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Sunday, December 10, 2023

Bank in a Box the Indian Scenario

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The turn of the century saw a proliferation of organizations offering a multi-cuisine menu of banking and other financial services. Large bank, consolidation of PSU banks, small banks & Fintech companies are severely competing with each other to provide best in class services to consumers across the country. These companies are offering more than just core banking services and have emerged as financial supermarkets. The scope of products has diversified from the traditional borrower / lender relationships. One of the key drivers to this enhanced relationship has been the digital transformation of the service delivery. The demonetization in 2016, and the COVID-19 pandemic in 2020 accelerated the adoption of digital financial services, mainly core banking. The newly formed small banks, fintech’s and the large banks had little or no problems in adapting to the new age digital platforms. The traditional small and co-operative banks fell behind the in the race to progress. Regulatory scrutiny like the landmark decision of 2020 in which the RBI bought in about 1550 Scheduled cooperative banks / multi state banks covering over 10 crore depositors under its supervision. Bank have to comply and adhere to strict regulatory guidelines.  

A staggering majority of these traditional banks have been pursuing the brick & mortar banking with zero digital footprint. Transformation was not that easy. The three major impediments to change were, the prevailing cultural mindset, the lack of understanding the digital framework and the capital investment needed to digitize.  Many of these banks have abysmally poor IT understanding and no idea how to evaluate and procure right technology services to embark on this journey.  Needless to say, all of them are Capex averse with no propensity to spend for Core or Digital banking licenses since they are prohibitively expensive. While issues pertaining to culture and digital understanding could be addressed, capital to implement change was difficult to find.

As per the ‘The Indian Banking Industry Report’ India has 12 public sector banks, 22 private sector banks, 46 foreign banks, 56 regional rural banks, 1485 urban cooperative banks and 96,000 rural cooperative banks in addition to cooperative credit institutions As of September 2021, the total number of ATMs in India reached 213,145.

Here in lies the opportunity for Bank in a Box. As each banking function requires a product-centric strategy at the organizational level, rather than separate teams controlling the front end, backend, data, and infrastructure. Companies like Techurate have emerged as independent service providers, hosting all willing banks a digital platform and a solutions provider with an integrated product suite for Core banking + Digital Banking.  Perfectly poised to serve this willing market. With virtually zero capital outlay to the banks these companies charge them only a user fee per subscriber, making the proposition irresistible. 

The painful and expensive adaptation of the digital platform was not just India centric. Many developing countries have battled with the issue. Having served several underbanked and unbanked markets in Africa, the company has the expertise to understand the consumer demands and provision services accordingly. Also, considering rural markets where smart phones and mobile internet may not be very accessible, cheaper alternatives allowing customers to use ordinary feature phones and yet access digital banking services makes it all encompassing.

With the amalgamation of automation and stringent regulatory mandates, the Indian banking ecosystem at large, is on its way to a more efficient, accurate, and transparent future – while offering customers the best of digitization, convenience, and security.  This will also put India on a higher financial inclusion trajectory. As Bank in a Box expands, there is a great opportunity for scheduled cooperative banks to forge profitable partnerships with fintech companies like Techurate. New revenue opportunities can be generated with a scalable and agile business model. Above all, financial information can be used to gain a better knowledge of consumer behavior. 

This article has been authored by Harshavardhan Pusala, Founder & Managing Director at Techurate Systems Private Limited

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