future of banking industry in india essay

Jay Powell, the Fed chair, has been praised for how he used the central bank's powers to steer the economy through the pandemic. 1.Political Factors: Banking sector is being stand within the government. Banking sectors are mainly affected by the government laws. The government can. Banks must and can contribute significantly to overcoming this global economic crisis. Whatever 'normal' may mean in the future.

: Future of banking industry in india essay

Future of banking industry in india essay
Future of banking industry in india essay
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Future of banking is a digital business model

The banking industry of the future will look radically different from what it is today driven by some evolutionary changes. It would be safe to say that the future of banking is ‘Digital’. The pandemic has reshaped our lives from how we shop, travel, work, to even how we bank, and has also driven a change in consumer behaviour. Driven by the pandemic, the social and economic landscape has been radically reshaped while customer needs and expectations continue to dynamically evolve.

Consumers have become more demanding of digital experiences. The pandemic has only amplified the need for easy access to banking products, services and information. Given most customers are now comfortable using online channels, the traditional ‘customer american banking association aba routing number for physical proximity of branch would now be influenced by personalization and customization provided through digital offerings. Some of the key purchase drivers would be ‘Value for money’, ‘Ease of buying’, ‘Personal safety’, ‘Customer Experience’ and ‘Personalization’.

Globally, the market has been flooded with a new wave of growing neo banks. Unlike traditional banking, these are not burdened by legacy technology and are operating with greater agility, neo banks can offer personalized experience and seamless interaction craved by a generation who demands a smart digital experience. Neo banks have not yet become the primary banking service for the customers and customers fall back on traditional banking channels only for primary banking. Having said that, the traditional banks will have to scale up in terms future of banking industry in india essay their offerings and services to cater to their customers with changing behaviours which can be achieved by going ‘Digital’.

For most of the traditional banks, security and cost-efficiency are strong motivators for going digital. With an increasing number of specialized banks and FinTechs, competition for acquiring new customers and retention of existing customers has never been higher. The advantage these traditional banks have over the specialized banks and FinTechs is that they have a 360-degree offering in terms of products and services. They just need to adapt to the customer-first approach in this ever-changing environment to continue to lead the space.

Emerging Technologies

Several emerging technologies will combine to redefine the bank-customer relationship forever. We expect to see a rapid uptake of open banking approaches and models as people become more aware of the benefits it can provide to consumers and small to medium enterprises viz. the ability to quickly understand their financial position, explore alternatives and make better financial decisions. As technology reshapes how we live and communicate, this will have an impact in several ways including a hyper-connected world as the norm, open banking services, engagement as a service and the rise of the ‘super-app’.

Super Apps

Super apps as emerging technology essentially serve as a single portal or app to a wide range of virtual products and services. The most sophisticated apps bundle together online messaging, social media, marketplaces and services. One app, one sign-in, one user experience, for virtually any product or service a future of banking industry in india essay may want or need.

Emerging Payment Technologies

For the longest of time, traditional banks were the kings of payments. Throughout the debit card era and well into the digital era, banks held a virtual monopoly over the payment’s ecosystem. This landscape is also changing and over the past few years, we have seen the rise of a range of new payment service providers and UPI emerging as a major payment option for most Indians. Some payment platforms have created vast 'merchant' networks through their online presence and partnerships with some of the bigger platform players. Others have found a niche in their own areas, often responding to specific customer pain points in the payment environment. The industry would see several payment options which would dominate the future broadly revolving around Biometric Authentication, Invisible payments, Voice enabled payments, Face recognition, QR Code Payments, etc.

Technology will continue to evolve at a rapid pace and emerging concepts such as augmented reality and distributed ledger technology will further redefine banking services. The above technologies will combine to redefine the bank-customer relationship, making banking more personalized across customer devices. Now, with low code development, ease of integration capabilities and cloud, the technology element of digital transformation is no future of banking industry in india essay the difficult part. The signals of change are driving an evolution across the retail banking sector, and our research tells us that in order to achieve profitable growth banks will need to pivot to a digital business model ecosystem to succeed.

The author is Partner and Head, Financial Services Advisory, KPMG in India. Views are personal.

(For front-line insights on how the future of banking, digital payments and markets will look like tune in to ET India Inc Boardroom from 22-26 February and hear from CEOs and thought leaders. Register now on www.etboardroom.com.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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Источник: https://economictimes.indiatimes.com/industry/banking/finance/banking/future-of-banking-is-a-digital-business-model/articleshow/80923490.cms

The World Bank In India

THE WORLD BANK GROUP AND INDIA

The World Bank Group’s (WBG) over seven decade-long partnership with India is strong and enduring. Since the first loan to Indian Railways in 1949, the WBG’s financing, analytical work, and advisory services have contributed to the country’s development. International Development Association – the WBG’s soft-lending arm created for developing countries like India - miwam www michigan gov uia supported activities that have had a considerable impact on universalizing primary education; empowering rural communities through a series of rural livelihoods projects; revolutionizing agriculture through support of the Green and White (milk) Revolutions; and helping to combat polio, tuberculosis, and HIV/AIDS.   In FY18, the relationship reached a major milestone when India became a low middle-income country and graduated from International Development Association financing.

COUNTRY PARTNERSHIP FRAMEWORK

The WBG’s present engagement with India is guided by its Country Partnership Framework for FY18-22 (CPF).  The CPF builds on the decades-long partnership and seeks to address the country’s development aspirations and priority needs identified in the Group’s Systematic Country Diagnostic for India. It aims to work with India so that the country’s rapidly growing economy makes much more efficient use of resources; fosters inclusiveness by investing in human capital and generating more quality jobs; and develops strong public sector institutions that are capable of meeting the demands of a rising middle-class economy. The CPF’s approach combines a focus on ‘what’ the WBG will work on and ‘how’ it will engage India in the process. 

What will the WBG work on?

  • Promoting resource-efficient growth, including in the rural, urban, and energy sectors as well addressing disaster risk management and air pollution;
  • Enhancing competitiveness and enabling job creation, including improving the business climate, access to finance, connectivity, logistics, skilling, and increasing female labor force participation;
  • Investing in human capital through early childhood development, education, health, social protection, and rural water supply and sanitation. 

How will the WBG amplify the impact of its work in India?

  • By leveraging the private sector
  • By harnessing India’s federalism
  • By strengthening public institutions
  • By supporting Lighthouse India to foster knowledge exchanges within the country and between India and the rest of the world. 

In all its activities, the WBG will seek to address climate change, gender gaps, and the challenges and opportunities afforded by technology.  

WORLD BANK GROUP PROGRAM

The World Bank’s lending program includes 92 lending operations ($22.8 billion in commitments, of which $17.7 billion is IBRD and $5.1 billion is IDA, and $0.1 billion is from other sources, primarily grant funding from the Global Environment Fund). 

Roughly future of banking industry in india essay third of the operations and around 56% of commitments are either to central or multi-state operations, while the remainder consist of state-specific operations in 21 of India’s 28 states. 

The three largest portfolios are Agriculture (15 operations totaling $3.7 billion in commitments), Urban Development (17 projects totaling $3.2 billion), and Transport (10 projects totaling $2.9 billion). 

In FY21, the Bank approved 14 operations amounting to $3.16 billion.  Of this, $2.65 billion is lending from IBRD and $0.5 billion from IDA (recommitted from cancelled IDA programs). There is a robust pipeline for FY22, which is expected to deliver around 20 operations with total commitments of $3 - 4 billion. 

For the IFC, India is the largest client country, accounting for 10 percent (US$6.3 billion) of its global portfolio. Since its first engagement in 1958, IFC has invested more than US$24 billion (including mobilization) in more than 500 companies in India. India is the sixth largest shareholder in IFC with a 4.01 percent stake.

The World Bank and IFC work together in several areas, most notably in energy, transport, water and health. IFC-Bank synergies have been particularly strong in raising financing for renewable energy, supporting the Government of Madhya Pradesh in setting up one of the largest single-site solar power project that provides solar power at record low cost. IFC and the World Bank had a similar collaboration under the government’s flagship Clean Ganga program for sewage treatment plants using hybrid annuity-based PPP projects. IFC led the PPP mandate while the World Bank loan is helping provide payment guarantees to increase the private sector’s participation in the sector.

The Multilateral Investment Guarantee Agency (MIGA) does not have exposure in India. MIGA has been working closely with the Ministry of Finance to provide credit enhancement solutions at the state-level and state-owned enterprise (SOE) level. This will enable state capital one full site on mobile and SOEs to utilize long-term commercial financing, which can complement concessional lending provided by mcb multilaterals and development finance institutions.

The WBG has a wide-ranging program of Advisory Services & Analytics. The program informs policy debate, provides analytical underpinnings and learnings for operations and strategy, facilitates the scale up of innovative solutions, and helps to improve state capability. As of October 2021, some 18 analytical studies and 15 advisory activities were ongoing. Key areas of focus include poverty and macroeconomic analysisfinancial sector reformenhancing human capital including universal health coverage and genderair quality management, as well as state capability and governance

Last Updated: Oct 04, 2021

Источник: https://www.worldbank.org/en/country/india/overview

What is digital banking? 

Digital banking is the digitalisation of banking services in order to reduce risk, improve efficiency and better serve customers. It allows customers to withdraw money, apply for loans, make payments online or on their smartphone and more. Looking to the future of banking, digital is no longer an option for firms who wish to survive - it is a must.

When it comes to retail banks (rather than corporate or investment banks) going digital, there are two elements: digitisation and digitalisation. “Digitising means converting into digital format anything which is currently manual or paper-based,” says Simon Paris, chief executive officer of fintech company Finastra. “Whereas digitalising is a whole new way of thinking.”

Once digitisation is complete, banks can start exploring revolutionary business processes which were not available to them before, from iris recognition to artificial intelligence to offer superior banking services.

Digital banking simply makes life easier for consumers - Ian Bradbury, Fujitsu

The future of banking is digital

While security and cost-efficiency are strong motivators for banks, the true value of digitalisation is what it can do for the customer. “Digital banking makes life easier for consumers,” says Ian Bradbury, chief technology officer for financial services at Fujitsu. “People are increasingly enjoying the simplicity of managing all their finances in one place, setting up automatic payments or making deposits, any time and anywhere, without the need to queue in a bank.”

And with an increasing number of challenger banks and fintechs in the game, competition for the customer has never been higher. As Flavia Alzetta, chief executive officer of digital banking company Contis points out, traditional banks have an advantage in both the range and complexity of the products they offer. “Traditional banks have a 360 degree offering. If they were to put the customer first, they already have a cit group address strong base to continue to occupy their place.”

More importantly, they have an existing clientele, which many of their younger competitors are still trying to build. “The customer is king and very expensive to acquire. Banks need to realise that if you look after customers they will reward you with loyalty,” continues Ms Alzetta, “customer expectations have evolved over the years, and there is no reason why they should not be met.”


What is omnichannel banking?

Omnichannel banking allows a customer to access their banking services, in real time, through any channel they choose, be it the physical branch, an ATM, a call centre or online. Implementing it means allowing customers the freedom of choice to access their finances anywhere, at any time, via any medium.

“Choice is the way forward, always”, says Ms Alzetta. But, she continues, although retail banks have begun to embrace an element of omnichannel banking, it has yet to develop to its fullest. “Omnichannel banking has been implemented mostly in terms of transactional activity. What would be a real novelty would be to rethink the most complex products and services banks provide, such as mortgages.”

The opportunities, should traditional banks fully embrace omnichannel banking, are extraordinary. In essence, it could mean a comprehensive, joined-up experience for the customer, at every stage. “If you call up to enquire about a credit card, and say ‘I’ve got a question about my mortgage too’, you shouldn’t be transferred,” says Mr Paris. “When you go into the future of banking industry in india essay and tell them you’ve been speaking to someone on new build homes for sale phone, they shouldn’t say ‘you’ve got to go back through the call centre, because I’ve got no idea what you’ve been doing’. It goes-hand in-hand with open banking.”

Often the biggest challenge for traditional banks is not the customers, but maintaining a technological DNA. You can’t push the job onto the CIO or CTO any more, the full board have to be involved in technological decisions - Matthias Kröner, the Fidor Group

What is open banking? 

Open banking means using open data to move towards greater transparency and ease for banking customers when they use various financial services. Open banking means that customers will be able to access all financial services in one place - whether they are looking for a loan, a mortgage, or to pay their bills.

This revolutionary idea is often tied to a piece of European Union legislation, known as the second Payment Services Directive (PSD2). PSD2 requires banks to open access to a customer’s data and information, if authorised. The desired goal for the customer is greater ease when it comes to account services and payments. For example, when buying something online, PSD2 will mean the consumer will not be redirected to Paypal in order to pay through them.

Although it is impossible to talk about open banking without mentioning PSD2, the two are not synonymous. Where PSD2 regulates how banks must act, open banking fundamentally means embracing a new mindset entirely, one which puts the customer’s needs right at the heart of banking.

What open banking will do for customers

If implemented correctly, open banking will help retail banks return to their roots as providers of financial services.

Rather than offering customers unwanted credit cards or unnecessary overdrafts, retail banks could use their platform to assemble a number of financial services and personalise them for the customer.

Take the example of buying a house. A mortgage is a product, the financial service is helping you to buy. Open banking would allow financial institutions not only to sell the customer a mortgage, but the most competitively priced one, as well as offer insights on house prices in the area, provide home insurance and find the best deal on gas and electricity. “The point is that none of these needs to have come from my bank” says Mr Paris. “What my bank has done is assemble the products and services which make sense for me.”

Banks are now presented with more chase atm cash withdrawal limit than ever, and are facing an exciting future - Ian Bradbury, Fujitsu

Becoming a digital bank: Bank Leumi and Pepper 

Bank Leumi, Israel’s oldest bank, was so convinced that the future of banking meant better serving customers, they were willing to spend time and money, and even cannibalise their own clientele, to create a mobile bank from scratch.

When Rakefet Russak-Aminoach joined as chief executive officer in 2012, she decided the existing digital strategy was not transformative enough. “The retail banking model - where people visit branches and consult bankers in person - is passé. Digital tools have become people’s first choice.”

They decided not simply to digitise Bank Leumi’s current operation, but to replace all of the bank’s core IT legacy systems and build their own product on a new technological platform. “We could just have created Leumi.com,” explains Ms Russak-Aminoach, “but that would have been a digital skin covering an essentially non-digital body. We believe you need a fully digital body to grant your customers the experience they deserve.”

The result was Pepper, Israel’s first mobile-only bank. Crucially, although Pepper was a new digital entity, it was built on the reputation and customer base of Bank Leumi, thus circumventing the trust issues digital banks often encounter.

“Customers have said that they would trust a tech giant like Amazon to be their bank,” says Pepper’s chief executive officer, Michal Kissos Hertzog, “but when it comes to it, many prefer a more traditional option. Luckily Pepper gets the best of both worlds, we have different people, different DNA, a different strategy, but we took our cybersecurity and our reputation from Leumi.”

What can traditional banks learn from fintechs?

What Bank Leumi and Pepper teach us is that both traditional banks and fintech companies have their strong suits, although interaction between the two has had mixed results.

Mr Paris believes the relationship has gone through three phases. The first saw traditional banks detect fintech as a threat and attempt to squash them through regulation. The second came as the banking industry recognised the true value of fintech and set out to partner with or acquire them. We are now in the third phase. “Banks realise that simply acquiring a fintech company does not solve the problem, as the relationship is still one-to-one. What is needed is for a future of banking industry in india essay to have access to thousands of banks and vice versa.”

The question is, will traditional banks consent to learn from or work with fintechs in any real sense? Matthias Kröner, founder and former chief executive officer of the Fidor Group, one trustco bank credit card login Europe’s first digital banks, thinks not. “I don’t think a big bank corporation is culturally able to deal with innovation”, he says. “It’s a question of compliance. In order to embrace the innovation of fintechs, you need a special governance structure that allows for a fail-fast, laboratory approach. Traditional banks are too afraid of risk.”

One challenge for fintechs is keeping the innovation level high. The bigger an organisation gets, the more you have the tendency for everyone to lean back - Matthias Kröner, the Fidor Group

So what is the future of banking? It is certainly digital and, as a result, more open, more transparent, more ambitious. Most importantly, it lies in the hands of the customer. Any financial services provider looking to make it to 2030 must embrace this truth, and use all the digital and technological tools at their disposal to make their offering as customer-centric as possible.

What does the future of banking look like, according to the experts?

Ian Bradbury, chief technology officer for financial services, Fujitsu

“The next wave of digital banking solutions, enabled by advanced data analytics, APIs and Open Banking legislation, will go much further. We will see a seamless incorporation of financial and pseudo-financial services into daily activities, both digitally and in the physical world.”

Simon Paris, chief executive officer, Finastra

“My vision is that banking will go back to what it was born for. To provide a financial service. To help people and businesses unlock their potential. Instead of being about how many products per customer you have, it will be about customer’s exchanging their personal data for better service. You tell me how much you drive, and I’ll decrease your car insurance. You share your smart watch data and I’ll decrease your life insurance.”

Matthias Kröner, founder and former chief executive officer, the Fidor Group

“Customer demands for innovation never changed a market as much as south mountain state park camping in regulation, like we’ve had with open banking. PSD2 is finally forcing the banks to be customer-centric. It will mean an easier and better life for customers. I'm absolutely convinced of this. If we combine the success of data with AI and machine-learning - the sky is the limit.”

Flavia Alzetta, chief executive officer, Contis

“In terms of payments, I think the shift from physical assets to virtual or no assets will be very visible over the coming years. I spent 14 years at Amex, and I think the physical card will disappear. The more innovative payment options coming up - such as biometrics - will simplify payments immeasurably.”

Rakefet Russak Aminoach, chief executive officer, Bank Leumi

“10 years from now the retail banks which take the right steps will be much more significant than they are today, and some will have ceased to exist. I don't think we will have one bank like one Amazon or one Google, I believe that we will have local winners. Regulators are a local thing, as are currencies, so I don't think we'll have one bank for the whole world, but I believe that, in each market, we will have a huge winner who will do the right thing and take a large part of the market.”

Michal Kissos Hertzog, chief executive officer, Pepper

“The CEO of AirBnB was asked a similar question. He said it doesn't really matter what AirBnb offers in 100 years - whether it is still a question of booking rooms online or not - if their DNA and culture stays the same, then AirBnb will stay relevant. Banking changes south dakota state tax the time, the value proposition and user experience will change. Banks which will can change and stay relevant will survive, and the others will not.”   


Источник: https://www.raconteur.net/finance/financial-services/future-banking/

How banking will change after COVID-19

Life for many of us has changed beyond recognition compared with just a few months resort realty kitty hawk nc – and one of the biggest changes has been doing electronically what we had historically done more in person. That means video conferencing for meetings and socialising, shopping online, digital banking, and so on.

The question is how much of this change will prove to be permanent versus how much is temporary. If COVID was to end overnight, would old patterns of behaviour return or would new habits become permanent?

For the banking industry the answer is probably more towards permanent change. There has been a lot of news coverage – including about HSBC – highlighting how COVID has driven established banks to accelerate their digital programmes. There’s some truth to this: we’ve had to prioritise enabling customers to complete the most common service journeys remotely, such as resetting PINs, changing loan terms, paying for groceries or filling in forms electronically.

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According to research by RFi Group, the financial services insights provider, 71 per cent of consumers globally are now using digital banking channels weekly – a 3 per cent year on year increase – while daily use increased 6 per cent in the same period. In the UK – where 73 per cent of consumers are using digital banking channels weekly, above the global average – there was also a sharp rise in mobile banking use monthly from 52 to 57 per cent of people between 2H 2019 and 1H 2020.

