Vol. 18 No. 9 January 2020 `75 Pages 40 The spread of pension Last mile financial inclusion Customer centricity @ Shriram Life Market Research www.bankingfrontiers.com BLOCKCHAIN -Reinventing Banking BF Cover Jan 20.indd 1 14/01/2020 7:23:19 AM Editor’s Blog Manoj Agrawal Mobile : 98673 66111 Email : [email protected] January 2020 - Vol. 18 No. 9 Group Publisher : Babu Nair Group Editor : Manoj Agrawal Understanding 2020 Editor : N. Mohan anuary is the season for forecasting. Technologies like AI, ML, API, RPA & blockchain will undoubtedly continue to Editorial Jmake a growing impact, as will the growing Mehul Dani, Ravi Lalwani, V. Raghuraman technology inroads into houses and automobiles, Research Editors and further within our bodies. Besides that, Prof Venugopal Iyengar, V. Babu, regulators are actively shaping the direction of Ratnakar Deole, W.A. Wijewardena, transformation of financial services. Sanchit Gogia, K.C. Shashidhar, I see further intensification of two major Dr L.S. Subramanian, Ajay Kumar global forces that we are already experiencing – authoritarianism and rebellion. Both are Advisor-Alliances co-related. Ateeq Siddique Authoritarianism is the counter reaction to Marketing the explosive growth of social media and rapid Kailash Purohit, Reshma Mandal globalization. It represents the increasing desire among people to reverse the level of unpredictability in their lives. Globalization has led to a huge job losses. Alongside, Events & Operations social media has created an outlet for people to liberally share their views, which has Gautam Magare, Shirish Joshi, led to differences coming out in the open in areas like government policies, economic Stalin Saldhana, Pramod Jadhav, policies, cultural norms, etc. Amit Gupta, Shweta Kadam, In response to both these sufferings, citizens are prefering and voting for Ashish Verma, Wilhelm Singh, Sneha Agrawal authoritarian leaders who promise to control these forces and revert back to the status quo. That explains the rise of conservative rightist leaders like Narendra Modi, Donald Design Trump, Boris Johnson, Vladimir Putin, Rodrigo Duterte, Jair Bolsonaro and many others. Somnath Roy Choudhury This tide is likely to continue during 2020 and beyond. Published By As regards rebellion, it is the result of rising anger among the masses, which is Glocal Strategies & Services happening across India, Hong Kong, Bolivia, Venezuela, Lebanon, Egypt, France, D-312, Twin Arcade, Military Road, Marol, Russia, Iraq, Algeria and many other countries. A mix of economics and politics is fueling Andheri (E), Mumbai 400059, India. this anger. In case you are wondering whether political and economic oppression has Tel: +91-22-29250166 / 29255569 suddenly increased, then that is not the case. What is happening is people have rising Fax: +91-22-29207563 expectations about improvements in economics and politics, and the rulers are not able to deliver the same. Job losses are rising, and fraud and corruption are becoming more tangible. Anger is the symptom of this increasing gap between expectations Printed & Published by Babu Nair on and reality. behalf of Glocal Strategies & Services and I expect this anger to continue rising resulting in more such rebellions during 2020 Printed at Indigo Presss (India) Pvt Ltd., and beyond. Global wars have declined, but anger is rising and becoming a destructive Plot No. 1C/716, Off Dadoji Konddeo Cross tsunami. I am not aware of any macro approach to reduce or contain this anger. Road, Between Sussex and Retiwala Indl. Both these mega-trends will have big impacts on the financial sector. Authoritarianism Estate, Byculla (E), Mumbai 400027. will impact from the top and rebellion will impact from the bottom. Both will heighten the risks and prudent banks should factor that in their business plans. Authoritarian Editor: N. Mohan (Responsible for selection leaders around the world are likely to expect more support from financial organizations of news under PRB Act) for their economic plans, while rebellions are likely to adversely impact both savings and loans. It is also seen that rebellion is more of an urban phenomenon, which means that greater opportunities will lie in the semi-urban and rural markets. Banking Frontiers January 2020 3 Edit Jan 20.indd 3 13-01-2020 11:22:33 N E W S Regulator Andrew Bailey to be governor of Bank of England Bank of Korea plans Andrew Bailey, who heads the UK Financial Conduct Authority, has CBDC been named as the next governor The Bank of Korea has set up a taskforce of the Bank of England. Sajid to build on top of the existing research Javid, chancellor of the exchequer, on central bank digital currency in South announced that Bailey will take over Korea. The bank’s Monetary Policy for from Mark Carney, who will exit the 2020 include research into innovations job after more than 6 years at the like distributed ledger technology, helm of the central bank. Bailey’s cryptocurrency assets and CBDCs. The appointment is seen as the top job at special task force