Is India approaching a perfect storm in digital financial services?
Thursday, December 18, 2014
Imagine if you could do all your banking business simply by using a smartphone app. Swipe once to transfer money to a friend or business associate. Click a photograph of a cheque and tap it to deposit it into your bank account. Simple, a US-based technology application supported at the back end by a licensed bank insured by the Federal Deposit Insurance Corp., is already making this happen. Such ease of use will delight banking customers. But the massive economic potential of technology as it transforms financial services in the coming decade will be even more striking.
In the use of digital technologies, financial services in India lags behind domestic categories such as travel, communication and entertainment. Internationally, it lags financial services in other parts of Asia. Recent McKinsey research across Asia showed digital and online banking penetration in India is half that of countries in emerging Asia, including China, Malaysia and Vietnam, and a fifth of that in developed Asian countries such as Japan, South Korea, Singapore and Taiwan. Almost 10 times as many Internet users in India use e-commerce as those who purchase banking products online. However, this will change. A perfect storm may soon come and enable technology-led disruption at a far greater scale, leading to better outcomes for customers and innovators.