Banks log-in to E-commerce

By: Himanshu Modi

Banks got a wake-up call when the Indian retailers aspired to play the role of a bank & applied for payments bank license after capturing the consumer’s wallets & payments business. The entry of Paytm, a mobile payments facilitator, into retailing as a marketplace with the backing of China's Alibaba has made banks like Axis Bank, State Bank of India (SBI) and HDFC Bank look at ways to ensure the likes of Flipkart and Snapdeal do not eat into their share. Hence, the Indian banks are now opening up to possibilities dawning on them. The E-commerce players are betting on the Unified Payments Interface (UPI) to replace the cash on delivery as the preferred mode of payment. But bankers such as SBI, Axis & HDFC have created & enhanced their mobile wallet applications in the recent times to help the consumers get multiple offers from leading E-commerce players to capture the urban Indian consumers on the move. Now a tap on the app can throw up a list of restaurants & deals or jewellery shops in the vicinity in augmented reality. Banks have now realized that there is no point throwing a hundred e-mails with exciting offers to customers that too at odd times which may not even be read by them. Location specific deals increase the chance of actual consumption. Banks have also realized that single-click authentication, faster checkouts, along with multiple things to buy from, come to the bank application only.

But to become a marketplace, banks have multiple hurdles, like they are heavily regulated & doing anything beyond banking is very difficult. It may be easy to tie up with merchants who are already on digital platforms, but full-fledged retailing requires an enormous build-up of a logistics platform which is difficult for banks to manage. Banks cannot enter into selling of physical merchandise because it involves a whole new idea around logistics, which is going to be a nightmare. Banks will end up burning cash, which the RBI will not entertain. Also the success of this marketplace model for the banks depends on the number of customers the bank has. Yes Bank, in existence for about a decade, partners with marketplaces rather than compete with them, including integrating with PhonePe, an arm of Flipkart. Even Kotak Mahindra Bank has tied up with the likes of Flipkart and GoIbibo to facilitate smooth pay ments through its applications. 

The battle for customers has only just begun between Banks & E-commerce marketplaces. While the banks have deep financing options, marketplaces face increased scrutiny after heights of valuation, some even higher than some banks.