It is clear that COVID alone hasn’t suddenly caused the shift to digital, rather it has simply accelerated it as more and more people have digital ecosystems as part of their lives. For instance, the shift away from cash towards digital payment methods has been building gradually for years.

According to UK Finance, just 23 per cent of all purchases made in the UK in 2019 involved cash, and over 70 per cent of the population shopped online last year. Even without COVID, these trends were expected to accelerate in the next few years. The World Economic Forum recently predicted that 50 per cent of goods consumption could be made online in many developed markets by 2030, and UK Finance expects just 9 per cent of payments in the UK to be made using physical currency by 2028.

So, if we were to make some predictions about what banking will look like post-COVID, they might be like this:

1. Even more day-to-day banking via digital

The transition towards digital was inevitable for routine activities – checking balances, payments and transfers, even credit card applications. Many of these activities are habits, and once habits are embedded they are unlikely to change. So, with even more people banking this way because of COVID, these routine activities will stay digital.

2. Customers still go to branches for important life moments

As COVID fades, people will still have a psychological need for human interaction at important life moments. People need to feel reassured when it comes to life events like sending a child overseas for education, managing generational wealth transfers, establishing a wealth plan, bereavement or buying a home. This means we can expect some return to “normal” post-COVID – and branches will see future of banking industry in india essay significant proportion of this type of activity. What remains to be seen is how far people will be willing to use video conferencing as part of this, which may in turn depend on factors like how long social distancing remains.

3. Bank branches become more like service lounges

The way branches look and feel will change. Branches will become less about rows of tellers managing daily transactions, which can now be done online – and more like service lounges. Agents will be on hand to guide customers through transactions on why is olive oil so good for you own devices, and space will be broken up into more casual seating areas for deeper private conversations. Changing the layout of branches in this way will also support any ongoing social distancing.

4. Regulatory collaboration on digitisation accelerates

Regulators and banks were able to work together to rapidly help customers keep banking during the early days of COVID – including collaboration to support greater availability of digital and video banking services in some markets. We predict that this cooperation will grow as digitalisation continues to accelerate and evolves into new areas like AI and machine learning.

5. Established banks compete like challenger banks, and form more partnerships

Increased digitisation for customers will also drive more partnerships between banks and platforms like online retailers and social platforms, so you can bank where you spend or socialise. Separately, as we’re seeing new digital entrants to retail banking markets around the world, we also predict that established international banks will begin to challenge with increasingly scalable digital platforms inside and outside their home markets. The benefit of both changes for consumers will be clear: more choice. For the established banks it’s an opportunity to compete in new markets, segments and marketplaces.

In general, AI and data analytics will be key areas of focus for investment in digital capabilities, as banks shift from using these not just to monitor transactions but also assist customers via “conversational banking&rdquo. Banks like HSBC will be merging human and digital channels to provide help to customers more quickly and at a lower cost. For example, customers can begin a conversation in the HSBC mobile app with an AI chatbot, which is capable of answering simple questions immediately, but enquiries that are more complex get passed on to front-line colleagues.

With the growing popularity of instant messages and demand for 24/7 banking services, conversational banking involving AI chatbots enables banks to engage with customers more promptly and effectively. At HSBC, we held 10 million chat conversations in 2019 across personal banking – and we expect to reach 10 million chat conversations a month by 2024.

It seems clear that normal post-COVID will not be the same as life before. COVID has made us focus as a society on new solutions to familiar problems in order to help us live our lives during the pandemic – and como negociar divida com santander of these developments will be permanently embedded. But while some parts of service industries like banking will change, the human element will persist – particularly where complexity is involved and reassurance is needed.

Источник: https://www.hsbc.com/insight/topics/how-banking-will-change-after-covid-19

6 ways the pandemic has changed businesses

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This article is part of the Pioneers of Change Summit

  • Sectors like healthcare and banking are battered but not beaten by COVID-19 disruption, McKinsey analysis finds.
  • Digital delivery features large in the post-pandemic futures of six sectors.
  • The World Economic Forum’s ‘Pioneers of Change Summit’ will showcase solutions for a ‘Great Reset’ across industries and regions.

Even with the promise of a vaccine edging closer, economic recovery could be years away for some sectors.

Yet companies that reimagine their operations will perform best in the next normal, according to management consultancy, McKinsey & Company.

In its executive briefing on COVID-19, McKinsey takes a look at how things might develop in six sectors.

1. Auto industry – down, but not out

Pandemic disruption will wipe $100 billion off the auto industry’s profits, McKinsey predicts, with sales expected to drop by 20 to 30% in 2020. But automakers were already facing disruptions before COVID – including driverless cars, automated factories and ridesharing – and the industry can bounce back, it says.

Opportunities include the huge shift to online shopping and the rise of software-subscription services, which enable people to pay for programmes that unlock features like heated seating or full self-driving capabilities, McKinsey says.

Restaurant industry – innovation still on the menu

Indoor dining in restaurants may not return to pre-crisis levels for months – or possibly even years, McKinsey warns. For full-service restaurant operators, it means developing a new long-term economic model.

There future of banking industry in india essay opportunities to optimize takeaway and drive-through operations and re-engineer menus and pricing. This might include finding the right balance of special offers and "high-margin items such as appetizers, sides, desserts and beverages,” McKinsey suggests.

Banking industry – digital decision-making pays off

For banks, the pandemic has changed everything. “Risk-management teams are running hard to catch up with cascades of credit risk, among other challenges,” McKinsey says. The company expects that automated underwriting will come into force for retail and small-business customers and that this will reduce losses.

Calculating the creditworthiness of a small business using software, rather than having staff make these decisions, could raise margins by 5-10%, McKinsey says.

4. Insurance industry – merger partners at a premium

Mergers and acquisitions (M&A) – particularly in the insurtech (insurance technology) space – will be a key strategy for traditional insurers, McKinsey says.

Insurtechs and fintechs (financial technology companies) have been among the most responsive to customers during the COVID-19 crisis and were the first to launch products focused on the pandemic.

“For example, one Chinese insurtech released an array of such products that covered nearly 15 million people after only a few months on the market,” McKinsey notes.

5. Healthcare industry – delivering at a distance

COVID-19 has hugely accelerated the growth of digital healthcare. In 2019, 11% of US customers used telehealth. Now, 46% are using it to replace cancelled healthcare visits, McKinsey notes.

India’s Apollo Hospitals, which comprises more than 7,000 physicians and 30,000 other healthcare professionals, launched a digital health app, Apollo 24/7, in early 2020. Within six months, the app had enrolled four million people, with around 30,000 downloads a day.

Public-private partnerships are also working well and have the potential to “influence the future of healthcare,” McKinsey dr jose gonzalez atlanta. Education – learning to adapt

In education, the pandemic has amplified existing challenges around inclusion, inequalities and drop-out rates. For example, lower-income students are 55% more likely to delay graduation due to the COVID-19 crisis than their higher-income peers, McKinsey warns.

With remote and online learning here to stay, institutions have a “once-in-a-generation chance” to reconfigure their use of physical and virtual space.

“They may be able to reduce the number of large lecture halls, for example, and convert them into flexible working pods or performance spaces,” McKinsey suggests. “Or they could reimagine the academic calendar, offering instruction into the summer months.”

The World Economic Forum’s inaugural Pioneers of Change Summit on 16-20 November will convene innovative leaders and entrepreneurs from around the world to showcase their solutions, build meaningful connections and inspire change across the Forum’s diverse multi-stakeholder communities.

The digital event is an opportunity to share and develop mechanisms for driving a Great Reset across industries and regions.

Individuals can sign up to follow the event, while companies can participate in the summit by becoming a member of the Forum’s New Champions Community of high-growth companies.

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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Источник: https://www.weforum.org/agenda/2020/11/covid-19-innovation-business-healthcare-restaurants/

Learning from Crises

The 2020 pandemic hit two sources of constant engagement for the Indian public: cinema and cricket. Both are slowly reviving as we get used to the ‘new normal’. However, while they were missing, a totally unimagined source was providing drama and frenzy for spectators: Indian banking. In the memorable words of Bill Lawry, former Australian cricket captain turned commentator: “It is all happening here.”

The Indian banking sector had started buzzing much before the pandemic, with rising Non-Performing Assets, failures of commercial banks, failures of non-banks and housing finance companies, frauds, and mergers of public sector banks. During the pandemic, several big borrowers were not being able to repay loans, leading to loan moratoriums. There was the added masala of boardroom battles, as in Yes Bank, and of shareholders firing directors and promoters at Lakshmi Vilas Bank and Dhanlaxmi Bank. Even as depositors eyed banks with nervousness, there was a googly from an unexpected corner. A committee of the Reserve Bank of India (RBI) suggested that the central bank could consider allowing corporates to become promoters of banks, a controversial measure that has been opposed for a long time.

The Banking Regulation Solano movie drive in, 1949 continues to define RBI’s present-day policy […] this history shapes responses to the current crisis.

In all this drama, RBI has become the central point of discussion. Some have praised the central bank for intervening and protecting depositors’ funds, while others have criticised the central bank for not being proactive and for allowing failures to develop over time.

Most commentators have ignored the fact that RBI has taken these decisions based on the existing legal structure. The Banking Regulation Act, 1949 continues to define RBI’s present-day santander consumer car finance number. In this piece, we analyse the evolution of banking regulation in India and reflect on how this history shapes responses to the current crisis.

Mark Twain famously said, “History does not repeat itself but often rhymes”. This is quite true when we compare banking crises over time not just in India but even across economies.

Banks fail due to a set of common microeconomics factors: low capital and reserves, greed for high profits, poor governance, and frauds. A common macroeconomic factor is that banking typically follows the business cycle. Banking grows sharply as the economy starts to grow, but as the growth cycle reverses there are high Non-Performing Assets future of banking industry in india essay which have defaulted) and losses.

What makes each crisis unique is that the political economy and overall economic conditions vary across times. 

Before the establishment of RBI in 1935, banks entered and exited the system freely without any regulation. Modern banks in India were initially governed under the Joint-stock Companies Act, 1857 and later by the Indian Companies Act, 1913. Imposing company law on banking left several regulatory gaps, which were quickly exploited by the banks. The RBI, after it was established, pointed out the need to have separate legislation for the sector as banking had its own idiosyncrasies.

The central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape.

The advent of RBI led to changes, but the central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape. The failure of the Travancore National and Quilon Bank (TNQ Bank) in 1938 was due to both political and economic reasons (RBI 1970). But the existing laws were not adequate for the RBI to be a lender of the last resort to the bank or to restructure the bank. Following this, the-then RBI governor James Taylor prepared a proposal in 1939 for legislation on the lines of acts in US, Canada, and select European countries. World War II and Independence delayed the acceptance of the proposal and the Banking Regulation Act had to wait till 1949.

The new act limited the use of ‘bank’ and allied terms to a specific set of institutions, prescribed minimal capital and reserve requirements, and banned the practice of common directors across banks and lending to directors. It also gave RBI powers of inspection over banks and to iboc app operations of banks if they could not honour their debts.

The second crisis came in 1960 when RBI was shaken by the failure of the Palai Central Bank (RBI 1998). Like TNQ Bank, this bank too was from the erstwhile princely state of Travancore, which had by then become part of Kerala. Unlike in the case of TNQ Bank, RBI had more time to handle the crisis at Palai Central. It gave time to the bank management to resolve the concerns of misgovernance and bad loans. However, the bank management ignored RBI advice. The bank was large and its failure created a run on several such banks in Kerala.




Following the failure, in the mid-1960s, RBI got additional powers to enforce amalgamations and to quickly 'de-license' banks. Earlier, moratoriums were requested by banks, but now RBI could impose moratoriums. It could also force mergers of weak banks with stronger banks (a strategy RBI has used multiple times into the present). The government also instituted the Deposit Insurance Act in 1961 to protect savers’ accounts, which helped stall bank failures and infused confidence in the banking system.

After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.

These developments had a marked effect on bank stability. On an average 16 banks failed every year between 1913 and 1934, before the establishment of RBI. This increased four times to 67 during the period 1935-48. After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.




In 1969 and 1980, the government nationalised major banks and stopped licencing new banks. RBI also continued to weed out weaker private banks by merging them with larger ones. The number of private banks declined to 24 in 1995 from 50 in 1969. No new banks came up until after the economic reforms of 1991.




In 1994 the RBI licenced 10 new private sector banks. The experience with them has been mixed with both failures and successes. Five of them have had financial difficulties. Of the five, four were merged with other banks: Global Trust Bank (GTB), Bank of Punjab, Centurion Bank (renamed as Centurion Bank of Punjab in 2005), and Times Bank. GTB in particular led to infamy for both promoters and regulation. The bank was mired in lending to stockbroker Ketan Parekh, who was accused of manipulating the stock market. The fifth, IDBI Bank, was recently taken over by LIC but has continued to maintain its identity.

RBI licenced four more banks in the 2000s, including Yes Bank which last year was hit by a crisis and was taken over by a group of banks led by SBI. Overall, of the 14 new private banks licenced since 1994, four do not exist anymore and two others were taken over by other financial institutions and banks following financial troubles. So, we continue to have 10 banks in the new category.

The current banking crisis also rhymes with previous crises.

The crisis is similar on account of microeconomic and business cycle factors. The reasons for failure too are similar to those in the past. Indian banking expanded significantly in the 2004-08 period, tracking high growth in the Indian economy. There was a minor blip due to the 2008 crisis. However, as the economy recovered quickly, the banking sector continued to grow. Slowing economic growth in 2012-2013 brought problems to light as NPAs began to rise. The NPA problem was revealed to be worser that expected after the RBI’s Asset Quality Reviews in 2015.

The difference this time is that the crisis is not limited to commercial banks. It started with public sector banks but has quickly engulfed cooperative banks, NBFCs and housing finance companies, and the new and old private banks. Each of these categories has its own story.

The new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble.

In the high growth phase, public sector banks were pushed into giving loans to the infrastructure sector and industrial projects with long gestation periods. This was partly because the development financial institutions established to fund these activities, such as ICICI and IDBI, had been converted to regular banks. The push was also to showcase India’s potential as an investment destination where infrastructure plays a crucial role. Loans to these projects, which take long periods to complete and generate returns, worsened the banks’ assets-to-liabilities mismatches (the bulk of bank deposits are short-term deposits). Once the business cycle reversed and the UPA-2 government got mired in several scams, many projects were stalled. This led to rising NPAs at the banks.

The reversal of the business cycle was not the lone factor for PSBs’ woes. There were several cases of frauds and misgovernance. While this led to finger-pointing at RBI’s regulatory role, former RBI governor Urjit Patel in 2018 highlighted that RBI could do little to regulate PSBs. The finance ministry has had control over regulation and appointments at PSBS since bank nationalisation. This dual regulatory structure was problematic earlier as well but has shown its real weaknesses in the current crisis.

The weakness in cooperative banks is on account of another kind of dual regulation, where powers are divided between RBI and state governments. This had fed the usual villains of misgovernance and frauds. While RBI has been cleaning up the cooperative banks for a while now, the crisis at the large Punjab & Maharashtra Cooperative bank has led to what is the best online stock trading platform attention.

Old private sector banks suffered from a different dual problem: of promoters also acting as directors. Promoter-directors directed all major decisions in the bank, from appointing board members to employment to credit decisions. RBI has been cleaning up governance in these banks. But there is a long way to go, as seen in cases of Lakshmi Vilas Bank and Dhanlaxmi Bank, where the shareholders voted out senior management following crises.

But the new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble. The case of Yes Bank was especially shocking as it was once a cynosure of Indian banking and boasted of profession management. In its failings though, Yes Bank resembled an old private sector bank where the promoter controlled everything around the bank.

Unlike other banking institutions, RBI had full powers to regulate and supervise Yes Bank. It is not clear how the regulator allowed the bank’s faults to emerge in the first place. It was ironical that a consortium led by State Bank of India, the oldest public sector bank, had to bail out one of the country’s newest banks.

The current crisis has elements of previous crises yet is different as it is more broad-based.

Large Non-Banking Finance Companies like IL&FS failed from misgovernance and from funding several dubious projects. IL&FS believed it was ‘too big to fail’, facing the same fate as Lehman Brothers which thought similarly. Smaller NBFCs suffered as banks were their largest source of funds. With banks in crisis, they restricted lending to NBFCs, almost a repeat of the 2008 crisis. Housing Finance Companies like Dewan Housing Finance Corporation failed for similar reasons as IL&FS. This sector was regulated by National Housing Bank, yet the blame was placed on RBI.

The above analysis shows how the current crisis has elements of previous crises yet is different as it is more broad-based. Both the central government and RBI have responded to the crisis in their own ways.

The government’s approach has been ad-hoc. It instituted a Banking Boards Bureau to appoint senior management of PSBs, but the finance ministry continues to intervene. The government infused capital in PSBs and merged smaller PSBs with larger ones to lower the number of PSBs to 12 from 27. To infuse confidence amidst depositors, the government hiked the deposit insurance on savings accounts to Rs 5 lakhs from Rs 1 lakh. RBI has been given more powers, including the regulation of HFCs and greater oversight of NBFCs. Dual regulation for cooperative banks may soon end. However, there is still no solution in sight for ending the dual regulation of PSBs.

The RBI has had several institutional changes. It is streamlining its regulation and supervision functions. The central bank is building a new cadre of specialized banking supervisors to look at risks across different bank types and not see commercial, cooperative and NBFCs in silos. As risks transfer quickly across markets and banking types, it is important supervisors see risks similarly as well.

“The Reserve Bank's powers are not [.] a substitute for the efficiency and integrity of the managements themselves.”

RBI has also established a College of Supervisors “to augment and reinforce supervisory skills among its regulatory and supervisory staff.” The college is supported by an Academic Advisory Council comprising bankers and academicians to benchmark the supervisory practices with the best in the world. RBI has also issued a paper on improving governance in Banks and asked all banks to appoint a Chief Compliance Officer in their respective organisations.

The current crisis is a reminder of two, often forgotten, aspects of banking.

First, banking crises are not new and come in different shapes and sizes. They can surprise you even when the economy is doing well, in the 2008 crisis in case of global banks and the post-2008 crisis in case of Indian banks.

Second, regulation evolves with developments and failures in banking. The Banking Regulation Act, with its amendments between 1949 and 1960, continues to be the main tool with the RBI to handle the current crisis. There is a need for a more comprehensive review of convert c to f calculator act to identify gaps and look towards the future. The banking industry is changing dramatically with the advent of technology and future risks could be from different sources.

Even with all these changes, we must realize that there is only so much any law or regulator can do. The Eastern Economist in 1949 termed Banking Regulation Act as a “colossal burden that a single institution is being called upon to have in policy-making as well as day-to-day administration of the country’s banking system” (Cited in RBI 1970). These words continue to be true as RBI now has additional powers to regulate NBFCs and HFCs. Yet despite these powers, the words of former RBI governor HVR Iyengar in 1960 tell us that RBI can only do so much:

“The Reserve Bank's powers are not [.] a substitute for the efficiency and integrity of the managements themselves [.] In the final resort, if a management does not listen to advice and chooses to be recalcitrant and it is felt that continued pressure would be useless, the Reserve Bank would have no option but to close down [the bank] in the interests of the depositors. But this decision involves a delicate balancing of several factors, some of future of banking industry in india essay operational, some psychological.” (Cited in RBI 1998)

The India Forum welcomes your comments on this article for the Forum/Letters section.
Write to [email protected]

Источник: https://www.theindiaforum.in/article/crisis-crisis

The future of retail, mobile, online, and digital-only banking technology in 2021

Digitalization is changing how people interact and do business on a day-to-day basis, and advancements in banking technology are continuing to influence the future of financial services around the world. An increasing demand for a bank of tennessee hours digital banking experience from millennials and Gen Zers is transforming how the entire banking industry operates. 

