Sankar Krishnan is the author of ‘The Power of Mobile Banking: How to Profit from the Revolution in Retail Financial Services’ (see my book review.) He is also Vice-President and Partner, Financial Services with Capgemini, a leading global firm in digitisation and SMAC (social, media and cloud) across operations, technology and consulting services.
Krishnan was earlier with Citigroup and Standard Chartered, and has over 25 years experience in banking and financial services in the US, Asia and Africa. He joins us in this interview on trends and developments in mobile banking, and its broader impacts on society.
YS: In the time since your book was published, what are some notable new startups you have come across in mobile payment space?
SK: This is the most exciting time for fintech. Here are some of the startups that I like in the fintech and mobile space.
- Moven, which is powering banking through the addition of a wearables strategy and improvising on what Simple and GO are doing
- Betterment and Wealthfront which have taken robo-advisory to a new level
- hearsaysocial that is building a great customised social analytics platform
- Continued growth of Applepay and Starbucks Pay, and their extension to banks and brands
- Uber’s global expansion that makes it the largest global payment tool, and Ola which can also do online shopping
- Paytm in India as well as Alipay in China and Yandex in Russia
- Expensify and Level Up (now Level Money).
And many many more!
YS: How was your book received?
SK: The book was very well received as a practical guide to developing a mobile strategy. The reactions were ranging from “How real is mobile” to “Will it really intermediate banks” to “Will it make money a standalone proposition.”
During the DotCom boom of the late 1990s, there were real companies and pureplay online companies - eventually all companies which were mere eyeballs without a business model failed, and subsequently all companies embraced online as a channel. Similarly, the “me too” apps today are failing and the real disruptors are beginning to do well. The big difference is that this time the mobile-first generation is a serious market and is more comfortable sticking to mobile as their preferred channel.
YS: What is your current field of research in digital banking?
SK: I am not a pure researcher but a business researcher, and by that I am making a distinction from being a smart academician (which I am not) to someone who has to constantly refine the approach to the market to serve clients better that we as a firm try to be and I try to be. In that sense, my current interests are “robo-advisory services” for wealth management and the role of “blockchain” in financial services.
YS: What are the typical challenges entrepreneurs face in the area of mobile banking?
SK: Data security, identity management, and monetising ideas - without running out of cash!
YS: There have been a number of regulatory innovations in India with respect to Universal ID, payment banks, electronic clearing, and so on. What impacts and changes do you see in the next three-five years?
SK: These are indeed tremendous catalysts to growing transactions on mobile. I see huge convergence and M&A activity between financial services, retail and telecom. Mobile will be used not just for ticket purchases and travel but also for food, clothing and shelter. It will be the only way of life - till something better and easier prevails.
The larger banks will acquire some of the smaller players. Mobile payment players will play a larger role than traditional banks in Tier 3 cities and smaller towns, where costs of bricks and mortar branches are high. The distinction between telcos and retailers will reduce in ten years. In the coming years, 4G will provide a digital experience which is more robust and rich.
YS: What are some emerging issues with data privacy and security that need to be addressed in mobile banking?
SK: This is the most interesting area, with lots of work underway. Here are some of the key issues that merit attention.
Device: The banking institute can control your product but not the customer’s device, especially in BYOD situations.
Tracking: You cannot prevent tracking so how do you adjust to this and mitigate the risk.
Challenging laws: How do you manage the globality of mobile banking – for example, an Indian consumer using a borrowed device from the airport when visiting the US surfing in Canada and making a purchase using his mobile app downloaded in Canada that has data on the device when returned to the US provider - and a compromise is detected when back in India! What about taxes on this purchase?
Social Media risks: For example, if this consumer goes to social media to complain and then he is tracked, and the resulting legal issues. What is responsible mobile citizenship with respect to mobile banking?
Each recent expose has yielded useful learnings in this regard. The risks of adjacencies, for example using mobile on public WiFi is considerable.
YS: Further down the road, what are some long term social impacts that mobile banking will unleash?
SK: Once we measure and manage the risks identified above, the social impacts are all positive.
- Mobile will enhance the quality of life for everybody
- It will drive down prices and margins
- It will improve the lives of many by promoting financial inclusion and insurance inclusion
- It will significantly drive convergence
- Mobile banking will create new distribution networks.
- The take off will be higher as there is no force fitting the growth that will come from the millenials and digital natives who don’t use other channels as much as mobile, if at all. In some ways we will have to thank the gaming companies, Uber and Whatsapp for helping the average person to understand and operate mobile better even in cases where mobile is not their first channel.
YS: As with proliferation of credit cards decades ago, we are seeing a proliferation of mobile wallets. Will this cause more complication or convenience for end users?
SK: The short term confusion and complication will be replaced by a better operating model in the medium long term. It will eventually cause convenience to consumers. But there will also need to be checks and balances on aspects like credit limits, and dispute resolution mechanisms on this front.
YS: Which incumbent banks and mobile operators are best re-inventing themselves for the mobile payment boom?
SK: Not to pick winners or losers but here are some notable banks, operators, tech companies and others, among many: Citi, Morgan Stanley, Uber, Verizon, CapGemini, Amazon, Harvard, MIT, Netflix, Tesla, Google and Apple. Think of what will happen when Whatsapp has a payment product. Look at how Quicken is leading the mortage revolution in the US.
YS: Instead of an either/or scenario, how can incumbent banks team up with startups for mutual benefit?
SK: Startups can take more risks and create new capabilities with speed and velocity. We should let them have a free hand to create the new world for the future. Once this is done, banks can leverage them as a utility and customise them for risk management and unique customer needs. Unless a bank is born and raised as a mobile bank, it will take some catching up to do for a traditional bank operating for 200 to 300 years, due to their legacy systems, size, globality and risk that they manage.
YS: What are some impacts that NFC, IoT, biometrics and other technologies will have on mobile payments and players?
SK: In addition to gathering data about people, places and payments, IoT and biometrics will provide richer insights into health habits, driving behaviour and so on – which will lead to smarter insurance policies.
Several insurance companies are already looking at how IoT ecosystems could predict insurance risks by connecting a consumer and his mobile to IoT, and UnderArmour is even exploring the use of nano-particles in this regard. The size of IoT is considerable; I was reading an International Data Corporation report which estimates that the universe of things connected to the Internet will generate nearly $9 trillion in annual sales in the coming decade.
There will also be more micro-finance institutions innovating ways of extending credit and financial shelter to smaller towns and villages. NFC-activated services will help development agencies deal with some of the issues in illiterate communities. Mobile payments will add more market reach and visibility for small scale entrepreneurs such as weavers. The rise of voice recognition and eye recognition and their integration will lead to more robust authentication systems.
YS: What is your next book going to be about?
SK: Possibly about the impact that wearables and nano technology are making and how blockchain can power financial services.
YS: What is your parting message to the startups and aspiring entrepreneurs in our audience?
SK: Please go ahead and keep trying. It is like sports. Before you play to win you will fail and that will teach you more than anything else. Keep tweaking the business model. Try and envision how your idea is disruptive. What are you disrupting? What is the new value you are bringing to the table? Don’t accept mediocrity. And no idea is foolish, in fact what seems like a bad idea because of our belief in traditional models is actually a disadvantage. I have faith in the youth of the world who are doing amazing things.
Make sure that you are using data to validate an idea and not emotion. Lead with technology and analytics to arrive at outcomes. Don’t worry about the money you will make or the wealth you will create.
Even if you get it wrong, you will have enough time to fix and get it right. Look at models that have worked elsewhere so your R&D costs can be reduced. Jump right in!