Banking post-COVID: Will the future be built on trust or technology?

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The world around us rapidly transformed itself into a technology-driven place in the last two years and covid plays a major role in accelerating this transformation across industries and the banking sector is no different. Looking at the industry trends and practices in recent times, it would not be wrong to say that the traditional banking model is most likely to be a thing of the past as innovations in technology are most likely to redefine financial institutions. In sync with the need of the hour, BigTech technology solution providers and fintech disruptors are finding their way to the financial institutions. To understand the rising significance of technology in deciding the fate of the banking industry during and after the pandemic and the choice between trust and technology, Rashi Aditi Ghosh of Elets News Network (ENN) spoke to several experts from across the industry.

How is Covid reshaping the banking behaviour of consumers?

COVID-19 has significantly impacted the banking behaviour of consumers around the world. A lot is happening in the banking sector to analyse whether these changes are long-lasting or are merely covid induced and will eventually fade away.

While digitisation was always on the priority list, the pandemic accelerated the deployment and implementation process by multiple folds. In a bid to fully understand the impact of the pandemic on consumer sentiment and behavior, multinational professional services network EY created EY Future Consumer Index to help business leaders understand the emerging trends and understand which are temporary, and which will lead to more fundamental shifts.

Based on the responses and the Index results, following are the four ways consumer banking behavior is changing in response to COVID-19.

  • Only 24 percent of respondents expect banks to operate more digitally in the next 12-24 months, and just 16 percent of respondents stated the way they bank will change over the longer term because of COVID-19.
  • 17 percent- Percentage of respondents who say they trust the activities of financial institutions in a time of crisis.
  • 27 percent-Percentage of consumers who agree that banks will be more flexible in the next 1-2 years

Covid is a Calamity but with Hidden Opportunities?

In an exclusive interaction hosted during the 5th BFSI CTO Summit, we spoke to Utpal Chakraborty, former Head of Artificial Intelligence at YES Bank, AI Researcher, who based on his experiences shared some trends and practices pertaining to changing behaviour of banking institutions based on the evolving market demands and customer needs.

Also Read: 5 Reasons that make Open Banking powered Personal Finance Management Apps a Must-Have

“In this pandemic as you all know, there is a huge loss in terms of life, in terms of business, in terms of jobs for many of us. So, if you look at it is an unprecedented kind of a calamity as you can see in the entire world for all the industries. At the same time, there are some positive things also that we can take from this particular pandemic because in every negative thing there will be some percentage of other things which is like huge focus on digitization and adopting new technologies which you can be termed as a blessing in disguise. Coming to banks and financial institutions today the core focus is basically rending more and more services into their digital channels whether it’s net banking, mobile banking, chatbot, and other types of lightweight channels. So, the core focus is rendering more and more services so that they can digitally provide the services to their customers and users that is one area,” said Chakraborty.

“When we talk about this kind of channels giving similar experience to the customers then definitely technologies like AI ML and all other things that come into the picture because those are basically technologies that enable the digital channels in one way or the other way. So, here definitely AI ML is playing a very measurable part. Apart from this, financial institutions today are also trying to find the different services pertaining to how operations can be managed in a remote kind of a scenario where probably employees are working from home and customers need to be serviced.”

“This is another area that is getting a lot of traction and different fintech coming up with a lot of innovative ideas and a lot of innovative solutions like to enhance this kind of services and leverage news and technologies how we’ll be able to operate in 100 percent manner without giving travel to any customers in any kind of scenario maybe it would be a lockdown, maybe similar kind of pandemic or maybe any kind of disaster may it come and I think that kind of preparation is very essential for tomorrow because today probably it is a discovery tomorrow some other virus may come nobody knows it could be more dangerous. So, one part is definitely will have to say save ourselves health-wise. Secondly, should be the business should run seamlessly it should not be impacted in that way because if you look at the impact on business probably is much more than any other impact that put today into. “

“I think there is a huge focus on a digital channel for any financial institutions not only financial institutions take about any other industry, everyone is today trying how I can provide my products and services through digital means that is the core focus. Number 2 newer innovative ideas that fintech and banks are coming up how we can operate without going into the office from home itself I can manage everything and my customer will not even realize that there is a pandemic or something when they do banking. These are areas that actually getting revolutionized after this pandemic and this situation.”

While Chakraborty spoke about the rising importance of digitisation during the pandemic across the banking sector, several reach reports too depict similar trends.

According to RFi Group (a global intelligence and digital media provider focusing exclusively on financial services), 71 percent of consumers globally are now using digital banking channels weekly, 3 percent year on year increase, while daily use increased 6 percent in the same period.

It was earlier observed that people in India from the older generation were reluctant on using technology for banking purposes but it seems that the pandemic has installed the trust factor amongst the millennials as well as the elderly people towards the use of technology for performing banking operations.

An article by Kevin Martin, Chief Operating Officer, Wealth and Personal Banking, HSBC states that “It is clear that COVID alone hasn’t suddenly caused the shift to digital, rather it has simply accelerated it as more and more people have digital ecosystems as part of their lives. For instance, the shift away from cash towards digital payment methods have been building gradually for years.”

Digitisation is booming but what about Cybersecurity?