From retail and mobile banking, to neobank startups, technology has its hand in seemingly every aspect of the banking industry; and, the influence of technology will continue to launch banking into a digitized future.

Retail banking, also known as consumer banking, refers to the specific services banks can offer to consumers–such as savings and checking accounts, credit and debit cards, and loans. Consumers' growing desire to access financial services from digital channels has led to a surge in new banking technologies that are reconceptualizing the entire retail banking market. 

Future of Retail Banking

Technology geared toward improving retail banks' operational efficiency is positively impacting the market. According to Insider Intelligence, 39% of retail banking executives say that reducing costs is where technology has the greatest impact, compared to only 24% who say  it's improving customer experience.

Retail banks are also launching platforms in the Banking-as-a-Service (BaaS) space to remain competitive. For example, UK neobank Starling used to exclusively offer business-to-consumer (B2C) retail banking services; but, after launching a BaaS platform, Starling diversified its product and revenue streams, helping it remain relevant in the neobank space.

Meanwhile, mobile banking has solidified its place as a must-have feature for financial institutions to remain competitive, particularly among digitally-savvy millennials and Gen Zers. In fact, over 45% of respondents to Insider Intelligence's fourth annual Mobile Banking Competitive Edge Study identify mobile as a top-three factor that determines their choice of FI.

Future of Mobile Banking

Mobile banking has become the go-to method for users to make deposits, account transfers, and monitor their spendings and earnings—and a key differentiator for banking leaders. Nearly future of banking industry in india essay of our survey respondents who have used mobile banking say it is the primary way they access their bank account.
Digital money management apps
BI Intelligence

Since the onset of the coronavirus pandemic, mobile capabilities is a more significant factor in bank selection among respondents than it was last year. Financial institutions should understand which mobile banking features consumers value most and where they stand compared to their competitors, so they can pinpoint specific areas to devote the most attention to.

The foremost concern consumers have when mobile banking remains security. The fear of data breach increases the demand for services that keep users' data secure–allowing consumers to place holds on credit or debit cards, schedule travel alerts, and file and review card transaction disputes are some successful security banking features. 

Online banking, which includes mobile banking, refers to the overall experience of banking through digital channels, including mobile apps, desktop, live chatbots, and more.

Future of Online Banking

The popularity of mobile banking has surpassed that of online banking, and the overall number of online customers has slowed worldwide. According to Insider Intelligence, mobile banking is growing at five times the rate of online banking, and half of all online customers are also mobile banking users. 

Despite this growing popularity, some banks still fall short on the demand for mobile tasks, like bill pay and reward redemption, causing them to push users to online banking. However, even this push won't be enough to popularize online banking as millenials and Gen Zers continue gravitating toward the mobile market.

Digital-only banks, also known as neobanks, are redefining the future of banking around the world. Though off to a slow start in the US due to high regulatory barriers, recent developments and the loosening of regulations suggest that US neobanks are set to take off.

Future of Digital-Only Banks

Sophisticated mobile banking tools are a top factor fueling US neobanks' stratospheric rise—one that's taken on more importance amid COVID-19. Incumbent financial institutions, neobanks, and tech companies alike can benefit from understanding exactly how leading neobanks are raising the bar for customer expectations and trust to successfully scale their businesses.

Chime Banking Mobile App + Debit (1)
Chime

San Francisco-based Chime, the largest US neobank, has attracted over 7.4 million account holders by 2019, and is projected to grow this figure to 19.8 million in 2024. The development of more neobanks in the US will bring awareness to digital-only banking, and eventually wane-out traditional banking firms.

Banking Technology Trends

The future of banking technology is driven by consumers, especially Gen Zers, who see technology as something that enhances their lives. A common trend in banking technology is using an application programming interface (API) to make proprietary data available to anyone who has the consumer's permission to access it.
Bank of America Erica app
Android Community

APIs could be used to enable a bank's mobile app to pull down customer account information. Fintechs have also used API technology future of banking industry in india essay enable their businesses to work, and their success is encouraging competitors to develop their own Central bank login missouri, Insider Intelligence reported that 48% of banking executives believe new technologies like blockchain and artificial intelligence (AI) is corn good or bad for you have the greatest impact on banking through 2020. According to Insider Intelligence, banks are exploring blockchain technology in hopes of streamlining processes and cutting costs.

Consumers can already see AI being used by most banks through chatbots in the front office. Banks are using AI to smooth customer identification and authentication, while also mimicking live employees through chatbots and voice assistants.

 

More Financial Industry Topics:

Источник: https://www.businessinsider.com/future-of-banking-technology

Future of banking industry in india essay -

Learning from Crises

The 2020 pandemic hit two sources of constant engagement for the Indian public: cinema and cricket. Both are slowly reviving as we get used to the ‘new normal’. However, while they were missing, a totally unimagined source was providing drama and frenzy for spectators: Indian banking. In the memorable words of Bill Lawry, former Australian cricket captain turned commentator: “It is all happening here.”

The Indian banking sector had started buzzing much before the pandemic, with rising Non-Performing Assets, failures of commercial banks, failures of non-banks and housing finance companies, frauds, and mergers of public sector banks. During the pandemic, several big borrowers were not being able to repay loans, leading to loan moratoriums. There was the added masala of boardroom battles, as in Yes Bank, and of shareholders firing directors and promoters at Lakshmi Vilas Bank and Dhanlaxmi Bank. Even as depositors eyed banks with nervousness, there was a googly from an unexpected corner. A committee of the Reserve Bank of India (RBI) suggested that the central bank could consider allowing corporates to become promoters of banks, a controversial measure that has been opposed for a long time.

The Banking Regulation Act, 1949 continues to define RBI’s present-day policy […] this history shapes responses to the current crisis.

In all this drama, RBI has become the central point of discussion. Some have praised the central bank for intervening and protecting depositors’ funds, while others have criticised the central bank for not being proactive and for allowing failures to develop over time.

Most commentators have ignored the fact that RBI has taken these decisions based on the existing legal structure. The Banking Regulation Act, 1949 continues to define RBI’s present-day policy. In this piece, we analyse the evolution of banking regulation in India and reflect on how this history shapes responses to the current crisis.

Mark Twain famously said, “History does not repeat itself but often rhymes”. This is quite true when we compare banking crises over time not just in India but even across economies.

Banks fail due to a set of common microeconomics factors: low capital and reserves, greed for high profits, poor governance, and frauds. A common macroeconomic factor is that banking typically follows the business cycle. Banking grows sharply as the economy starts to grow, but as the growth cycle reverses there are high Non-Performing Assets (loans which have defaulted) and losses.

What makes each crisis unique is that the political economy and overall economic conditions vary across times. 

Before the establishment of RBI in 1935, banks entered and exited the system freely without any regulation. Modern banks in India were initially governed under the Joint-stock Companies Act, 1857 and later by the Indian Companies Act, 1913. Imposing company law on banking left several regulatory gaps, which were quickly exploited by the banks. The RBI, after it was established, pointed out the need to have separate legislation for the sector as banking had its own idiosyncrasies.

The central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape.

The advent of RBI led to changes, but the central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape. The failure of the Travancore National and Quilon Bank (TNQ Bank) in 1938 was due to both political and economic reasons (RBI 1970). But the existing laws were not adequate for the RBI to be a lender of the last resort to the bank or to restructure the bank. Following this, the-then RBI governor James Taylor prepared a proposal in 1939 for legislation on the lines of acts in US, Canada, and select European countries. World War II and Independence delayed the acceptance of the proposal and the Banking Regulation Act had to wait till 1949.

The new act limited the use of ‘bank’ and allied terms to a specific set of institutions, prescribed minimal capital and reserve requirements, and banned the practice of common directors across banks and lending to directors. It also gave RBI powers of inspection over banks and to suspend operations of banks if they could not honour their debts.

The second crisis came in 1960 when RBI was shaken by the failure of the Palai Central Bank (RBI 1998). Like TNQ Bank, this bank too was from the erstwhile princely state of Travancore, which had by then become part of Kerala. Unlike in the case of TNQ Bank, RBI had more time to handle the crisis at Palai Central. It gave time to the bank management to resolve the concerns of misgovernance and bad loans. However, the bank management ignored RBI advice. The bank was large and its failure created a run on several such banks in Kerala.




Following the failure, in the mid-1960s, RBI got additional powers to enforce amalgamations and to quickly 'de-license' banks. Earlier, moratoriums were requested by banks, but now RBI could impose moratoriums. It could also force mergers of weak banks with stronger banks (a strategy RBI has used multiple times into the present). The government also instituted the Deposit Insurance Act in 1961 to protect savers’ accounts, which helped stall bank failures and infused confidence in the banking system.

After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.

These developments had a marked effect on bank stability. On an average 16 banks failed every year between 1913 and 1934, before the establishment of RBI. This increased four times to 67 during the period 1935-48. After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.




In 1969 and 1980, the government nationalised major banks and stopped licencing new banks. RBI also continued to weed out weaker private banks by merging them with larger ones. The number of private banks declined to 24 in 1995 from 50 in 1969. No new banks came up until after the economic reforms of 1991.




In 1994 the RBI licenced 10 new private sector banks. The experience with them has been mixed with both failures and successes. Five of them have had financial difficulties. Of the five, four were merged with other banks: Global Trust Bank (GTB), Bank of Punjab, Centurion Bank (renamed as Centurion Bank of Punjab in 2005), and Times Bank. GTB in particular led to infamy for both promoters and regulation. The bank was mired in lending to stockbroker Ketan Parekh, who was accused of manipulating the stock market. The fifth, IDBI Bank, was recently taken over by LIC but has continued to maintain its identity.

RBI licenced four more banks in the 2000s, including Yes Bank which last year was hit by a crisis and was taken over by a group of banks led by SBI. Overall, of the 14 new private banks licenced since 1994, four do not exist anymore and two others were taken over by other financial institutions and banks following financial troubles. So, we continue to have 10 banks in the new category.

The current banking crisis also rhymes with previous crises.

The crisis is similar on account of microeconomic and business cycle factors. The reasons for failure too are similar to those in the past. Indian banking expanded significantly in the 2004-08 period, tracking high growth in the Indian economy. There was a minor blip due to the 2008 crisis. However, as the economy recovered quickly, the banking sector continued to grow. Slowing economic growth in 2012-2013 brought problems to light as NPAs began to rise. The NPA problem was revealed to be worser that expected after the RBI’s Asset Quality Reviews in 2015.

The difference this time is that the crisis is not limited to commercial banks. It started with public sector banks but has quickly engulfed cooperative banks, NBFCs and housing finance companies, and the new and old private banks. Each of these categories has its own story.

The new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble.

In the high growth phase, public sector banks were pushed into giving loans to the infrastructure sector and industrial projects with long gestation periods. This was partly because the development financial institutions established to fund these activities, such as ICICI and IDBI, had been converted to regular banks. The push was also to showcase India’s potential as an investment destination where infrastructure plays a crucial role. Loans to these projects, which take long periods to complete and generate returns, worsened the banks’ assets-to-liabilities mismatches (the bulk of bank deposits are short-term deposits). Once the business cycle reversed and the UPA-2 government got mired in several scams, many projects were stalled. This led to rising NPAs at the banks.

The reversal of the business cycle was not the lone factor for PSBs’ woes. There were several cases of frauds and misgovernance. While this led to finger-pointing at RBI’s regulatory role, former RBI governor Urjit Patel in 2018 highlighted that RBI could do little to regulate PSBs. The finance ministry has had control over regulation and appointments at PSBS since bank nationalisation. This dual regulatory structure was problematic earlier as well but has shown its real weaknesses in the current crisis.

The weakness in cooperative banks is on account of another kind of dual regulation, where powers are divided between RBI and state governments. This had fed the usual villains of misgovernance and frauds. While RBI has been cleaning up the cooperative banks for a while now, the crisis at the large Punjab & Maharashtra Cooperative bank has led to renewed attention.

Old private sector banks suffered from a different dual problem: of promoters also acting as directors. Promoter-directors directed all major decisions in the bank, from appointing board members to employment to credit decisions. RBI has been cleaning up governance in these banks. But there is a long way to go, as seen in cases of Lakshmi Vilas Bank and Dhanlaxmi Bank, where the shareholders voted out senior management following crises.

But the new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble. The case of Yes Bank was especially shocking as it was once a cynosure of Indian banking and boasted of profession management. In its failings though, Yes Bank resembled an old private sector bank where the promoter controlled everything around the bank.

Unlike other banking institutions, RBI had full powers to regulate and supervise Yes Bank. It is not clear how the regulator allowed the bank’s faults to emerge in the first place. It was ironical that a consortium led by State Bank of India, the oldest public sector bank, had to bail out one of the country’s newest banks.

The current crisis has elements of previous crises yet is different as it is more broad-based.

Large Non-Banking Finance Companies like IL&FS failed from misgovernance and from funding several dubious projects. IL&FS believed it was ‘too big to fail’, facing the same fate as Lehman Brothers which thought similarly. Smaller NBFCs suffered as banks were their largest source of funds. With banks in crisis, they restricted lending to NBFCs, almost a repeat of the 2008 crisis. Housing Finance Companies like Dewan Housing Finance Corporation failed for similar reasons as IL&FS. This sector was regulated by National Housing Bank, yet the blame was placed on RBI.

The above analysis shows how the current crisis has elements of previous crises yet is different as it is more broad-based. Both the central government and RBI have responded to the crisis in their own ways.

The government’s approach has been ad-hoc. It instituted a Banking Boards Bureau to appoint senior management of PSBs, but the finance ministry continues to intervene. The government infused capital in PSBs and merged smaller PSBs with larger ones to lower the number of PSBs to 12 from 27. To infuse confidence amidst depositors, the government hiked the deposit insurance on savings accounts to Rs 5 lakhs from Rs 1 lakh. RBI has been given more powers, including the regulation of HFCs and greater oversight of NBFCs. Dual regulation for cooperative banks may soon end. However, there is still no solution in sight for ending the dual regulation of PSBs.

The RBI has had several institutional changes. It is streamlining its regulation and supervision functions. The central bank is building a new cadre of specialized banking supervisors to look at risks across different bank types and not see commercial, cooperative and NBFCs in silos. As risks transfer quickly across markets and banking types, it is important supervisors see risks similarly as well.

“The Reserve Bank's powers are not [...] a substitute for the efficiency and integrity of the managements themselves.”

RBI has also established a College of Supervisors “to augment and reinforce supervisory skills among its regulatory and supervisory staff.” The college is supported by an Academic Advisory Council comprising bankers and academicians to benchmark the supervisory practices with the best in the world. RBI has also issued a paper on improving governance in Banks and asked all banks to appoint a Chief Compliance Officer in their respective organisations.

The current crisis is a reminder of two, often forgotten, aspects of banking.

First, banking crises are not new and come in different shapes and sizes. They can surprise you even when the economy is doing well, in the 2008 crisis in case of global banks and the post-2008 crisis in case of Indian banks.

Second, regulation evolves with developments and failures in banking. The Banking Regulation Act, with its amendments between 1949 and 1960, continues to be the main tool with the RBI to handle the current crisis. There is a need for a more comprehensive review of the act to identify gaps and look towards the future. The banking industry is changing dramatically with the advent of technology and future risks could be from different sources.

Even with all these changes, we must realize that there is only so much any law or regulator can do. The Eastern Economist in 1949 termed Banking Regulation Act as a “colossal burden that a single institution is being called upon to have in policy-making as well as day-to-day administration of the country’s banking system” (Cited in RBI 1970). These words continue to be true as RBI now has additional powers to regulate NBFCs and HFCs. Yet despite these powers, the words of former RBI governor HVR Iyengar in 1960 tell us that RBI can only do so much:

“The Reserve Bank's powers are not [...] a substitute for the efficiency and integrity of the managements themselves [...] In the final resort, if a management does not listen to advice and chooses to be recalcitrant and it is felt that continued pressure would be useless, the Reserve Bank would have no option but to close down [the bank] in the interests of the depositors. But this decision involves a delicate balancing of several factors, some of them operational, some psychological.” (Cited in RBI 1998)

The India Forum welcomes your comments on this article for the Forum/Letters section.
Write to [email protected]

Источник: https://www.theindiaforum.in/article/crisis-crisis

What is digital banking? 

Digital banking is the digitalisation of banking services in order to reduce risk, improve efficiency and better serve customers. It allows customers to withdraw money, apply for loans, make payments online or on their smartphone and more. Looking to the future of banking, digital is no longer an option for firms who wish to survive - it is a must.

When it comes to retail banks (rather than corporate or investment banks) going digital, there are two elements: digitisation and digitalisation. “Digitising means converting into digital format anything which is currently manual or paper-based,” says Simon Paris, chief executive officer of fintech company Finastra. “Whereas digitalising is a whole new way of thinking.”

Once digitisation is complete, banks can start exploring revolutionary business processes which were not available to them before, from iris recognition to artificial intelligence to offer superior banking services.

Digital banking simply makes life easier for consumers - Ian Bradbury, Fujitsu

The future of banking is digital

While security and cost-efficiency are strong motivators for banks, the true value of digitalisation is what it can do for the customer. “Digital banking makes life easier for consumers,” says Ian Bradbury, chief technology officer for financial services at Fujitsu. “People are increasingly enjoying the simplicity of managing all their finances in one place, setting up automatic payments or making deposits, any time and anywhere, without the need to queue in a bank.”

And with an increasing number of challenger banks and fintechs in the game, competition for the customer has never been higher. As Flavia Alzetta, chief executive officer of digital banking company Contis points out, traditional banks have an advantage in both the range and complexity of the products they offer. “Traditional banks have a 360 degree offering. If they were to put the customer first, they already have a very strong base to continue to occupy their place.”

More importantly, they have an existing clientele, which many of their younger competitors are still trying to build. “The customer is king and very expensive to acquire. Banks need to realise that if you look after customers they will reward you with loyalty,” continues Ms Alzetta, “customer expectations have evolved over the years, and there is no reason why they should not be met.”


What is omnichannel banking?

Omnichannel banking allows a customer to access their banking services, in real time, through any channel they choose, be it the physical branch, an ATM, a call centre or online. Implementing it means allowing customers the freedom of choice to access their finances anywhere, at any time, via any medium.

“Choice is the way forward, always”, says Ms Alzetta. But, she continues, although retail banks have begun to embrace an element of omnichannel banking, it has yet to develop to its fullest. “Omnichannel banking has been implemented mostly in terms of transactional activity. What would be a real novelty would be to rethink the most complex products and services banks provide, such as mortgages.”

The opportunities, should traditional banks fully embrace omnichannel banking, are extraordinary. In essence, it could mean a comprehensive, joined-up experience for the customer, at every stage. “If you call up to enquire about a credit card, and say ‘I’ve got a question about my mortgage too’, you shouldn’t be transferred,” says Mr Paris. “When you go into the bank and tell them you’ve been speaking to someone on the phone, they shouldn’t say ‘you’ve got to go back through the call centre, because I’ve got no idea what you’ve been doing’. It goes-hand in-hand with open banking.”

Often the biggest challenge for traditional banks is not the customers, but maintaining a technological DNA. You can’t push the job onto the CIO or CTO any more, the full board have to be involved in technological decisions - Matthias Kröner, the Fidor Group

What is open banking? 

Open banking means using open data to move towards greater transparency and ease for banking customers when they use various financial services. Open banking means that customers will be able to access all financial services in one place - whether they are looking for a loan, a mortgage, or to pay their bills.

This revolutionary idea is often tied to a piece of European Union legislation, known as the second Payment Services Directive (PSD2). PSD2 requires banks to open access to a customer’s data and information, if authorised. The desired goal for the customer is greater ease when it comes to account services and payments. For example, when buying something online, PSD2 will mean the consumer will not be redirected to Paypal in order to pay through them.

