As the year 2022 went past, it is clear that the world order as we once knew it, has undergone significant change. Political and economic developments that have been simmering below the surface for a few years have now come to a head, exposing in all their complexity the problems that the current frameworks and institutions are no longer able to handle. Riding on the wave of digital transformation and aligning its outlook with the contemporary time, the banking sector has become more resilient and convenient and is leading the financial inclusion in the country, writes Abhineet Kumar of Elets News Network (ENN).
In the ever-increasing technological- driven world, it has become imperative for the government to bring modern technologies at play in the banking sector to shape the growth trajectory of the nation. To everyone’s surprise, India’s digital transformation like UPI and Aadhar has taken the world by storm and they are contemplating following suit. India is not sitting idle. The country is doing more such transformation in the banking sector in order to ensure that the country is able to translate the large availability of the working age population into a demographic advantage, enhancing their employment quotient with an aim of increasing financial independence of citizens, especially women. Given that, India is blessed with a huge and active demographic dividend, their technological skilling and adaptation to modern technologies hold key in order to circumvent or avoid “technological displacement” (sometimes known as “technological unemployment”) – a term coined by British economist John Maynard Keynes to refer to “a situation where technology or automation is destroying jobs at a rate that is quicker than the rate at which jobs are being created”.
Today, the banking industry has been afflicted by many challenging forces. One of such forces is the revolution of information technology. The future prosperity of Indian banks depends on technology since information technology has fundamentally altered how banking is done today. Banking services are now branchless, anytime, anywhere, thanks to business process re-engineering, which began as a simple automation of some typical work procedures in banks in the middle of the 1980s. Additionally, it makes it possible to build new products and supply services in almost real time. Through the use of technology, banks are able to contact customers at their homes despite banking’s geographical and physical reach restrictions.
Technological Impacts
There was a time when huge databases existed in silos, and churning out meaningful data from the same consumed endless time and energy. Modern banking practices have undergone a significant change as a result of emerging technologies like Big Data, artificial intelligence (AI) and machine learning (ML). AI makes it possible to perform real-time data analysis from a vast number of data sets and provide banking customers with customised solutions.
Utilising predictive analysis, which is at the foundation of AI and ML, banks can make well-informed choices more quickly with the help of strong AI technologies. With the ability to examine different consumer data points, analyse customer spending patterns, and assess creditworthiness, banks’ lending procedures have also greatly improved.
“Digital transformation and data analytics per se is going to play a huge role in transforming the governance sector in India,” said Abhinav Sood, Business Advisory Industry Consultant, SAS India.
With the advent of chatbots and chat agents that use Natural Language Processing (NLP) to read, interpret, and comprehend text and speech, customer-centric banking has become indispensable. Banks have successfully used chatbots to respond to consumer inquiries, which has allowed them to save time and effort by using less human labour while still providing prompt and reliable service. Banks are expected to save $7.3 billion in operational costs by leveraging chatbots.
Changing Customer Profile
In order to meet the expectations of its customers, especially the millennial generation, the banking industry’s evolving profile depends heavily on the surrounding digital ecosystem. The change has been made possible by their demands for their banks to deliver an omni- digital experience, enabling people to handle their banking requirements while sitting in a distant place. Rightly so, banks quickly jumped onto the digitalisation bandwagon and refreshed their services in line with their requirements.
Mobile banking, for example, has already made a significant impact on millennials.
According to research from Insider Intelligence, Mobile Banking Competitive Edge, a whopping 97% of millennials use mobile banking. With a few clicks on their mobile devices, they may perform any task, including money transfers online transaction reviews, account statement downloads, and loan applications. Additionally, this has made physical branches unnecessary, allowing banks to operate more effectively and cut back on wasted spending.
The use of credit cards, debit cards, mobile wallets, third-party payment apps, etc., has all increased significantly — signalling a significant shift in consumer preferences. To ensure a smooth customer experience, banks have streamlined their procedures and removed obstacles between the different entities involved, including branches, ATMs, and online banking.
New Business Models Taking Shape
The COVID-19 epidemic encouraged the financial sector to rely extensively on
technology and tech-enabled processes in order to survive. However, the pandemic’s aftermath gave rise to fresh starts, including a massive digital revolution and the development of fresh business models for banks.
Also Read | Technology revamping the future of banking industry: Mukesh Bubna, CEO, Monexo
Recently, open banking has experienced tremendous growth, enabling third-party financial institutions unfettered access to consumer banking, financial, and other client data via APIs. It is regarded by all stakeholders as a tremendous breakthrough that has the potential to transform the whole banking industry.
In Conclusion
Technology has made massive transformations in the banking sector that can be clearly
felt across banking institutions. All banking institutions can obviously feel the positive effects of technology. Even if the banking industry has made great progress toward digital immersion, there are still many more undiscovered opportunities that banks can take advantage of and unearth. However, it is still up to banks to protect the privacy of their customers’ data and provide them with better services without compromising security. The few issues that the banking industry has yet to resolve include data breaches or leaks, clients who are unfamiliar with online banking, and the constantly changing technical environment that necessitates ongoing training and updating. With a cooperative effort from all parties involved, including the government, experts in the field, and, of course, various individuals, it is possible to come up with workable solutions to the aforementioned problems.
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