How often do you find an entry " go to the bank" in your daily to-do list? Very rarely or probably never. One is more likely to have the to-do list read like this: book airline tickets for the vacation, pay electricity and DTH bill, do festival shopping, send money to your daughter studying in US and so on. It's out of fashion these days to make a visit to your bank, wait in a queue, fill up forms, follow their complex processes. Banks have made it convenient for customers to use remote channels like ATM, Internet and phone. However, the digital disruption and the ensuing change in customer behaviour is causing paradigm shift in the way banking itself is thought about. Digital mega trend is profoundly impacting all businesses globally. Ubiquitous and high speed connectivity, instant information, cheap and unlimited storage, secure digital identity, influx of multi-feature and affordable access devices, are all contributing to a rapid change in the ways consumers can be served. We have seen the complete transformation of the music and media industries with the advent of digital.  Iconic technology companies like Google, Apple, Amazon with their technological prowess and operational excellence have provided customers with unparalleled digital experiences. Customer expectations are being driven very high by their experience with non-bank digital companies – ease and convenience, targeted offers, instant fulfilment.
 
Some of the long standing paradigms in banking and financial services may need to be revisited.

Current Paradigms	Emerging Paradigms
Financial services is a serious business and needs direct contact and documentation	Financial services are a virtual product and can be offered remotely
Brick and mortar presence is core to building trust and confidence	Positive customer experience and excellent service quality builds trust and confidence
Get the customer to come to the bank (defined channels) for what she needs	Be available wherever the customer is
Focus on the “stock” of deposit and loan balances	Focus on the “flow” of transactions and payments
All products – savings, credit, investments, payment services, should be offered by a single provider	Each provider may choose to effectively focus on certain products and services only

 
Non-bank challengers like Apple Pay in US, Alibaba in China, Safaricom in Kenya are redefining delivery of financial services. They are operationally built for continuous innovation, and are often more agile with remarkable “speed to market” with product and software upgrades. The line between services offered by banks and non-banks are getting blurred. Equity Bank in Kenya has through its wholly owned subsidiary announced its entry as a Mobile Virtual Network Operator. Recognizing the shifting trends, banking regulators have responded with different measures to promote competition, innovation and financial inclusion. The Central Bank of Brazil and the financial services regulator in Peru have issued regulation that allows for the creation of a new and specialized legal entity for e-money issuers under license from the financial sector authority. The Reserve Bank of India has recently issued draft guidelines for the licensing of “Payments Bank”.  Regulators in many geographies have also been instrumental in driving payments infrastructure and common standards to adapt to new customer requirements.
 
A recent study has said that mobile phones will outnumber human population by the end of 2014 reaching a staggering 7.3 billion against the human population of 7 billion. Over 100 countries have the number of cellphone accounts exceeding their population. By 2020, over 6 billion consumers will be connected to the internet with a mobile device. There are now more than 1 billion people around the world who have mobile phones but who have no bank accounts. In India, there are 900 million mobile subscriptions, 450 million bank accounts and only 67 million mobile connections are linked to bank accounts and an even smaller percent of that are active users. Most banks across the world, offer additive mobile banking service for their existing client base, where mobile is an additional and more convenient access channel. On the other hand, countries with low banking penetration and high mobile penetration have seen rapid rise of mobile money service being offered by mobile network operators. Kenya has moved its proportion of the population excluded from financial services from 38.4% in 2006 to 25% in 2013 and mobile has had an important role to play in that. Kenya is probably the only country to have more active mobile money accounts than adult citizens and with the rapid use of digital payments the extent of currency usage outside the banking system is coming down, an important parameter which is tracked by the Central Bank of Kenya. Closer home, Bangladesh has 22% of adult population using mobile banking services with an aggregate transaction value of over USD 1 billion per month.
 
Incumbent banks in India need to reinvent themselves in this new paradigm in order to ensure that they “have the lunch” and not “become the lunch”. Month on month banks report a significant  increase in their mobile transactions, a major part of which is only channel migration i.e. the customer is now using mobile instead of a branch/internet channel. There is no value addition of this to the economy. With the rapid growth of mobile usage in our country, combined with advancement of technology and facilitative regulation for expanding the reach of financial services, there is tremendous opportunity for transformational innovation through mobile and agent networks to reach out to underserved customers, introduce new products, deepen customer relationships, explore new sources of revenue, rationalise costs and most importantly digitize the economy. As a first step every new account should be mobile enabled, including for the millions of accounts being opened under the Prime Minister’s Jan Dhan Yojana, mobile can be the primary access point. Banks should take the lead in creating an ecosystem for digital payments through alliances with telcos, merchants, small businesses, transport companies, agent networks that would make even small value retail digital payments more convenient and safe than cash. Use of high-end analytics on the “digital footprint” of the customer, can provide banks invaluable information about the customer. This should be supported by a regulatory approach that is proportionate and encourages innovation and growth. The regulator may adopt a “test and learn” approach to allow the market to develop before being overly prescriptive or burdensome. Further, to facilitate interoperability and enhance customer convenience, regulator should insist on common standards to be adopted by all and prevent exclusivity in alliances. In the context of digital banking, the relevance of branch location is minimal. Mobile is not an alternate channel, it will soon be THE face of banking and regulation should recognize this and relook at the stipulations with reference to branch location.
 
Its time to breakdown the various silos like alternate channels, financial inclusion, consumer banking,  technology, etc and redesign a whole new business model which makes banking part of everyone’s life the way the mobile is.