The banking industry is the backbone of the Indian economy. It caters to the financial needs of 138 crore citizens. As an early adopter of technological advancements, the banking industry has constantly reinvented itself to improve business as well as the economy. The recent digital transformation has ensured seamless banking services to customers, and banks are transforming themselves from traditional brick and mortar institutions to adaptable financial service providers.
The advent of cutting-edge technologies enabled banks to reimagine their operations. Emerging technologies including artificial intelligence (AI), machine learning (ML), Internet of things (IoT), Cloud computing, blockchain and robotic process automation (RPA) have contributed to the expansion of business to under-served areas. In fact, the way of banking has shifted from being conventional to convenient – making financial products and services available practically at the touch of a button. Welcome, Banking 4.0!
AI-ML is one of the most important components of Banking 4.0 since the benefits are abundant. It plays a pivotal role in core banking services, back-office operations, customer experience, compliance, risk management and product delivery to name a few. Several manual operations are automated, and we witness enhanced agility as the system algorithm makes fact-based, unbiased decisions by analysing a large history of data at an appropriate time.
Blockchain is going to transform the banking industry altogether. This technology, on one hand, improves efficiency and is cost-effective, and on the other hand, it gives heightened security for the entire spectrum of financial services. This helps banks in fraud reduction, loan processing, know your customer (KYC) processes, inter-bank transactions, smart contacts, and many other banking services. The extent of opportunities that blockchain offers is yet to be explored by many of our banks.
Robotic process automation (RPA) is a revolutionary technology that helps banks to automate operations by executing pre-programmed rules across structured and unstructured data. It improves quality and speed, and reduces the cost of administrative and regulatory processes. Additionally, it eliminates human error and records the detailed log of processes to use for future references, if required. Prompt services, especially in customer-related activities such as complaint redressals, account opening, credit approvals, etc. are benefitted by the use of RPA.
The emergence of Cloud computing has made banking easier by relying on secure storage, 24×7 uptime and interoperability. Banks get an opportunity to directly connect with their customers and enable the service to be accessible “anywhere anytime”. Cloud computing secures transactions by integrating all the services of the bank system, and thus, reduces the time and effort of the customer.
Data analytics helps to predict customer behaviour and customise products for different customer needs. Banks have already explored various devices such as smartwatches, smart voice-controlled speakers and monitors, thereby making banking convenient for the customer.
The disruption caused by the emergence of FinTech startups and the fast-paced innovations have compelled banks to adopt these new-age technologies in their services. Many banks in partnership with FinTech players started implementing smart solutions in their products. Banks now embed cutting-edge technologies in their new products to cater to the needs of customers and expand segments. Thus, digital banking provides a convenient one-stop-shop for multiple cross-platform services including savings account, credit cards, trading, investments, etc.
It’s no wonder that banks are now considered financial service providers rather than just lenders or cash depositing institutions. From financial inclusion to helping MSMEs and being facilitators for startups, the responsibility of banks is multifaceted and increasing further. During the current crisis, banks have realized the importance of these disruptive technologies and intensified digital transformation in their processes and solutions.
The social distancing norms to curb COVID-19 has enhanced usage of digital solutions especially payment applications, Internet banking and mobile banking. the entry of large non-Banking marketplaces or aggregators such as WhatsApp, Amazon, Google into payments and peer to peer lending and also the significance of Mobile Wallets for service providers such as an OLA or Uber.
The launch of non-banking aggregators such as Google Pay and now WhatsApp Pay have truly accelerated financial inclusion by providing access to the users who require it the most. They offer a simplified way to handle digital payments. The usage of mobile wallets to make payments everytime an individual takes an Ola or Uber cab has transformed people’s lives. Faster and safer payments are made with UPI nowadays. Ola also recently entered the mobile payments business with Ola Money, which allows users to send money to their family and friends and also recharge their mobile phones.
More people belonging to remote areas and lower-income strata are logging in to these applications for their banking and financial needs as almost all the services are now available digitally. Clearly, banks now have a better reach and FinTech startups play a pivotal role in this transformation.
How Indian banks can reap the benefits of emerging technologies
The benefits of emerging technologies are sundry, the challenge is to implement it efficiently in the way an organisation works. Building infrastructure is the first step for digital transformation. The infrastructure needs to be customised for the requirements of banks and aligned with the regulatory compliances. In fact, all banks have already equipped themselves with the necessary infrastructure and this is a major step towards progress.
To set up and run the infrastructure successfully, banks need skilled talent with expertise in the emerging technologies. As we know, scarcity of talent is a major challenge. These newly emerged technologies are most demanded domains. Therefore, banks can either reskill or upskill their existing employees as part of the reorientation of duties, or hire fresh talent in these fields before deploying them in their role.
It is well known that those employees who have undergone future-ready training perform far better in the field compared to other staff. Since the new-age technologies have great impact, the banks need to deliberately invest in upskilling of employees. Some institutions in India have been delivering end-to-end hands-on training for various banks to ensure their employees are skilled to address the challenges of the new digital economy. The onus lies on individual banks and their desired outcome from the deployment of emerging technologies with their ecosystem.
(The author is the Chief Business Officer at Manipal Global Academy of BFSI)
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