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Uday Kotak, the CMD of Kotak Mahindra Bank, the 4th largest private sector bank in India, put it very well in an interview on Economic Times today. Traditional banking is driven by short and medium term profits, so it chases 20% of customers who contribute
80% of profits. On the other hand, digital banking chases the other 80% who deliver massive losses. As long as they are well funded, digital neobanks can afford to ignore revenues and profits in the short and medium term. However, even the largest and most
profitable traditional bank is answerable for its financial performance to Wall Street every quarter.
I didn't see any guidance from Mr. Kotak on whether traditional banks should ignore short and medium term financial performance and go after the 80%. Which is okay since there may be enough room for both traditional banks and digital banks to coexist.
This post is from a series of posts in the group:
A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.