Time for banks to gear up for digital war

Despite the growing number of internet users and increased government focus on creating digitally-enabled infrastructure, banks in India are yet to completely harness the power of digitalisation. While mobile payment wallets have taken a major portion of the bank’s role in transacting money, these are, also challenging banks in terms of the insurance business, says Indrajeet Arora, General Manager & Head – Banking Innovation (Mission Parivartan), Punjab National Bank, in conversation with Elets News Network (ENN).

What changes have you observed in the banking sector over the last two decades?

India’s banking sector has undergone a paradigm shift in the past two decades evolving from being a physical banking provider to becoming digital anchors. The Sector witnessed a transition from the simple automation of paperwork in bank branches to today’s branchless banking paradigms that use new-age contactless technologies. The role of technology has evolved from being a mere cog in the strategic framework of companies to driving, shaping and redefining business models and revenue streams. The pace of technological advancement has led these developments to be viewed less as enablers and more as positive disruptors.

This shift can be attributed to organic changes across the following five key segments:

Customers’ trust: The first part of the 2000s witnessed a change in the mindsets of consumers. Customers progressed from perceiving money as an instrument that was meant to be preserved to one that offered growth opportunities. This led to ‘safe’ money from homes being increasingly mobilised to banks.

Technology: The movement from paper-based book-keeping to IT systems was a step in the right direction. But it was the adoption of the Core Banking Solutions (CBS) in 2002 that set the ball rolling for the incorporation of sophisticated technological processes in the banking sector.

Credit preferences: Informal lending and borrowing from family and relatives played a prominent role and was prevalent in the first decade of the 21st Century. But with growing trust in the banking system, people started to move away from the social stigma associated with borrowing from family and friends. This was the precursor of the credit off-take in this rapidly emerging space. The latter part of the decade saw new-age financial institutions focusing on niche products gaining a substantial share in the sector.

Regulation: The industry has moved from a pro-banking regime that was unsupportive of NBFCs and other small players till the late 2000s to one in which payments banks, NBFCs, small finance banks, and Jan-Dhan accounts flourished in the second decade. Profitability: Due to major drivers that put the industry on a growth trajectory in 2002, banks were driven to acquire customers as a means to ensure their profitability. This led to the opening of bank branches across India so that banks could be as inclusive as possible.

Give an overview of your recently – launched initiative Mission Parivartan?

To keep pace with the changing banking environment, it is essential for every organisation to realise the need for timely and appropriate changes in its functioning and undertake structural changes, wherever needed. The bank, under the visionary leadership of its MD/ CEO Shri Sunil Mehta, embarked upon a transformational exercise, Mission Parivartan, which is a structured approach keeping the long-term success of the bank in mind.

The mission focuses on transformation in the existing processes and products, keeping the human asset – the ‘people’ – at the centre. Each staff member is encouraged to post his/ her ideas and suggestions through an in-house portal for crowd-sourcing ideas, hence becoming a part of this transformational exercise. Under this mission, an independent think tank on the lines of the ‘NITI Ayog’ named ‘Mission Parivartan Division’ was formed to act as the catalyst to ensure the 3 C’s i.e. Commitment, Collaboration and Communication bring together all internal stakeholders.

What are the major threats faced by Indian banks in terms of tech-deployments? How to overcome these challenges?

Customers’ expectations are fast evolving in tandem with rapid advancements in technology across the sector that reflects the propensity to access services online. Changing consumer behaviour and FinTech-friendly government initiatives have paved the way for tech giants like Google, Amazon, and Facebook to penetrate deeply into the Indian financial sector, infusing digital innovations in various dimensions of customer services.

Silicon Valley-based tech giants are also betting big on factors such as customer satisfaction, unified customer experiences and financial inclusion. Despite the growing number of internet users and increased government focus on creating digitally-enabled infrastructure, banks in India are yet to completely harness the power of digitalisation.

While mobile payment wallets have taken a major portion of the bank’s role in transacting money, these are also challenging banks in terms of an insurance business. Companies like Paytm, PhonePe have now shifted their strategies to become a single point for financial services. Thus, it’s time for banks to gear up for the digital war.

What steps are you taking to overcome these challenges?

Emerging technologies like Big Data, artificial intelligence, data analytics and the availability of digitally-enabled infrastructure will enable banks to become competitive and efficient. Banks, by increasing their investment in technologies, can significantly reduce the cost involved in expensive human interactions and improve digitisation across the various aspects of customer services.

 Set up an integrated internal data stream that can power the data-insight to the action cycle. The banks need to have a state-of-the-art infrastructure in place for processing huge volumes of data, analyse real-time information and take instant decisions.

Operationalising analytics, in banking, requires significant investment across technology, and banks need to significantly beef up the CRM infrastructure to win the race. Banks also need to digitally empower their workforce. With customer experience being the touchstone of success in the digital era, banks need to move their employees closer to customers. The people on the front lines need to be vested with the knowledge and awareness of the digital strategy of the bank.

Banking in India is reinventing itself with tech-innovations. Is India ready to embrace emerging technologies?

The propagation of personal digital devices has led to a profound shift in the way customers prefer to interact with their banks. The Indian payments landscape has evolved rapidly over the past few years, driven by an increase in the number of digitally initiated Payment, urbanisation and improvement in technology and mobile data usage. While in the past banks played a central role in providing payment services, the landscape today has evolved with active participation coming in from non-bank players as well. Increasing smartphone penetration, reduction in the prices of telecom data, growth in digital commerce and institutional support have all been the key drivers for tech-innovations in India. There is no doubt that the recent push towards digitalisation is rapidly influencing the traditional banking models. However, it has also exposed the institutions, to increasing cybersecurity threats and vulnerabilities.

The banks are increasingly looking at emerging technologies such as blockchain and analytics in creating an active defence mechanism against cybercrimes. What innovations are you planning for the rest of 2019?

 The Indian Public Sector Banks are becoming more focused on technological advancement to respond to customer expectations while trying to defend market share against increasing competition from Private Sector Banks. A great deal of emphasis is being placed on digitising Core Business Processes and Revamping Organizational Structures and Grooming Internal Talent to be better prepared for the future of banking. This transformation illustrates the increasing desire to become a ‘Digital Bank’. As technologies continue to evolve, the Bank will continue to accelerate its investments in innovation and digital enhancements. Key drivers for such digital enhancement shall be:

  1. Use of Big data, Artificial Intelligence-Driven Predictive Banking, Advance analytics, and cognitive computing
  2. Use of APIs and Open Banking
  3. Improving the digital experience for the customer, through Chatbot
  4. Digitisation of back-office operations
  5. Recruit and retain talent to meet changing needs 6. Partnering with FinTechs 7. Improve components of IT Security.

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