To match the customers’ changing demands in the digital era, banks in India should emphasise on embracing tech-driven initiatives. They should enhance their services and modernise offerings to provide personalised products to customers, says Pinak Chakraborty, Senior Vice President of Technology – Building Digibank, DBS Bank, in an interview with Rakesh Roy of Elets News Network (ENN).
How is digitisation reinventing the banking sector in India?
Digitisation has laid a profound impact on banking in several ways. Be it the upgradation of mobile banking, wearable gadgets or social media that is increasingly becoming an interactive platform to develop applications, advancement of machine learning and artificial intelligence, robotic process automation, Open API, flexibility and scalability of cloud infrastructure and lastly blockchain distributed ledger technology. Ideally, any technology platform can easily become a channel for banks to deliver its banking services. However, that platform should be mature enough to provide security, scalability and address the bank’s concern of confidentially of customer data. I mentioned blockchain distributed ledger technology as the last point, not because of the impact that it may have on banking because I personally believe that the underlying technology and related process to support its implementation in production are still maturing and are at an experimentation stage for now. Many aspects of it, for example, confidentially, data model, consensus building or even scalability aspects are not fully understood as of now. It will require some more thoughts and experiments before it can be fully adopted. My opinion on this is that banks cannot turn their back on this interesting technology but should stay engaged and help in developing it further doing experimentation in collaboration with other banks and define process around it so that they are ready when the time comes finally.
How different are the Indian digitisation initiatives in retail banking as compared to the measures taken by the US?
While the challenges faced by the retail banks and their approach towards digital journey are more or less the same across India and the USA in my opinion, there are many differences as well. The two prominent differences that I have noticed are: Firstly, in the USA, there is a realisation in retail banks that they need to be more cautious and diligent in protecting intellectual property that they are creating to be able to compete with technology companies and hence, we have seen a lot of focus to file patents and a willingness to spend time and budget allocation to this end. This is not the case in India so far, perhaps because of the regulatory framework and situation in the industry in terms of IP. Secondly, in India, the central bank and the Government have a clear direction to move towards digital and some initiatives like Unified Payment Interface to modernise payment delivery mechanism is driven by the central entities which retail banks have adapted to. But in the USA, central banks are playing a role of advisor and consultant and innovation is more driven from ground-up by the retail banks themselves.
How did AI, Machine Learning, Robotics change the banking system?
Advancement of Artificial Learning (AI) and Machine Learning algorithms and multitude of data points from customers’ interactions with banking channels, social media updates mean that banks can now have a deeper understanding of their customer and their needs. This insight can be used to provide a frictionless, personalised and contextual experience to the customers. The mobile or any other self-service channels UI may not be a fixed one, but change depending on the tasks that customers are about to perform. There can be dynamic help for customers to navigate the UI and advise them from going on a wrong route to try out a transaction. In another context, AI/ML can make bank’s internal processes more efficient, like fraud detection can certainly improve if it can be based on customers’ behavioural pattern, inputs from social media etc., instead of following a static rule-based mechanism.
Please apprise us on how retail banks are looking at increased competition from non-banking entities and FinTech companies?
It is well-known that banks are facing challenges of disintermediation from non-bank Fintech organisations who are placing themselves between banks and banks’ customers. Most of these Fintechs are developing expertise in one area – like payments or unsecured loan etc. and providing an efficient, personalised and speedy execution of those banking functions of their expertise. But the way banks have attempted to address this challenge varies. In some cases, banks attempted to launch a competing product to retain their customer base, and we have seen close collaboration among banks in developing these products as their challenge back to the Fintechs.
Zelle, a digital payment app launched in the USA where most of the retails banks worked collaboratively, is one such example. However, in some other cases, banks’ approach was to work closely with Fintech and to find a common ground that is beneficial for both. After all, if a digital wallet provider can increase usage of the credit cards, then banks also stand to earn more in interchange fees, but may miss out on details of transaction data if the digital wallet provider does not share all the merchant details etc. in a transaction to the issuer banks. You can notice that barring a few exceptions, most of the USA retail banks did not launch a digital wallet based on NFC, but worked collaboratively with Apple Pay, Google Pay, Samsung Pay etc. and of course, payment networks, like Visa, MC and Amex to launch tokenisation solution. To summarise, I think we will see retail banks learning from Fintech challenges and using this as an opportunity to modernise their technical stack to offer more efficient and personalised products to the customers and will also work collaboratively with Fintech in some cases.
Pinak Chakraborty is working with DBS as a Senior Vice President to build a mobile-first, in branchless and paperless banking experience for customers. The views expressed here are personal