Banks have been “short sighted” in the last three years on the payments business which is now monopolised by two or three payment companies, said veteran banker Uday Kotak, and urged them to “wake up”.

“Indian banks are behind the curve. Indian banks have allowed the growth of UPI payments that have been essentially monopolised by two players — Google Pay and PhonePe — which have 85 per cent of the market share,” said Kotak, Managing Director and CEO, Kotak Mahindra Bank on Friday.

Wake-up call

Addressing the InFinity Forum organised by IFSCA and Bloomberg, Kotak added that this is a wake up call for Indian banking.

“Wake up or you will see large parts of traditional financial systems move out,” he said.

Also see: Fintech risk landscape

Noting that bankers had been short-sighted over the last three years, Kotak said their standard response was that there is no money in payments.

He, however, stressed that consumer protection has to be the key priority when fintech companies grow.

Legal boundaries

Consumer tech companies have revenue models which are outside finance — such as advertising and e-commerce — while banks legally can not enter non-financial businesses, Kotak noted.

“So, there are serious issues of how to draw lines and, simultaneously, there are issues on financial stability,” he said.

Keep trust

While underlining that he is not against competition, Kotak said that we need to make sure that competitive service mustn't lead to systemic and stability challenge.

Also see: Digital payments remain strong, marginal decline in November

“We must ask the question of who runs the risk when raising the deposit — is it the consumer tech company which is facing customers and raising deposits who runs the risk of the underlying asset? As we grow fintech, we must make sure that we do not betray trust,” he added.