Banks are scared their relationship with customers will be upstaged: MobiKwik founder Bipin Preet Singh

The rapid rise of wallet companies is making traditional banks jittery. Bipin Preet Singh, Founder and CEO of consumer mobile wallet start-up MobiKwik, dissects the challenge before the banks. Excerpts from an interview:  BT: Did banks lose out because they did not see the transition to mobile? Singh: They were not early to the game. They didn't see the shift coming. Banks are now reacting. Banks have their captive user base. The problem is that creating a new bank account or onboarding a new customer is very difficult. However, onboarding a new customer for MobiKwik or Paytm is relatively easier. That is our advantage. BT: What are the challenges banks face as they have to compete more and more with wallet companies now?  Singh: It's not that the banks can't do technology. Core banking is built on strong foundations of technology. However, this is a market which is evolving very fast. The user experience patterns, the consumption patterns - those are changing fast. Banks will face challenges in adapting and reacting fast enough to these challenges. If you have to create a solution - let's say how a new user onboards - the way MobiKwik will do it and the way a bank would approach it are very different. MobiKwik will create different flows and will choose one, launch and measure. Then we will iterate, fine tune it within a matter of one-two weeks to make it  easier for the user. Iteration is learning from the customer and from the data as your app is being used. This requires a different mindset, a different focus, and a different team. The apps are developed in the agile model. In the case of banks, they usually appoint an external agency to build the app. By the time the app is ready and they get the feedback, it will take a few months. It is about the mindset. It is not that banks cannot catch up to where we are today. It is the pace of innovation - we keep moving forward.

BT: Are banks feeling threatened at the new paradigm?

Singh: Banks are scared of their relationship with their own customers being upended or upstaged by entities such as MobiKwik, which offer a better experience even for a similar service. We are not a bank - but if you want to do payments, make a purchase people traditionally thought of a bank - now they think of a MobiKwik. So the perception in the minds of the customer is changing from 'bank first' to 'payments first'. That is what makes banks nervous.  They don't want to lose out in their primary relationship with the customer. The pace of innovation are mere symptoms.

BT: Why do banks need the transactions business? The money is in lending… Singh: Who does the bank lend to? Its customers. If customers were to have their first interface or the primary relationship with a MobiKwik in terms of payments, they would feel nervous. Because one day, MobiKwik can enter the lending business. Today you can't. But in the future. There is a primary relationship and then you cross-sell and up-sell other stuff including lending. Today, banks have a regulatory advantage - they can do many things that other companies cannot. As technology goes deeper and regulation changes, it is possible that every piece of what banks do can be done by independent technology companies much better. Payments is just one part. Other entities can do lending more efficiently and with lesser capital.

BT: On the other hand, what is the threat to wallet companies from banks?Singh: Banks have to react. They have to give a better experience. Whether that will work, only time will tell. Banks don't believe they can create the biggest wallet.