By Bernard Lunn
In 1994 I was running the Misys Asia banking division from Singapore when I got a call to bid on a core banking system project for a new bank in India. I knew Misys needed to get into either India or China (we did not have the resources to do both at the same time) and I was leaning towards India (rule of law and English language), so this opportunity made that decision for me. In short order we closed deals with Centurion Bank, Times Bank and Indusind Bank and so began a long association with India for me.
This batch of new bank licenses looks very different. The facts are here on the Reserve Bank of India site.
The 11 licensees are:
- Aditya Birla Nuvo Limited
- Airtel M Commerce Services Limited
- Cholamandalam Distribution Services Limited
- Department of Posts
- Fino PayTech Limited
- National Securities Depository Limited
- Reliance Industries Limited
- Shri Dilip Shantilal Shanghvi
- Shri Vijay Shekhar Sharma
- Tech Mahindra Limited
- Vodafone m-pesa Limited
The reason for granting new bank licenses is the same now as in 1994 – to promote competition and financial inclusion for the Underbanked. However this is a totally different list from 1994. First, note two mobile telecoms companies (Airtel and Vodafone) and one conglomerate (Reliance) that operates one of the big mobile phone companies. If the future of banking is mobile (little dispute on that) it is natural that Telecoms firms will compete with banks (as I outlined in this post in November). In the West, Telecoms are dipping their toes into the banking waters. In India, they are diving in fully.
India is where we will see the battle between m-pesa and other forms of mobile money play out. Vodafone m-pesa Limited is one the firms granted a banking license. If they open up m-pesa, it could take off in India and become the global standard for mobile payment.
The Underbanked is one of the biggest opportunities in Fintech (here is an index to all the Underbanked posts on Daily Fintech). The Underbanked market is playing out in Africa, China and many other big countries, but India is one of the most interesting markets for the Underbanked because India is also so strong in software technology.
China is also making some interesting moves in this area. For example, China’s Tencent (operating the WeChat messaging app) has launched its banking arm called “WeBank”. Facebook will probably do this with WhatsApp but it has already happened in China. This is one more example of “First the Rest, then the West” leapfrogging of innovation by the countries formerly known as emerging.
In a few weeks, I will be in Singapore for SIBOS for a session on Killer Platforms, the Chinese road to platform disruption. The panel of speakers include people who know what is happening in China. I wll be chipping in to contrast that with what is happening in India.
It is exciting that SIBOS is in Singapore this year. I will be returning to my old stamping grounds but more importantly, Singapore is increasingly a hub for innovation around the Underbanked as it has deep connections into both India and China as well as other big markets in the region such as Indonesia. We reviewed some Singapore Fintech ventures on the Fintech Global Tour back in February. To that list, one should add Kyepot and Skolafund.
Mobile payments are taking off in India because it solves a real problem (as we explore in this post about Paytm).
M-pesa is huge in Kenya where it accounts for over 40% of GDP. It will be interesting to see if it can take off in a bigger market such as India. However I don’t see this happening unless it becomes an open standard as payments is all about network effects and you only get network effects when a whole ecosystem benefits.
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