While Covid has boosted the digital drive across the banking sector, the risks of cyber threats have also reported a rise.

Also Read: Data and Analytics in Banking 4.0: The key differentiators

In its bi-annual Financial Stability Report of the Reserve Bank of India (RBI) stated that attempts to target the payment ecosystem of the country by adopting multiple modus operandi, including the theft of payment card credentials and compromise of ATM infrastructure was witnessed.

Besides, the Computer Security Incident Response Team for the Financial Sector (CSIRT-Fin) under the Indian Computer Emergency Response Team (CERTIn) issued several early warning threat intelligence alerts in near real time in a bid to enable mitigation of attacks by the financial sector organisations.

Further, the FSR alerted cyber-attacks as a challenge for banks along with climate-related risks, increased competition from the entry of fintech and the growing presence of big tech in financial services.

An article titled Cyber and anti-fraud controls are paramount for banks during COVID-19 and beyond by KPMG mentions that there has been a significant rise in the number of ‘phishing’ emails connected to COVID-19 being sent to customers – emails that look like they are from the bank and that may be about financial support available in the wake of the pandemic, but which are actually a lure asking customers to provide or validate their account or identity information. Other emails may contain malware that downloads onto a customer’s system once a link is clicked.

Biju K, Head Operational Risk and Chief Information Security Officer, Federal Bank said, “Investment in cybersecurity has always to continue irrespective of whether it is covid kind of a pandemic or any other kind of situation because as you all know the threat landscape changes continuously. In fact, it is very dynamic. As you all know, we are seeing increased threats particularly from many countries considering the fact that almost all organisations are now working on a work from home environment wherein boundaries has been disappeared so earlier when the environment was totally different where the employees or the users particularly those privileged users connecting from the organizational network there something called parameter which was defined and some there were a lot of controls which are introduced in a parameter level and we all believe that these are reasonable security controls.”

Also Read: 2 Ways the Pandemic Affected Banking Innovation

“With covid pandemic and with the kind of environment we all are working today so, essentially the environment totally changed and the threat scenario and threat landscape also changed a lot. Some amount of additional investment by a new way of security tools, secured connective establishing, secured connectivity to the employees the compromise or data leakages are not happening so like new investments certainly were warranted during this covid period. On one side I will say it’s a continuous improvement and on another side, I also believe that the covid pandemic made us improve a little more quickly in certain areas. The pandemic improved digitization very quickly which didn’t happen in the last multiple years it happened over a few months. So, the security side also had to adapt to the technology change in the work environment certainly for that investment has to happen,” added Biju.

How is Covid Induced Digitisation Intensifying Risk Management?

An article titled -The COVID-19 recovery will be digital: A plan for the first 90 days by Mckinsey states that Covid accelerated digitisation by five years in consumer and business digital adoption in a matter of around eight weeks. Banks have transitioned to remote sales and service teams and launched digital outreach to customers to make flexible payment arrangements for loans and mortgages.

So, does this intensify the role of a Chief Information Security Officer in sync with disruptive technologies like AI and Ml.

Shibu PS, Assistant General Manager, Indian Bank said, “Technologies like AI ML technology are commonly known as disruptive technologies and they help us improving the business as well as enhancing the customer experience. They are meeting their expectations and dealing with their digital products. These technologies enhance the customer experience as well as improving the business. As far as the role of Chief Information Security Officers (CISOs) is concerned, especially during Covid, these technologies prove to be intelligent and help us analyze the technology security perspective. Because scopes associated with these kinds of technologies are very huge and if it can improve the business or it can enhance the customer experience. It can be maliciously used by malicious actors also or occurs also because these technologies are not proper to anyone. It can be used maliciously by partners also. The new kind of attack or a new kind of threats can come out of these terms.”

Also Read: Opinion: 3 Banks that are a Step Ahead with Open Banking APIs

“As a CISO, we should know what worst coming out of these kinds of technologies because it is more important to identify the risk and analyze the risk and find out what kind of impact that technology can create,” he added.

Conclusion

While experts across the industry do agree that the pandemic accelerated the digital drive, they also opine that the transformation was not overnight and it is the intensification of the already existing priority. They believe that digitisation will help them in meeting the changing customer requirements keeping the current challenges in mind. As a far as trust is concerned, experts believe that banking is based on trust and it is therefore important to be modern and responsive, but safety of money and information of the customers are of prime importance and therefore cybersecurity is pivotal and so are the investments pertaining to it.

Blurb 1: According to RFi Group (a global intelligence and digital media provider focusing exclusively on financial services), 71 percent of consumers globally are now using digital banking channels weekly, 3 percent year on year increase, while daily use increased 6 percent in the same period.

Blurb 2: In its bi-annual Financial Stability Report of the Reserve Bank of India (RBI) stated that attempts to target the payment ecosystem of the country by adopting multiple modus operandi, including the theft of payment card credentials and compromise of ATM infrastructure were witnessed.

Blurb 3: An article titled Cyber and anti-fraud controls are paramount for banks during COVID-19 and beyond by KPMG mentions that there has been a significant rise in the number of ‘phishing’ emails connected to COVID-19 being sent to customers.

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