5 New Technologies That Could Revolutionize The Indian Banking Sector

If one were to tell a banker from the 1990s that by 2016 a vast majority of banking transactions would be handled digitally, the chances of them laughing hysterically was a real possibility. Such is the extent at which technology has grown that nearly every aspect of human life has undergone a massive revamp.

In this article, you will find 5 most of the best trends that will revolutionise the way we look at banking.

• Unified Payment Interface (UPI):

National Payments Council of India (NPCI) along with the RBI introduced the UPI in a bid to make India a cashless society and in turn into a digital nation. Through this network, money can be transferred between two bank accounts with the use of smartphones. The most revolutionary aspect of this system is that unlike NEFT or other such online payment methods, individuals don’t need IFSC codes or net banking credentials to make payments. Currently, UPI apps are available for most of the banks in the country for android smartphone users.

• Cloud Banking Systems:

We have all seen how cloud networking systems have improved the techverse. Much the same way, a cloud banking system is also in the pipeline in the country. What this service will do is decrease the data transfer costs while also being extremely responsive to customers’ and the markets’ needs. Currently, banks like HDFC, IDFC, Kotak Mahindra, and ICICI Lombard have adopted the cloud infrastructure provided by Microsoft while plenty others are contemplating the same.

• Internet of Everything (IoE):

In case you don’t know what Internet of Everything is, you should know that it is basically the internetworking of vehicles, physical devices, and buildings. The main idea of IoT is to embed these items with software, sensors, electronics, and network connectivity to enable the collection and sharing of data. To put it in simpler terms, IoT is a proposed idea wherein everyday objects have network connectivity to help with the seamless transfer of data. A number of institutions like RBL and ICICI Bank among others have started with the use of biometric scanners and the like to significantly improve customer experience.

• Robotics:

Imagine a robot assisting you with never-seen-before consistency for any and all of your banking related queries. That’s what this idea is all about. Presently, ICICI Bank has deployed over 200 software robots across various branches to help take care of repetitive tasks. The bank also has plans to increase the number to 500 by the end of this fiscal year. Besides ICICI Bank, HDFC Bank too is looking into the introduction of robotics into their operations.

• Blockchain Technology:

Indian banking industry is growing at an unprecedented rate but still maintaining a database of basic details are becoming tougher by the day. This is why a number of banks are partnering to invest in blockchain technology which is basically a database which stores regularly used data like E-KYC and AML (Anti-Money Laundering) details in blocks. Muthoot Finance and Yes Bank are two financial institutions that are currently working to get this system operational.

There you have it. The introduction of these five technologies in the country would not just improve the state of banking, but revolutionise by the way we bank. 

Unified Payment Interface - A Single Digital Wallet for Your Spends

India is inching towards a cashless economy through innovative payment solutions introduced by the RBI and the National Payment Corporation of India (NPCI). Their latest offering is the Unified Payment Interface (UPI), using which your smartphones get transformed into virtual debit cards for money transfer.

Image Source: http://www.infrasofttech.com/

The UPI Demystified

• The UPI interface allows customers to make fund transfers between two people, person-to-business and business-to-person.
• In the current mobile payment system, only the ‘send’ mode is available. The advantage of the UPI is that it enables the person receiving the funds to initiate a transaction. So, in addition to the ability to send funds to a recipient, the UPI empowers the recipient to initiate a cash ‘collection’ from a source.
• Previously users need to to provide their account number, branch IFSC code, Aadhaar number, mobile number. Although the platform also use the Aadhaar number, mobile number and account number of an individual, these details are not divulged during the payment process.
• The user could initiate transfers using virtual addresses (resembling email ids) that are aliases to bank accounts. Alternatively, fund transfer is also possible using Aadhaar number as an identifier. This is a very useful functionality for the rural demographic.
• An exciting feature of the interface is the ‘pay by’ date, which allows payment requests to be put on hold and paid at a later date. It allows recurring payments, like salaries, school fees, subscriptions, etc. with a one-time secure authentication.
• It also allows PSPs to pay from an account using multiple virtual addresses, segregated by passwords, PINs or biometrics.
• Interoperability is the real game changer here. With the ambitious plans chalked out for the UPI system, the need to have different wallets for different e-commerce sites could be completely eliminated.
• The UPI platform mandates a limit of Rs. 1 lakh per transaction.
• UPI runs on IMPS; hence the service is available real-time and 24x7.
• NCPI has stated that each transaction through UPI will be charged Rs. 0.50, and it will appear as an IMPS transaction on the bank statement.
• UPI is an extremely secure payment method, and transactions happen in an encrypted format.
• Currently, the UPI app is not available on App Stores, but it will be launched shortly.

Impact on Mobile Wallets:

Popular mobile wallets like MobiKwik has millions of users who are loyal to these platforms owing to the convenience, security and speed of transactions. With the UPI in place, these companies expect to unlock new channels for growth and enlarge their reach.

The RBI has only authorised banks to be Payment Service Providers for UPI, keeping mobile wallets away from the platform. These non-bank members are currently awaiting directions from the RBI and NCPI to get access to the system. Unless wallet companies signify their relevance through innovative methods, they will find it difficult to survive the competition.

Impact on Payment Gateways:

Payment gateways aggregate various payment methods like credit cards, netbanking and mobile wallets. These also offer detailed information on received payments,  provide transaction management insights and enable customisation at every level. This is beyond the current capabilities of the UPI. Moreover, the protection that payment gateways offer against disputes is unavailable in the UPI today, but will be incorporated as the platform matures.

In conclusion, the success of the UPI largely depends on smartphone penetration in the country. But it currently looks like a step in the right direction towards faster, smoother and easier payments.