Banking in 2020

Henry Ford once remarked, "It is well enough that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Looking back at the banking landscape of India in the 1980s, I recall, as a child, how visiting a bank was quite the expedition. Bank officers, with their domineering demeanor, seemed to lord over people's finances, dispensing money as though it were a favor. Customers often spent hours in line, awaiting a summons from the teller—akin to a capricious deity—who delighted in power plays, ill-timed breaks, and even abusive language. This was tolerated because banks, under state control, were heavily regulated. Despite the benefits of state ownership, like financial inclusion and risk mitigation—which, if absent, could spell disaster for banks as witnessed with some international banks—it also quashed the entrepreneurial drive vital for national progress. The scarcity of banks left people with little choice.

The narrative changed dramatically by the late 1990s. With deregulation, the banking sector underwent a transformation, and customers emerged empowered. Banks became attuned to customer needs, offering on-demand drafts, telephonic loans, and various incentives—just for opening a savings account or applying for a card. This period also heralded the introduction of novel products and technologies. Banking terms, once arcane, entered common parlance; acronyms like LAP, BIL, PIL, or HL became familiar to the average person—concepts perhaps nonexistent in the '80s.

By 2015, the rise of fintech had already necessitated a new evolution in banking. The combination of analytics, finance, and technology has become a powerful and dynamic force, transforming the once complex jargon of banking into today's common language. New entities such as payment banks, small finance banks, processors, and M-wallets are set to become commonplace in a few years. The traditional banking model may struggle to fully withstand the impact from the influx of alternative financial systems that are poised to compete with it. I believe we are in for a significant surprise, as the sometimes hegemonic and discerning approach of traditional banking towards customers will be overturned by nimble, technology-driven alternative banking models. I can't recall the last time I went to a bank branch to withdraw cash in the past decade, and I wouldn't be surprised if personalized credit card delivery or loan disbursement becomes a sub-two-minute end-to-end process well before 2020... a revolution is unfolding tomorrow morning.