Asserting that Indian banks have been behind the curve in tapping payments technology, Kotak Mahindra Bank Managing Director Uday Kotak on Friday said they need to wake up before large parts of the traditional financial markets move out from them. Indian bankers have been short-sighted on the payments business in the last couple of years as they saw no money in payments, Kotak said at Infinity Forum organised by the International Financial Services Centres Authority (IFSCA) and Bloomberg.
As a result, they have allowed the growth of unified payments interface (UPI) payments monopolised by two players, Google Pay and PhonePe which have got 85 per cent market share, he said. Therefore, it’s a wake-up call for Indian banking, he said: “Wake up, you will see large parts of the traditional financial markets move out.”
Having said that, he said, “We have to keep in mind that consumer tech companies have revenue models outside of finance. For instance, the advertising model or the e-commerce model. Banks, by law, under Section 6 of the Banking Regulation Act cannot get into non-financial business as defined.”
Therefore, there are serious issues about how you are going to draw the lines and simultaneously, there is an issue about financial stability, he said. “I was reading an article which said that when you put a regulated entity into competition with a fintech or a consumer tech, the standard approach of the consumer tech is to play fast and loose on regulation and gain market share at great speed.
“I am not against competition. All that I’m saying is we need to make sure that in the name of better competitive service, we don’t have a systemic and a stability challenge at the same time,” he said. Recalling Prime Minister Narendra Modi’s assertion that the most important aspect of digital growth is consumer trust that has to be protected at all costs.
“So, we need to make sure that as we go for fintech and grow it, we must also be clear that we do not betray trust,” he said. On the homegrown payments ecosystem, Kotak said UPI payments as well as Aadhaar unique identity basis for transactions are remarkable innovations and they could be exported globally.