Several Founders, Co-Founders, CXO Bankers, CXO Fintech professional & people who participated in the ePanel discussions:

  • Mr. Himanshu K, Head Corporate Legal & Advisory, VISPL
  • Mr. V V Ramana Rao, DGM, Indian Bank
  • Mr. Sandeep Todi, Co-Founder & CBO, Remitr
  • Mr. Hitesh Thakkar, Fintech Consultant, Self-Service Automation
  • Mr. Vikas R Panditrao, Co-Founder, Forum of Industry and Academic Knowledge Sharing (FIAKS)
  • Many other CEO/CXO Bankers & Fintech professionals on FIAKS Forum requested to remain anonymous

On the news of Neo Banks’ sad demise in Europe [1] FIAKS community member raised a couple of notable questions.

Question 1: News floating in the market is that RBI is planning to come up with a digital banking license in India? Do we need yet another banking license category or will RBI just copy what’s happening in developed markets like Europe or Singapore?

  • Well, a member is of the opinion that no additional banking license is required to serve the same 100 million customers. Sponsor bank relationships should be the best way forward.
  • On the other hand, another member opines, “RBI is run by professionals with a deep understanding of markets. Nothing wrong if the best practices from any other part of the world are replicated by regulators in the home country.”
  • Regulatory authorities will find it difficult to issue a digital banking license. As the fresh license category may give advantage to digital banks over payments banks. There will be no takers for any license category with more restrictions compared to payments banks.

Now talking specifically about Digital Banking License here’s something that can really be considered;

  • Well, having a digital banking license is a good thing, similar to E-money or else PI license (Payment Institution licenses) in Europe. Both are different in scope and regulation, so RBI has to decide which way it is going to lead to. However, if it imposes the kind of restrictions that it did on payments banks then it will defeat the purpose.
  • Secondly, to spur innovation it makes sense to have a 2-tier license, one which is bank-sponsored and therefore ultimately the funds are held with and insured by a Tier1 bank. The second could be an independent license that carries more responsibility and therefore also allows more flexibility to the new entrants.
  • Third and very important is to include international payments in the purview of a digital banking license. In today’s age purely local banking has its own wide use case but it will severely limit innovation for global opportunities.

Question 2: Why can’t these tech offerings be done by core banking platform providers of the bank?

  • Yes, core banking providers can surely service this requirement of the large banks. But it’s like making elephant dance.
  • Additionally, core banking platform providers are unable to service the need of the bank who want to be agile like Fintech’s and looking for a programmable platform. They need platforms on which product can be configured within hours as against several months by the core banking platform providers.

Question 3: What’s the revenue these neobank products are generating as against the investment by the large bank on these platforms? Shouldn’t this be an audit query by regulatory authorities?

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