Although it is impossible to talk about open banking without mentioning PSD2, the two are not synonymous. Where PSD2 regulates how banks must act, open banking fundamentally means embracing a new mindset entirely, one which puts the customer’s needs right at the heart of banking.

What open banking will do for customers

If implemented correctly, open banking will help retail banks return to their roots as providers of financial services.

Rather than offering customers unwanted credit cards or unnecessary overdrafts, retail banks could use their platform to assemble a number of financial services and personalise them for the customer.

Take the example of buying a house. A mortgage is a product, the financial service is helping you to buy. Open banking would allow financial institutions not only to sell the customer a mortgage, but the most competitively priced one, as well as offer insights on house prices in the area, provide home insurance and find the best deal on gas and electricity. “The point is that none of these needs to have come from my bank” says Mr Paris. “What my bank has done is assemble the products and services which make sense for me.”

Banks are now presented with more opportunities than ever, and are facing an exciting future - Ian Bradbury, Fujitsu

Becoming a digital bank: Bank Leumi and Pepper 

Bank Leumi, Israel’s oldest bank, was so convinced that the future of banking meant better serving customers, they were willing to spend time and money, and even cannibalise their own clientele, to create a mobile bank from scratch.

When Rakefet Russak-Aminoach joined as chief executive officer in 2012, she decided the existing digital strategy was not transformative enough. “The retail banking model - where people visit branches and consult bankers in person - is passé. Digital tools have become people’s first choice.”

They decided not simply to digitise Bank Leumi’s current operation, but to replace all of the bank’s core IT legacy systems and build their own product on a new technological platform. “We could just have created Leumi.com,” explains Ms Russak-Aminoach, “but that would have been a digital skin covering an essentially non-digital body. We believe you need a fully digital body to grant your customers the experience they deserve.”

The result was Pepper, Israel’s first mobile-only bank. Crucially, although Pepper was a new digital entity, it was built on the reputation and customer base of Bank Leumi, thus circumventing the trust issues digital banks often encounter.

“Customers have said that they would trust a tech giant like Amazon to be their bank,” says Pepper’s chief executive officer, Michal Kissos Hertzog, “but when it comes to it, many prefer a more traditional option. Luckily Pepper gets the best of both worlds, we have different people, different DNA, a different strategy, but we took our cybersecurity and our reputation from Leumi.”

What can traditional banks learn from fintechs?

What Bank Leumi and Pepper teach us is that both traditional banks and fintech companies have their strong suits, although interaction between the two has had mixed results.

Mr Paris believes the relationship has gone through three phases. The first saw traditional banks detect fintech as a threat and attempt to squash them through regulation. The second came as the banking industry recognised the true value of fintech and set out to partner with or acquire them. We are now in the third phase. “Banks realise that simply acquiring a fintech company does not solve the problem, as the relationship is still one-to-one. What is needed is for a fintech to have access to thousands of banks and vice versa.”

The question is, will traditional banks consent to learn from or work with fintechs in any real sense? Matthias Kröner, founder and former chief executive officer of the Fidor Group, one of Europe’s first digital banks, thinks not. “I don’t think a big bank corporation is culturally able to deal with innovation”, he says. “It’s a question of compliance. In order to embrace the innovation of fintechs, you need a special governance structure that allows for a fail-fast, laboratory approach. Traditional banks are too afraid of risk.”

One challenge for fintechs is keeping the innovation level high. The bigger an organisation gets, the more you have the tendency for everyone to lean back - Matthias Kröner, the Fidor Group

So what is the future of banking? It is certainly digital and, as a result, more open, more transparent, more ambitious. Most importantly, it lies in the hands of the customer. Any financial services provider looking to make it to 2030 must embrace this truth, and use all the digital and technological tools at their disposal to make their offering as customer-centric as possible.

What does the future of banking look like, according to the experts?

Ian Bradbury, chief technology officer for financial services, Fujitsu

“The next wave of digital banking solutions, enabled by advanced data analytics, APIs and Open Banking legislation, will go much further. We will see a seamless incorporation of financial and pseudo-financial services into daily activities, both digitally and in the physical world.”

Simon Paris, chief executive officer, Finastra

“My vision is that banking will go back to what it was born for. To provide a financial service. To help people and businesses unlock their potential. Instead of being about how many products per customer you have, it will be about customer’s exchanging their personal data for better service. You tell me how much you drive, and I’ll decrease your car insurance. You share your smart watch data and I’ll decrease your life insurance.”

Matthias Kröner, founder and former chief executive officer, the Fidor Group

“Customer demands for innovation never changed a market as much as changes in regulation, like we’ve had with open banking. PSD2 is finally forcing the banks to be customer-centric. It will mean an easier and better life for customers. I'm absolutely convinced of this. If we combine the success of data with AI and machine-learning - the sky is the limit.”

Flavia Alzetta, chief executive officer, Contis

“In terms of payments, I think the shift from physical assets to virtual or no assets will be very visible over the coming years. I spent 14 years at Amex, and I think the physical card will disappear. The more innovative payment options coming up - such as biometrics - will simplify payments immeasurably.”

Rakefet Russak Aminoach, chief executive officer, Bank Leumi

“10 years from now the retail banks which take the right steps will be much more significant than they are today, and some will have ceased to exist. I don't think we will have one bank like one Amazon or one Google, I believe that we will have local winners. Regulators are a local thing, as are currencies, so I don't think we'll have one bank for the whole world, but I believe that, in each market, we will have a huge winner who will do the right thing and take a large part of the market.”

Michal Kissos Hertzog, chief executive officer, Pepper

“The CEO of AirBnB was asked a similar question. He said it doesn't really matter what AirBnb offers in 100 years - whether it is still a question of booking rooms online or not - if their DNA and culture stays the same, then AirBnb will stay relevant. Banking changes all the time, the value proposition and user experience will change. Banks which will can change and stay relevant will survive, and the others will not.”   


Источник: https://www.raconteur.net/finance/financial-services/future-banking/

6 ways the pandemic has changed businesses

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This article is part of the Pioneers of Change Summit

  • Sectors like healthcare and banking are battered but not beaten by COVID-19 disruption, McKinsey analysis finds.
  • Digital delivery features large in the post-pandemic futures of six sectors.
  • The World Economic Forum’s ‘Pioneers of Change Summit’ will showcase solutions for a ‘Great Reset’ across industries and regions.

Even with the promise of a vaccine edging closer, economic recovery could be years away for some sectors.

Yet companies that reimagine their operations will perform best in the next normal, according to management consultancy, McKinsey & Company.

In its executive briefing on COVID-19, McKinsey takes a look at how things might develop in six sectors.

1. Auto industry – down, but not out

Pandemic disruption will wipe $100 billion off the auto industry’s profits, McKinsey predicts, with sales expected to drop by 20 to 30% in 2020. But automakers were already facing disruptions before COVID – including driverless cars, automated factories and ridesharing – and the industry can bounce back, it says.

Opportunities include the huge shift to online shopping and the rise of software-subscription services, which enable people to pay for programmes that unlock features like heated seating or full self-driving capabilities, McKinsey says.

Restaurant industry – innovation still on the menu

Indoor dining in restaurants may not return to pre-crisis levels for months – or possibly even years, McKinsey warns. For full-service restaurant operators, it means developing a new long-term economic model.

There are opportunities to optimize takeaway and drive-through operations and re-engineer menus and pricing. This might include finding the right balance of special offers and "high-margin items such as appetizers, sides, desserts and beverages,” McKinsey suggests.

Banking industry – digital decision-making pays off

For banks, the pandemic has changed everything. “Risk-management teams are running hard to catch up with cascades of credit risk, among other challenges,” McKinsey says. The company expects that automated underwriting will come into force for retail and small-business customers and that this will reduce losses.

Calculating the creditworthiness of a small business using software, rather than having staff make these decisions, could raise margins by 5-10%, McKinsey says.

4. Insurance industry – merger partners at a premium

Mergers and acquisitions (M&A) – particularly in the insurtech (insurance technology) space – will be a key strategy for traditional insurers, McKinsey says.

Insurtechs and fintechs (financial technology companies) have been among the most responsive to customers during the COVID-19 crisis and were the first to launch products focused on the pandemic.

“For example, one Chinese insurtech released an array of such products that covered nearly 15 million people after only a few months on the market,” McKinsey notes.

5. Healthcare industry – delivering at a distance

COVID-19 has hugely accelerated the growth of digital healthcare. In 2019, 11% of US customers used telehealth. Now, 46% are using it to replace cancelled healthcare visits, McKinsey notes.

India’s Apollo Hospitals, which comprises more than 7,000 physicians and 30,000 other healthcare professionals, launched a digital health app, Apollo 24/7, in early 2020. Within six months, the app had enrolled four million people, with around 30,000 downloads a day.

Public-private partnerships are also working well and have the potential to “influence the future of healthcare,” McKinsey says.

6. Education – learning to adapt

In education, the pandemic has amplified existing challenges around inclusion, inequalities and drop-out rates. For example, lower-income students are 55% more likely to delay graduation due to the COVID-19 crisis than their higher-income peers, McKinsey warns.

With remote and online learning here to stay, institutions have a “once-in-a-generation chance” to reconfigure their use of physical and virtual space.

“They may be able to reduce the number of large lecture halls, for example, and convert them into flexible working pods or performance spaces,” McKinsey suggests. “Or they could reimagine the academic calendar, offering instruction into the summer months.”

The World Economic Forum’s inaugural Pioneers of Change Summit on 16-20 November will convene innovative leaders and entrepreneurs from around the world to showcase their solutions, build meaningful connections and inspire change across the Forum’s diverse multi-stakeholder communities.

The digital event is an opportunity to share and develop mechanisms for driving a Great Reset across industries and regions.

Individuals can sign up to follow the event, while companies can participate in the summit by becoming a member of the Forum’s New Champions Community of high-growth companies.

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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Источник: https://www.weforum.org/agenda/2020/11/covid-19-innovation-business-healthcare-restaurants/

The World Bank In India

THE WORLD BANK GROUP AND INDIA

The World Bank Group’s (WBG) over seven decade-long partnership with India is strong and enduring. Since the first loan to Indian Railways in 1949, the WBG’s financing, analytical work, and advisory services have contributed to the country’s development. International Development Association – the WBG’s soft-lending arm created for developing countries like India - has supported activities that have had a considerable impact on universalizing primary education; empowering rural communities through a series of rural livelihoods projects; revolutionizing agriculture through support of the Green and White (milk) Revolutions; and helping to combat polio, tuberculosis, and HIV/AIDS.   In FY18, the relationship reached a major milestone when India became a low middle-income country and graduated from International Development Association financing.

COUNTRY PARTNERSHIP FRAMEWORK

The WBG’s present engagement with India is guided by its Country Partnership Framework for FY18-22 (CPF).  The CPF builds on the decades-long partnership and seeks to address the country’s development aspirations and priority needs identified in the Group’s Systematic Country Diagnostic for India. It aims to work with India so that the country’s rapidly growing economy makes much more efficient use of resources; fosters inclusiveness by investing in human capital and generating more quality jobs; and develops strong public sector institutions that are capable of meeting the demands of a rising middle-class economy. The CPF’s approach combines a focus on ‘what’ the WBG will work on and ‘how’ it will engage India in the process. 

What will the WBG work on?

  • Promoting resource-efficient growth, including in the rural, urban, and energy sectors as well addressing disaster risk management and air pollution;
  • Enhancing competitiveness and enabling job creation, including improving the business climate, access to finance, connectivity, logistics, skilling, and increasing female labor force participation;
  • Investing in human capital through early childhood development, education, health, social protection, and rural water supply and sanitation. 

How will the WBG amplify the impact of its work in India?

  • By leveraging the private sector
  • By harnessing India’s federalism
  • By strengthening public institutions
  • By supporting Lighthouse India to foster knowledge exchanges within the country and between India and the rest of the world. 

In all its activities, the WBG will seek to address climate change, gender gaps, and the challenges and opportunities afforded by technology.  

WORLD BANK GROUP PROGRAM

The World Bank’s lending program includes 92 lending operations ($22.8 billion in commitments, of which $17.7 billion is IBRD and $5.1 billion is IDA, and $0.1 billion is from other sources, primarily grant funding from the Global Environment Fund). 

Roughly a third of the operations and around 56% of commitments are either to central or multi-state operations, while the remainder consist of state-specific operations in 21 of India’s 28 states. 

The three largest portfolios are Agriculture (15 operations totaling $3.7 billion in commitments), Urban Development (17 projects totaling $3.2 billion), and Transport (10 projects totaling $2.9 billion). 

In FY21, the Bank approved 14 operations amounting to $3.16 billion.  Of this, $2.65 billion is lending from IBRD and $0.5 billion from IDA (recommitted from cancelled IDA programs). There is a robust pipeline for FY22, which is expected to deliver around 20 operations with total commitments of $3 - 4 billion. 

For the IFC, India is the largest client country, accounting for 10 percent (US$6.3 billion) of its global portfolio. Since its first engagement in 1958, IFC has invested more than US$24 billion (including mobilization) in more than 500 companies in India. India is the sixth largest shareholder in IFC with a 4.01 percent stake.

The World Bank and IFC work together in several areas, most notably in energy, transport, water and health. IFC-Bank synergies have been particularly strong in raising financing for renewable energy, supporting the Government of Madhya Pradesh in setting up one of the largest single-site solar power project that provides solar power at record low cost. IFC and the World Bank had a similar collaboration under the government’s flagship Clean Ganga program for sewage treatment plants using hybrid annuity-based PPP projects. IFC led the PPP mandate while the World Bank loan is helping provide payment guarantees to increase the private sector’s participation in the sector.

The Multilateral Investment Guarantee Agency (MIGA) does not have exposure in India. MIGA has been working closely with the Ministry of Finance to provide credit enhancement solutions at the state-level and state-owned enterprise (SOE) level. This will enable state governments and SOEs to utilize long-term commercial financing, which can complement concessional lending provided by other multilaterals and development finance institutions.

The WBG has a wide-ranging program of Advisory Services & Analytics. The program informs policy debate, provides analytical underpinnings and learnings for operations and strategy, facilitates the scale up of innovative solutions, and helps to improve state capability. As of October 2021, some 18 analytical studies and 15 advisory activities were ongoing. Key areas of focus include poverty and macroeconomic analysisfinancial sector reformenhancing human capital including universal health coverage and genderair quality management, as well as state capability and governance

Last Updated: Oct 04, 2021

Источник: https://www.worldbank.org/en/country/india/overview

The future of retail, mobile, online, and digital-only banking technology in 2021

Digitalization is changing how people interact and do business on a day-to-day basis, and advancements in banking technology are continuing to influence the future of financial services around the world. An increasing demand for a digital banking experience from millennials and Gen Zers is transforming how the entire banking industry operates. 

From retail and mobile banking, to neobank startups, technology has its hand in seemingly every aspect of the banking industry; and, the influence of technology will continue to launch banking into a digitized future.

Retail banking, also known as consumer banking, refers to the specific services banks can offer to consumers–such as savings and checking accounts, credit and debit cards, and loans. Consumers' growing desire to access financial services from digital channels has led to a surge in new banking technologies that are reconceptualizing the entire retail banking market. 

Future of Retail Banking

Technology geared toward improving retail banks' operational efficiency is positively impacting the market. According to Insider Intelligence, 39% of retail banking executives say that reducing costs is where technology has the greatest impact, compared to only 24% who say  it's improving customer experience.

Retail banks are also launching platforms in the Banking-as-a-Service (BaaS) space to remain competitive. For example, UK neobank Starling used to exclusively offer business-to-consumer (B2C) retail banking services; but, after launching a BaaS platform, Starling diversified its product and revenue streams, helping it remain relevant in the neobank space.

Meanwhile, mobile banking has solidified its place as a must-have feature for financial institutions to remain competitive, particularly among digitally-savvy millennials and Gen Zers. In fact, over 45% of respondents to Insider Intelligence's fourth annual Mobile Banking Competitive Edge Study identify mobile as a top-three factor that determines their choice of FI.

Future of Mobile Banking

Mobile banking has become the go-to method for users to make deposits, account transfers, and monitor their spendings and earnings—and a key differentiator for banking leaders. Nearly 80% of our survey respondents who have used mobile banking say it is the primary way they access their bank account.
Digital money management apps
BI Intelligence

Since the onset of the coronavirus pandemic, mobile capabilities is a more significant factor in bank selection among respondents than it was last year. Financial institutions should understand which mobile banking features consumers value most and where they stand compared to their competitors, so they can pinpoint specific areas to devote the most attention to.

The foremost concern consumers have when mobile banking remains security. The fear of data breach increases the demand for services that keep users' data secure–allowing consumers to place holds on credit or debit cards, schedule travel alerts, and file and review card transaction disputes are some successful security banking features. 

Online banking, which includes mobile banking, refers to the overall experience of banking through digital channels, including mobile apps, desktop, live chatbots, and more.

Future of Online Banking

The popularity of mobile banking has surpassed that of online banking, and the overall number of online customers has slowed worldwide. According to Insider Intelligence, mobile banking is growing at five times the rate of online banking, and half of all online customers are also mobile banking users. 

Despite this growing popularity, some banks still fall short on the demand for mobile tasks, like bill pay and reward redemption, causing them to push users to online banking. However, even this push won't be enough to popularize online banking as millenials and Gen Zers continue gravitating toward the mobile market.

Digital-only banks, also known as neobanks, are redefining the future of banking around the world. Though off to a slow start in the US due to high regulatory barriers, recent developments and the loosening of regulations suggest that US neobanks are set to take off.

Future of Digital-Only Banks

Sophisticated mobile banking tools are a top factor fueling US neobanks' stratospheric rise—one that's taken on more importance amid COVID-19. Incumbent financial institutions, neobanks, and tech companies alike can benefit from understanding exactly how leading neobanks are raising the bar for customer expectations and trust to successfully scale their businesses.

Chime Banking Mobile App + Debit (1)
Chime

San Francisco-based Chime, the largest US neobank, has attracted over 7.4 million account holders by 2019, and is projected to grow this figure to 19.8 million in 2024. The development of more neobanks in the US will bring awareness to digital-only banking, and eventually wane-out traditional banking firms.

Banking Technology Trends

The future of banking technology is driven by consumers, especially Gen Zers, who see technology as something that enhances their lives. A common trend in banking technology is using an application programming interface (API) to make proprietary data available to anyone who has the consumer's permission to access it.
Bank of America Erica app
Android Community

APIs could be used to enable a bank's mobile app to pull down customer account information. Fintechs have also used API technology to enable their businesses to work, and their success is encouraging competitors to develop their own APIs.

Additionally, Insider Intelligence reported that 48% of banking executives believe new technologies like blockchain and artificial intelligence (AI) will have the greatest impact on banking through 2020. According to Insider Intelligence, banks are exploring blockchain technology in hopes of streamlining processes and cutting costs.

Consumers can already see AI being used by most banks through chatbots in the front office. Banks are using AI to smooth customer identification and authentication, while also mimicking live employees through chatbots and voice assistants.

 

More Financial Industry Topics:

Источник: https://www.businessinsider.com/future-of-banking-technology

Future Of Artificial Intelligence In The Banking Sector

Swedish philosopher Nick Bostrom, in the book Superintelligence said, “Machine learning is the last invention that humanity will ever need to make.” From electronic trading platforms to medical diagnosis, robot control, entertainment, education, health, and commerce, Artificial Intelligence (AI) and digital disruption have touched every field in the 21st century. AI has made its presence felt in all walks of life due to its ability to help the user innovate. It has also enabled users to make faster and more informed decisions with an increased amount of efficiency.

Of late, the banking sector is becoming an active adapter of artificial intelligence—exploring and implementing this technology in new ways. The penetration of artificial intelligence in the banking sector had been unnoticed and sluggish until the advent of the era of internet banking.

