Positioning Trust – Banking in the Digital Era

At a time when every business claims to be a digital one, Uday Kotak (at NTLF 2019) believes that being a bank has its disadvantages. It connotes an old-fashioned protected environment which is causing him paranoia about a future which will smirk at anything even vaguely considered as “legacy”. But he also believes that this imagery can easily be changed. Digital and banking aren’t really mutually exclusive sets but part of the same value proposition which aims to provide unique customer experience – an enhanced one. However, as banks gather greater momentum they have to remain mindful at all times, that their brand value is derived from their ability to manage risk.

The Speed of Trust   

The debt-equity ratio in a bank is about 10:1 which is naturally very high. Though banking is a high-risk business, a good bank is always perceived to be safe and associated with trust. Nothing impacts a human being more severe than loss of health and money. Fortunately, the younger generation has not yet experienced the latter (in most cases) and that’s why they remain obsessed with short-term experience – ease of banking in a digitally enabled environment. While perfectly understandable as it may be and that’s where we are all headed, but transacting in a safe and secure environment is no less an “experience” with long-term consequences. Often, this is something the younger generation fail to appreciate.

Cheekily he said that there’d be a great cause for worry if Google and Facebook ever wanted to enter the banking industry – taking a dig at their aversion for anything that is regulatory. Governance in this age isn’t easy at all and is often found struggling to keep pace with the technological impact on the business environment.

The Rise of FinTechs

November 8, 2016, caused a major shake-up at Kotak Mahindra Bank, and many others in the industry. Suddenly, they were all gripped by fear. A relatively unknown name shot up to gain tremendous market share in a remarkably short time. Will I have a bank in future? Is my customer’s money safe? Apprehensions like these birthed the need to transform almost overnight. Thus, the product “811” saw the light of day. One could open a bank account in three minutes flat. It was a major step to attract the younger generation which has a higher risk appetite.

Primarily there are three segments in which the fintech companies can operate in – payments, storage and lending. In payments, banks have fallen behind the curve but are clawing hard to get their mojo back. Though profit margins are thin in this segment, there’s no way banks are willing to let go.

In the other two areas – storage & lending – the fintechs have a negligible presence. However, there’s hardly any room for complacency. Lending is based on certain assumptions and this is an area where AI can play a definitive role to minimize risk. However, assumptions can go off target so the ML will have to take into account changes very rapidly, in case of failure.

What Does Culture Eat?

Culture eats strategy for breakfast. While this is true but one must also bear in mind that principles and values are like the water in the ocean which continually gets replenished. It isn’t static at all. Internally at Kotak Mahindra Bank, there are points of stress which are intentionally created between support & control function and speed of doing business. No one function, in particular, is allowed to get out of hand. That’s why an environment of constructive tension enables the overall balance within the system.

Culture is defined by the people who work in the organization. At the bank, they do take in people with entrepreneurial skills (read an innovative way of thinking) who can work within a structure. For startups, he has a piece of advice. The probability of success in startups is low and that’s why founders should always have the resilience to go on, even knowing that death may be lurking just around the corner.

He had something to say to the Indian IT industry as well. One, he would like to see costs coming down particularly while engaging with the industry as a transformational partner. And two, it’s time we created world-class software products.




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