Impact Of Accentuated Digitalisation On Banking Sector

Modernisation is a necessary component for digital transformation in banking. It is also essential to remain competitive, help decrease operational costs, and improve the digital banking customer experience. The banking world has faced disruption in the past - some survived, some failed, and some thrived. The adage of lead, follow, or get out of the way comes to mind as banks look at their strategy for successful digital transformation projects within the new digital economy. The barriers to success have been steadfast—those that divide the digitally challenged banks from the digitally native. For many banks, those barriers are the business models and manual processes sitting on legacy platforms with a bolted-on interface that creates a barely acceptable digital experience for the customer but doesn’t accrue the actual benefits of being digitally transformed. 

The Indian financial services ecosystem is going through very interesting times - the emergence of techfins and fintechs. We believe banks need to respond to these changes and remain at center to control consumer choices. Banks can no longer afford to have manual processes sitting on legacy platforms with a bolted interface offering sub-optimal digital experience. Banks are moving away from point solutions towards embracing a platform approach that supports a faster time to market in the ever-changing world with the evolution of technology. 

The trend continues to move away from point solutions and towards solutions that have taken a platform approach, providing more agility and adapting rapidly to future technological advances. While the leaders in digital transformation, as well as Silicon Valley’s tech giants, today tend to be more digitally native organisations, primarily outside of the banking industry, an increasing number of traditional financial institutions are embracing the digital bank concept and technology to take advantage of today’s platform-driven solutions.  

At a roundtable discussion with BW Businessworld, banking technology leaders spoke on the various impacts of digitalisation. The roundtable found participation from Sunil Soni of Punjab National Bank, MV Yugandhar of NABARD, Mahesh Ramamoorthy of Yes Bank, and Shankar Sundarrajan of IBM. It was moderated by Daya Prakash, Consulting Editor, Hoshie Ghaswalla.   

Focusing on Critical Activities Within the Organisation: 

On this, Mahesh Ramamoorthy, CIO of Yes Bank Ltd., said, “The way I look at it is from a banking perspective. Technology has to be an enabler that allows employees to work remotely and, more importantly, securely. COVID-19 accelerated the transition and training, which helped employees adjust and adapt to the home environment. Apart from technology and HR functions, another role critical for the organization during such times is information security. In addition, many business models have also evolved, changing the way we do business in terms of managing, to sourcing and remotely engaging with the client, from a servicing perspective”.  

While discussing the critical activities of an organisation, Sunil Soni, CGM of Customer Acquisition, Punjab National Bank, added, “The way business is being done has undergone a change. Today, it appears temporary, but there is a change in the customer behavior pattern. This requires a change in our products and need to make them more relevant to customers in the present perspective. From a business perspective, customer experience is the most important. Products have undergone a temporary change that may turn permanent over time as one doesn’t know when the pandemic will go away. Being a 127-year organisation, it makes sense to see how we have done away with old practices and enveloped ourselves with new ones. Shutting down all in one go may not be feasible, but bringing about change from various perspectives such as the customer’s perspective, technological perspective, and lastly, from customer adoption. However we have seen, the pandemic has accelerated the change in the business model”. 

While commenting on this topic, M V Yugandhar, Chief Data Officer, NABARD stated, “As the pandemic hit during the end of the financial year and just before the monsoon, there was a pressure to secure our short term, but as an organisation, we were also conscious in keeping our investments in the social capital level that is required. Secondly, during this phase, we started thinking in terms of digital empowerment and connectivity. So yes, we were under pressure, but the rural economy was not impacted during the first wave, we thus had the bandwidth to relook at a lot of things, and we made significant investments in technology”. Yugandhar added that “the future bankers and technology vendors unwilling to change would eventually be out of the competition”. 

Key Tech Adaptations to Gain Competitive Advantage:

While speaking about the specific adoptions in the organisation, Soni stated, “First thing is that the Customer onboarding has undergone a change. Now banking is also available through alternative delivery channels such as net banking, mobile banking, and transactions through ATMs were existent though not to such a great extent as today. The second aspect is frictionless onboarding. In our kind of business model face to face, interaction becomes mandatory for credit proposals. Thirdly, digitalization became mainstream. Handholding older customers through the technological dynamics became another challenge. Hence a lot of awareness had to be spread, which became a mantra”.   

Open Innovations: 

Commenting on open innovations, Shankar Sundarrajan of IBM stated, “A belief emerging in the Indian ecosystem is that innovation has to be viable. Financial institutions can collaborate with the FinTechs & Techfins and vice versa, This will then predominantly be the crux of going forward, which will be a win-win for both parties”. 

Competitive Markets:  

In a conversation regarding the competitive market, Ramamoorthy said that “The emergence of strong/agile players has increased competition, that will force banks to think about creating a more comprehensive customer engagement within the ecosystem or collaborate with partners”. 

Finally, Sundarrajan concluded by saying with the issuance of the account aggregator and OCEN in the Indian financial services ecosystem, the partnership constructs will be driven by who will be the custodian of the customer data and to address that banks will orchestrate ecosystems in their segment that they are strong and participate in other ecosystems to distribute their products.  

Technology has shifted its stance from an optional spectator to a significant player in the banking structure, and the effects, both positive and negative, have been discussed through the session. The fast pace at which digitalization suddenly hit India was unprecedented, but the rate at which the country adopted the change and fine-tuned itself is commendable. Reports also state that digital platforms are susceptible to security risks. Adverse effects can destroy trust and jeopardize investments made in digital solutions, and advocated that financial institutions adopt a cyber-security approach to address the associated risks.