I remitted some money using GPay recently. There were many people with the same name, and erroneously the money went to the wrong account of one Arjunan. When the actual Arjunan to whom the money was sent called me and said that the money had not been received, I checked up and found the mistake. For a month, I have been calling the wrong Arjunan, who does not reply. GPay has no recourse to recover the money, which was possible in money transfer by banks.
Irony is, GPay, Razorpay, Freo, Mahila Money, FI Money, Jupiter, InstantPay, ZikZuk, and Akudo are some of the Neo-banking apps in India without any banking license.
Yono is owned by SBI, and in 2021 it was ranked No.1. So it is an exception though named a Neo-banking app. Neo-banks are digital-only banks that operate without traditional branch networks. They do not have a license from RBI, and there is no regulator for monitoring.
Now GPay has advertised credit card operations. They don’t have a banking license to issue credit cards, but they are promoting credit cards of Discover, Green Dot, HSBC, NFCU, and other foreign operators. GPay already has the largest customer base without a banking license, as they have access to the bank account of every bank under the Neo-banking model. In some countries, they have started charging the customers for every transaction, which will come to India sooner or later. Now for the issue of credit cards, they will have access to the CIBIL score of individuals. They already have the data of everyone who uses Gmail, Google Maps, GPay, and more. This is going to be dangerous.
What is happening is that instead of opening foreign bank branches, these companies are using the backdoor entry to capture business in India. In credit card operations, they can charge even 36% interest. The leader in credit cards, SBI Cards, will have a tough time now. More will come with the entry of GPay into credit card operations.
Already, after the RBI allowed foreign shareholdings in Indian private banks up to 74%, HDFC has 48.1% shareholding by Foreign Institutional Investors, ICICI 44.8%, Axis 53.8%, and even in SBI, 11.1% of the shares are held by FIIs.
The irony is that the promoters of HDFC Bank, ICICI Bank, and Axis Bank have 0% shareholding now! The promoters are the Government of India. Morgan Stanley has significant investment in these banks. The majority voting share in these banks is also with foreign investors.
This is a careful way of handing over the banking system to foreigners while talking about “Make in India.” In the name of “Making America Great Again” (MAGA), Indians in the USA are targeted. But we are handing over the Indian banking sector to the US. The deposits and advances of private banks, led by the above, have doubled in 20 years, whereas in public sector banks, it has increased only by 60%. So far, the privatization of public banks has been put on hold because of the resistance of trade unions. But indirectly, banking services are privatized.
The Neo-banking and fintechs, which are almost the same, are slowly taking over, led by foreign companies. In the last few years, fintechs/Neo-banks that failed internationally are many. Some of them are Beenz.com, Boo.com, Wonga, Powa Technologies, CClincle, Habito, Monitise, Eastpost, Yapstone, and Azimo.
In the US alone, 37Coins, Bitpass, CircleBack Lending, Eventrue, Flowtab, Monitor 110, Scalefactor, Tilt, Wesabe, Birdy, and more have failed.
In India, Koniex failed. Paytm is struggling and charged with sharing information with Chinese companies. Synapse Financial Technologies, a service provider to fintech companies in the US, filed many fintech firms and their customers. Some of them are Copper, Mainvest, Olta, Juno, and Yieldstreet.
GPay is only the beginning in India. But more will come if RBI does not insist on registering them and introducing a strict monitoring mechanism. Without a regulator, the customers will be cheated.
Banking is not a child’s play. Today, data security, regulatory compliance, financial management, recovery mechanisms, relationship banking, and lending risk are very important.
In 2025, with AI and Gen AI getting into everything, India has a great challenge. Let us not hand over the banking sector to foreign and Indian private corporates, which will be a peril to the economy and the people of India.
Thomas Franco is the former General Secretary of the All India Bank Officers’ Confederation and a Steering Committee Member at the Global Labour University.
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