How Technology Can Drive The Co-operative Banks Market In India
Digital is the buzz word today. Technology is evolving faster than what society and organizations could even imagine a few years ago. The rapid progress and development in the technological advancements have created an upheaval not only in our personal lives but also in the professional marketplace. The emergence of digital platforms has provided ease, access, and convenience to consumers and made it easier for companies to track data and analytics to refine their offerings and target customers better. There is a 180 degrees shift in how organizations operate these days and the market opportunity is staggering. According to the World Economic Forum, India can unlock a market potential of $1.2 trillion over the next decade, just by implementing digital initiatives.
Large sections of the Indian banking sector were a late entrant to the technology party. The Indian banking sector caught up with technological changes in the early 1990s post the liberalization of Indian economy. Ever since that, there has been no looking back. 25 years on and Indian banking has become as technologically advanced as the most developed markets in the world. Today, digitization has helped provide access to banking facilities to even the remotest of areas in the country today. The government and financial organizations are making significant investments in building digital infrastructure in the country. From ATMs to digital lending and payment solutions, wallets and platforms that promote innovative products like flexible credit lines today, the digital banking space has witnessed a paradigm shift. This post is about how the vast Co-Operative Banks and NBFCs sector can also benefit from embracing technology.
NBFCs and Co-operatives
The Non Banking Financial Companies aka NBFCs and Co-operative banks are also considering adopting technological and digital changes in the industry. However, co-operative banks are yet to go full throttle. The new RBI guidelines have made the co-operatives up their ante on the digitization front. Inspired by the success of the many private sector banks post technology adoption, the central government and various state governments are also putting their best efforts to take co-operative societies towards the digital future. For example, Bihar Chief Minister Nitish Kumar directed a move to digitize all the co-operative banks and Primary Agriculture Credit Societies in the state. The move is predicted to bring in transparency in implementing various agricultural schemes in the state.
A fairly large chunk of co-operative banks has progressed towards digitization at the head office level. The major challenge is how to replicate that success at the grass root levels. This is where the co-operative banks are highly active in the rural and semi-urban areas. This is also where they face competition in customer retention and acquisition from other similar players and also the rural ambitions of the larger private banks.
Challenges
The operating cost of running and maintaining a banking software system is higher than what many co-operative banks have been primed to consider paying for technology. Besides this, cyber-security poses another major threat that calls for significant investment to address. To help co-ops overcome these hurdles, the government’s National Informatics Centre is providing effective, cost-efficient, and easy-to-implement IT solutions. These software solutions run from a remote central server and are made available to individual banks via the internet or public networks. The hosting costs for the software are borne by NIC and the government. The NIC also extends implementation support to the co-operatives across the country. The NIC is providing market-defining IT solutions like the Co-operative Core Banking Solution (CBBS). The Co-ops and rural banks take over the solution after an initial period where the NIC provides the manpower in addition to the hardware which the CBBS needs at the point of operation. The point of operation access system provides data security as the use is restricted to authorized users only. Other government-driven solutions are also making an appearance to help Co-Ops and rural banks leapfrog into the big league. For eg., India is only the sixth country in the world to adopt its own bank card – RuPay. The Samruddhi Co-operative Bank in Nagpur was the first ever bank to issue the RuPay card to its lenders. Initiatives like this are helping these banks adopt technology more easily.
Such solutions provide the essential starting point for the digitization efforts of the co-operative banks, but is that adequate? The fact is the rural Indian is also digitizing at a growing rate. In such a scenario, adding more innovative digitally accessible products and solutions that leverage this basic infrastructure will become the key to customer acquisition and retention. An example is app-based products for digital lending or credit access. This is a crying need for the rural consumer and, if offered appropriately, can drive an increasing number of new adopters. The other advantage of such digital platforms that aim to bring together the co-operative banks and the consumers is that they are effectively available at no-cost to the co-op. Their business model factors in revenue when a consumer avails of a financial product and to that extent there is no upfront investment the co-operative bank needs to make.
The Road Ahead
Central and State Governments are providing well thought out and committed assistance to co-operative banks to widen their digital scope and operations. One major roadblock in digitizing the co-operative banks has been the access to appropriate IT solutions, and the government has succeeded in eliminating that issue to a certain extent. The fact is, co-operative banks have to face the competition presented by the private sector banks that already have a strong digital base today. Web, mobile, and app-based banking have fundamentally changed the way the banking sector operates. These internet and digital platforms have made banking easier than ever. Innovative app-based products that feed into these technology platforms are providing never-before levels of access to address a variety of financial needs of the consumers. They can carry their bank work like transferring money, paying EMIs, accessing credit, and consuming other financial products on the go. In such a scenario, it has become almost inevitable for the co-operative banks to catch up with the digitization of their services.
To attract new clients or to retain the existing ones, the co-operative banks have to look at the digital world. The future is digital, be it any sector or industry. In such times, to neglect the digital space would be a folly the co-operative sector can ill afford. Some co-operative banks across the country have adopted digitization with open arms -it’s time the others did too! Is your co-operative bank ready to embrace the digital world?
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