The banking industry is undergoing a tremendous transformation vis-à-vis technological innovations and changing customer behaviour. The FinTech startups have revolutionized this transformation with innovative products and services to suit the diverse customer base which, in fact, led to financial inclusion of the unbanked or underbanked communities, as new digital solutions transcend beyond boundaries of urban settlement.
In India, banks often ensure to incorporate new technologies in their business and operations. ATMs, online banking, mobile banking, point-of-sale (POS) machines were early technologies that banks adopted.
Today, FinTech players have emerged as disruptors in the financial service industry by incorporating a number of cutting-edge technologies in their products and service offerings.
Digital transformation in the country was accelerated owing to the COVID-19 crisis as the social distancing norms almost destabilized branch operations, and banks needed to focus on remote solutions for customer-facing operations.
App-based digital payment providers, e-wallets and payment banks expanded their business during the pandemic. They also started offering savings products such as PayTM Payment Bank, the emergence of new lending providers for micro-loans (which used to be the forte of the traditional banks), and new FinTechs started offering credit and Forex products to individuals without needing to have a bank account.
In FY20, the number of new retail digital payments breached the 30 billion mark and the value of such transactions went past INR three lakh billion for the first time in India. Reports say the impact of COVID-19 on digital payments is greater than that of the post-demonetisation drive in India.
New banking service
The emergence of new banks such as small finance banks, micro-finance institutes, rural banks and post office savings banks are redefining a very niche user base with tailored products and trusted relationships. Financial institutions are primarily focusing on people and convenience banking.
The emergence of new-age technologies such as AI-ML, big data, blockchain, cloud computing, robotic process automation and others enabled the banking industry to offer customer-centric offerings to diverse groups of people.
Big data allows banks to create useful insights from unstructured financial and personal data collected from various sources in order to launch more customer-friendly products and services as well as expand banking operations.
AI-ML lets banks automate their core-banking services thus easing the customer relationship. Banks are now incorporating powerful technology such as blockchain to develop an efficient distributed ledger to record transactions thereby securing the financial data from leaks. In fact, cybercrimes are a real challenge for banks. Statistics show its rising trend also owing to digital transformation.
Hence, the banking industry needs to build a strong cyber-risk-free ecosystem by increasing the awareness of customers and other stakeholders as well as investing in the cybersecurity infrastructure. Building a culture is the precursor of cybersecurity in any organization to improve customers’ trusts.
The FinTech innovations such as e-wallets, payment gateways, UPI, peer-to-peer lending, etc. have expanded banking services to a wider customer base and enabled a seamless banking experience.
Customers now anticipate banks to augment digital interactions and come up with digital alternatives for their day-to-day banking requirements as they are now more open to trying out a new app than they were before the COVID-19 pandemic.
Banks therefore are exploring customer-engaging platforms such as social media and messenger services to expand their businesses. For example, WhatsApp banking is a reality now while other social media channels are used for building customer relationships.
The concept of remote work culture has been introduced in the banking industry recently, which will continue to remain in the post-Covid world as well. Banks are trying to adopt more comprehensive business continuity plans to prepare for unexpected situations like the current crisis.
This includes a mix of digital workspaces, cloud scalability, intrinsic security and enhanced network capabilities.
Additionally, regulatory bodies and governments are bringing new frameworks and guidelines for banks to comply with and banks will need to align their digital transformation strategies time-to-time.
Despite all these improvements and prospects, banks are crippling with acute skills gap and talent shortage to take up emerging roles. It highlights the significance of upskilling and reskilling of banking professionals and freshers to build a future-ready workforce. It is a collective effort of all the stakeholders including the industry, banks, employees, and educational and training institutions.