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May 28, 2015

Mobility's Shifting Landscape

Posted by Rajashekara V. Maiya (View Profile | View All Posts) at 9:40 AM

The digital revolution is beginning to look more and more like a mobile revolution, at least in banking. The maturity of a bank's mobile services portfolio is increasingly becoming the metric that drives customers to choose or switch service providers. And banks are returning the favor by placing mobility right at the top of their innovation priorities.

The digital revolution is beginning to look more and more like a mobile revolution, at least in banking. The maturity of a bank's mobile services portfolio is increasingly becoming the metric that drives customers to choose or switch service providers. And banks are returning the favor by placing mobility right at the top of their innovation priorities.

But mobility is still a relatively nascent concept where multiple components are shifting and settling, all the while opening up new opportunities as well as challenges. Here are a few of those shifts that banks will have to address in order to stay on top of their mobile game.

The shift of power to the end points: Whether from a consumer, partner or regulator perspective, the power of purchasing, decision making and judging will increasingly move to the (mobile-enabled) end points. Banks must recognize this shift early on and lead the change by making necessary enhancements to systems, policies and processes.

The shift of interaction from person-to-person to screen-to-screen: Many in-person interactions have already moved to the handheld screen, which compels banks to revisit their content & communication strategies in the new context. But experience remains the buzzword and banks need to design interactions around fulfillment and consumer delight, rather than processes and transactions.

The shift to industrialization: Mobility has been an important catalyst for the wave of industrialization, rationalization and standardization that is sweeping through the banking world. The "factory model" of banking will not only standardize products at the back-end but will also simultaneously enable their customization at the front-end. Mobile should be an integral part of the "one size fits all" strategy to ensure that customers can undertake all activities - purchase, deposit, consult, transact, complain and compliment - on a mobile screen.

The shift from form factor to all forms or formless: Wearables shipments are expected to grow four-fold over the next four years. Wearables, some predict, will free experience from all constraints of time and space. But some wearable devices, such as glasses, will also raise the quality of personal interaction by enabling the parties to maintain eye contact, even when using the device. And customers will expect to bank with it.

The shift from less- to -less: In the few decades of its existence, IT has mainly worked behind the scenes as an enabler of efficiency, productivity, agility and resource utilization. The mobile wave will usher in a new paradigm where "extensive, explosive and exponential" will replace the traditional "incremental, conservative and linear" approach. Interaction will have to become timeless, effortless, people-less, even bankless, and therefore technology will have to be more intelligent, interactive, predictive and proactive.

These are just some of the temporal shifts, which though topically important, are merely signs of a deeper, foundational transformation that mobility will bring to banking. But for mobile to realize its potential to be the future of banking, banks have to ensure that mobility remains the central focus in every strategic decision they make.

May 13, 2015

Educational inclusion and the demographic dividend - 2

Posted by Varun Goyal (View Profile | View All Posts) at 1:53 PM

So, does Indian education need its own version of the Jan Dhan Yojna to ensure that it becomes as socially and financially inclusive as banking aspires to be?

That was the placeholder that concluded my previous post, which I shall pick up herein.   

In recent times, financial inclusion has become an understandably high profile social mandate for the government.  With a target of opening 75 Million accounts by end January this year, the banking industry has already delivered a whopping 106.3 Million basic savings bank deposit accounts in a record time of just four months. 

The big question now is if financial empowerment will have a trickle-across effect on education in terms of affording access or ensuring affordability of education loans? Or does there have to be a focused model that addresses the issues that currently isolate many from the educational system in the country?   

At this point it would be quite illuminative to take cues from some of the most productive and efficient global models. Government-funded education is a working reality in many developed countries, including Canada and Australia. But one of the best examples comes from the United Kingdom where the Student Loan Company (SLC) has been facilitating student access to higher, secondary and part-time education since 1989. A non-profit government-owned organization, SLC offers loans and grants to over a million students each year.  

With diversity and inclusion being part of its core agenda, SLC offers grants that are specifically designed to help students from different sections of society, such as low-income families, students with permanent disabilities etc. More importantly, repayment of these student loans is based on a unique concept called Income Contingent Repayments that allows borrowers to pay back loans after a certain holiday period based on how much they earn rather than on how much they owe. 

Typically less expensive than normal bank loans, these programs are even generating profits for government with interest payments offsetting the borrowing cost and provision for losses. Having evolved over time, the programs are now tightly linked with other nodes of the financial ecosystem, like employers, for example, who are authorized to automatically deduct payments required of a salaried borrower and transfer it to the governing body. 

