In India, there is a very thin line today between industry and commerce. Telecom players are in the payment space, which is different from the norm. In the ‘The Future of Banking’ webinar session, experts felt that the regulator needs to act before any entity becomes too big to fail.
Speaking during the third part of the Future of Banking series, Hu Beihei, CEO, Bank of China, Mumbai, India, said, “In the past year, the Chinese government has realised that these fintech or big tech companies must be regulated heavily. This is mainly because there are only a few large players. This has a lot of disadvantages.” He pointed to the fear of misuse of customer data, to squeeze their competitors, as key concerns among other issues. “The Chinese government has said that it wants these companies to develop, but you cannot be too big to threaten the government or stability of society.” The Chinese government became very careful after the Alibaba incident, he stressed. He also stated that when it comes to regulation it is necessary to focus on activity-based regulation rather than entity-based regulation.
Giving a perspective about India, Venkatesh Hariharan, the India representative for Open Invention Network said, “China seems to be clamming down on too-big-to-fail companies, India is allowing companies through the back door.” Hariharan added, “This could be an expensive mistake that India makes.”
Commenting on India Stack and UPI, he said India had built a world-class payment infrastructure, a non-profit organisation (NPCI) that is controlled by Indian entities. But now, private players want to create an umbrella organisation similar to NPCI, which will be a for-profit organisation. “From a regulatory perspective, this could be one of the worst disasters that we have ever made in the history of regulation.” He went on to add that the payment and infrastructure layer have to be sacrosanct.
Responding to a question on digital currency and conventional banking, Hariharan said, “Digital currency will open a new era of cash flow.” However, this does not mean that conventional banking will be out of business.
Adding to this, Hu stated, “There will be a major transformation in the banking industry. Branches will shrink. Human interaction will reduce. But conventional banking will not go out completely. This is because there are some areas that cannot be replaced like risk management, KYC, etc.” But there is no doubt that conventional banking will need to continue investing heavily in technology.