The banking sector in India has always been one of the most conservative industries in nature. Before the pandemic hit the country, most banks followed traditional processes for customer acquisition. Since the majority of the banking sector relied on legacy systems, embracing advanced technology posed a challenge. Thus, the need for improved strategies and innovation in banking was apparent even before the pandemic started.
On the other hand, India has not been shy about making the most talked-about reforms and striking decisions in the financial sector. For example, the Unified Payment Interface (UPI) developed by National Payment Corporations of India garnered worldwide recognition. It has even inspired the UAE to pursue a similar model.
Changing customer expectations in the digital age are forcing banks to rethink their strategies. Customers are not just expecting more flexibility and interactivity, but also instant 24/7 contact through digital channels, along with personalized products and services and real-time insights.
To cater to these digital age customers, banks need to re-imagine their business continuously. The banking sector is currently making great strides towards digital transformation. From customer acquisition to customer interaction, a new working model has been laid out in the BFSI sector.
Here are some of the key forces that have disrupted the customer onboarding process in the BFSI sector.
Video KYC
Video KYC was a game-changer in the BFSI sector. While COVID-19 tightened its grip on the economy, banks and other financial institutions struggled to onboard customers using the traditional offline process.
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Due to the country-wide lockdowns, banks started adopting video KYC to complete their customer verification and onboarding processes. One year later, video KYC has become a standard norm of the onboarding journey.
Customer First Approach and Greater focus on UI/UX
In earlier years, banks and financial institutions had below-par and cumbersome websites for customer onboarding. Thus, most customers preferred physical onboarding over online .
According to a report, the average consumer level of trust in banks is 40% compared to 70% trust level in technology companies. This is because Fintech companies focus on user experience as part of their value-generating process.
However, this changed with the onset of the pandemic. Banks redefined the customer experience. Today, almost every bank and financial institution has a great website with an intuitive user interface and quality user experience.
Enhanced Loan Processing and Screening
Loan processing is lengthy and time-consuming . This is because banks have to do a detailed background check to know whether or not the applicant is suitable for a loan.
Insuring loans for borrowers who cannot repay them may result in financial losses for the financial institution.
This is where digital lending comes in. Digital lending is the process of offering loans that are applied for, disbursed, and managed through digital channels. Banks and financial institutions have started using advanced loan processing and screening technologies to help digitize the process of lending. Digitization of the lending process brings a number of powerful benefits for banks, including better decisions, improved customer experience, and significant cost savings.
Today, Lending Process Automation is heavily used by financial institutions to disburse loans and collect repayments. This artificial intelligence technology collects users’ data from various sources to determine the credibility of applicants.
Rise of Neobanks
A few years ago, if someone needed to move money from one account to another, they had to visit the bank branch. The online mode of the transaction was deemed as ‘’unsafe’’. However, this has changed with the advent of neobanks. Lately, neobanks have taken the world by storm.
A neobank is a digital bank that has no physical branch. Unlike traditional banks, where users are tied to a single branch, neobanks are entirely online. Some popular neobanks in India are Kotak 811, SBI YONO, Fino Payments Bank , and others.
Neobanks bypass the restrictions of the traditional banking industry. They bridge the gap between customers’ expectations and what traditional banks offer.
Account Aggregator
The Account Aggregator (AA) framework was another breakthrough in the BFSI sector during the pandemic. An Account Aggregator (AA) is a type of RBI regulated entity that helps an individual securely and digitally access and share information from one financial institution they have an account with to any other regulated financial institution in the AA network. Data cannot be shared without the consent of the individual.
Also Read: Why the BFSI Industry Needs to Place its Trust in Zero Trust
Our banking system currently involves cumbersome tasks like sharing physical signed and scanned copies of bank statements, notarizing or stamping documents, and sharing personal username and password to give your financial history to a third party. The Account Aggregator network would replace all these with a simple, mobile-based, simple, and safe digital data access & sharing process.
Currently, the top 8 banks in India, including State Bank of India(SBI), ICICI Bank, Axis Bank, IDFC, IndusInd, HDFC, Federal, and Kotak Mahindra Bank, have joined the AA network.
The distinct advantage of an account aggregator is that the user’s financial data cannot be shared without the user’s consent. This helps in reducing the stigma that is prevalent among older generations regarding online transactions.
Bottom Line:
Customer onboarding processes in the BFSI space need to continually evolve in tandem with digital transformation. Adopting newer technologies equips banking institutions to act upon market trends and scale these efforts with gradual successes.
Financial institutions need to take into account the current state of affairs, work out a thorough strategy, and use the right tools in order to succeed in the future. Only if an institution is able to upgrade itself, will it be able to cater to the demands of new-age customers.
Views expressed in this article are the personal opinion of Amit Das, CEO and Co-founder, Think360.ai.