Finally, if access to higher education is to be broadened, it will take a well-choreographed effort led by the government and supported wholeheartedly by academia and industry. But the key takeaway is that the urgency and efficiency with which we pursue this particular agenda will eventually determine our success as a nation in converting our demographic opportunity into demographic dividend.

May 11, 2015

Banking in the Mobile Economy

Posted by Rajashekara V. Maiya (View Profile | View All Posts) at 6:45 AM

Mobility is no longer a concept whose potential can be defined merely by enumerating handsets shipped, connections created, apps launched or data consumed. It is a phenomenon that is estimated to have generated a total economic value of almost US$ 10 trillion last year, which makes it the third largest economy in the world after the U.S. and China. I should also probably mention the 11 million jobs that it was directly responsible for creating around the globe.So, how has the mobile phenomenon changed banking and other financial service verticals?

Mobility is no longer a concept whose potential can be defined merely by enumerating handsets shipped, connections created, apps launched or data consumed. It is a phenomenon that is estimated to have generated a total economic value of almost US$ 10 trillion last year, which makes it the third largest economy in the world after the U.S. and China. I should also probably mention the 11 million jobs that it was directly responsible for creating around the globe.So, how has the mobile phenomenon changed banking and other financial service verticals?

Let's start with mobile payments, expected to touch US$ 1 trillion this year and then double by 2018. A record 193 payment startups received VC funding in 2013, the same year that saw the launch of more than 40 mobile money services. Now with Apple Pay in the fray, there's the promise of nothing but heady times.

In commerce, Single's Day in China netted Alibaba record sales of US$ 9.3 billion, with 42.6 percent of that coming from mobile devices. Alibaba also managed to galvanize the fund management space when its affiliate payment service, Alipay, emerged as the world's third largest money market fund, a position it wrangled in a mere 10 months.

Now I really need to go back and rephrase the previous question: how must banking and other financial services verticals change in the light of the mobile phenomenon?

Banks and financial institutions need to begin with a two-pronged strategy of New & Renew: Which existing systems and processes need to be renewed to enhance performance and efficiency? What new systems and processes need to be introduced to augment existing systems as well as harness new opportunities and drive profitable growth? This strategy needs to be applied at every layer of the IT stack, from infrastructure to platforms to applications.

The next strategic focus has to be on changing the traditional approach to defining problems and creating solutions. Banks have to harness the potential of the as yet esoteric concept of design thinking to create solutions that not only tick the boxes of user desirability and commercial profitability, but are also feasible from a technology, ecosystem, resource availability and regulatory perspective.

To sum up, mobility is clearly a powerful phenomenon bringing its own impetus to global economic growth. What must traditional banks do in order to become an integral part of the still emerging mobile economy?

May 6, 2015

Educational inclusion and the demographic dividend - 1

Posted by Varun Goyal (View Profile | View All Posts) at 11:47 AM

Generally speaking, to reap a dividend one has to first commit one's confidence and resources to an opportunity. Right now, what India has is a demographic opportunity of becoming the largest contributor to the global workforce in 2030, with a working population of 962 Million. But is India ready to convert that opportunity into dividend? To enhance the mere size of scale with the sheer usefulness of skills? Are we equipped to create and deliver the human capital without which there is no dividend to be had?

These are all questions that have to be addressed today if we have to plan and progress towards our rendezvous with our global destiny in just 15 transitory years.

Current projections based on labor participation and the employment rate indicate that 423 million, or nearly 45% of the employable population in 2030, will not be able to participate in the demographic opportunity due to a skill-set mismatch. Even in the current scenario, the healthy demand for human resources across industry verticals is being stymied by an uninspiring supply that is woefully short on high-skill labor.

 The Government of India has already taken a series of steps to correct this talent imbalance, one of which was the launch of the National Skill Development Corporation (NSDC).  The stated ambition of the NSDC is to contribute at least 30% to the overall target of skilling 500 Million Indians by 2022 by providing funding and fostering private sector initiatives in skill development.

But the emphasis on skill development is not a recent phenomenon. There has been a largely concerted effort over the last decade to strategically expand and deepen the academic ecosystem with the objective of enhancing the relevance and quality of education. Beyond those two pertinent and practical goals, there is also the critical issue of ensuring that education becomes socially and financially inclusive.

The focus will therefore also have to be on improving access and affordability so that even socially and financially underprivileged sections of society can aspire to the opportunity that is the demographic dividend.

 So then, does this call for a Jan Shiksha Yojna, on the lines of the Jan Dhan Yojna for financial inclusion, to ensure that education is as much about relevance and quality as it is about becoming more inclusive? More on that in my next post. 

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