We are seeing a great interplay between digital and physical in the banking industry. And what is working is 'phygital', which is physical plus digital. For instance, we are increasing our workforce by 10 per cent this year. This is the net addition to our workforce. So, on a base of 60,000 people, we are making 6,000 net additions. As I have said on many occasions, we don't need 10,000 branches, but we are still opening branches. That is because we are finding a very interesting mix of digital and physical play.
The density of branches will come down in the future but not the requirement. In a fast changing digital world, banks will become more efficient and effective through the combination of digital and physical presence.
Digital is actually a massive game changer in Indian banking. As a business, banking is shifting to having more digital platforms and banks are acquiring customers digitally. But even those customers are coming to branches for RTGS transactions, cash deposits, cash withdrawals, etc. Recently, we did a review of our branches, and I was amazed to see the amount of cash that is getting deposited and withdrawn. The currency in circulation is also growing despite the number of digital initiatives. The level of currency in circulation today is almost equal to the pre-demonetisation level as a percentage of GDP. That is the reason behind banks acquiring digitally and servicing physically. At the same time, the reverse is also true - acquiring physically and servicing digitally. On the lending side, the banking industry is acquiring customers digitally - in credit cards, personal loans, business loans, and other segments.
Two Sides of a Coin
- Currency in circulation is growing despite the number of digital initiatives. The level is almost equal to the pre-demonetisation level as a percentage of GDP.
- At the same time, banks are acquiring customers digitally - credit cards, personal loans, business loans, and others.
Similarly, banks are stitching partnerships with fintech firms to offer innovative solutions and adopting robotics process automation technology. In fact, we have completed over 2,00,000 transactions across multiple processes through robotic process automation.
As the adoption of analytics and Artificial Intelligence increases, new sets of jobs will be created. As part of that process, people with new skills will be added. Some part of digital is also changing the nature of jobs. But what shape and form it will take, only time will tell.
In tandem with change in the nature of jobs, there will be new jobs in risk management and compliance. Take, for instance, risk management. Today, it is one of the most sought after jobs in a bank. There will be huge job opportunities in these areas.
Risk management can be automated, but one of the things about data is that you make assumptions for the future based on the past. The question you have to ask is, what if those assumptions are wrong. This is because at the end of the day, you are lending money. Banks are leveraged in the ratio of 10:1. The key question one has to ask is, will I get my money back? And the answer to this is beyond any technology but within common sense.
If I look at Banking 2030, I am confident that it will exist as a business, but its shape might change. Banks are increasingly becoming technology-oriented companies. In fact, most sectors will have a much larger presence of technology embedded in the sector. So, you will also find things moving in a different trajectory in all spheres.
Uday Kotak is MD and CEO of Kotak Mahindra Bank
(As told to Business Today)