Amid the increasing popularity of online payment systems, India's top banker Uday Kotak has alarmed the Indian Banks to protect their turf from consumer tech companies. On December 3, Kotak Mahindra Bank chief executive said bankers have been short-sighted on the payments business in the last couple of years. This may have the lenders losing a large part of their traditional business to a digital wallet such as google pay and Walmart-backed Phonepe.
Google Pay & Phonepe Has Captured 85% Of Market
Google Pay and Phonepe dominate the country's retail payment system, capturing 85% of the market share, thereby establishing a monopoly. These are either owned or backed by big tech giants, said Kotak while speaking at a forum organized by Bloomberg and India's International Financial Services Centres Authority.
The Indian Banking sector needs to shift the fulcrum from customer-centric to a sales-centric approach. Moreover, he added that the lender must hire more talent and significantly scale up the technologies. According to Kotak, banks have allowed payment businesses to be taken away from them by two or three companies.
According to the reports of Mint Kotak said,
"Banks, by law, under Section 6 of the Banking Regulation Act, cannot get into non-financial business as defined. Therefore, there are serious issues how you will draw the lines and simultaneously there is an issue about financial stability. Their standard response was that there is no money in payments. We must keep in mind that consumer tech companies have revenue models outside of finance. For instance, the advertising model or the e-commerce model."
Tech Giants And Digital Payment Companies
A section of Indian Bankers and Policymakers has closely monitored the emerging relationship between some lenders with large consumer tech companies on the deposit side. Asked about this, Reserve Bank of India (RBI) deputy governor M Rajeshwar Rao had said that this emerging relationship trend between tech giants and digital payment companies is a global phenomenon that has attracted Central Banks' attention around the World.
Kotak also informed about the 20,000 accounts being opened digitally on fintech daily. He also acknowledged India's domestic payment ecosystem and termed UPI and the AADHAR system a remarkable innovation that should be adopted globally.