Former Finance Secretary S.C. With the increase in digital transactions, banks need to embrace the model of financial technology companies, otherwise they will end, Garg said on Thursday. He said that the financial technology companies occupied a lot of the area in the payment segment and now the business of banks and the business of banks is fast.
Addressing the industry body Assocham Online, Gerg said, “In the digital age, banks have to act like financial technology companies, otherwise they will go away.” Once the digital wallet threshold rises and the currency is digitized, banks will shrink formally and exit the payment sector, he said.
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However, the former Finance Secretary expressed confidence that the Reserve Bank of India’s (RBI) ‘National Umbrella Entity’ (NUU) initiative would help banks remain the biggest entities in the payment sector. The pioneers of NUE were probably banks. He said the lending sector’s financial technology companies have curtailed credit estimation procedures and can send money to a faster borrower’s account.
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“Banks must be financial technology companies or digital or online to manage their core business,” warns Garg. Banks are also likely to lose their strong position in the credit sector. In an earlier session on ‘digitization’, Sunil Mehta, CEO of the Indian Banks Association (IBA), said that the digital technology adopted by the banks has facilitated financial transactions and payments during the epidemic. The number of digital transactions at the end of March 2020 was two trillion crore, and it rose to 5 trillion in March 2021.