Agility in Finance Aligning Technology with Market Dynamics

Nina Nagpal

Until a decade or so ago, financial services were predominantly a people’s business, and customer satisfaction was its key driver. It still is. But increasingly, banking and other financial services now rest strongly on another fulcrum i.e. technology which has subsumed all of its operations. Today technology aids customer service and satisfaction in a manner that was inconceivable until a few years ago. It allows for an elevated sophistication & complexity of products, agility and an expansive scale of operation. From here on, technology will make deeper inroads and its role will be increasingly interchangeable with those of humans, shared Nina Nagpal, Board Member and Governance Advisor in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN).

As a seasoned financial services industry leader, you’ve navigated through various sectors such as financial advisory, Market Infrastructure Institution, Investment, and Commercial banking. How do you see the evolving landscape of the financial services industry in the next decade, considering the ongoing global economic shifts and technological advancements?

Most of the developments underway in the financial services industry are technology- centric. The Indian financial services industry institutions e.g. banks, Market Infrastructure Institutions (MII) like Stock EXchanges, Clearing Corporations, and Depositories, have been early adopters of technology both at the front and back end. This has allowed significant scalability, volumes, and speed in the execution and processing of transactions. That being said, in my view, the next decade will be even more tech-intense. The use of technology in the way as we see it today i.e. use of BOTS for basic customer queries, high-speed trading, data processing, online customer service options for banking and trading, data analytics, use of algorithms, and the huge advantages that APIs bring in will all be highly elevated with the rapidly emerging potential of Artificial Intelligence (AI) and Artificial General Intelligence (AGI). In economic terms, my view is that technology and its applications
will increasingly constitute a larger share of the economy. The people’s impact will be substantive too – except that the shape of the impact is hard to predict.

With your extensive experience in Board positions and corporate governance, could you elaborate on the key challenges and opportunities that financial institutions are currently facing in terms of governance? Also, how has the landscape of corporate governance in the financial sector evolved over the years?

Good corporate governance results from the interplay of good corporate citizens, robust regulations and agile regulators. In the Indian financial services and banking space, we have easily one of the world’s top-quality regulatory institutions and regulatory standards. From my experience in the industry, I can say that our banking and securities regulators enjoy very high credibility amongst international regulators and the international industry alike. The regulation in the financial services industry in India has kept pace with the growth, evolution, and complexity of the services. The markets, banking system, and financial services industry in general are in a constant state of dynamism resulting from new demands brought in by investors, customers, new products, services, and new regulations. Importantly, given the increasing interconnectedness and the globalised nature of the banking system and the financial markets, it requires heightened preparedness, agility and speedy response. This makes governance increasingly complex and will continue to do so even as we get more digital and data intensive. Data security logically is becoming an area of paramount significance.

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Given your strategic orientation, how do you approach aligning long-term
business strategies with the dynamic and often unpredictable nature of financial markets? What are the key elements you consider in developing and executing successful strategies in the financial services industry?

Over the past decade or so, technology has become a key fulcrum of the financial
services industry. It allows for speed, product sophistication & complexity, agility . and scale of operation that perhaps was hard to envision. I believe that from here on, technology will make deeper inroads and its role will be increasingly interchangeable with those of humans. Managing the technology and the many manifestations of Artificial Intelligence, the utilisation of quantum data that will be generated, its security and innovation will be key. Last but not the least, the quality of customer service will always determine the success of any strategy.

Drawing from your experience in the Market Infrastructure Institution (MFI), how do you perceive the role of technology in transforming the infrastructure of financial markets? What challenges and opportunities does this technological transformation present for both established institutions and emerging players?

As I understand the array of institutions in the securities industry, I believe that they are entirely aligned with the cutting-edge technology of the day. This is exactly the reason why India is now ranked the fourth- largest equity market in the world. The volumes and the complexity of products cannot be sustainable without the first-in-class technology that our Market Infrastructure Institutions have. This includes the Stock EXchanges, the downstream institutions that clear, and settle the trades. For instance, as far back as nearly three decades ago, the Indian industry and policymakers chose a dematerialised model of securities Depository vis a vis the ‘immobilisation’ model which was the norm in most developed markets. This vaulted India and gave it a ‘leg up’ that allowed our markets to effectively and securely settle high volumes and values. The electronic ledgers resulting from dematerialised securities and a paperless environment support over~ 110 MM accounts and high settlement volumes in one of the largest markets of the world that India has become.

With your diverse background, including roles in various segments of the financial industry, how do you envision the role of sustainable and responsible finance in the future? What steps can financial institutions take to integrate environmental, social, and governance (ESG) considerations into their business models effectively?

This is an aspect that is at the heart of human existence. If the planet is to be habitable, environment and sustainability will need to assume center stage. This is a complex subject that involves the interplay of governments, policy, budgets & funding, businesses, the banking industry, and virtually all of us. So not just the financial/banking industry. So, suffice it to say that this interplay across these factors and stakeholders will need to play out well and soon.

Also Read | Demystifying how technology has changed insurance dynamics

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