Empowering India with Innovations in Banking

The urban Indian has never had it so good. Locate closest ATM on mobile, before leaving home for work or use a 19-inch touch screen to portray the transaction at hand. Most banks in India utilize biometric smart cards and POS devices for authentication and transaction which also connect rural masses. These technological marvels in banking empower the semi-literate farmer who merely tells the amount of transaction to acquire the money he needs; without the hassle of obtaining or maintaining a checkbook, which in today’s digital age appears prehistoric.

However, Harish K Murthi, Chairman, HMA STARware, the first company in India to sell ATMs to public sector banks, maintains that, “In technology, we have a lot of catching up to do.” He adds, “Korea hs over 2,00,000 POS terminals versus a mere 50,000 in our country.”

Almost 12 million users in Kenya, withdraw cash through their mobiles thanks to M-PESA. 

 In another part of  the world,  NFC Payments capability like Visa PayWave, Mastercard PayPass built right into the handset could be revolutionary for our 21st century, spelling the end of checks and possibly even cash. Whereas the most recently launched Square makes people and organizations, become instant merchants through their iPhone OS.

Every bank’s golden opportunity!

If you thought it is only Indian women who are crazy about the yellow metal, or elderly parents using gold as an investment for the future, think again. Zoom in to Koramangala, India, the IT hub, where several youngsters buy gold coins and bars, invest in gold saving schemes through monthly instalments and allot themselves, an additional budget for light jewellery as daily office wear. Jewellers cash in on the trend by devising special schemes for the auspicious Akshay Tritiya and Diwali. The Swarndhara Scheme, akin to a fixed deposit, has helped jewelers reap a golden harvest, luring 3 lakh customers. You can even book a small amount every month, like in a savings scheme, through the Swarn Mangal Kalash, offered by another popular jeweller. Then there is Tanishq tempting with its Golden Harvest. But does the customer really benefit? What about making charges? Conversion costs while redeeming?

Fear about the financial crisis, insecurity of other assets like government bonds have made customers believe gold is a safe haven. In fact, In Germany, 1 gm gold wafers and 10gm bars can be obtained from vending machines at airports and railway stations, through GoldtoGo for safety-seeking shoppers. Money from exchange-traded funds (ETFs) will be pooled to buy gold. This is how banks are rebuilding gold reserves. ETFs save investors the bother of purchasing and keeping gold, in fact these allow buying and selling on the stock market, at wholesale rate and even guarantee purity. Paper gold, then amply proves to be the best bet for small investors.

The festive season has once again accelerated gold buying, considered part of Indian tradition. Banks and financial institutions have geared up; selling gold at lower prices than the prevailing market price. ICICI Bank has offered a discount, for online purchase of the metal, with its Pure Gold offer. Punjab National Bank and Oriental Commerce Bank have offered rebate for a single purchase of gold coins of any denomination, on a day. Will your bank be a part of the gold rush?

Banking towards a digital future

Welcome to the digital era where developing economies like India can leapfrog; using mobiles as technology springboards like their Singapore counterparts with their CashCard TopUp; simply a combination of a dual slot mobile phone, smart ATM card, and a HomeNETS PIN. The mobile has also been an instrument for women empowerment, like in Bangladesh, with the Grameen Bank & Grameen Phone project, providing credit to the poorest of the poor. Similarly, Pride Africa, a financial institution, provides access to credit to more than 80,000 entrepreneurs with its virtual information and services network and smart cards for SME’s.  Or take the case of ACCION International, one of world’s leading microfinance organizations which uses Palm Pilots to cut costs and time to make a microloan.

E-finance has also made inroads in the securities market especially retail where online trading has captured large market share. This rapid spread suggests e-brokerage is easy to introduce and market to users and cost reductions are quickly passed on to consumers. In Denmark, Netherlands, Norway, e-cards have replaced existing financial services. Venezuela, Ghana and Turkey have a similar story to tell with Mondex e-cash, a multifunctional purse that allows upto 5 currencies to be held at a time and can be used across open networks like telephony or internet.

 

Digitalised insuance? Asia’s fully online insurance product from DollarDEX helps DollarDex.com’s participating banks know more about what other banks are offering and also reduce cost of customer acquisition. Consumers now are at the epicenter of a digital finance revolution and can quickly discern which dust-gathering options add much value as social media or mobile applications. Many are disillusioned by their banks’ lack of real time support on their websites. In fact tech initiatives like Google Wallet have already begun to change the finance game. According to Brett King, digitalization implies banks have to rebuild marketing teams, define new metrics and deliver true 1:1 propositions. Or like co-operative banks in Poland discovered to their horror, be left out in the cold.

Belligerent nature versus banks and nations

Hurricane Sandy or cyclone Nilam; is the banking industry geared to handle natural disasters?

“2 days worth of economic activity amounting to $20 billion lost,” “potential insured losses equal $15 billion and counting”… read the grim headlines.  But there’s always a softer side. Since the storm hit early in the quarter, and operation clean-up amounts to $20 billion, the real blow on America’s GDP would be zero. Another silver lining is rebuilding will create new jobs. In fact, the construction industry will experience a boom. A multiplier effect to the tune of $36 billion will surely make the mood upbeat.

Devastation is more in terms of damage to homes and small businesses like restaurants which have no scope for rebound. Besides, standard insurance in the US does not cover flood damage. Insurers like Chubb, Allstate and Travelers will have to bear the brunt due to their presence in the affected areas. Rebuilding is at the cost of investment. Also, when external money is pumped in, it could slow down growth at the state level.

India too, has witnessed a similar calamity though on a smaller scale. The poetry-inspiring, Coromandal Coast, faces the fury of tropical cyclone, Nilam. Paddy and maize crops destroyed. An oil tanker ran aground, off Marina Beach. Fishing operations suspended.  Economic losses pegged at Rs 70-80 crore, an additional Rs 20 crore daily, until fishing operations are resumed. Fishing is the only means of livelihood for 591 villages in Andhra Pradesh. Add to this, the detrimental effect on Mahabalipuram, a popular tourist destination, now deserted due to closed hotels.

Do banks have a unique disaster management policy to speedily mobilize relief funds? Country’s cyclone risk mitigation project, initiated in 2009, for a 5-year span has been unable to strengthen vital communication infrastructure, crucial for sounding alerts and warnings. Villages lack sirens, alarm bells; have no access to radio, television or internet. Banks can pitch in with technical and implementation assistance, especially now with thousands rendered homeless.