“Banks are leveraging the power of data immensely to serve customer better”

Pinaki Halder

Today not only banks but the entire BFSI sector has become a data-driven world. Through the empowerment of ‘Data, the King’, financial institutions are now offering personalised services to customers, improve efficiency through RPA/ ML and ultimately increase profitability said Pinaki Halder, Senior Vice President -BIU, Axis Bank Limited, in conversation with Shruti Jain of Elets News Network (ENN).

How are open banking and banking as a service (BaaS) technologies helping consumers in Tier-3, and Tier-4 cities?

Open Banking and Banking as a service ( Baas) are two revolutionary technologies enabling our country’s digital transformations.

Banks provide financial APIs through Open Banking and Bass which allow companies to integrate banking into their products and services. It started from ‘India Stack’ by introducing Aadhar through which Government has laid the path for the entire digital innovation. Then UPI revolutionised digital payments in India. CKYC project was initiated to centrally store the KYC details of customers through which they can interact with any financial institution. Account aggregator framework is another great initiative through which Account aggregators can digitally store customers’ data with their consent and exchange that with Banks, Insurance companies, or mutual fund companies whenever a customer needs any financial service from them. The biggest beneficiaries of all these initiatives are the people of tier 3 and tier 4 cities as the financial intermediation was very difficult there compared to tier 1 and tier 2 cities.

As they are enabled with biometric, the re- KYC issue is no longer there, which helps Banks to operate smoothly without even opening a branch there. Banks are also enabling services to them through partnerships e.g. Banks are partnering with Flipkart, Amazon, and Google for issuing credit cards. Also offering point- of-sale financing through BNPL( Buy now, pay later ). Banks are also collaborating with partners who have reach all over India. Most of these collaborations are possible as banks are allowing access to their technology and data to be used by external parties through Baas. Thus, Open Banking and Baas have greatly benefited the consumers of Tier3 and Tier4 cities.

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What would be the future trends/ innovations that shape the banking sector in the upcoming months?

First of all, Innovation on Open Banking/ India Stack will continue. Several initiatives over UPI will disrupt Banking. Competition from Fintech will continue. More focus on Data, analytics AI, RPA, Chatbot, movement of more and more applications and data to cloud, innovation on cloud technologies, and security will surely improve the Banking system in upcoming months. The evolution of Blockchain in Financial services will grow. Hyper-personalisation and Omnichannel experience for the customers will be a focused agenda in the digital strategy of banks. There will be progress on the Digital currency (CBDC) initiative though it will take time to shape up properly.

Conversations are coming through about Independent Digital Banks. Another challenge that might emerge for Banks is how they make money with distinctive services and products as all big banks are working extensively on digitization neck to neck. More and more Partnerships with Fintech across products will be an emerging trend in upcoming months. Account aggregator and OCEN (Open Credit enhancement Network) are likely to be the next disruption in the lending area as UPI has done to payments. We might see significant progress in these two areas in the upcoming months. Experimentation will continue in the area of the metaverse. New Data Privacy bill, Digital India Act bill might be brought in this FY which would address digital data protection. This would also bring changes to Banks’ systems and processes. In the area of cyber security, next generation end point protection and the use of ML and Big data will be the game changer.

How are banking leaders reshaping customer and employees’ experiences with their approaches, lately, especially in sync with technology?

From the customer’s point of view, everyone has understood that if we want a greater share of the pie, we must put dedicated focus on the customer, and understand the customer preference, behaviour in a better way by leveraging data, analytics and technology. The customers are continuously pinging us through all their activities, transactions, and interactions with Bank. We must take those hints and serve them accordingly. Banking leaders are taking initiative to provide hyper-personalised experience to customers. In a digital world, personalisation is a superpower. If you want to expand your reach, wants to improve customer experience, and increase their stickiness with your Bank, hyper-personalization is the key. We are trying to understand the customer through data, delivering a personalized experience, and nudges through data and technology. We must send personalized communication unique to them at the right time and through the right channel. This will increase the chances of our customer’s engagement with our communication with reduced cost and provides completive advantages. This will also deepen their trust with us, and improve CSAT (Customer satisfaction score), and NPS ( Net promoter score) which are very important parameters for Banks. All of these are only possible through the power and blend of Data Science, Data Engineering, and Technology.

The same holds true for employees. Based on the data, and interactions of Employees, Banking leaders are trying to understand the employees in a better way – what they are good at, where they need improvement, their development, training, upskilling needs etc. By using all these data, Banks try to improve their employees’ experience and productivity through similar kinds of personalised experiences. The pandemic has created a huge impact on them. They have started working from home without travelling to the office, spending more time with their family. A lot of organizations have introduced hybrid or complete work-from-home facilities for them. Microsoft team, zoom etc have created disruption and improved the collaboration among employees to a great extent. Technology disruption and fast turnaround time were the key differentiators among different Banks. Online training through Coursera etc. has improved their learning experience compared to the traditional classroom training.

How is data changing the banking landscape? What revolutionary changes took place after the pandemic?

‘Data is the new oil’ and Banks leverage the power of data immensely to serve the customer better. Banks are taking several initiatives to leverage data apart from creating data assets using data warehousing, data lake, lakehouse , cloud etc.

1. Prescriptive analytics helps business decisions e.g. setting up branches, ATMs, etc.
2. Predictive analytics: Credit risk decisions. Data Base programs leveraging marketing and behavioural scorecards.
3. Optimisations: Pricing optimisation.
4. Efficiency: RPA (Robotic Process Automation) and Machine learning models to automate internal processes thus improving efficiency, accuracy, reducing cost and TAT.
5. Artificial Intelligence: Build capability and monetise Bank’s unstructured data-text, speech, and images.
6. Data Governance: Data Quality, MDM, Data Privacy, Metadata Management, data security, etc.

Apart from these, Banks are also using data to do hyper personalisation for better customer experience, leveraging alternate data from external sources to generate impactful insights, real-time campaigns, real-time fraud detection, identifying growth opportunities promptly through insights, etc. Banks are also trying to identify hidden opportunities with their data that will directly impact their bottom line. All these are examples through which data is changing the landscape of Banking.

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The revolutionary change which took place post-pandemic is digitization. It has helped Bank to increase digital acquisition, cross- sell/up-sell, Lifecycle management, and Risk Management across all customer segments of the Bank i.e. retail, commercial and corporate.

Data-driven banking is fundamentally changing the way companies interact with their customers. What are your thoughts?

I completely agree with this. Today’s BFSI sector not only Bank has become a data-driven world. Through the empowerment of ‘Data, the King’, Bank can offer personalised services to customers, improve efficiency through RPA/ ML and ultimately increase profitability. This has created a profound effect on every aspect of banking: Customer experience, reduction of costs, digital strategies, Pricing, revenues, product penetration, risk mitigation, etc. Thus, Banking will completely rely on data collected through digitisation, and interactions with the customer which in-turns will help Bank to provide a superior customised experience.

In Data-driven banking, data analysts leverage the banking data differently. Rather than treating customers’ data just like a set of information of their account, Bank brings insights from that through sophisticated tools to create better products and services.

In simple terms, data-driven banking is about using data and analytics to serve customers better, to make better decisions.

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