One of the first steps was taken in 2015 by Ally Bank (USA)—introducing Ally Assist—a chatbot that could respond to voice and text, make payments on behalf of the customer, give an account summary, monitor savings, spending patterns, and use natural language processing to understand and address customer queries.

Banks all over the world followed up with their best versions of chatbots: Erica to iPAL, Eva and the most famous one—SBI’s SIA. According to Payjo (the start-up which developed SIA), SIA can handle up to ten thousand inquiries per second and is one of the world’s largest deployments of artificial intelligence in consumer-facing banking. In this era of technological revolution, the banking sector has also witnessed a paradigm shift in its approach from brick and mortar branches to digital banks. Banks are increasingly spending on artificial intelligence and ML in data analytics for personalized and faster customer experiences to garner the interests of the tech-savvy and the millennial class.

According to the FinTech Trends India Report by PwC in 2017, the global spending in artificial intelligence has touched $5.1 billion. The IHS Markit’s “Artificial intelligence in Banking” report claims that this cost has grown up to $41.1 billion in 2018, and is expected to reach $300 billion by 2030. This shows that artificial intelligence has reached a stage where it has become affordable and efficient enough for implementation in financial services. The challenge now is in exploring more ways where the powers of artificial intelligence can be harnessed to streamline internal banking processes and improve customer experiences.

Front end operations of artificial intelligence are those that involve direct interaction with the clients. It includes applications and payment interfaces, digital wallets, chatbots, or interactive voice response systems. Back-end operations are more complicated as they involve the systematic processing of large chunks or terabytes of data to provide security to the system, analyse fraudulent transactions, and generate reports, improve compliance. We shall now discuss the future of artificial intelligence in each of these fields.

Enhanced Customer Experience

Customer being the key driver of a service industry, customer service is at the forefront of any business. AI can be used to derive a better understanding of customers spending patterns, which will help banks customize products by adding personalized features. This supplements meaningful customer engagement, building strong relationships, and growth of business for the bank.

For instance, SBI is working on a system ‘Automated Real-Time Customer Emotion Feedback’ (ARTCEF) using AI to study, in real-time, the facial expressions of customers. AI can also be used to offer personalised payment experience—like most suitable EMIs at checkout based on past payment patterns, offering multi-currency cards to customers who frequently travel abroad etc. AI can also help in setting up biometric face recognition ATMs which function without the need of a card, using real-time camera images and at the same time detect and prevent frauds.

Use Of Chatbots

Chatbots and interactive voice response systems which utilise Natural Language Processing are increasingly used by banks nowadays to increase the efficiency of services. It reduces the expenditure on human capital, thus resulting in savings for the bank. Customer satisfaction is also enhanced as they can avail the service at the comfort of their homes without having to visit branches —saving their time. Chatbots can be enhanced in future to announce new offers to the customer like loans, or to alert customers if they have any EMI payment due, suggest good discounts based on the tie-ups the bank has with e-commerce sites etc.

Data analytics to predict future outcomes and trends:

Effortless and swift processing of a large amount of data can help banks observe the patterns of customer behaviour, predict future outcomes and help them contact the right customer at the right time with the right product. It can also help in identifying frauds, fraudulent transactions, and simultaneously detect anti-money laundering pattern on a real-time basis.

Machine Learning and Cognition can be used to identify suspicious data patterns and convince banks if the actual source of money is legal or illegal. AI can also study the past consumer behaviour to predict future requirements, which helps banks to up-sell and cross-sell successfully.

Wealth Management And Portfolio Management

AI-based systems help potential investors by analysing their salary and spending patterns. They can also predict market trends and choose the right funds for their portfolio by determining the adequate sum of money they should invest every month in realising their dreams. All this can be done without visiting branches or hiring experts. In the world of ‘Banking at your fingertips’, mutual funds, fixed deposits can be created at home, and the money is redeemed when necessary.

AI can further be leveraged to notify customers instantly for any suspicious transaction beyond their usual patterns.

Improved operations, efficient cost management vs. focus on profitability:

Banks essentially have to make a profit to survive, and today, banks face significant pressure on their margins. Regulators and their persistent focus on transparency make several businesses unprofitable.

AI technologies enable banks to bring more efficiency to their operations and manage costs. Robotic Process Automation (RPA) and Intelligent Process Automation (IPA) are immensely helpful here. Parsing of financial deals is just a matter of a few seconds, thanks to AI. They can also help manage contracts and act as brokers, simultaneously taking over routine tasks, thus improving productivity and efficiency. All this transforms to increased revenue, reduced costs, and a boost in profits. Robotic automation of processes can reconfigure the financial sector and make it more humane and intelligent. Automation of about 80% of repetitive work processes helps officers dedicate their time in value-added operations that require a high level of human intervention like product marketing.

What we need now is not just empowering of banks by automation, but making the entire system intelligent enough to beat the newly emerging FinTech players. This has prompted a lot of banks to use software robotics to ease the back-end process and achieve a better functional design. SBI plans to institute an ‘Innovation Centre’ to explore RPA, which can help in making internal banking processes more efficient.

Intelligent Character Recognition System

This system has been used by some foreign banks to recognize, extract important information from old loan applications, lease agreements and feed it to a central database which can be accessed by everyone. It can help in costly and error-prone banking services like claims management by drastically reducing the time spent in reading or recording client information.

For instance, JPMorgan Chase’s COiN reviews documents and extracts data from 12,000 documents (which, without automation, would require more than 360,000 hours of work) in just seconds.

Lending:

A minuscule percentage of the Indian population has an idea of credit. Even to this day, applying for loans is considered a hassled process. It is also an annoying task for banks to analyse an individual’s creditworthiness due to the lack of credit history.

The use of Big Data and Machine Learning to analyse spending patterns and behavioural data of a customer over 10,000+ data points can help banks have an insight into the customer’s creditworthiness. This also helps in giving pre-approved loans to a huge range of customers without the need for paperwork and allows self-employed and students (as they are out of the financial fold) to obtain credit. In case of SME and corporate loans, AI simplifies complex and critical borrowing process, identify the potential risks in giving the loan by analysing market trends, prospect’s behaviour and identifies even the slightest probability of fraud.

Risk Management And Fraud Detection

The Punjab National Bank scam exposed the banking sector to an enormous amount of risk and shook the regulators, financial and stock markets, and the banking industry. AI and due diligence can monitor such potential threats and help banks install fool-proof surveillance and fraud detection systems. Surveillance in banks has been through audits and sampling. Some data sets and files that are capable of causing huge risks may not be covered in these samples. The algorithmic rules-based approach can help in monitoring of each and every file, and machine learning techniques can keep a database of all such files which pose a risk to the bank.

Banks, while providing secure and swift transactions, can use AI to detect the fraud in the transactions or find out any suspicious activity in the customer’s account on the basis of behaviour analysis. With an increasing percentage of cybercrimes in the recent years, AI can be used to maintain cyber-security and most importantly, in safeguarding personal data. Citibank has invested over $11 million in a new anti-money laundering structure already using machine learning and big data.

AI-based systems can help in compliance by judging the functionality of the internal control systems. AI can also be a game-changer by detecting insider trading that leads to market abuse.

Insurance underwriting and claims:

In this era of bancassurance, customers are more likely to come to banks rather than visit insurance agencies. Insurance sector can reap the benefits of AI in underwriting, claim-handling procedures, and fraud detection. It can also help in identifying risky behaviour and charge higher premiums to those groups of customers. Insurance firms have an enormous amount of data which can help make mathematical models and predict risky behaviours accurately. Such data can also be lent to banks to be used in customer risk identification. This reduces the turn-around-time (TAT) for both loans and insurance. For example, to analyse the damage to a vehicle, deep learning techniques can analyse an image of the vehicle, and calculate repair cost using predictive models.

Also read: Artificial Intelligence Will Prove To Be A Game Changer For The Indian Economy

Threats Posed By AI

Jack Ma, the founder of Alibaba, warned the audience at the World Economic Forum 2018 at Davos, that AI and big data were a threat to humans and would disable people instead of empowering them. A massive deployment of AI in banks would come with its share of risks and opportunities. Banks increase their investment in AI every year, often at the risk of becoming obsolete. But what we also need to understand is the risks to the system that AI can pose.

1. Loss Of Jobs

Banks face the risk of backlash from their employees due to the potential automation of tasks, which can lead to job loss and job reassignments. AI, in the garb of increasing enterprise productivity, will reshape the way the employees perform their jobs. This could lead to possible dissatisfaction among employees, resulting in resignations or employees being fired due to inefficiency. AI can replace a teller, customer service executive, loan processing officer, compliance officer, and even finance managers.

2. The Opacity Of Processes:

While deep learning models and neural networks in AI have proven over time to be perfect than human decision-making, they are often not transparent in terms of revealing how they generated such conclusions. It then becomes a challenge for bankers to explain that to the regulators. Justice Srikrishna Committee has mentioned that the biggest challenge in using big data, artificial intelligence is that they operate outside the framework of traditional privacy principles. This could now act in a reverse way and expose banks to risks without their knowledge. It could also possibly give rise to hidden biases in decision making since AI has access to data of all the customers.

3. Reduced Customer Loyalty

There is also a fear of reduced customer loyalty due to less customer contact and the lack of essence of “human touch.” Banks, especially in India, have an emotional value as they help many in cherishing their long-standing dreams—be it a beautiful house or a good education for students. All this could be lost due to AI and automation. The socio-economically backward groups would be the biggest losers and most affected in such a scenario due to low levels of education and the digital divide.

The Way Forward

Nick Bilton, tech columnist, wrote in the New York Times, “The upheavals [of artificial intelligence] can escalate quickly and become scarier and even cataclysmic. Imagine how a medical robot, originally programmed to rid cancer, could conclude that the best way to obliterate cancer is to exterminate humans who are genetically prone to the disease.” The message conveyed here is that banks have to develop an understanding of the effects of digitization and develop an expansive foresight into the prospects of AI—so that we as humans have control over AI and not the reverse. The area that banks should now focus on is Data Acquisition. The lack of proper customer records is the biggest hindrance to AI.

We should ensure that the data used by banks are KYC compliant clean data as these would be used in AI models. Massive data infrastructure is required to leverage AI. Proper inspection of data and checks of accuracy are also needed before using such technologies in the public domain.

Analysis and standardization of data:

The amount of data with banks is so enormous that Oracle and Accenture have entire departments storing bank data. What we need is a proper analysis of the data, and that requires a high level of leadership skill to bring together cross-functional teams—one with knowledge of financial business, and the other with requisite machine learning skills to formulate a plan and infrastructure across various departments for efficient usage of such data sets. AI remains a niche-oriented domain with a shortage of talent and expertise.

Leakage And Misuse Of Data

Several experts in the U.S. and the U.K. opine that cyber, political and physical threats arise with the growth in the capabilities and reach of AI. The recent Facebook scandal highlights the risk corrupt data practices can bring to a firm. Complete transparency while venturing into new AI projects also should be ensured so that banks don’t face reputation risks.

Banks should start building AI systems with a small set of complex data and add subsequent ones, thus creating a universal record of each client. Adequate investments should be done on the safe storage of data and prevent it from leakage. This will help the bank detect potential hazards in the implementation stage of the project and enable efficient identification—and then execution—of goals and priorities of the organization. Artificial intelligence will soon become the sole determinant of the competitive position of banks and a key element enhancing their competitive advantage.

Источник: https://www.youthkiawaaz.com/2019/07/future-of-artificial-intelligence-in-banks/

How the Banking Sector Impacts Our Economy

The banking sector is an industry and a section of the economy devoted to the holding of financial assets for others and investing those financial assets as a leveraged way to create more wealth. The sector also includes the regulation of banking activities by government agencies, insurance, mortgages, investor services, and credit cards.

Financial Assets

Holding financial assets is at the core of all banking, and where it began—though it has expanded far beyond the days of holding gold coins in exchange for promissory notes. A bank holds assets (deposits) for its clients, with a promise the money may be withdrawn if the individual or business needs said assets back. Avoiding devastating bank runs that could destroy the sector as a whole is why banks are required to maintain at least 8% of their book values as actual money.

Key Takeaways

  • The banking industry is an economic sector at the forefront of the U.S. economy.
  • Banks must adhere to specific government regulations.
  • During the 2008 financial crisis, some big banks, such as Citigroup and Wells Fargo, had to be bailed out by the federal government.

Using Assets as Leverage

Traditionally, banks leverage the money in their vaults as loans, earning money from the interest rates charged on those loans. The great contradiction of banking is that almost all of a bank's actual money is nowhere near its vaults, meaning that its true value is only paper, yet that paper value is what grows the economy.

The banking sector has always attempted to diversify its risks by investing as widely as possible; this prevents an unexpected loan default from sinking the entire bank. However, this can cause other problems.

If a bank had invested in the aluminum futures market and had a vested interest in increasing its value, it could simply prevent the aluminum from being sold to industry and drive up that value. This could have a knock-back effect on industry and disrupt the economy, which the banking sector should avoid at all costs.

This is not a random example. Goldman Sachs did exactly that from 2010-2013, and it avoided regulation to prevent this sort of market manipulation by moving the aluminum from warehouse to warehouse within the regulatory limit. It also owned the warehouses, located in Chicago.

Regulation of Banking Activities

Because banks are the underpinning of a modern economy, governments naturally have laws in place to prevent banks from engaging in dangerous activities that could threaten the economy.

These laws are often enacted after hard financial lessons, such as the creation of the Federal Deposit Insurance Corporation (FDIC) in 1933 after the bank panics of the previous 50 years. However, such laws are campaigned against by banks and are sometimes removed, and this has led to history repeating itself.

The financial crisis of 2007-2008 was created, in part, by several U.S. banks over-investing in subprime mortgages. Prior to 2000, there were laws that limited the number of subprime mortgages available, but deregulation efforts removed this limitation and permitted the crisis to happen. Questionable mortgages were not the only cause, but it was the tipping point that destroyed worldwide trust in the banking sector.

The regulation of the banking sector is key to maintaining the public's trust.

The banking sector's core is trust. Without it, no one would deposit money, and banks would be unable to use that money to give loans, invest, and drive economic growth. Regulation is essential to create that trust.

Popular Companies in the Banking Sector

Wells Fargo (WFC) is one of the largest U.S. financial services and bank holding companies by market capitalization. It operates in more than 30 countries worldwide and is one of the 100 largest companies in the United States. The company provides consumer and commercial financing, as well as banking, insurance, and investment services.

JPMorgan Chase & Co. (JPM), like Wells Fargo, is a true American banking institution and one of the largest investment banks in the world. In addition to regular consumer and commercial banking, the bank offers a wide variety of investment banking services, including raising capital in debt and equity markets, advising on corporate strategies, market making in derivatives, brokerage, and investment research services. 

HSBC Holdings (HSBC), headquartered in the United Kingdom, is a global banking and financial services firm. The company is segmented into four divisions through which it offers a wide range of consumer and commercial banking services—retail banking and wealth management, global banking and markets, commercial banking, and private banking.

Источник: https://www.investopedia.com/ask/answers/032315/what-banking-sector.asp

Future of banking industry in india essay -

The Past, Present, and Future of Money, Banking and Finance

The history of money is wrapped up in sex, religion, and politics, those things we are told not to talk about. After all, these are the themes that rule our lives, and money is at the heart of all three. To put this in context we need to begin at the beginning, as that is a very good place to start, and talk about the origins of humans, which is what I am going to cover in detail in this article. In fact, the origins of money reflect the origins of humans. As you will see, there have been three great revolutions in human history as we formed communities, then civilization and industry. We are currently living through a fourth great revolution in humankind, and these revolutions fundamentally change the way we live. Equally important is the fact that each evolution of humankind creates a revolution in monetary and value exchange. That is why it is important to reflect on the past to understand the present and forecast the future, especially as we are living through a fourth revolution in humanity and trade, and about to enter a fifth.

The First Age: The Creation of Shared Beliefs

Seven million years ago, the first ancestors of mankind appeared in Africa and seven million years later, as we speak, mankind’s existence is being traced by archaeologists in South Africa, where they believe they are finding several missing links in our history. A history traced back to the first hominid forms. What is a hominid, I hear you say, and when did it exist?

BBVA, OpenMind. The First Age: The Creation of Shared Beliefs. Skinner. Andy Warhol, Dollar Sign, c. 1981 Synthetic polymer paint and silkscreen ink on canvas, 35.56 x 27.94 cm, The Andy Warhol Foundation for the Visual Arts, Inc., New York, USA.

Well, way back when scientists believe that the Eurasian and American tectonic plates collided and then settled, creating a massive flat area in Africa, after the Ice Age. This new massive field was flat for hundreds of miles, as far as the eye could see, and the apes that inhabited this land suddenly found there were no trees to climb. Instead, just flat land, and berries, and grasses. This meant that the apes found it hard going thundering over hundreds of miles on their hands and feet, so they started to stand up to make it easier to move over the land. This resulted in a change in the wiring of the brain, which, over thousands of years, led to the early forms of what is now recognized as human.

The first link to understanding this chain was the discovery of Lucy. Lucy—named after the Beatles song “Lucy in the Sky with Diamonds”—is the first skeleton that could be pieced together to show how these early human forms appeared on the African plains in the post-Ice Age world. The skeleton was found in the early 1970s in Ethiopia by paleoanthropologist Donald Johanson and is an early example of the hominid australopithecine, dating back to about 3.2 million years ago. The skeleton presents a small skull akin to that of most apes, plus evidence of a walking gait that was bipedal and upright, similar to that of humans and other hominids. This combination supports the view of human evolution that bipedalism preceded an increase in brain size.

Since Lucy was found, there have been many other astonishing discoveries in what is now called the “Cradle of Humankind” in South Africa, a Unesco World Heritage site. It gained this status after the discovery of a near-complete Australopithecus skeleton called Little Foot, dating to around 3.3 million years ago, by Ron Clarke in 1997. Why was Little Foot so important? Because it is almost unheard of to find fossilized hominin remains intact. The reason is that the bones are scattered across the Earth as soil sank into the ground and remains were distributed among the porous caves underneath. An intact skeleton is therefore as likely to be found as a decent record by Jedward.

More recently, archaeologists have discovered the Rising Star Cave system, where many complete bodies have been found, and scientists believe this was a burial ground. It has also led to the naming of a new form of human relative, called Homo naledi.

All in all, the human tree of life that falls into the catchall of the Homo species, of which we are Homo sapiens, has several other tributaries including Homo erectus, Homo floresiensis, Homo habilis, Homo heidelbergensis, Homo naledi, and Homo neanderthalensis.

The question then arises: if there were several forms of human, how come we are the only ones left?

Some of that may have been due to changing times. After all, there are no Mammoths or Sabre-Toothed Tigers around today, but there are several forms of their ancestors still on Earth. Yet what is interesting in the order of Hominids, according to Professor Yuval Harari, author of Sapiens and leading authority on the history of humankind, is that Homo sapiens defeated all other forms of hominid because we could work together in groups of thousands. According to his theory, all other human forms peaked in tribes of a maximum of 150 members—about the maximum size of any ape colony—because at this size of a group, too many alpha males exist and the order of the group would fall apart. One part of the group would then follow one alpha male and another part the other. Consequently, the tribe divides and goes its separate ways.

Homo sapiens developed beyond this because we could talk to each other. We could create a rich landscape of information, not just grunts and signs, and began to build stories. By building stories, we could share beliefs and, by sharing beliefs, hundreds of us could work together in tribes, not just one hundred.

