With the continued Disruption, are banks ready for the challenge?
The technological revolution is now shaking up the banking industry with the emergence of FinTechs has had huge implications for incumbent banks. There are few banks are still operating traditional ways of operations and there are scope to either upgrading their digital infrastructure or collaborating with FinTech companies in order to develop such technologies. Today, millennials are no longer interested to use the banking system. Banks are embracing technology enough to change.
India is on the cusp of a digital revolution amid proliferation of new technologies and growing use of mobile data and smartphones. The financial service sector also continues to build on its rapid adoption of digital driven by greater push from the Government and the advent of innovative technologies. With the exponential growth in technological innovations, the traditional banking system is now challenged by financial technology (fintech). Many tech giants are now acting like big banks and disrupting the legacy banking system, these companies are now offering banking services to the consumers in a smarter way than the incumbent retail banks including Apple Pay, Google Pay and PayPal etc.
Millennials are embracing these technological developments for their day to day payments as this generation is more gadget dependent than their older generations. Banks have the opportunity to cater this new generation embracing fintech innovation for smarter banking solutions.
The key technology-led trends that are collectively driving the digital transformation include cloud computing, big data and analytics, blockchain/distributed ledger technology, Internet of-Things (IOT), robotic process automation (RPA) and artificial intelligence (AI),eKYC & identity, UX & UI and Cybersecurity.
Blockchain allows users to transfer value cutting the middleman efficiently, reliably and promptly. Banks are using the blockchain for clearing and settlements, payments, trade finance and syndicated loan to significantly reduce the cost and to increase efficiency.
The IoT is the network of internet-connected sensors that can be embedded into physical devices (things). These devices can collect data and share it across the web with people, applications and other devices. Data collected through the IoT can aid banks in decision making by helping them to gain insights into their customers’ spending patterns,
RPA involves automation of routine processes that are high in volume but carry low value. RPA has progressed from enhancement of manual, repetitive tasks to the automation of intelligent processes and augmentation of human resources.
Artificial intelligence (AI), can perform smarter and better than human, financial service sector is now using AI for compliance, quick transaction processing, mitigating human error, automation etc. AI is the next significant evolution in their analytics journey.
e-KYC and identity, through the digitalisation of identity checking process banks can make their know your customer (KYC) process easier and better. Many financial institutions rely solely on the e-KYC process, collecting and verifying customer identity through their mobile app. Voice and facial recognition to verify customers are becoming a new norm in digital banking.
The next is , App with great UX and UI, Mobile app-based payments are on the rise, banks need to make their mobile banking app smarter as the smartphones are getting smarter.
Now the most challengeable things is on Cybersecurity, as the digital platforms are more exposed to cyber threats, mobile, wearable technologies and the internet of things (IoT) devices are highly vulnerable. Just a two-factor authentication (2FA) is not enough to tackle the increasing level of threats, it is possible to intercept the SMS sent by banks for 2FA purpose due to the vulnerabilities in the set of telephony signalling protocols known as SS7.
Lastly, the new technologies will revolutionize the Indian financial service sector, the disruption is typically an opportunity long before it becomes a threat. If the banks cannot think beyond their legacy system, the best move will be to collaborate, not to compete with fintech start-ups, if banks cannot beat them, they should simply join them.
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