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Uday Kotak, MD of Kotak Mahindra Bank, said on Friday that Indian banks have been slow to adopt payment technology. He went on to say that they needed to wake up before losing a significant portion of their traditional financial markets. Kotak was speaking at the Infinity Forum, which was co-hosted by Bloomberg and the International Financial Services Centres Authority (IFSCA).
Indian bankers, according to Kotak, have been short-sighted in the payments business in recent years since they saw no money in it. As a result, they opened the way for unified payments interface (UPI)-based payments to flourish, with Google Pay and PhonePe monopolising the industry. According to Kotak, the two companies together control 85% of the market.
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"Wake up, you will see huge segments of the old financial markets walkout," Kotak warned, calling it a wake-up call for Indian banks.
He went on to say that banks should keep in mind that consumer tech companies have revenue models that aren't related to banking. "Take, for example, the advertising or e-commerce models. Banks are prohibited from engaging in non-financial operations as specified by Section 6 of the Banking Regulation Act "He went on to say more.
As a result, according to Kotak, there could be severe difficulty with how to draw borders and maintain financial stability.
"I was reading an article that suggested that when a regulated firm competes with a fintech or a consumer tech, the consumer tech's normal approach is to play fast and light with the regulation in order to win market share quickly," Kotak added. He went on to say that he is not anti-competition, but that he wants to make sure that the concept of improved competitive service does not pose any systemic or stability risks.
"So, when we go for fintech and build it, we must also be clear that we do not betray trust," he said, referring to Prime Minister Narendra Modi's declaration that the most essential part of digital growth is customer trust, which must be safeguarded at all costs.
UPI payments, as well as the Aadhaar unique identity basis for transactions, are outstanding breakthroughs, according to Kotak, and they might be spread globally.
(With contributions from PTI)
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