India is beginning to reap the benefits of an ambitious national programme of digitalisation that is being actioned at breakneck speed. BNP Paribas India is bullish about the long-term impact of the initiative on the country’s economy and is itself being highly proactive in leveraging the fast-increasing levels of digital connectivity to deliver novel solutions for its corporate clients, not least across transaction banking.
The rapid digital transformation of India over the last decade has played a major role in supporting the country’s healthy economic performance in recent years. While it is widely expected to continue accelerating and paying off handsomely for India over the long term, digitalisation is already having a profound impact on many fronts, not least in payments innovation and transaction banking.
India now accounts for nearly 40% of all digital transactions globally. In less than 10 years, there has been a seismic shift away from a paper-based cash management, driven in no small part by the introduction of electronic payment systems which run 24/7/365 – with instant capabilities on tap.
A crucial aspect of the country’s successful digital transformation is that the needs of the consumer have been central to its design and implementation. As a result, government-backed payment platforms are proving generally popular. And that, in turn, is supportive of consumers and retailers wanting to use the most accepted payment methodologies, helping to build critical mass.
We have embarked on a journey of co-creating solutions with fintech players and indeed our own clients.
Arguably the most significant game-changer for India has been the state-led, regulated Unified Payments Interface (UPI) payments system. Launched in 2016, UPI is a platform that enables free and almost instantaneous account-to-account transfers using fintech apps facilitated by QR codes or easy-to-remember virtual IDs. Unlike its peers in other countries, for example Alipay in China, UPI is open. This means users are not locked into a single company and can take their financial history to competitors. UPI’s zero-fee model, meanwhile, has helped ensure its wide acceptance nationally – which is great news for businesses in all sectors. Overall, UPI processed over $1tr. in transactions in 2022, equivalent to a third of India’s GDP.
UPI spreads its wings
What’s more, further development of UPI is continuing apace. In March 2023, the Reserve Bank of India (RBI) launched UPI for feature-phones. These are basic phones that typically provide voice-calling and text-messaging functionalities and are equipped with buttons, not touchscreens, as with smartphones. The initiative potentially opens up UPI to millions of people without smartphones.
Elsewhere, UPI has been such a success that it is being connected to other countries worldwide, with aim of making cross-border payments more seamless. It has already been integrated with Singapore’s payments system, enabling people to send remittances with a relatively low 3% fee. Indeed, India wants UPI to become a payment option abroad, just as Alipay is widely accepted outside China.
More broadly, rapid digitalisation has meant that India now also has a much-evolved market for API-based banking products, a reliable technology stack, and strong controls on data security and data protection. The banking industry has played a crucial role in this journey by bringing in technology and transforming its processes at breakneck speed. And BNP Paribas has played a leading part in that effort.
The importance BNP Paribas attaches to India’s digital transformation is a reflection of its status as the bank of choice for a wide range of corporates – from the biggest automobile manufacturers and dairy products companies to the largest oil distribution firms and telecom equipment makers.
Focus on solutions not products
BNP Paribas operates on a primarily B2B business model in India and in this space we are increasingly becoming a very large player. In the two dozen or so request for proposals (RFPs) we have participated in during the last 24 months, our success rate has been around two out of three and this has been achieved in competition with the top peer global banks.
Three key elements have underpinned this success.
The first is our determination to sell solutions, not products. Many banks stress their commitment to implementing solutions that duly address the needs of the client – but in reality, few achieve that goal. BNP Paribas’ strong focus on understanding client needs, developing fit-for-purpose solutions for them, and not falling back on commoditised products is well-known and backed up by client case studies such as the Fortum success story.
The second element is BNP Paribas India’s strong focus on the quality and reliability of our IT systems and ensuring they can be tweaked effectively at the local level to adapt to client needs. In India, this capability is especially important from a regulatory perspective.
The final element of our success is a continuous mechanism of reinventing ourselves to outpace the competition. On this front we have embarked on a journey of co-creating solutions with fintech players and indeed our own clients. And these partnerships are proving remarkably successful, with great results for end-users, namely corporate treasurers.
Innovative solutions
More specifically, it is widely acknowledged that BNP Paribas India has been at the forefront of innovations in transaction banking in India over the last two decades. For instance, we were among the first of the major banks in India to introduce a virtual account solution and we were the first bank to offer a fully integrated bill payment solution for corporate clients.
Elsewhere on the innovation front, BNP Paribas India has co-produced novel financing solutions with our fintech partners, including for electric vehicle (EV) charging stations and electronic invoice payment and presentment. The bank has also developed in-house an AI/ML-based tool to read payment advice notices, which can potentially reduce our clients’ manual efforts and result in an automated solution for receivables reconciliation.
Our innovative platform Document Exchange Connect (DEC), meanwhile, provides clients with a single interactive platform enabling them to offer more than 22 trade products. All these innovations have led to an enhanced user experience for our clients and tangible benefits, such as a reduction in manual processes.
The sheer pace and scale at which India has embarked on digital transformation has few if any parallels in India’s recent history. Its implications for the future of transaction banking and the corporate treasury profession are clear: both need to be laser-focused on building digital functionality and promoting sustainability.
Challenge for treasurers
Moving forward, digitalisation for treasurers in India is likely to mean that they focus much more on managing and protecting data and not just money. There is already an enormous amount of data that exists in the bank’s ecosystems. How to leverage that data to offer solutions in the new digital landscape is a major challenge. While some of these novel solutions will undoubtedly give rise to disruptive practices, others will enable clients to do more with less.
And with the last of the digital-native Gen Y cohort entering the workforce and Gen Z consumers beginning to enter the digital ecosystem and shape consumer behaviour over the long term, India is well placed to reap the full benefits of digitalisation. So too are corporates operating in the country, with the support of an innovative banking partner.
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