“Banking in the digital era will have to adapt- Fintechalise or it will perish,” Garg said at a virtual event organised by Assocham.
He said once the limit of digital wallets increases and if the currency gets digitalised with a much more direct relationship between the currency issuer the Reserve Bank of India (RBI) and the people, the banks will formally get squeezed out of the payments space.
He, however, believes the RBI’s initiative on National Umbrella Entity (NUE), which is likely to be promoted by banks, might allow banks to remain major players in the payment space.
Garg further said in the credit space, fintechs are able to cut down the processes involving credit evaluation and can disburse money fast into the account of the borrowers.
“Banks also have to become fintechalised or digitalised or virtual banks to be able to retain what their core business (credit) is. If they don’t do it, there is a very good likelihood that banks will lose an enormous amount of space in the credit also,” Garg warned.
Speaking on digitalisation, Indian Banks’ Association CEO Sunil Mehta, in an earlier session, said the digital technologies adopted by the banking system enabled them to deliver financial transactions and payments during the pandemic time.
Over the last year, the number of digital transactions has gone up from 2 lakh crore on March 20 to 5 lakh crore on March 21, registering a growth of 150 per cent.
He believes India, as a country, has matured in terms of the adoption of digital payment systems and now it is a time for digitisation in the lending space.
Many banks and NBFCs have developed their models, where a lot of loans can be underwritten and disbursed online.
He feels the banking sector needs to make a higher investment in information and technology space for creating new infrastructure and also invest in cybersecurity.