Bank Management

MBA
IIMC
2024
Praloy Majumder
1
Session Three

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 Implications
Higher Higher Lower
capital capital capital
adequacy adequacy adequacy
ratio ratio ratio

Higher NIM Higher NIM Lower NIM

Low GNPA Low GNPA Higher GNPA

and Low and Low and Lower
NNPA NNPA NNPA

Lower PCR Higher PCR Higher PCR

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Bank Transaction , bank
profitability and fin tech

Increase in income Decrease in Expenses

How fintech can help banks to achieve the above ?

4
Bank’s four new revenue
generating areas

5
Structure of Fintech

6
Platform

7
Fintech transition

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 Pay Tech entities

Bank is the central to financial intermediation process

Mobile phone Digitalisation Mobile Financial Service

Alternate payment ecosystem
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 Level 1 of pay tech firm
• Improvement in payment process
– Mobile subscribers
– Simple KYC
– Payment transfer
– Digital wallet
– Last level settlement happening
through banks

MFS

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 Level 2 of pay tech firm
• Improvement in payment process
– Credit card
– Debit card
– Mobile payment system
– Internet payment system
• Companies are working around
these established players

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 Credit card transaction
EMV

Pay tech
Tokenisation
Tokenisation +
Mobile hardwareProcessor /ISO Merchant
Credit card – customer
Based security

Payment network

Merchants bank
Issuer
Acquirer
 Level 3 of pay tech firm

PSP PSO

Payment
gateway
E commerce

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Payment gateway working
Bank account , credit card , digital wallet

Net
PG1 PG2 Bankin UPI
g

PSO/PSP

Customer E commerce site 14

 Level 3 of pay tech firm
• Social media to payment process :
– Start with social medium
– Increasing loyalty
– Understanding customer behaviour
– Payment services
• Venmo , What’s app pay
– Targeted for young millennials

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 Level 3 of pay tech firm

Contactless payment QR Code Iris based payment

Physical transaction with social distancing

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 Credit tech firm
• Pay tech firms are gathering data of
the customer
• Pay tech firms can get more insight
about customers behaviour
• Pay tech firms can create better
credit underwriting models and then
can lend
• Thus the formation of Credit tech firm

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 Credit tech firm
MSME lending

Ve

ta
nd
E commerce firm

da
Kirana shop
or
da

or
ta

nd
Ve
Pay tech firm
Customer
data
Structured and unstructured data
Customer Financial
AI and ML Data
Based AA
Retail lending algorithm

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 Global evolution

E commerce Pay tech Credit tech

Social media to payment

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 Global evolution

E commerce Pay tech Credit tech

Social media to payment

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 Indian scenario

Pay tech Credit tech , wealth tech ,

E commerce
Insurance tech

Payment bank

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 Indian scenario

Telecom Physical presence E commerce

Digital wallet Payment bank Kirana linkages

Reliance Account
NBFC Aggregator
 Ant Financial- Chronology
To solve trust issues of buyer and sellers in fledging e
Launch of Alipay commerce industry
2004

First mobile app in China to provide fast , Convenient and

2009 Alipay App
secure payment to Consumers and Merchant
Tao bao Shipping return insurance
2010 QR code based payment launched
2011 QR Code
Earn daily return while making the fund available for
2013 Yu’ebao
daily purchase
Ant First digitally unsecured revolving lending product for daily
2014 Huabei
Financial expenses of consumers
2015 Jiebei First digitally unsecured revolving lending product for
higher amount to Huabei consumer
Mutual aid program that provides affordable and
Xianhubao accessible wealth protection to participants
2018
AntChain Block chain and SaaS for cross border cross border
Ant remittances services through open platform
Group 2019
 Coexistence :
Fintech and bank
collaboration

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 Four stages

• Stage I : Tech firms would rely on

crumbling structure of existing
incumbents banks. Banks would
run the payment infrastructure but
payments and non core activities
would be opened up to new
incumbents .

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 Four stages

• Stage II : Payments would

routinely cut out the existing
players :
– European Fintech can initiate
transfers but they still move money
between bank accounts
– In Sweden Fintech originates 60% of
consumer loans

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 Four stages

• Stage III : Era of “ super-apps”

– WeChat’s users can also use more
than 500,000 mini-apps on its platform
– Tata group is planning to launch “ super-
apps”

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 Four stages

• Stage IV : Fintech involves in

production and distribution of
financial services – may not ever
come

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 Digital Public
Infrastructure

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Private and central bank payment systems
Technology stack Commercial Stand alone Payments build on
applications private systems public infrastructure

Payment methods Visa , Master Card Private digital wallet Central Bank

Google maps , Big tech Fintech companies,

Private Apple pay , Payment rails : Private Commercial banks, Non
Companies messaging services Identity rails :membership Bank payment operators

Large scale
Data sharing rail :
Infrastructure
Customer consent
platforms
Public frame work : AA
Sector Payment rail : UPI,
AEPS,IMPS
Identity rai; : Aadhaar ,

Publicly available technology

innovations Internet, GPS Blockchain Internet Internet
( publicly funded )

Telecommunications and Smart phones , Smart phones ,

Smart phones ,
computing technologies Tablet , PCs Tablet , PCs
Tablet , PCs
(hardware)

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Chronology of development of India stack

Data Account
sharing Aggregator
Rails (AA)

Biometric Govt
Jhan Dhan Lending
payment - benefit
Yojana
Payment AEPS ABPS
Rails
Debit
IMPS cards UPI
Rupay

Digital Digital Online

Identity
Aadhaar verification signature –e repository
Rails –e KYC sign Digi locker

2010 2011 2012 2013 2014 2015 2016 2019

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 Data Sharing Rail
Financial Information Provider

RBI Govt SEBI IRDA PFRDA

Banks PC GS
CIB DP
SB R IT Insuran Pension
T Equities
Paymen ce funds
Securities
ts Policies Portfolio

5. Data request 3. Notification of

request User
6. Data transfers

1. Seeks service
with encryption
Account Aggregators ( Regulated 4. Granting consent
AA can not read data
by RBI) 2. Data request

Financial Information User

Robo Personal
Credit Finance
Advisory
Management

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GST Digitalisation

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 DPI and future of lending
Digital Public Infrastructure
Borrower Industry /
SB /CC/ CIBIL DP Specific Economic
CA Insurance Title deed Specific
GST , IT IIBI Physical Crop yield ; dairy
Performance yield ; production
Data Yield; service data
Data in Machine Readable Format
Data in Machine Readable Format
Account
Aggregator Non Financial Data

Identity Rail
Sends request Sends request
Borrower
Data in Machine Readable Format

Applies Participates
Risk Classification
with extremely
Data in Machine Readable Format high degree of
accuracy
Public Credit
NBFC Use of AI and ML
Tech Platform ( ULI)
Gives periodic / one time consent

Seeks consent
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