Embracing Automation & Innovation: A Transformative Era For Banking
In a world rife with geopolitical tension, interest rate hikes, runaway inflation and monetary tightening, banks today face challenges that are putting significant pressure on their margins. However, amidst these obstacles, the banking sector in India has shown remarkable resilience.
Recently, even an institution such as Moody's expressed confidence in the credit quality of Indian banks and Non-Bank Financial Corporations (NBFCs) amidst a challenging global banking sector. The agency believes that these institutions are well-positioned to withstand any stress in the banking industry. Several factors contribute to this resilience. Firstly, the strong domestic demand in India plays a vital role in supporting the credit quality. Credit conditions for bank borrowers have been improving, further bolstering the stability of these institutions.
Speaking with BW Businessworld, Shailja Singh, Director- Technology Sales, Enterprise, IBM India & South Asia agrees with Moody’s assessment that the trends remain positive in the Indian banking sector. She highlights increased net interest margins (NIMs), robust credit growth and better control over non-performing assets (NPAs) provisioning. While Singh lauds the maturity of the Indian market in terms of payments, she also stresses the emergence of new use cases in areas such as buy now pay later (BNPL), wealth management, corporate banking, retail lending, and insurance.
Moody's Indian affiliate, Investment Information and Credit Rating Agency (ICRA), also shares a positive outlook for the banking sector. They expect healthy profitability, driven by robust loan growth and a favorable credit environment. Overall, the combination of these factors instills confidence in the credit quality of Indian banks and NBFCs, despite the global challenges faced by the banking industry.
But highlighting the need of addressing the existing challenges head-on, Avinash Raghvendra, President & CIO, Axis Bank, says innovation and technology has an important role to play. Speaking on Axis Bank’s initiatives, he highlighted the establishment of a dedicated digital bank unit within the organisation. This unit aims to create a comprehensive digital proposition that goes beyond digitising individual processes, focusing instead on delivering end-to-end digital experiences. Today, 95 per cent of transactions made by Axis Bank consumers are completely digital.
The COVID-19 pandemic accelerated the shift towards contactless payments and digital banking, pushing the payments industry into a "hands-off" direction. This gave a massive momentum to the "do-it-yourself" (DIY) movement in financial services, which has created a demand for enhanced functionality, including easier payment facilitation, fraud reporting and automated alerts.
Raghvendra tells BW Businessworld that Axis Bank has created about 250 do-it-yourself journeys. Additionally, the Bank is working on over 30 initiatives to execute its digital strategy which is based on the key pillars of their growth, profitability and sustainability (GPS) strategy.
IBM's Contribution To Banking Transformation
IBM has been closely supporting banks worldwide in their digital transformation journeys. With a market share of 40-45 percent, the tech major focuses on integration, data, security, automation, infrastructure and analytics. IBM also helps banks with the transformative power of hybrid cloud and technologies such as AI, cognitive processes and open banking to drive innovation across the sector. Its collaborations with banks to establish analytics centres of excellence and its involvement in blockchain initiatives also showcase the commitment to modernising operations, predicting outcomes, and ensuring security.
Automation: From Traditional To Generative AI
Automation has evolved significantly in the banking sector in recent years, enabling banks in India to enhance efficiency and affordability while promoting financial inclusion. The first wave of automation brought ATM networks, allowing customers to self-serve, and reducing operational costs. However, older and poorer customers faced challenges with digital banking.
Now, the second wave, Automation 2.0, powered by AI and machine learning, addresses the issues. Advanced chatbots and virtual assistants, like ChatGPT, enable customers to have interactive conversations and resolve queries online. Currently, intelligent automation is streamlining loan approvals, generating credit scores for the underserved population. This evolution empowers banks to provide simpler, safer, and more inclusive banking experiences, advancing India's journey towards financial empowerment.
Axis Bank’s Avinash Raghvendra says automation has undergone an evolution in the banking industry. He acknowledged the tremendous progress made during the pre-generative AI era, where Axis Bank utilised thousands of bots to automate various tasks and employed chatbots to address customer queries. However, he emphasises a significant shift taking place in the current generative AI era. He envisions automation revolutionising the speed and efficiency of tasks, potentially eliminating the need for human intervention. The preliminary results of Axis Bank's exploration into this realm have been highly encouraging, signaling an exciting journey ahead, Raghvendra reveals.
"When it comes to automation, especially in the Financial Services industry, I think over the next two years, we are in for a very exciting ride," he says.
As the banking industry faces global challenges and rising customer expectations, the transformative power of automation and innovation cannot be understated. Axis Bank's digital initiatives and IBM's technology-driven solutions exemplify the commitment of industry leaders to redefine the banking landscape.
“Axis Bank has been utilising the IBM Connect API platform for the past three to four years, initially focusing on amplifying retail offerings and subsequently expanding into corporate integrations. With a suite of 250-350 APIs covering areas like cash, trade, inquiries, and actions, the bank aims to convert available services into APIs whenever there is a use case,” says Raghvendra.
“IBM has been instrumental in providing expertise and support, and the bank is now looking to migrate to the cloud for scalability and efficiency," he adds.
The future holds immense potential for leveraging automation to streamline processes, enhance customer experiences, and achieve operational efficiency. Embracing this transformative era will unlock new opportunities and reshape the banking industry for years to come. With automation as the engine and innovation as the compass, banks can navigate the evolving landscape with confidence, delivering unparalleled value to their customers and driving industry-wide progress.
