Banking in India

With a population of over 1 billion, India is an exciting environment for banking, with cutting edge technology leading the financial scene in India into the future.  India has 32,342 ATMs as of December 31, 2007, but an increasing number of customers are finding that the need to visit a bank branch or ATM machine is not what it used to be, thanks to exciting technological advances.

Banks are moving toward allowing customers to complete banking transactions using mobile phones and other handheld technology.  Banks in the past had used technology such as text messages to advertise promotions for customers, but electronic transactions will probably replace many types of cash transactions in India within the next few years.  The use of technology in banking lowers transaction costs and reduces the need for rapid branch expansion.  Currently, 8% of banking transactions in India are completed online.

This idea of handheld banking technology is called Mobile Banking, and it is predicted that mobile banking will revolutionize the banking industry in India and eventually around the world.  Already, 85-90% of mobile bankers do not use debit or credit cards; they simply use their phone to complete transactions.  The technology used to make this style of banking possible is the same technology that runs ATM machines, although it’s much cheaper to maintain.  India is truly on the cutting edge in this rapidly growing area of finance

An increasing number of Indians are also using the Internet for banking purposes, although the majority of bank customers using the Internet limit their activity to checking statements and determining whether or not transactions have been completed.  The Internet also allows bank customers to interact with bank employees to ask questions and inquire about bank products and services, although this is not heavily utilized so far by Indian bank customers.

Traditionally, Indians have not carried a great deal of debt, with consumer debt making up only 4% of the country’s Gross Domestic Product, compared with over 60% for countries such as South Korea and Taiwan.  Banks are eager to participate in the increasing debt loads of Indian consumers.  Like China and South Asia as a whole, India is one of the largest growing areas for credit card, debit card, and cash card services, and studies predict that the credit card market in this region will grow by 15-20% over the next three years.  Indian households currently save 28% of their disposable income.

The banking presence is growing in India, as more International banks and financial companies rush to compete for the growing banking needs in the country.  Demographically, half of India’s 1.2 billion people are under the age of 25, so over the next several years, a huge generation of people will be entering their earning years and will have diverse banking needs.  The banks that find a way to provide the services Indian banking customers enjoy a windfall of new customers and profit in the years to come.