will have the sole purpose Bank of England passing on to safe of providing a better understanding of how hands as he has extensive experience digital assets operate. The central bank has as a former deputy governor at the Bank. Carney, who was due to leave the Bank at the made its intentions clear about launching a end of January, will now step down on 15 March to ensure an orderly transition. Among digital currency of its own. Bailey’s priorities will be to steer the UK economy and financial system through the Brexit process and trade talks with Brussels in 2021. He is also expected to scrutinize internal controls at the bank. Prof Lakshman is governor of Central Bank of Sri Lanka The Central Bank of Sri Lanka has a new governor. President Gotabaya Rajapaksa has appointed renowned academic Prof W D Lakshman as the 15th governor of the central bank. Prof Lakshman will also function as the chairman of the Monetary Board of the Central Bank of Sri Lanka. He is a well-known economist who served as the vice Google recommends chancellor of the University of Colombo from 1994 to 1999. In 2005, he was awarded the UPI to US Fed ‘Deshamanya’ title for his contributions to the academic field. Following his retirement in 2007 from the university system after 43 years of service, he was appointed an advisor to the ministry of finance in 2008 and as the chairman of the Institute of Policy Studies in 2010. In 2009, he was appointed the chairman of the Presidential Commission on Taxation in Sri Lanka. China’s digital currency not a cryptocurrency There is a recommendation to the US Federal The digital yuan the People’s Bank of China is planning to launch will be fundamentally Reserve from Google - adopt the salient different from Bitcoin or similar cryptocurrencies, the regulator’s digital currency aspects of India’s Unified Payments Interface research institute deputy director Mu Changchun has said. It will also be different from (UPI) for the proposed FedNow, the new stablecoins, which are digital assets pegged one-to-one with major fiat currencies such interbank gross settlement service. Google as the US dollar or the British pound. He has said that the virtual renminbi would be said in a letter to Fed’s Board of Governors a digital form of the nation’s currency. The central bank has said digital yuan holders that UPI was thoughtfully planned, and would not be able to speculate on its value, and that it would not be backed by a basket critical aspects of its designs led to its of fiat currencies (like Facebook’s Libra). Mu said the e-yuan is not for speculation. It is success. It said, ‘UPI is an interbank transfer different from bitcoin or stable tokens, which can be used for speculation or require the system, it is a real time system and is ‘open’ support of a basket of currencies. He revealed that the digital e-yuan will exist in a two-tier - meaning technology companies can build system, with the PBoC managing its circulation, and local commercial banks operating applications that help users directly manage at the second tier of the centralized electronic currency system. transfers into and out of their accounts held at banks’. The approach in India attained Malaysia plans to issue licenses for digital banks amazing results for banks, consumers, other Bank Negara Malaysia plans to issue up to 5 licenses to set up digital banks in the country players within the payments ecosystem and to either conventional or Islamic banking businesses in the country. The central bank India’s central bank, Google said, adding has issued the Exposure Draft on Licensing Framework for Digital Banks that forms that the approach in India attained amazing part of the series of measures adopted by the bank to enable innovative application of results for banks, consumers, other players technology in the financial sector. The draft outlines the proposed framework for the within the payments ecosystem and India’s licensing of digital banks to offer banking products and services to address market gaps central bank. Fed has said the proposed in the underserved and unserved segments. The bank has fixed an asset threshold of FedNow would offer round the clock real not more than RM2 billion in the initial 3 to 5 years of operations. This functions as a time payment services 365 days a year. It is ‘foundational phase’ for the licensees to demonstrate their viability and sound operations, expected to be operational by 2023 or 2024 and for the bank to observe performance and attendant risks. and would allow transactions up to $25,000. Banking Frontiers January 2020 5 News Regulator Jan 20.indd 5 13-01-2020 11:21:55 Project Pipeline SBI setting up DevOps platform CBI to start merchant State Bank of India has announced that it is acquiring biz embarking on a DevOps Central Bank of India proposing to set up journey and wishes to set up a system for merchant acquiring business a scalable platform (mostly through PoS and other associated acquiring based on Open Source channels on a revenue sharing model.