Amid surge in digital transactions, former finance secretary S C Garg has said that banks need to adopt the model of fintech companies otherwise, they will perish. He noted that fintech companies have already captured a lot of area in the payments space, and now the credit segment, which is the principal business of banks, is witnessing significant action from the fintech players.
Garg underlined that once the limit of digital wallets increases and if the currency gets digitalised with a much more direct relationship between the currency issuer the Reserve Bank of India (RBI) and the people, the banks will formally get squeezed out of the payments space. But, he is expecting the RBI's initiative on National Umbrella Entity (NUE), which is likely to be promoted by banks, might allow banks to remain major players in the payment space.
Besides, Garg said that in the credit space, fintechs are able to cut down the processes involving credit evaluation and can disburse money fast into the account of the borrowers. He also said that banks also have to become fintechalised or digitalised or virtual banks to be able to retain what their core business (credit) is. If they don't do it, there is a very good likelihood that banks will lose an enormous amount of space in the credit also.