In traditional banking, bank accounts are opened by the end customers/consumers to conduct critical and common banking transactions – payments and transfers, loan disbursements and repayments, forex transactions, investment and private banking etc. Sometimes one single operative account and multiple sub accounts are opened by the customer and there is a possibility of opening multiple operative accounts for different purposes. Customers also open accounts in different banks for varied needs. This is increasingly visible across the middle class/urban/privileged or high net-worth customers (HNI) in India. Currently the process is to enable these accounts with online (internet) banking, mobile banking, and ATM for customers to access and perform transactions anytime anywhere with security and password control.
Different banks provide products and services in different lines of business and differentiate them from competitors’ products with interest rates, charges etc. They charge the customer for a few services and pay/collect interest for investments/lending as required. The balance ultimately reflects on the Profit and Loss statement of the bank. There are standard message protocols /APIs built within these products and services which are exposed based on security/rules and regulations of the home country which can be consumed/published by software vendors/banks/Fintechs as needed.
With the technology advancement of mobile and with data provisions through different technologies like GSM, 3G, 4G, 5G, the customer/authorities can access critical data with controls and consent as required – few countries have provided online integration mechanism with passport, national identity / security number, or driving license authorities to store, update and retrieve information using APIs. With the concept of open banking and open APIs, most of the banks and software providers are opening up the core and surrounding solutions allowing their APIs to be consumed by the external world with strict consent/access and control.
Multiple countries have started the process of introducing bill junction/desk, payment junction/gateways so that any type of payments can be routed through these interfaces. However, these are mostly one-time or a weekly/monthly recurring activity and can be easily templatized. For this, one needs to register with a bill junction with provision for ad hoc payments and mechanism for settlement.
A junction/gateway for accessing and availing different products and services of multiple banks/financial service/fintechs by customers based on selections is also an option. Gateway junctions can also enable customers to close and complete the transaction in a few clicks. Considering the micro-services architecture design with collection of services, it is only a matter of time before one will be able to pick the services and use it as required. With security controls, accessibility of data, opening and completing transactions through mobile applications or devices and choosing the best services out of the listed options can be considered. Without restricting to a single bank/FI, one should be in a position to avail the best services /offers and it should be seamless. The customer is not restricted to one institution and should be provided ample choice and the best of offers from multiple banks/FI.
Options need to be explored for fulfillment and settlement of banking transactions without maintaining a single account/multiple bank accounts. Without a bank account, one needs to create alternate storage of funds with a unique identity for the customer. This could help in settlement of transactions as per need. It would be a deviation from the fundamental concept of banking/financial ecosystem wherein banks have till date survived on the basis of the traditional lending and financing interest-based business. However, banks need to innovate and explore new revenue opportunities continuously given the changing regulations and increasing customer needs.
A concept of transparent processing, access, storage and movement of customer documents is Block chain. Block chain has also conceptualized distributed ledger instead of single ledger concept. However, settlement for block chain transactions still requires customers to have a bank account.
To conclude, with the concept of open Banking, API availability, micro services, digital transactions and transaction overdose, it should be possible for the customer to do banking transactions with/without a bank account. This can bring in models / avenues for storage of customer data and account balances and this role can be played by an intermediary appointed by the Government with strict supervisions and monitoring. Though such a concept will limit the scope of the banking system, it will also open up more opportunities for the system to explore new models. The allocation of excess funds can be assigned to qualified fund manager/robot who can use AI and analytics to deploy funds across the globe in financial instruments which can provide better returns, liquidity and can be used for settlement of transactions. From the customer’s perspective, banking services and products will move more towards commodity business with the concept of use, pay, settle and balance excess funds with investments in lucrative financial instruments worldwide. After software-as-a-service, platform-as-a-service, this will be the rise of true banking-as-a-service.