The result is that when Homo sapiens villages were attacked by other Homo forms, we could repel them easily. We could also, in return, attack those human forms and annihilate them. And we did. Neanderthals, who share about 99.5 percent of our DNA, died out 40,000 years ago and were the last Homo variation to survive. After that, it was just us human beings, or Homo sapiens if you prefer. Now why is this important as a background to the five ages of man?Because this was the first age. This was the age of enlightenment. It was the age of Gods. It was an age of worshiping the Moon and the Sun, the Earth and the Seas, Fire and Wind. The natural resources of Earth were seen as important symbols with the birds of the sky, the big cats of the Earth, and the snakes of the Earth below seen as key symbols for early humankind.We shared these stories and beliefs and, by doing so, could work together and build civilizations. One of the oldest surviving religions of the world is Hinduism, around three thousand years old, but there were other religions before Hinduism in Jericho, Mesopotamia, and Egypt. The Sun God and the Moon God were fundamental shared beliefs, and these shared beliefs were important because they maintained order. We could work together in larger and larger groups thanks to these shared beliefs.This is why a lot of Old Testament stories in the Bible have much in common with those of the Koran. Jews, Christians, and Muslims all share beliefs in the stories of Adam and Eve, Moses, Sodom and Gomorrah, and Noah, and some of these beliefs even originate from the ancient Hindu beliefs of the world.

Shared beliefs is the core thing that brings humans together and binds them. It is what allows us to work together and get on with each other, or not, as the case may be. The fundamental difference in our shared beliefs, for example, is what drives Daesh today and creates the fundamentalism of Islam, something that many Muslims do not believe in at all.

I will return to this theme since the creation of banking and money is all about a shared belief that these things are important and have value. Without that shared belief, banking, money, governments, and religions would have no power. They would be meaningless.

The Second Age of Man: the Invention of Money

So man became civilized and dominant by being able to work in groups of hundreds. This was unique to Homo sapiens form of communication, as it allowed us to create shared beliefs in the Sun, Moon, Earth, and, over time, Gods, Saints, and Priests.

Eventually, as shared beliefs united us, they joined us together in having leaders. This is a key differential between humans and monkeys. For example, the anthropologist Desmond Morris was asked whether apes believe in God, and he emphatically responded no. Morris, an atheist, wrote a seminal book in the 1960s called The Naked Ape, where he states that humans, unlike apes, “believe in an afterlife because part of the reward obtained from our creative works is the feeling that, through them, we will ‘live on’ after we are dead.”

This is part of our shared belief structure that enables us to work together, live together, and bond together in our hundreds and thousands. Hence, religion became a key part of mankind’s essence of order and structure, and our leaders were those closest to our beliefs: the priests in the temples. As man settled into communities and began to have an organized structure however, it led to new issues. Historically, man had been nomadic, searching the land for food and moving from place to place across the seasons to eat and forage. Where we were deficient in our stores of food, or where other communities had better things, we created a barter system to exchange values with each other.

You have pineapples, I have maize; let’s swap.

You have bright colored beads, I have strong stone and flint; let’s trade.

The barter trade worked well, and allowed different communities to prosper and survive.

Eventually, we saw large cities form. Some claim the oldest surviving city in the world is Jericho, dating back over 10,000 years. Others would point to Eridu, a city formed in ancient Mesopotamia—near Basra in Iraq—7,500 years ago. Either way, both cities are extremely old.

As these cities formed, thousands of people gathered and settled in them because they could support complex, civilized life.

Using Eridu as the focal point, the city was formed because it drew together three ancient civilizations: the Samarra culture from the north; the Sumerian culture, which formed the oldest civilization in the world; and the Semitic culture, which had historically been nomadic with herds of sheep and goats; and it was the Sumerians who invented money.

Money: a new shared belief structure that was created by the religious leaders to maintain control.

In Ancient Sumer, the Sumerians invented money because the barter system broke down. It broke down because of humankind settling into larger groups and farming. The farming and settlement structures introduced a revolution in how humankind operated. Before, people foraged and hunted; now they settled, and farmed together.

Farming resulted in abundance and abundance resulted in the trading system breaking down. Barter does not work when everyone has pineapples and maize. You cannot trade something that someone already has. So there was a need for a new system and the leaders of the time—the government if you prefer—invented it. They invented money. Money is the control mechanism of societies and economies. Countries that have money have respected economies; countries that do not, do not.

BBVA, OpenMind. The First Age: The Creation of Shared Beliefs. Skinner. Sumerian tablets for accounting, with cuneiform writing (c. 3,000–2,000 BC).

How can America and Britain have trillions of dollars of debt, but still be Triple-A rated? Because they have good money flows linked to their economies as global financial centers, binding our shared belief structures together.

As Professor Yuval Noah Harari puts it:

The truly unique trait of [Homo] Sapiens is our ability to create and believe fiction. All other animals use their communication system to describe reality. We use our communication system to create new realities. Of course not all fictions are shared by all humans, but at least one has become universal in our world, and this is money. Dollar bills have absolutely no value except in our collective imagination, but everybody believes in the dollar bill.

So how did the priests invent this shared belief and make it viable?

Sex.

There were two Gods in Ancient Sumer: Baal, the god of war and the elements, and Ishtar,

the goddess of fertility. Ishtar made the land and crops fertile, as well as providing pleasure and love:

Praise Ishtar, the most awesome of the Goddesses,

Revere the queen of women, the greatest of the deities.

She is clothed with pleasure and love.

She is laden with vitality, charm, and voluptuousness.

In lips she is sweet; life is in her mouth.

At her appearance rejoicing becomes full.

This was the key to the Sumerian culture: creating money so that the men could enjoy pleasure with Ishtar. Men would come to the temple and offer their abundant crops to the priests. The priests would place the crops in store for harder times—an insurance against winter when food is short and against crop failure in seasons of blight and drought. In return for their abundance of goods, the priests would give the famers money. A shared belief in a new form of value: a coin.

What could you do with this coin?

Have sex of course. The Greek historian Herodotus wrote about how this worked:

Every woman of the land once in her life [is compelled] to sit in the temple of love and have intercourse with some stranger […] the men pass and make their choice. […] It matters not what be the sum of the money; the woman will never refuse, for that were a sin, the money being by this act made sacred. […] After their intercourse she has made herself holy in the goddess’s sight and goes away to her home; and thereafter there is no bribe however great that will get her. So then the women that are fair and tall are soon free to depart, but the uncomely have long to wait because they cannot fulfill the law; for some of them remain for three years, or four.

So money was sacred and every woman had to accept that she would prostitute herself for money at least once in her life. This is why Ishtar was also known by other names such as Har and Hora, from which the words harlot and whore originate.

It is why prostitution is the oldest profession in the world and accountancy the second oldest. Money was created to support religion and governments by developing a new shared belief structure that allowed society to overproduce goods and crops, and still get on with each other after barter broke down.

The Third Age: the Industrial Revolution

The use of money as a means of value exchange, alongside barter, lasted for hundreds of years or, to be more exact, about 4,700 years. During this time, beads, tokens, silver, gold, and other commodities were used as money, as well as melted iron and other materials. Perhaps the strangest money is that of the Yap Islands in the Pacific that use stone as money.

This last example is a favorite illustration of how value exchange works for bitcoin libertarians, who use the stone ledger exchange systems of the Yap Islands to illustrate how you can then translate this to digital exchange on the blockchain, as it is just a ledger of debits and credits.

The trouble is that stone, gold, and silver is pretty heavy as a medium of exchange. Hence, as the Industrial Revolution powered full steam ahead, a new form of value exchange was needed.

In this context, I use the term “full steam ahead” as a key metaphor, as the timing of the Industrial Revolution is pretty much aligned with steam power. Steam power was first patented in 1606, when Jerónimo de Ayanz y Beaumont received a patent for a device that could pump water out of mines. The last steam patent dates to 1933, when George and William Besler patented a steam-powered airplane.

The steam age created lots of new innovations, but the one that transformed the world was the invention of the steam engine. This led to railways and transport from coast to coast and continent to continent. Moving from horse power to steam power allowed ships to steam across oceans and trains across countries. It led to factories that could be heated and powered, and to a whole range of transformational moments culminating in the end of the nineteenth-century innovations of electricity and telecommunications. The move from steam to electricity moved us away from heavy-duty machinery to far lighter and easier communication and power structures. Hence, the Industrial Revolution ended when we moved from factories to offices but, between 1606 and 1933, there were massive changes afoot in the world of commerce and trade.

Within this movement of trade, it was realized that a better form of value exchange was needed, as carrying large vaults of gold bullion around was not only heavy but easily open to attack and theft. Something new was needed. There had already been several innovations in the world—the Medici bankers created trade finance and the Chinese had already been using paper money since the ninth century—but these innovations did not go mainstream until the Industrial Revolution demanded it. And this Revolution did demand a new form of value exchange.

Hence, the governments of the world started to mandate and license banks to enable economic exchange. These banks appeared from the 1600s, and were organized as government-backed entities that could be trusted to store value on behalf of depositors. It is for this reason that banks are the oldest registered companies in most economies. The oldest surviving British financial institution is Hoares Bank, created by Richard Hoare in 1672. The oldest British bank of size is Barclays Bank, first listed in 1690. Most UK banks are over two hundred years old, which is unusual as, according to a survey by the Bank of Korea, there are only 5,586 companies older than two hundred years with most of them in Japan.

Banks and insurance companies have survived so long as large entities—it is notable that they are large and still around after two to three hundred years—because they are government instruments of trade. They are backed and licensed by governments to act as financial oil in the economy, and the major innovation that took place was the creation of paper money, backed by government, as the means of exchange.

Paper bank notes and paper checks were created as part of this new ecosystem, to make it easier to allow industry to operate. At the time, this idea must have seemed most surprising. A piece of paper instead of gold as payment? But it was not so outrageous.

Perhaps this excerpt from the Committee of Scottish Bankers provides a useful insight as to why this idea took root:

The first Scottish bank to issue banknotes was Bank of Scotland. When the bank was founded on 17th July 1695, through an Act of the Scottish Parliament, Scots coinage was in short supply and of uncertain value compared with the English, Dutch, Flemish or French coin, which were preferred by the majority of Scots. The growth of trade was severely hampered by this lack of an adequate currency and the merchants of the day, seeking a more convenient way of settling accounts, were among the strongest supporters of an alternative.

Bank of Scotland was granted a monopoly over banking within Scotland for twenty-one years. Immediately after opening in 1695 the Bank expanded on the coinage system by introducing paper currency.

This idea was first viewed with some suspicion. However, once it became apparent that the Bank could honor its “promise to pay,” and that paper was more convenient than coin, acceptance spread rapidly and the circulation of notes increased. As this spread from the merchants to the rest of the population, Scotland became one of the first countries to use a paper currency from choice.

And the check book? The UK’s Cheque & Credit Clearing Company provides a useful history:

By the seventeenth century, bills of exchange were being used for domestic payments as well as international trades. Cheques, a type of bill of exchange, then began to evolve. They were initially known as ‘drawn notes’ as they enabled a customer to draw on the funds they held on account with their banker and required immediate payment […] the Bank of England pioneered the use of printed forms, the first of which were produced in 1717 at Grocers’ Hall, London. The customer had to attend the Bank of England in person and obtain a numbered form from the cashier. Once completed, the form had to be authorized by the cashier before being taken to a teller for payment. These forms were printed on ‘cheque’ paper to prevent fraud. Only customers with a credit balance could get the special paper and the printed forms served as a check that the drawer was a bona fide customer of the Bank of England.

In other words, the late seventeenth century saw three major innovations appear at the same time: governments giving banks licenses to issue bank notes and drawn notes; checks, to allow paper to replace coins; and valued commodities.

The banking system then fuelled the Industrial Revolution, not only enabling easy trading of value exchange through these paper-based systems, but also to allow trade and structure finance through systems that are similar to those we still have today.The oldest Stock Exchange in Amsterdam was launched in 1602 and an explosion of banks appeared in the centuries that followed to enable trade, supporting businesses and governments in creating healthy, growing economies. A role they are still meant to fulfill today. During this time, paper money and structured investment products appeared, and large-scale international corporations began to develop, thanks to the rise of large-scale manufacturing and global connections. So the Industrial Revolution saw an evolution of development, from the origins of money that was enforced by our shared belief systems, to the creation of trust in a new system: paper. The key to the paper notes and paper check systems is that they hold a promise to pay which we believe will be honored. A bank note promises to pay the bearer on behalf wof the nation’s bank and is often signed by that country’s bank treasurer. A check is often reflective of society of the time, and shows how interlinked these value exchange systems were with the industrial age. In summary, we witness three huge changes in society over the past millennia of mankind: the creation of civilization based upon shared beliefs; the creation of money based upon those shared beliefs; and the evolution of money from belief to economy, when governments backed banks with paper.

The Fourth Age of Man: the Network Age

The reason for talking about the history of money in depth is as a backdrop to what is happening today. Money originated as a control mechanism for governments of Ancient Sumer to control farmers, based upon shared beliefs. It was then structured during the Industrial Revolution into government-backed institutions—banks—which could issue paper notes and checks that would be as acceptable as gold or coinage, based upon these shared beliefs. We share a belief in banks because governments say they can be trusted, and governments use the banks as a control mechanism that manages the economy.

So now we come to bitcoin and the Internet age, and some of these fundamentals are being challenged by the Internet. Let us take a step back and see how the Internet age came around.

Some might claim it dates back to Alan Turing, the Enigma machine, and the Turing test, or even further back to the 1930s when the Polish Cipher Bureau were the first to decode German military texts on the Enigma machine. Enigma was certainly the machine that led to the invention of modern computing, as British cryptographers created a programmable, electronic, digital, computer called Colossus to crack the codes held in the German messages.

Colossus was designed by the engineer Tommy Flowers, not Alan Turing—he designed a different machine—and was operational at Bletchley Park from February 1944, two years before the American computer ENIAC appeared. ENIAC, short for Electronic Numerical Integrator and Computer, was the first electronic general-purpose computer. It had been designed by the US Military for meteorological purposes—weather forecasting—and delivered in 1946.

When ENIAC launched, the media called it “the Giant Brain,” with a speed a thousand times faster than any electromechanical machines of its time. ENIAC weighted over 30 tons and took up 167.4 square meters (1800 square feet) of space. It could process about 385 instructions per second.

Compare that with an iPhone6 that can process around 3.5 billion instructions per second, and this was rudimentary technology, but we are talking about seventy years ago, and Moore’s Law had not even kicked in yet.

The key is that Colossus and ENIAC laid the groundwork for all modern computing, and became a boom industry in the 1950s. You may think that surprising when, back in 1943, the then President of IBM, Thomas Watson, predicted that there would be a worldwide market for maybe five computers. Bearing in mind the size and weight of these darned machines, you could see why he thought that way but my, how things have changed today.

However, we are still in the early days of the network revolution and I am not going to linger over the history of computers here. The reason for talking about ENIAC and Colossus was more to put our current state of change in perspective. We are seventy years into the transformations that computing is giving to our world.

Considering it was 330 years from the emergence of steam power to the last steam-power patent, that implies there is a long way to go in our transformation.

Let us first consider the fourth age in more depth as the key difference between this age and those that have gone before is the collapse of time and space. Einstein would have a giggle, but it is the case today that we are no longer separated by time and space as we were before. Distance is collapsing every day, and it is through our global connectivity that this is the case.

We can talk, socialize, communicate, and trade globally, in real time, for almost free. I can make a Skype call for almost no cost to anyone on the planet and, thanks to the rapidly diminishing costs of technology, there are $1 phones out there today, while the cheapest smartphone in the world is probably the Freedom 251. This is an Android phone with a 10.16-centimeter (4-inch) screen that costs just 251 rupees in India, around $3.75. In other words, what is happening in our revolution is that we can provide a computer that is far more powerful than anything before, and put it in the hands of everyone on the planet so that everyone on the planet is on the network.

Once on the network, you have the network effect, which creates exponential possibilities, since everyone can now trade, transact, talk, and target one-to-one, peer-to-peer.

This is why I think of the network as the fourth age of man and money, as we went from disparate, nomadic communities in the first age; to one that could settle and farm in the second; to one that could travel across countries and continents in the third; to one that is connected globally, one-to-one. This is a transformation and shows that man is moving from single tribes to communities to connected communities to a single platform: the Internet.

The importance of this is that each of these changes has seen a rethinking of how we do commerce, trade, and therefore finance. Our shared belief system allowed barter to work until abundance undermined bartering, and so we created money; our monetary system was based upon coinage, which was unworkable in a rapidly expanding industrial age, and so we created banking to issue paper money. Now, we are in the fourth age, and banking is no longer working as it should. Banks are domestic, but the network is global; banks are structured around paper, but the network is structured around data; banks distribute through buildings and humans, but the network distributes through software and servers. This is why so much excitement is hitting mainstream as we are now at the cusp of the change from money and banking to something else. However, in each previous age, the something else has not replaced what was there before. It has added to it. Money did not replace bartering; it diminished it. Banking did not replace money; it diminished it. Something in the network age is not going to replace banking, but it will diminish it. By diminish, we also need to put that in context.

Diminish. Barter is still at the highest levels it has ever been—about 15 percent of world trade is in a bartering form—but it is small compared to the monetary flows. Money in its physical form is also trading at the highest levels it has ever seen—cash usage is still rising in most economies—but it is not high compared to the alternative forms of monetary flow digitally, and in FX markets and exchanges. In other words, the historical systems of value exchange are still massive, but they are becoming a smaller percentage of trade compared with the newest structure we have implemented to allow value to flow.

This is why I am particularly excited about what the network age will do, as we connect one-to-one in real time, since it will create massive new flows of trade for markets that were underserved or overlooked. Just look at Africa. African mobile subscribers take to mobile wallets like ducks to water. A quarter of all Africans who have a mobile phone have a mobile wallet, rising to pretty much every citizen in more economically vibrant communities like Kenya, Uganda, and Nigeria. This is because these citizens never had access to a network before; they had no value exchange mechanism, except a physical one that was open to fraud and crime. Africa is leapfrogging other markets by delivering mobile financial inclusion almost overnight.

The same is true in China, India, Indonesian, the Philippines, Brazil, and many other underserved markets. So the first massive change in the network effect of financial inclusion is that the five billion people who previously had zero access to digital services are now on the network.

A second big change then is the nature of digital currencies, cryptocurrencies, bitcoin, and shared ledgers. This is the part that is building the new rails and pipes for the fourth generation of finance, and we are yet to see how this rebuilding works out. Will all the banks be based on an R3 blockchain? Will all clearing and settlement be via Hyperledger? What role will bitcoin play in the new financial ecosystem?

We do not know the answers to these questions yet, but what we will see is a new ecosystem that diminishes the role of historical banks, and the challenge for historical banks is whether they can rise to the challenge of the new system.

The Fourth Age of Moneykind is a digital networked value structure that is real time, global, connected, digital, and near free. It is based upon everything being connected from the seven billion humans communicating and trading in real time globally to their billions of machines and devices, which all have intelligence inside. This new structure obviously cannot work on a system built for paper with buildings and humans, and is most likely to be a new layer on top of that old structure.

A new layer of digital inclusion that overcomes the deficiencies of the old structure. A new layer that will see billions of transactions and value transferred at light speed in tiny amounts. In other words, the fourth age is an age where everything can transfer value, immediately and for an amount that starts at a billionth of a dollar if necessary.

This new layer for the fourth age is therefore nothing like what we have seen before and, for what was there before, it will supplement the old system and diminish it. Give it half a century and we will probably look back at banking today as we currently look back at cash and barter. They are old methods of transacting for the previous ages of man and moneykind.

This fourth age is digitizing value, and banks, cash, and barter will still be around but will be a much less important part of the new value ecosystem. They may still be processing volumes greater than ever before, but in the context of the total system of value exchange and trade, their role is less important.

