The Banking, Financial Services and Insurance (BFSI) segment in India is flourishing, with a constant focus on technological innovations. Indian banks have deployed technology-intensive solutions for staying relevant but despite advancement, the journey continues, Rashi Aditi Ghosh of Elets News Network (ENN) explores the voyage of Indian banking industry towards the zenith of advancement.
The Indian banking scenario
Banking as an institution originated in India around the late 18th century, essentially catering to the needs of the British government.
Post-independence, the nationalisation of major private sector banks in 1969 is marked as an important milestone in the Indian banking system. This is said to be one of the initial steps taken in making banking accessible to the unbanked population in India.
Later, the economic liberalisation in the early 1990s acted as a catalyst and steered in the era of privatization, giving birth to several new generation tech-savvy private banks.
In this era, few foreign banks commenced their India operations as well. All these banks, which were quick to leverage emerging technology, were competitive in attracting customers and winning them over by professional services.
This, as a result, ignited a sense of urgency in public sector banks and older private sector banks to mend their ways, which, in turn, completely transformed banking operations in India.
Impact of the IT revolution
The opening up of the Indian economy in 1991 almost proved to be in sync with the worldwide Internet revolution (www). This, in return, doubly impacted the Indian private and public sector banks that were still stuck in the old traditional ways of performing.
With the rise of Indian IT services, within no time Indian banks started embracing technology wholeheartedly.
This channelised the emergence of business process automation in Indian banking segment.As a result of this initiative, customer service reported enhancement, reduction in manpower costs and an increase in profitability.
Indian banking also saw a drastic change gradually. Apart from normal banking products and services, the banks started selling third party products such as mutual funds and insurance to their clients as well.
This step proved to be positive as single window selling saved the customer’s time and enabled the bank to enrich the relationship.
The Reserve Bank of India (RBI) played a pivotal role in this transformational journey, by issuing regulations and recommendations on banking mechanisation and computerisation.
Serveral significant steps namely establishment of computeried inter-connectivity across bank branches, introduction of MICR based cheque clearing, revamping of payment services and settlements through Electronic Clearing Services (ECS), Real Time Gross Settlement System (RTGS), National Electronic Funds Transfer (NEFT), paved way to the onset of banking technology revolution.
Regular advances in technology, growth in middle-class income levels, and rise in demand from a consumer-oriented financial market, soon transformed the Indian banking sector to a customer centric, technology-driven, financial industry, catering to the diverse needs of its customers.
Significant milestones in Indian Banking Sector
over the years, the banking sector in India has witnessed a visible shift from traditional mode to channel-based banking.
One such revolution in the history of Indian banking was the introduction of ATMs (Automated Teller Machines).This service for the first time provided the customers in India with “any time” access to their money. The credit and debit card enabled cashless transactions, introduced a revolution in the banking world.
Affordable technology-based infrastructure namely cheap, small but powerful computers and other hand-held gadgets and higher Internet bandwidth within less investment gradually started ensuring easy access to banking products and effortless banking transactions.
The rise of call centres and phone banking services further added to customer convenience. A major change in banking was also observed through directing banking transactions via different electronic channels and by providing customers direct access to their bank accounts, banks could now offer quick service and transparency as well. Several banks at the initiation of the above mentioned services also started offering incentives to customers for using non-branch channels.
All these major changes trimmed down the number of customer footfalls in the branches. The next noteworthy milestone in the segment was the introduction of mobile banking primarily through SMS.
Acting as a catalyst, the launch of smartphones created a revolution in the banking world. As the number of mobile phone users in India saw a robust rise, the banks explored the feasibility of using the omnipresent device as an alternative channel for delivery of full-fledged banking services.
According to Rajeev Arora, COO of the Fino Payments Bank, technology, for us, has always been dependent on the customers’ convenience as well as geographical factors.
“In the recent years, we focused inwards – using technology to improve process efficiency, risk analytics and enhancing productivity of our organisation. All these learnings will culminate to our payments bank, where we intend to ensure a 100 per cent paperless four-minute banking suite of solutions, using technology, especially eKYC (Know Your Customer), as an enabler.”
Major Technology Trends Fueling Banking Transformation in 2017
Projecting a major transformation towards technological innovation, the Indian banking system is on the verge of adopting several out of the box measures. Onset of digital age and hyper-connected environment have indicated the need for the banks to re-imagine their business continuously. And, the Indian banks are emerging as a leader in terms of transforming from digital to truly digital shape.
