Technology giants have no business in banking, says Uday Kotak1 min read . Updated: 20 Feb 2019, 08:58 PM IST
- Banking is a business with a high degree of leverage involving public trust and continues to be synonymous with safety
- The comments come amid an aggressive play by giants like Google with its payment platform Google Pay in the financial sector
MUMBAI : Banker Uday Kotak opined that technology majors like Google and Facebook should not be allowed to become banks as they don't like to be regulated.
He said banking is a business with a high degree of leverage involving public trust and continues to be synonymous with safety.
"If a Google or a Facebook ever decided to be a bank, we have a problem...They don't want to be as regulated as we are," Kotak, who heads Kotak Mahindra Bank said while speaking at the annual Nasscom leadership summit here Wednesday.
The comments come amid an aggressive play and keen interest by the global tech giants like Google with its payment platform Google Pay in the domestic financial sector, especially through payment services offerings.
Kotak said banks work at a leverage of 10:1 wherein they lend out ₹10 for every rupee of capital which they have. It is a high risk business, but perceived to be safe, Kotak said, stressing banks have "no choice" but to manage the risks well.
He also hinted that young people are a bit adventurous with their investments and often put money into risky bets. But fortunately, a large pot of money is with the old people who allocate the resources very judiciously.
Kotak advised young fintech players and startups to enter the fray assuming that they will fail, as 99% of new entities fail.
Stating that banks and other entrenched financial services players should not be complacent in facing competition by young companies out to disrupt the game, he said within a week of demonetisation, a "relatively unknown" company became a common place across the masses, hinting at Paytm.
"It shook us out of our slumber," he said, adding this had the his bank soon launching the 8/11 account opening drive which gave it good business as it helped address the opportunities in the mass segment from the earlier mass premium segment.
Kotak also sounded peeved at the high cost of accessing IT services, exhorting software players to offer services at lower cost and said they need to offer services at 1-2% of the cost they are charging now.
He also rued that while the country has made a name for itself rendering software services to the world, there have not been enough product companies, resulting in multinationals to make a lot money.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.