Technology Is The Growth Engine For India's Burgeoning Financial Ecosystem
Emerging technology in banking has not only enabled exceptional customer experience, but it is also catalysing smoother, more transparent banking transactions.
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In the last decade or so, banking has evolved by leaps and bounds, thanks to the rapid advent of cutting-edge technologies that have reshaped operational models of the banking sector to maintain its competitiveness in a dynamic market. Banks are heavily invested in creating a completely digital infrastructure to offer services such as mobile banking, UPI, e-wallets, virtual cards, cardless withdrawal, etc. thereby moving towards a branchless and paperless future for the sector. Emerging technology in banking has not only enabled exceptional customer experience, but it is also catalysing smoother, more transparent banking transactions.
Benefits of technology in banking
Management and product planning: Predictive and analytics-based technology does and shall continue to help banks get a better understanding of products required by clientele. The space will assist them in coming closer to their target audiences via personalisation. Product creation apart, predictive analytics also helps define go-to-market. For example, the OND quarter is a lovely time to launch loan-related products, given consumer spending typically rises around this time.
Customer relationship management: Tech-oriented apps assist banks in deep-diving to analyse customer-related data and offer them the required product and services timely. This also helps build healthy relationships and offers better micro-experiences to customers.
Personalized marketing: Personalised marketing is the most successful way to retain customers in this highly competitive market. Emerging technology has empowered banks to track their customer activities accurately and offer product and services to fulfil their every need.
With all these benefits and more, technology in banking has led to a complete paradigm shift for the economy. And the only way for traditional banks to thrive in the world of tomorrow is to adopt and implement technology that is scalable, agile, flexible and as importantly, secure. As we usher in a new decade, let us look at a few factors which possibly transform the way Indian banks operate.
Way forward for banking, with technology
In the last five years, digital adoption has gained swift momentum with a significant hike in the number of internet users from 302 billion in 2014 to 900 million in 2019 and the utility of billions of devices. In an effort to outpace the rapid adoption of technology by its customers, financial institutions are investing in prominent innovations such as cloud computing, internet of thing (IoT), AI, big data and robotic process automation (RPA). According to a Gartner report, IT spending in the banking and securities sector in India is estimated to grow by 9.1%, to $11 billion by the end of 2020.
While technology in entirety is the way forward for banking, the two major technological interventions, those of AI and IoT, are contributing predominantly to enhance the customer experience and transparency in banking.
AI-enables businesses to better predict the needs of consumers and deliver unprecedented levels of customisation. It has the potential to evaluate future results with a high degree of precision which invites new possibilities and potential in a wide spectrum of areas. For example, Fortune 500 banks automated the reconciliation of fraudulent transactions using conversational AI technology and data-processing chatbots, thereby saving millions of dollars.
As AI progresses, it is unveiling new opportunities for economic development. Another beautiful example is that of AI-based algorithms which are today enabling credit providers to predict creditworthiness with alternative credit scoring. Consequently, a bank in the USA has been able to expand its marketplace to over 45 million people, including even those with no existing credit score. Internationally, the unfulfilled financial requirements of small businesses without credit data is estimated at $5.2 trillion. Eventually, AI can fulfil this existing void with its reliable metrics of defining creditworthiness for the new-to-credit populace as well.
Internet of Things
IoT strategically connects billions of devices to build an intelligent system of systems, let’s call it a framework or an exoskeleton to a superstructure. Since the banking sector experiences massive data disbursal, IoT intelligently analyses and filters through this data dump, bringing siloes together on the cloud.
Today, banks have a complete view of consumers’ finances and spending patterns in real-time. They evaluate accumulated data, anticipate requirements of customers, and offer solutions and rewards, using omnichannel communication, to help make better decisions. Technology, therefore, plays the role of a powerful facilitator to enhance customer loyalty and brings more business to banks.
The increased number of devices used by customers has also led to a rapid increase in data. Gartner predicts that by the end of 2020, there will be 25 to 30 billion IoT devices and the market size of IoT will reach US$3.7 billion. This provides a significant infinite opportunity for banks to do more with data and take the customer experience to the next level.
Miles to go for the banking sector...
The banking sector will experience a huge impact of innovations on its operational process like other industries. However, technologies such as IoT and AI have yet not revealed their full potential, which in turn does and will describe business strategies and the way forward for the entire financial ecosystem. Leveraging more advanced AI, ML, data science, IoT and other technologies, banks of the future will be able to eliminate fraudulent payments, regulate precise data interpretation and minimize human intervention among reaping many other advantages of technology.
The whole world expects technology to redefine the burgeoning banking and financial ecosystem. While what is happening right now in the banking sector may feel somewhat akin to a revolution, yet in my opinion, the real revolution is about to unravel.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.