In conclusion, I do not expect banks to disappear, but I do expect a new system to evolve that may include some banks but will also include new operators who are truly digital. Maybe it will be Google’s, Baidu’s, Alibaba’s, and Facebook’s; or maybe it will be Prosper’s, Lending Club’s, Zopa’s, and SoFi’s. We do not know the answer yet and if I were a betting man, I would say it will be a hybrid mix of all, as all evolve to the Fourth Age of Moneykind.

The hybrid system is one where banks are part of a new value system that incorporates digital currencies, financial inclusion, micropayments, and peer-to-peer exchange, because that is what the networked age needs. It needs the ability for everything with a chip inside to transact in real time for near free. We are not there yet but, as I said, this revolution is in its early days. It is just seventy years old. The last revolution took 330 years to play out. Give this one another few decades and then we will know exactly what we built.

The Next Age of Moneykind: The Future

Having covered four ages of moneykind—barter, coins, paper, chips—what could possibly be the fifth?

When we are just at the start of the Internet of Things (IoT), and are building an Internet of Value (ValueWeb), how can we imagine something beyond this next ten-year cycle?

Well we can and we must, as there are people already imagining a future beyond today. People like Elon Musk, who see colonizing Mars and supersmart high-speed transport as a realizable vision. People like the engineers at Shimzu Corporation, who imagine building city structures in the oceans. People like the guys at NASA, who are launching space probes capable of sending us HD photographs of Pluto when, just a hundred years ago, we only just imagined it existed.

A century ago, Einstein proposed a space-time continuum that a century later has been proven. What will we be discovering, proving, and doing a century from now?

No one knows, and most predictions are terribly wrong. A century ago they were predicting lots of ideas, but the computer had not been imagined, so the network revolution was unimaginable. A century before this, Victorians believed the answer to the challenge of clearing horse manure from the streets was to have steam-powered horses, as the idea of the car had not been imagined. So who knows what we will be doing a century from now.

2116. What will the world of 2116 look like?

Well there are some clues. We know that we have imagined robots for decades, and robots must surely be pervasive and ubiquitous by 2116 as even IBM are demonstrating such things today. A century from now we know we will be travelling through space, as the Wright Brothers invented air travel a century ago and look at what we can do today.

Emirates now offer the world’s longest nonstop flight with a trip from Auckland to Dubai lasting 17 hours and 15 minutes. We are already allowing reusable transport vehicles to reach the stars and, a century from now, we will be beyond the stars I hope.

Probably the largest and most forecastable change is that we will be living longer. Several scientists believe that most humans will live a century or more, with some even forecasting that a child has already been born who will live for 150 years.

A child has been born who will live until 2166. What will they see?

And we will live so long because a little bit of the machine will be inside the human and a little bit of the human will be inside the machine. The Robocop is already here, with hydraulic prosthetics linked to our brainwaves able to create the bionic human. Equally, the cyborg will be arriving within thirty-five years according to one leading futurist. Add to this smorgasbord of life extending capabilities from nano-bots to leaving our persona on the network after we die, and the world is a place of magic become real.

We have smart cars, smart homes, smart systems and smart lives. Just look at this design for a window that becomes a balcony and you can see that the future is now.

Self-driving cars, biotechnologies, smart networking, and more will bring all the ideas of Minority Report and Star Trek to a science that is no longer fiction, but reality.

It might even be possible to continually monitor brain activity and alert health experts or the security services before an aggressive attack, such as in Philip K. Dick’s dystopian novella Minority Report.

So, in this fifth age of man where man and machine create superhumans, what will the value exchange system be?

Well it will not be money and probably will not even be transactions of data, but some other structure. I have alluded to this other structure many times already as it is quite clear that, in the future, money disappears. You never see Luke Skywalker or Captain Kirk pay for anything in the future, and that is because money has lost its meaning.

Money is no longer a meaningful system in the fifth age of man. Having digitalized money in the fourth age, it just became a universal credit and debit system. Digits on the network recording our taking and giving; our living and earning; our work and pleasure.

After robots take over so many jobs, and man colonizes space, do we really think man will focus upon wealth management and value creation, or will we move beyond such things to philanthropic matters. This is the dream of Gene Rodenberry and other space visionaries, and maybe it could just come true. After all, when you become a multibillionaire, your wealth becomes meaningless. This is why Bill Gates, Warren Buffet, and Mark Zuckerberg start to focus upon philanthropic structures when money and wealth become meaningless.

So could the fifth age of man—the man who lives for centuries in space—be one where we forget about banking, money, and wealth, and focus upon the good of the planet and mankind in general? If everyone is in the network and everyone has a voice, and the power of the one voice can be as powerful as the many, do we move beyond self-interest?

I have no idea, but it makes for interesting questions around how and what we value when we become superhumans thanks to life extending and body engineering technologies; when we move beyond Earth to other planets; and when we reach a stage where our every physical and mental need can be satisfied by a robot.

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Источник: https://www.bbvaopenmind.com/en/articles/the-past-present-and-future-of-money-banking-and-finance/

Learning from Crises

The 2020 pandemic hit two sources of constant engagement for the Indian public: cinema and cricket. Both are slowly reviving as we get used to the ‘new normal’. However, while they were missing, a totally unimagined source was providing drama and frenzy for spectators: Indian banking. In the memorable words of Bill Lawry, former Australian cricket captain turned commentator: “It is all happening here.”

The Indian banking sector had started buzzing much before the pandemic, with rising Non-Performing Assets, failures of commercial banks, failures of non-banks and housing finance companies, frauds, and mergers of public sector banks. During the pandemic, several big borrowers were not being able to repay loans, leading to loan moratoriums. There was the added masala of boardroom battles, as in Yes Bank, and of shareholders firing directors and promoters at Lakshmi Vilas Bank and Dhanlaxmi Bank. Even as depositors eyed banks with nervousness, there was a googly from an unexpected corner. A committee of the Reserve Bank of India (RBI) suggested that the central bank could consider allowing corporates to become promoters of banks, a controversial measure that has been opposed for a long time.

The Banking Regulation Act, 1949 continues to define RBI’s present-day policy […] this history shapes responses to the current crisis.

In all this drama, RBI has become the central point of discussion. Some have praised the central bank for intervening and protecting depositors’ funds, while others have criticised the central bank for not being proactive and for allowing failures to develop over time.

Most commentators have ignored the fact that RBI has taken these decisions based on the existing legal structure. The Banking Regulation Act, 1949 continues to define RBI’s present-day policy. In this piece, we analyse the evolution of banking regulation in India and reflect on how this history shapes responses to the current crisis.

Mark Twain famously said, “History does not repeat itself but often rhymes”. This is quite true when we compare banking crises over time not just in India but even across economies.

Banks fail due to a set of common microeconomics factors: low capital and reserves, greed for high profits, poor governance, and frauds. A common macroeconomic factor is that banking typically follows the business cycle. Banking grows sharply as the economy starts to grow, but as the growth cycle reverses there are high Non-Performing Assets (loans which have defaulted) and losses.

What makes each crisis unique is that the political economy and overall economic conditions vary across times. 

Before the establishment of RBI in 1935, banks entered and exited the system freely without any regulation. Modern banks in India were initially governed under the Joint-stock Companies Act, 1857 and later by the Indian Companies Act, 1913. Imposing company law on banking left several regulatory gaps, which were quickly exploited by the banks. The RBI, after it was established, pointed out the need to have separate legislation for the sector as banking had its own idiosyncrasies.

The central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape.

The advent of RBI led to changes, but the central bank had a steep learning curve from the two spectacular banking failures that changed the regulatory landscape. The failure of the Travancore National and Quilon Bank (TNQ Bank) in 1938 was due to both political and economic reasons (RBI 1970). But the existing laws were not adequate for the RBI to be a lender of the last resort to the bank or to restructure the bank. Following this, the-then RBI governor James Taylor prepared a proposal in 1939 for legislation on the lines of acts in US, Canada, and select European countries. World War II and Independence delayed the acceptance of the proposal and the Banking Regulation Act had to wait till 1949.

The new act limited the use of ‘bank’ and allied terms to a specific set of institutions, prescribed minimal capital and reserve requirements, and banned the practice of common directors across banks and lending to directors. It also gave RBI powers of inspection over banks and to suspend operations of banks if they could not honour their debts.

The second crisis came in 1960 when RBI was shaken by the failure of the Palai Central Bank (RBI 1998). Like TNQ Bank, this bank too was from the erstwhile princely state of Travancore, which had by then become part of Kerala. Unlike in the case of TNQ Bank, RBI had more time to handle the crisis at Palai Central. It gave time to the bank management to resolve the concerns of misgovernance and bad loans. However, the bank management ignored RBI advice. The bank was large and its failure created a run on several such banks in Kerala.




Following the failure, in the mid-1960s, RBI got additional powers to enforce amalgamations and to quickly 'de-license' banks. Earlier, moratoriums were requested by banks, but now RBI could impose moratoriums. It could also force mergers of weak banks with stronger banks (a strategy RBI has used multiple times into the present). The government also instituted the Deposit Insurance Act in 1961 to protect savers’ accounts, which helped stall bank failures and infused confidence in the banking system.

After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.

These developments had a marked effect on bank stability. On an average 16 banks failed every year between 1913 and 1934, before the establishment of RBI. This increased four times to 67 during the period 1935-48. After the Banking Regulation Act, failures almost halved during the period 1949-60. The regulatory regime put in place following the collapse of the Palai Central Bank further lowered the number of failed banks.




In 1969 and 1980, the government nationalised major banks and stopped licencing new banks. RBI also continued to weed out weaker private banks by merging them with larger ones. The number of private banks declined to 24 in 1995 from 50 in 1969. No new banks came up until after the economic reforms of 1991.




In 1994 the RBI licenced 10 new private sector banks. The experience with them has been mixed with both failures and successes. Five of them have had financial difficulties. Of the five, four were merged with other banks: Global Trust Bank (GTB), Bank of Punjab, Centurion Bank (renamed as Centurion Bank of Punjab in 2005), and Times Bank. GTB in particular led to infamy for both promoters and regulation. The bank was mired in lending to stockbroker Ketan Parekh, who was accused of manipulating the stock market. The fifth, IDBI Bank, was recently taken over by LIC but has continued to maintain its identity.

RBI licenced four more banks in the 2000s, including Yes Bank which last year was hit by a crisis and was taken over by a group of banks led by SBI. Overall, of the 14 new private banks licenced since 1994, four do not exist anymore and two others were taken over by other financial institutions and banks following financial troubles. So, we continue to have 10 banks in the new category.

The current banking crisis also rhymes with previous crises.

The crisis is similar on account of microeconomic and business cycle factors. The reasons for failure too are similar to those in the past. Indian banking expanded significantly in the 2004-08 period, tracking high growth in the Indian economy. There was a minor blip due to the 2008 crisis. However, as the economy recovered quickly, the banking sector continued to grow. Slowing economic growth in 2012-2013 brought problems to light as NPAs began to rise. The NPA problem was revealed to be worser that expected after the RBI’s Asset Quality Reviews in 2015.

The difference this time is that the crisis is not limited to commercial banks. It started with public sector banks but has quickly engulfed cooperative banks, NBFCs and housing finance companies, and the new and old private banks. Each of these categories has its own story.

The new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble.

In the high growth phase, public sector banks were pushed into giving loans to the infrastructure sector and industrial projects with long gestation periods. This was partly because the development financial institutions established to fund these activities, such as ICICI and IDBI, had been converted to regular banks. The push was also to showcase India’s potential as an investment destination where infrastructure plays a crucial role. Loans to these projects, which take long periods to complete and generate returns, worsened the banks’ assets-to-liabilities mismatches (the bulk of bank deposits are short-term deposits). Once the business cycle reversed and the UPA-2 government got mired in several scams, many projects were stalled. This led to rising NPAs at the banks.

The reversal of the business cycle was not the lone factor for PSBs’ woes. There were several cases of frauds and misgovernance. While this led to finger-pointing at RBI’s regulatory role, former RBI governor Urjit Patel in 2018 highlighted that RBI could do little to regulate PSBs. The finance ministry has had control over regulation and appointments at PSBS since bank nationalisation. This dual regulatory structure was problematic earlier as well but has shown its real weaknesses in the current crisis.

The weakness in cooperative banks is on account of another kind of dual regulation, where powers are divided between RBI and state governments. This had fed the usual villains of misgovernance and frauds. While RBI has been cleaning up the cooperative banks for a while now, the crisis at the large Punjab & Maharashtra Cooperative bank has led to renewed attention.

Old private sector banks suffered from a different dual problem: of promoters also acting as directors. Promoter-directors directed all major decisions in the bank, from appointing board members to employment to credit decisions. RBI has been cleaning up governance in these banks. But there is a long way to go, as seen in cases of Lakshmi Vilas Bank and Dhanlaxmi Bank, where the shareholders voted out senior management following crises.

But the new private sector banks are the biggest thorn in the current crisis. These banks were licenced amidst huge hype and expectations, yet nearly half of them have run into financial trouble. The case of Yes Bank was especially shocking as it was once a cynosure of Indian banking and boasted of profession management. In its failings though, Yes Bank resembled an old private sector bank where the promoter controlled everything around the bank.

Unlike other banking institutions, RBI had full powers to regulate and supervise Yes Bank. It is not clear how the regulator allowed the bank’s faults to emerge in the first place. It was ironical that a consortium led by State Bank of India, the oldest public sector bank, had to bail out one of the country’s newest banks.

The current crisis has elements of previous crises yet is different as it is more broad-based.

Large Non-Banking Finance Companies like IL&FS failed from misgovernance and from funding several dubious projects. IL&FS believed it was ‘too big to fail’, facing the same fate as Lehman Brothers which thought similarly. Smaller NBFCs suffered as banks were their largest source of funds. With banks in crisis, they restricted lending to NBFCs, almost a repeat of the 2008 crisis. Housing Finance Companies like Dewan Housing Finance Corporation failed for similar reasons as IL&FS. This sector was regulated by National Housing Bank, yet the blame was placed on RBI.

The above analysis shows how the current crisis has elements of previous crises yet is different as it is more broad-based. Both the central government and RBI have responded to the crisis in their own ways.

The government’s approach has been ad-hoc. It instituted a Banking Boards Bureau to appoint senior management of PSBs, but the finance ministry continues to intervene. The government infused capital in PSBs and merged smaller PSBs with larger ones to lower the number of PSBs to 12 from 27. To infuse confidence amidst depositors, the government hiked the deposit insurance on savings accounts to Rs 5 lakhs from Rs 1 lakh. RBI has been given more powers, including the regulation of HFCs and greater oversight of NBFCs. Dual regulation for cooperative banks may soon end. However, there is still no solution in sight for ending the dual regulation of PSBs.

The RBI has had several institutional changes. It is streamlining its regulation and supervision functions. The central bank is building a new cadre of specialized banking supervisors to look at risks across different bank types and not see commercial, cooperative and NBFCs in silos. As risks transfer quickly across markets and banking types, it is important supervisors see risks similarly as well.

“The Reserve Bank's powers are not [...] a substitute for the efficiency and integrity of the managements themselves.”

RBI has also established a College of Supervisors “to augment and reinforce supervisory skills among its regulatory and supervisory staff.” The college is supported by an Academic Advisory Council comprising bankers and academicians to benchmark the supervisory practices with the best in the world. RBI has also issued a paper on improving governance in Banks and asked all banks to appoint a Chief Compliance Officer in their respective organisations.

The current crisis is a reminder of two, often forgotten, aspects of banking.

First, banking crises are not new and come in different shapes and sizes. They can surprise you even when the economy is doing well, in the 2008 crisis in case of global banks and the post-2008 crisis in case of Indian banks.

Second, regulation evolves with developments and failures in banking. The Banking Regulation Act, with its amendments between 1949 and 1960, continues to be the main tool with the RBI to handle the current crisis. There is a need for a more comprehensive review of the act to identify gaps and look towards the future. The banking industry is changing dramatically with the advent of technology and future risks could be from different sources.

Even with all these changes, we must realize that there is only so much any law or regulator can do. The Eastern Economist in 1949 termed Banking Regulation Act as a “colossal burden that a single institution is being called upon to have in policy-making as well as day-to-day administration of the country’s banking system” (Cited in RBI 1970). These words continue to be true as RBI now has additional powers to regulate NBFCs and HFCs. Yet despite these powers, the words of former RBI governor HVR Iyengar in 1960 tell us that RBI can only do so much:

“The Reserve Bank's powers are not [...] a substitute for the efficiency and integrity of the managements themselves [...] In the final resort, if a management does not listen to advice and chooses to be recalcitrant and it is felt that continued pressure would be useless, the Reserve Bank would have no option but to close down [the bank] in the interests of the depositors. But this decision involves a delicate balancing of several factors, some of them operational, some psychological.” (Cited in RBI 1998)

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Источник: https://www.theindiaforum.in/article/crisis-crisis

Future of banking is a digital business model

The banking industry of the future will look radically different from what it is today driven by some evolutionary changes. It would be safe to say that the future of banking is ‘Digital’. The pandemic has reshaped our lives from how we shop, travel, work, to even how we bank, and has also driven a change in consumer behaviour. Driven by the pandemic, the social and economic landscape has been radically reshaped while customer needs and expectations continue to dynamically evolve.

Consumers have become more demanding of digital experiences. The pandemic has only amplified the need for easy access to banking products, services and information. Given most customers are now comfortable using online channels, the traditional ‘customer loyalty’ for physical proximity of branch would now be influenced by personalization and customization provided through digital offerings. Some of the key purchase drivers would be ‘Value for money’, ‘Ease of buying’, ‘Personal safety’, ‘Customer Experience’ and ‘Personalization’.

Globally, the market has been flooded with a new wave of growing neo banks. Unlike traditional banking, these are not burdened by legacy technology and are operating with greater agility, neo banks can offer personalized experience and seamless interaction craved by a generation who demands a smart digital experience. Neo banks have not yet become the primary banking service for the customers and customers fall back on traditional banking channels only for primary banking. Having said that, the traditional banks will have to scale up in terms of their offerings and services to cater to their customers with changing behaviours which can be achieved by going ‘Digital’.

For most of the traditional banks, security and cost-efficiency are strong motivators for going digital. With an increasing number of specialized banks and FinTechs, competition for acquiring new customers and retention of existing customers has never been higher. The advantage these traditional banks have over the specialized banks and FinTechs is that they have a 360-degree offering in terms of products and services. They just need to adapt to the customer-first approach in this ever-changing environment to continue to lead the space.

Emerging Technologies

Several emerging technologies will combine to redefine the bank-customer relationship forever. We expect to see a rapid uptake of open banking approaches and models as people become more aware of the benefits it can provide to consumers and small to medium enterprises viz. the ability to quickly understand their financial position, explore alternatives and make better financial decisions. As technology reshapes how we live and communicate, this will have an impact in several ways including a hyper-connected world as the norm, open banking services, engagement as a service and the rise of the ‘super-app’.

Super Apps

Super apps as emerging technology essentially serve as a single portal or app to a wide range of virtual products and services. The most sophisticated apps bundle together online messaging, social media, marketplaces and services. One app, one sign-in, one user experience, for virtually any product or service a customer may want or need.

Emerging Payment Technologies

For the longest of time, traditional banks were the kings of payments. Throughout the debit card era and well into the digital era, banks held a virtual monopoly over the payment’s ecosystem. This landscape is also changing and over the past few years, we have seen the rise of a range of new payment service providers and UPI emerging as a major payment option for most Indians. Some payment platforms have created vast 'merchant' networks through their online presence and partnerships with some of the bigger platform players. Others have found a niche in their own areas, often responding to specific customer pain points in the payment environment. The industry would see several payment options which would dominate the future broadly revolving around Biometric Authentication, Invisible payments, Voice enabled payments, Face recognition, QR Code Payments, etc.

