can’t game the system. You need to make sure… The wave is going to get bigger and bigger against you, as you go along. You need to make sure you’re doing the right side of transactions. You’re reporting every transaction correctly. Your supply chain is fully aligned, and so on and so forth. So, to me, this change of GST reporting is likely to, in 12 to 18 months of time, have a very strong impact on behavioral patterns, how transactions happen in the economy. And then, that’s for the benefit of everybody, because if everybody starts following the signals, then you don’t have accidents, right?
Ashutosh Kumar: Vishal from NPCI, you know maybe it will be good if you can paint a picture, a landscape, of what’s coming.
Vishal Kanvaty (Senior VP, Products & Innovations, NPCI): If I take a step back – maybe 2014, if we start, you know – I think we started this with RuPay initiatives, where we started a RuPay card. I think we started fundamentally with three principles, saying ‘How do I reduce the cost of a transaction?’, ‘How do I make it interoperable?’ and ‘How do I get the ecosystem in place for everything?’ I think that’s the three principles on which we started on every product. And, I think, from a digitization perspective, we have seen a lot of initiatives in the last two years, with UPI, BHIM getting launched… And, I think, every aspect where we have ventured is how do I make it at a scale, take everyone into confidence and… If I take the example of NETC, you know, we talked about 375 toll plazas on the system. But we also have enabled an interoperable system, where we have 10 issuers, and you know, equally 10 acquirers of various banks, who are now interoperable. So, I can use any of the tags from any of the banks and get on to any of the acquirers. So, that’s been the foundation principle on which we’re trying to scale up our platforms.
Ashutosh Kumar: Where do you see companies should be able to leverage, and should, more importantly, leverage the India Stack?
Sanjay Jain: So, if we take e-KYC, e-KYC is really about customer onboarding. And if you’re able to do customer onboarding in a very authentic way with 100% certainty at a very low cost to suddenly, your customer onboarding requisition changes and you’re able to now go out and expand the market. The classic example of it is, what you’re seeing in the investment space now, so where SEBI allowed e-KYC-based account opening. Now, previously, prior to that, many of my friends who are in this business would say that the cost of acquiring a customer and onboarding them was 1000 to 1500 rupees. And you’re only allowed half per cent commission on distribution of mutual funds. So, you would only acquire a customer who was willing to spend 200 to 300 thousand rupees to purchase mutual funds the next year. Anyway, you needed to recover the 1000 rupees in the first year and so, you only went after the top tier of the country. Now, because with e-KYC, that cost has come down to under 100 rupees, it suddenly means your target market becomes much, much bigger. Your transaction size goes down, your volumes go up and you have financial inclusion. So, because, now by doing this API-based thing, you’ve suddenly changed the economics of the situation.
Maxime De Guillebon (Head, Digital Platforms, Transaction Banking, Standard Chartered Bank): I’ll ask Alan, what does API mean for a treasurer or a treasury operation? How will the technology around connectivity really help treasurers and cash managers manage liquidity and reduce potentially their head count and manage their operation?
Alan Lin (Global Head, Cash Management, Transaction Banking, Standard Chartered Bank): The thing about today’s environment, a lot of treasurers now have started automating these things, and they get information, right? So, digitization is really changing the way of treasury operation and what they really need is a real-time. Real-time in regard to their banking transaction, in regards to their payment procedure, regarding to even external information. And then, API has become a technology where we can make a lot of information available real-time, and it’s also shifting from reactive to proactive.
Maxime De Guillebon: Really welcome your views on, you know, first – what exactly is AI? How do you guys use it in your company? And how do you foresee this having an actual impact on your businesses?
Ankit Ratan (Co-founder, Signzy): We going digital is something that everyone understands. I think banks understand it better than any other industry, because the asset was always digital, and we are facing the most pressure. And so, you have all these banking apps, like mobile apps and web apps. And so, you have customers now being able to interact with banks online or digitally, but at the operations side, you still have desk-based, semi-manual operations. And what is not understood enough is that, apart from the fact that a customer wants a digital interaction, he wants – in this modern world – decisions to be really, really fast. He wants real-time decisions, and that is where AI adds value, as an example in operations. That it is able to make these desk-based operations into small AI bots, and hence, if the consumer onboards digitally, within real-time, you can also get a decision made which today was taking, you know, large streams of operations and a lot of desk-based processes. So, in some ways, what AI is allowing you to do is give a true digital experience to your customer, but without compromising your processes. So, without being able to say ‘Okay, I’ll do OTP and I’ll go online’ or ‘I’ll use social media login and go online’. No, you’re doing whatever you were doing, but instead of that check being performed manually, it is now being performed using technology.