Some of the rising trends in projection towards the technology interface are:
The rise of Open banking
Open banking is emerging as the future of banking. It will be acting as a connected ecosystem for financial and non-financial services with multiple underlying service providers.
The launch of Unified Payment Interface (UPI) by the National Payments Corporation of India (NPCI) has opened new vistas or innovation in the open banking space. The UPI is empowering payment service providers to come up with products/offerings without being limited by the underlying account relationships. Customers will be provided with the flexibility that they need and UPI will enable all service providers to innovate for better customer experiences.
According to Biju K, Chief Information Security Officer, Federal Bank, the Federal Bank believes in digitally influencing the life of customers with a guiding philosophy of “Digital at Fore, Human at Core”.
“We are at the forefront of the digital banking narrative with the successful launch and operations of innovative products like Selfie (instant account opening), Lotza (UPI App), missed call banking, online personal loans, etc.”
“We have implemented technology driven solutions for improving customer engagement by blending data insights through customer analytics and behavioral patterns,” Biju K, Chief Information Security Officer, Federal Bank,” he added.
Banking on Cloud Technology
Clouds are providing a whole new innovation to the Indian banking industry. Several progressive banks have already adopted cloud technology, ensuring a safe future for data related services.
Technologies that are already transforming the face to banking business namely Big Data, blockchain, artificial intelligence (AI), IoT will be leveraged using cloud computing. Demonetisation in a major way has pushed the country towards a cashless society, and as banks prepare themselves to handle the increased influx of electronic transactions, cloud will provide banks with the required elasticity to meet these demands.
As banks are preparing themselves to be agiler and efficient for meeting the rising demands of customers, blockchain will be one of the enablers for re-imagining processes.
In 2017, banks will essentially welcome projects to leverage the launch a blockchain .
According to Prasanna Lohar, Head of Technology, Digital Banking, DCB Bank, the banking services sector is yet to be “radically transformed but recent disruption has given clear indication for upcoming new business models” e.g. Aggregation of Services, banking will remain as a service, collaboration with Fintech is need of the time, partnering for banking services is gaining momentum in India.
“Those working in sales and manufacturing will need new skills, such as technological literacy. Mobile, Internet and cloud technology are already impacting the way we work. Blockchain, Artificial intelligence (AI), 3D printing and advanced materials are still in their early stages of use, but the pace of change will be fast,” he added.
Artificial intelligence (AI) has shown major potential towards transformation of both front office and back office operations with its cutting edge self-improving programmes.
AI has already proved itself in providing seamless differentiated customer experience on digital channels, and security measures with its integration within the banking infrastructure. Intelligent digital assistants are commonplace, and these self-learning programmes keep getting better with every interaction.
Today, the applications of AI are ubiquitous, ranging from data analytics to a number of tools like software testing, face detection, optical character recognition. AI is already being implemented across a number of service sectors including advertising and targeting, banking, finance, media, navigation, aerospace, agriculture, and genetics.
According to Rajnish Khare, Head – Digital Transformation, Social Business & New Media and Mobility Banking, HDFC Bank, the HDFC Bank’s approach to AI is holistic. “We have a strong testing & learning driven approach.”
“Customer Experience, Customer Support, Process Automation, HR, Security, Fraud Detection are some of the areas where we will be developing our AI solutions. We don’t want to just create gizmos. Our guiding principle is Generating Customer Value out of artificial intelligence. To put it across as is, AI will help us manage both internal and external customers much more effectively and help reduce our operational costs exponentially in the near future.”
He says: “Our key developments in the Artificial Intelligence space includes HDFC Bank OnChat – An AI based e-commerce chatbot on facebook, Programmatic Ad Bidding – AI based ad bidding tool for digital marketing, HDFC Bank Ask “Eva” – AI based FAQ & customer service assistant and HDFC Bank “IRA” – Our Intelligent Robotic Assistant at branches.”
“The realm of innovations pertaining to artificial intelligence extends to recruitment, customer service, core banking, employee training and engagement, operational efficiency, analytics, and e – commerce. Also, many additional initiatives are in the development phase under these domains.”
The message from the Indian banking industry is loud and clear. India is on its transformational journey to modernity and the change in indeed revolutionary. But concerns, namely rural-urban divide is waiting to get bridged for a long time now.Time has come to fuel up the Financial Inclusion and connect the rural with the mainstream economy. The progression should be harmonious and in perfect tune with the technology.Technology advancement is important but better awareness of its usage, to curb down the menace of malware and misuse is the need of the hour.