Technology will continue to evolve at a rapid pace and emerging concepts such as augmented reality and distributed ledger technology will further redefine banking services. The above technologies will combine to redefine the bank-customer relationship, making banking more personalized across customer devices. Now, with low code development, ease of integration capabilities and cloud, the technology element of digital transformation is no longer the difficult part. The signals of change are driving an evolution across the retail banking sector, and our research tells us that in order to achieve profitable growth banks will need to pivot to a digital business model ecosystem to succeed.

The author is Partner and Head, Financial Services Advisory, KPMG in India. Views are personal.

(For front-line insights on how the future of banking, digital payments and markets will look like tune in to ET India Inc Boardroom from 22-26 February and hear from CEOs and thought leaders. Register now on www.etboardroom.com.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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Источник: https://economictimes.indiatimes.com/industry/banking/finance/banking/future-of-banking-is-a-digital-business-model/articleshow/80923490.cms

6 ways the pandemic has changed businesses

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This article is part of the Pioneers of Change Summit

  • Sectors like healthcare and banking are battered but not beaten by COVID-19 disruption, McKinsey analysis finds.
  • Digital delivery features large in the post-pandemic futures of six sectors.
  • The World Economic Forum’s ‘Pioneers of Change Summit’ will showcase solutions for a ‘Great Reset’ across industries and regions.

Even with the promise of a vaccine edging closer, economic recovery could be years away for some sectors.

Yet companies that reimagine their operations will perform best in the next normal, according to management consultancy, McKinsey & Company.

In its executive briefing on COVID-19, McKinsey takes a look at how things might develop in six sectors.

1. Auto industry – down, but not out

Pandemic disruption will wipe $100 billion off the auto industry’s profits, McKinsey predicts, with sales expected to drop by 20 to 30% in 2020. But automakers were already facing disruptions before COVID – including driverless cars, automated factories and ridesharing – and the industry can bounce back, it says.

Opportunities include the huge shift to online shopping and the rise of software-subscription services, which enable people to pay for programmes that unlock features like heated seating or full self-driving capabilities, McKinsey says.

Restaurant industry – innovation still on the menu

Indoor dining in restaurants may not return to pre-crisis levels for months – or possibly even years, McKinsey warns. For full-service restaurant operators, it means developing a new long-term economic model.

There are opportunities to optimize takeaway and drive-through operations and re-engineer menus and pricing. This might include finding the right balance of special offers and "high-margin items such as appetizers, sides, desserts and beverages,” McKinsey suggests.

Banking industry – digital decision-making pays off

For banks, the pandemic has changed everything. “Risk-management teams are running hard to catch up with cascades of credit risk, among other challenges,” McKinsey says. The company expects that automated underwriting will come into force for retail and small-business customers and that this will reduce losses.

Calculating the creditworthiness of a small business using software, rather than having staff make these decisions, could raise margins by 5-10%, McKinsey says.

4. Insurance industry – merger partners at a premium

Mergers and acquisitions (M&A) – particularly in the insurtech (insurance technology) space – will be a key strategy for traditional insurers, McKinsey says.

Insurtechs and fintechs (financial technology companies) have been among the most responsive to customers during the COVID-19 crisis and were the first to launch products focused on the pandemic.

“For example, one Chinese insurtech released an array of such products that covered nearly 15 million people after only a few months on the market,” McKinsey notes.

5. Healthcare industry – delivering at a distance

COVID-19 has hugely accelerated the growth of digital healthcare. In 2019, 11% of US customers used telehealth. Now, 46% are using it to replace cancelled healthcare visits, McKinsey notes.

India’s Apollo Hospitals, which comprises more than 7,000 physicians and 30,000 other healthcare professionals, launched a digital health app, Apollo 24/7, in early 2020. Within six months, the app had enrolled four million people, with around 30,000 downloads a day.

Public-private partnerships are also working well and have the potential to “influence the future of healthcare,” McKinsey says.

6. Education – learning to adapt

In education, the pandemic has amplified existing challenges around inclusion, inequalities and drop-out rates. For example, lower-income students are 55% more likely to delay graduation due to the COVID-19 crisis than their higher-income peers, McKinsey warns.

With remote and online learning here to stay, institutions have a “once-in-a-generation chance” to reconfigure their use of physical and virtual space.

“They may be able to reduce the number of large lecture halls, for example, and convert them into flexible working pods or performance spaces,” McKinsey suggests. “Or they could reimagine the academic calendar, offering instruction into the summer months.”

The World Economic Forum’s inaugural Pioneers of Change Summit on 16-20 November will convene innovative leaders and entrepreneurs from around the world to showcase their solutions, build meaningful connections and inspire change across the Forum’s diverse multi-stakeholder communities.

The digital event is an opportunity to share and develop mechanisms for driving a Great Reset across industries and regions.

Individuals can sign up to follow the event, while companies can participate in the summit by becoming a member of the Forum’s New Champions Community of high-growth companies.

The first global pandemic in more than 100 years, COVID-19 has spread throughout the world at an unprecedented speed. At the time of writing, 4.5 million cases have been confirmed and more than 300,000 people have died due to the virus.

As countries seek to recover, some of the more long-term economic, business, environmental, societal and technological challenges and opportunities are just beginning to become visible.

To help all stakeholders – communities, governments, businesses and individuals understand the emerging risks and follow-on effects generated by the impact of the coronavirus pandemic, the World Economic Forum, in collaboration with Marsh and McLennan and Zurich Insurance Group, has launched its COVID-19 Risks Outlook: A Preliminary Mapping and its Implications - a companion for decision-makers, building on the Forum’s annual Global Risks Report.

Companies are invited to join the Forum’s work to help manage the identified emerging risks of COVID-19 across industries to shape a better future. Read the full COVID-19 Risks Outlook: A Preliminary Mapping and its Implications report here, and our impact story with further information.

The views expressed in this article are those of the author alone and not the World Economic Forum.

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Источник: https://www.weforum.org/agenda/2020/11/covid-19-innovation-business-healthcare-restaurants/

The World Bank In India

THE WORLD BANK GROUP AND INDIA

The World Bank Group’s (WBG) over seven decade-long partnership with India is strong and enduring. Since the first loan to Indian Railways in 1949, the WBG’s financing, analytical work, and advisory services have contributed to the country’s development. International Development Association – the WBG’s soft-lending arm created for developing countries like India - has supported activities that have had a considerable impact on universalizing primary education; empowering rural communities through a series of rural livelihoods projects; revolutionizing agriculture through support of the Green and White (milk) Revolutions; and helping to combat polio, tuberculosis, and HIV/AIDS.   In FY18, the relationship reached a major milestone when India became a low middle-income country and graduated from International Development Association financing.

COUNTRY PARTNERSHIP FRAMEWORK

The WBG’s present engagement with India is guided by its Country Partnership Framework for FY18-22 (CPF).  The CPF builds on the decades-long partnership and seeks to address the country’s development aspirations and priority needs identified in the Group’s Systematic Country Diagnostic for India. It aims to work with India so that the country’s rapidly growing economy makes much more efficient use of resources; fosters inclusiveness by investing in human capital and generating more quality jobs; and develops strong public sector institutions that are capable of meeting the demands of a rising middle-class economy. The CPF’s approach combines a focus on ‘what’ the WBG will work on and ‘how’ it will engage India in the process. 

What will the WBG work on?

  • Promoting resource-efficient growth, including in the rural, urban, and energy sectors as well addressing disaster risk management and air pollution;
  • Enhancing competitiveness and enabling job creation, including improving the business climate, access to finance, connectivity, logistics, skilling, and increasing female labor force participation;
  • Investing in human capital through early childhood development, education, health, social protection, and rural water supply and sanitation. 

How will the WBG amplify the impact of its work in India?

  • By leveraging the private sector
  • By harnessing India’s federalism
  • By strengthening public institutions
  • By supporting Lighthouse India to foster knowledge exchanges within the country and between India and the rest of the world. 

In all its activities, the WBG will seek to address climate change, gender gaps, and the challenges and opportunities afforded by technology.  

WORLD BANK GROUP PROGRAM

The World Bank’s lending program includes 92 lending operations ($22.8 billion in commitments, of which $17.7 billion is IBRD and $5.1 billion is IDA, and $0.1 billion is from other sources, primarily grant funding from the Global Environment Fund). 

Roughly a third of the operations and around 56% of commitments are either to central or multi-state operations, while the remainder consist of state-specific operations in 21 of India’s 28 states. 

The three largest portfolios are Agriculture (15 operations totaling $3.7 billion in commitments), Urban Development (17 projects totaling $3.2 billion), and Transport (10 projects totaling $2.9 billion). 

In FY21, the Bank approved 14 operations amounting to $3.16 billion.  Of this, $2.65 billion is lending from IBRD and $0.5 billion from IDA (recommitted from cancelled IDA programs). There is a robust pipeline for FY22, which is expected to deliver around 20 operations with total commitments of $3 - 4 billion. 

For the IFC, India is the largest client country, accounting for 10 percent (US$6.3 billion) of its global portfolio. Since its first engagement in 1958, IFC has invested more than US$24 billion (including mobilization) in more than 500 companies in India. India is the sixth largest shareholder in IFC with a 4.01 percent stake.

The World Bank and IFC work together in several areas, most notably in energy, transport, water and health. IFC-Bank synergies have been particularly strong in raising financing for renewable energy, supporting the Government of Madhya Pradesh in setting up one of the largest single-site solar power project that provides solar power at record low cost. IFC and the World Bank had a similar collaboration under the government’s flagship Clean Ganga program for sewage treatment plants using hybrid annuity-based PPP projects. IFC led the PPP mandate while the World Bank loan is helping provide payment guarantees to increase the private sector’s participation in the sector.

The Multilateral Investment Guarantee Agency (MIGA) does not have exposure in India. MIGA has been working closely with the Ministry of Finance to provide credit enhancement solutions at the state-level and state-owned enterprise (SOE) level. This will enable state governments and SOEs to utilize long-term commercial financing, which can complement concessional lending provided by other multilaterals and development finance institutions.

The WBG has a wide-ranging program of Advisory Services & Analytics. The program informs policy debate, provides analytical underpinnings and learnings for operations and strategy, facilitates the scale up of innovative solutions, and helps to improve state capability. As of October 2021, some 18 analytical studies and 15 advisory activities were ongoing. Key areas of focus include poverty and macroeconomic analysisfinancial sector reformenhancing human capital including universal health coverage and genderair quality management, as well as state capability and governance

Last Updated: Oct 04, 2021

Источник: https://www.worldbank.org/en/country/india/overview

What is digital banking? 

Digital banking is the digitalisation of banking services in order to reduce risk, improve efficiency and better serve customers. It allows customers to withdraw money, apply for loans, make payments online or on their smartphone and more. Looking to the future of banking, digital is no longer an option for firms who wish to survive - it is a must.

When it comes to retail banks (rather than corporate or investment banks) going digital, there are two elements: digitisation and digitalisation. “Digitising means converting into digital format anything which is currently manual or paper-based,” says Simon Paris, chief executive officer of fintech company Finastra. “Whereas digitalising is a whole new way of thinking.”

Once digitisation is complete, banks can start exploring revolutionary business processes which were not available to them before, from iris recognition to artificial intelligence to offer superior banking services.

Digital banking simply makes life easier for consumers - Ian Bradbury, Fujitsu

The future of banking is digital

While security and cost-efficiency are strong motivators for banks, the true value of digitalisation is what it can do for the customer. “Digital banking makes life easier for consumers,” says Ian Bradbury, chief technology officer for financial services at Fujitsu. “People are increasingly enjoying the simplicity of managing all their finances in one place, setting up automatic payments or making deposits, any time and anywhere, without the need to queue in a bank.”

And with an increasing number of challenger banks and fintechs in the game, competition for the customer has never been higher. As Flavia Alzetta, chief executive officer of digital banking company Contis points out, traditional banks have an advantage in both the range and complexity of the products they offer. “Traditional banks have a 360 degree offering. If they were to put the customer first, they already have a very strong base to continue to occupy their place.”

More importantly, they have an existing clientele, which many of their younger competitors are still trying to build. “The customer is king and very expensive to acquire. Banks need to realise that if you look after customers they will reward you with loyalty,” continues Ms Alzetta, “customer expectations have evolved over the years, and there is no reason why they should not be met.”


What is omnichannel banking?

Omnichannel banking allows a customer to access their banking services, in real time, through any channel they choose, be it the physical branch, an ATM, a call centre or online. Implementing it means allowing customers the freedom of choice to access their finances anywhere, at any time, via any medium.

“Choice is the way forward, always”, says Ms Alzetta. But, she continues, although retail banks have begun to embrace an element of omnichannel banking, it has yet to develop to its fullest. “Omnichannel banking has been implemented mostly in terms of transactional activity. What would be a real novelty would be to rethink the most complex products and services banks provide, such as mortgages.”

The opportunities, should traditional banks fully embrace omnichannel banking, are extraordinary. In essence, it could mean a comprehensive, joined-up experience for the customer, at every stage. “If you call up to enquire about a credit card, and say ‘I’ve got a question about my mortgage too’, you shouldn’t be transferred,” says Mr Paris. “When you go into the bank and tell them you’ve been speaking to someone on the phone, they shouldn’t say ‘you’ve got to go back through the call centre, because I’ve got no idea what you’ve been doing’. It goes-hand in-hand with open banking.”

Often the biggest challenge for traditional banks is not the customers, but maintaining a technological DNA. You can’t push the job onto the CIO or CTO any more, the full board have to be involved in technological decisions - Matthias Kröner, the Fidor Group

What is open banking? 

Open banking means using open data to move towards greater transparency and ease for banking customers when they use various financial services. Open banking means that customers will be able to access all financial services in one place - whether they are looking for a loan, a mortgage, or to pay their bills.

This revolutionary idea is often tied to a piece of European Union legislation, known as the second Payment Services Directive (PSD2). PSD2 requires banks to open access to a customer’s data and information, if authorised. The desired goal for the customer is greater ease when it comes to account services and payments. For example, when buying something online, PSD2 will mean the consumer will not be redirected to Paypal in order to pay through them.

Although it is impossible to talk about open banking without mentioning PSD2, the two are not synonymous. Where PSD2 regulates how banks must act, open banking fundamentally means embracing a new mindset entirely, one which puts the customer’s needs right at the heart of banking.

What open banking will do for customers

If implemented correctly, open banking will help retail banks return to their roots as providers of financial services.

Rather than offering customers unwanted credit cards or unnecessary overdrafts, retail banks could use their platform to assemble a number of financial services and personalise them for the customer.

Take the example of buying a house. A mortgage is a product, the financial service is helping you to buy. Open banking would allow financial institutions not only to sell the customer a mortgage, but the most competitively priced one, as well as offer insights on house prices in the area, provide home insurance and find the best deal on gas and electricity. “The point is that none of these needs to have come from my bank” says Mr Paris. “What my bank has done is assemble the products and services which make sense for me.”

Banks are now presented with more opportunities than ever, and are facing an exciting future - Ian Bradbury, Fujitsu

Becoming a digital bank: Bank Leumi and Pepper 

Bank Leumi, Israel’s oldest bank, was so convinced that the future of banking meant better serving customers, they were willing to spend time and money, and even cannibalise their own clientele, to create a mobile bank from scratch.

When Rakefet Russak-Aminoach joined as chief executive officer in 2012, she decided the existing digital strategy was not transformative enough. “The retail banking model - where people visit branches and consult bankers in person - is passé. Digital tools have become people’s first choice.”

They decided not simply to digitise Bank Leumi’s current operation, but to replace all of the bank’s core IT legacy systems and build their own product on a new technological platform. “We could just have created Leumi.com,” explains Ms Russak-Aminoach, “but that would have been a digital skin covering an essentially non-digital body. We believe you need a fully digital body to grant your customers the experience they deserve.”

The result was Pepper, Israel’s first mobile-only bank. Crucially, although Pepper was a new digital entity, it was built on the reputation and customer base of Bank Leumi, thus circumventing the trust issues digital banks often encounter.

“Customers have said that they would trust a tech giant like Amazon to be their bank,” says Pepper’s chief executive officer, Michal Kissos Hertzog, “but when it comes to it, many prefer a more traditional option. Luckily Pepper gets the best of both worlds, we have different people, different DNA, a different strategy, but we took our cybersecurity and our reputation from Leumi.”

What can traditional banks learn from fintechs?

What Bank Leumi and Pepper teach us is that both traditional banks and fintech companies have their strong suits, although interaction between the two has had mixed results.

Mr Paris believes the relationship has gone through three phases. The first saw traditional banks detect fintech as a threat and attempt to squash them through regulation. The second came as the banking industry recognised the true value of fintech and set out to partner with or acquire them. We are now in the third phase. “Banks realise that simply acquiring a fintech company does not solve the problem, as the relationship is still one-to-one. What is needed is for a fintech to have access to thousands of banks and vice versa.”

The question is, will traditional banks consent to learn from or work with fintechs in any real sense? Matthias Kröner, founder and former chief executive officer of the Fidor Group, one of Europe’s first digital banks, thinks not. “I don’t think a big bank corporation is culturally able to deal with innovation”, he says. “It’s a question of compliance. In order to embrace the innovation of fintechs, you need a special governance structure that allows for a fail-fast, laboratory approach. Traditional banks are too afraid of risk.”

One challenge for fintechs is keeping the innovation level high. The bigger an organisation gets, the more you have the tendency for everyone to lean back - Matthias Kröner, the Fidor Group

So what is the future of banking? It is certainly digital and, as a result, more open, more transparent, more ambitious. Most importantly, it lies in the hands of the customer. Any financial services provider looking to make it to 2030 must embrace this truth, and use all the digital and technological tools at their disposal to make their offering as customer-centric as possible.

What does the future of banking look like, according to the experts?

Ian Bradbury, chief technology officer for financial services, Fujitsu

“The next wave of digital banking solutions, enabled by advanced data analytics, APIs and Open Banking legislation, will go much further. We will see a seamless incorporation of financial and pseudo-financial services into daily activities, both digitally and in the physical world.”

Simon Paris, chief executive officer, Finastra

“My vision is that banking will go back to what it was born for. To provide a financial service. To help people and businesses unlock their potential. Instead of being about how many products per customer you have, it will be about customer’s exchanging their personal data for better service. You tell me how much you drive, and I’ll decrease your car insurance. You share your smart watch data and I’ll decrease your life insurance.”

Matthias Kröner, founder and former chief executive officer, the Fidor Group

“Customer demands for innovation never changed a market as much as changes in regulation, like we’ve had with open banking. PSD2 is finally forcing the banks to be customer-centric. It will mean an easier and better life for customers. I'm absolutely convinced of this. If we combine the success of data with AI and machine-learning - the sky is the limit.”

Flavia Alzetta, chief executive officer, Contis

“In terms of payments, I think the shift from physical assets to virtual or no assets will be very visible over the coming years. I spent 14 years at Amex, and I think the physical card will disappear. The more innovative payment options coming up - such as biometrics - will simplify payments immeasurably.”

Rakefet Russak Aminoach, chief executive officer, Bank Leumi

“10 years from now the retail banks which take the right steps will be much more significant than they are today, and some will have ceased to exist. I don't think we will have one bank like one Amazon or one Google, I believe that we will have local winners. Regulators are a local thing, as are currencies, so I don't think we'll have one bank for the whole world, but I believe that, in each market, we will have a huge winner who will do the right thing and take a large part of the market.”

Michal Kissos Hertzog, chief executive officer, Pepper

“The CEO of AirBnB was asked a similar question. He said it doesn't really matter what AirBnb offers in 100 years - whether it is still a question of booking rooms online or not - if their DNA and culture stays the same, then AirBnb will stay relevant. Banking changes all the time, the value proposition and user experience will change. Banks which will can change and stay relevant will survive, and the others will not.”   


Источник: https://www.raconteur.net/finance/financial-services/future-banking/

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