Maxime De Guillebon: Joydeep, is this spread, is that what you’re hearing from your clients? Is it reflective of the questions you’re getting from your clients or the industry?
Joydeep K Roy (Partner, Insurance and Allied Sector, PwC): So, it’s not coincidental that all of these have bubbled up now. These are, some of them are technologies, some of them interfaces, some of them are platforms, some of those are environments, some of those are mediums, and all of these are sort of moving up now, because they can’t work with the other. So, I think the time has come for us to look at the digitized workplace.
Maxime De Guillebon: If you look at API, if you look at cryptocurrency and if you look at Blockchain, that’s Ripple. So, how do you guys use those three technologies to essentially come up with something of value, as opposed to just technology for the sake of it?
Navin Gupta: What is happening is, and that’s the reason you see things going up and down, is customers are getting to a certain level of maturity to essentially say which use cases are viable. For example, what is going to happen is, if you look at something like Tally, which we’re all familiar with, or Xero, right? Now, in an accounting system itself, today what we do is, we say ‘I need to pay Navin his salary’ and then, we go to the banking system and make the payment, right? Both are disjointed and then we do bank reconciliation. But what is going to happen is once you say that ‘I want to pay Navin his salary’, you will be able to initiate a payment from Tally itself, directly to the bank. The bank pays out, confirms and the reconciliation gets done right there itself, right? So, you’re eliminating a very big step. Now, you do it through Blockchain, you do it through API, but what the customer is looking for is ‘I’m looking for this great use case, which essentially eliminates what’s there in the middle, the reconciliation layer and hundreds of accountants all over India who need to reconcile this – this essentially goes away and my life becomes easy, right? So, this will be an example, a use case what the customer wants to solve for, and the companies that solve for it, including intermediaries, are the ones who are going to get the customer’s business. So that something is already happening, and I think people are starting to get beyond the tag names or the labels as I would call them.
Maxime De Guillebon: So, I know there were a lot of questions that you guys have raised on the app. What I suggest is, we close for now. We’ll thank each of the panelists.
Sanjay Gurjar: The name ‘Banking on Digitisation’ itself is symbolic of what we think is going to drive banking for the next many years to come – digitization, and everything around it and everything that, you know, is part of the ecosystem of digitization. Now, what makes India unique is the fact that we have a very strong government push, in addition to, of course, the normal driving factors of mobility, technological revolution, client needs. We have a very, very strong government push, in the form of, you know, changes made by the government and also an NPCI kind of an organization, which has dramatically changed the landscape of payments in India.
SV Ramanan: I think it’s a great event organized by Standard Chartered Bank, getting participants from the government, the corporates, the industry folks to come together to ideate. I mean, during the session, I was able to pick up some ideas that I can go back and implement in my company, which is regulated to FASTag, which basically means that any vehicle that is going to be manufactured in the country is going to come with a FASTag. How do we latch on to it and make sure the insurance can be issued using the FASTag?
Ashutosh Kumar: I think the future of Digital India is very bright. You know, a lot of things that have happened in India are now getting replicated in the world. So, take UPI as an example. This was something which happened last year in India, and now, we see that happening in Singapore – it is called PayNow, and it is evolving there. We see that happening in Thailand – it is called PromptPay, and again, something which is evolving. So, again, a lot of things which have happened in India are being picked up elsewhere in the world. But with those whole, you know, move towards Aadhar-based payments, as an example, will be a big thing. In many ways, it will also help companies solve real problems which people are facing by making things more digital.Alan Lin: This event is creating an environment for people to communicate and exchange ideas. They are companies from different industries, some are also coming from the same industry. They have an opportunity to use this environment to exchange ideas, and that’s what Standard Chartered Bank is hoping to contribute to this community.