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Banking Industry Getting Reshaped By Digitalization

by Mohua Sengupta, SVP-BFSI, ITC Infotech September-2016

ITC Infotech (NSE:ITC), headquartered in Bangalore, Karnataka, with a market cap of INR 260166 crores is a provider of Big Data Consulting, Product Engineering Services, Big data Hadoop, Software Product Engineering, Customer Relationship Management, ERP and Business Analytics, Infrastructure Services and Product Lifecycle Management.

High Performance is critical in today’s Banking industry, to combat the market pressure from various conflicting forces.  High performance is a result of a series of interconnected activities that are executed to excellence; be it strategy formulation, business planning and execution, financial management or supply chain efficiency. In the banking scenario, as market conditions continue to evolve, banks must navigate a dynamic landscape—one laden with pressures on margins and credit quality, restrictions on capital, demanding customers and cost optimization initiatives.  The foundation to provide effective services is “simplification” of processes, grounded in customer centricity.

 Simplification comes with clarity and clarity with transparency, the core to which is “Data”. Banks that shall win in the future are the ones that have invested in mining and are gleaning meaningful insights from their data. Though we have been hearing of a cohesive data strategy for some time now, we have actually seen very little action towards it on the ground. Banks have more data about their consumers than companies such as Google, and Amazon have, about their customers, who have revolutionized consumer intelligence and one-to-one targeting. Banks are still mired in their own complex structural data silos and possess a lot of dark data that is locked and underutilized due to the complexity of integration and aggregation. It’s time that banks revisit their data strategy and review their data capability end to end, from infrastructure to insight, to be able to get a clear view of their customers.

Convenience while guaranteeing security of transactions has been a perennial problem for any bank.  This has just got further complicated with the evolution of digital Technology and the advent of “fintech experience” that customers are lured into.   So banks can no longer ignore it.  Hence, the focus on Security of transaction.  The trends in the user authentication continue to be dominated by the convergence of four forces- social, mobile, cloud and information.  It is building on and transforming user behavior, while creating new opportunities.  We continue to see a significant shift from traditional hardware tokens to phone with soft token authentication methods.

Data security remains a very critical focus area for banks, the reputational risk and the regulatory fines have rather reinforced it. Banks in many countries are not just responsible for the data security of the clients but also for the data that is handled by any third party on behalf of them. In this view, banks' compliance teams need to develop, document, implement, and rehearse a process that clearly identifies the roles and responsibilities of every entity that handles data for the bank. The legal department must draft language for contracts with third parties binding them to specified levels of data security and requiring the reporting of data breaches.

Payments represent the beachhead for the entire banking relationship, and this beachhead is under attack, newer non- traditional competitors that include fintechs have been increasing, dis-intermediating the bank payments industry. But to compete in this emerging arena, banks must meet the expectations of digital natives, delivering diverse tools to help customers make smart decisions across a range of financial services. Banks need an integrated payments services strategy, based on a robust technology platform, to support the payments need of an omni channel customer engagement.

Fragmented customer journey interventions due to lack of customer insights and an integrated view of the customer result in sub-optimal customer experience. The proliferation of digital devices has resulted in volumes of valuable data that these devices throw: A truly digital bank should be capable of applying actionable insights to interactions and processes resulting in integrated customer journeys.

Banking, we firmly believe is at the cusp of a major change.  Multiple market forces are at play in altering the industry that has been relatively insulated from major shake-up. 

2016 will be a year where banks will progress their digital agenda.

• Banks will start building an ecosystem of partnerships that will enable them to offer products that are beyond banking and into the daily lives of their customers.

• Banks will lay impetus on digital innovation at manageable costs, through niche technology partners, to drive innovative products and solutions.

•Banks will relook and bring rigor to their automation efforts and start making strides in adapting intelligent automation to improve their processes

• Disruption will continue, banks will form strategic alliances with fintechs in offering newer products and services to compete effectively in the market

• Employee experience will continue to gain momentum. Nurturing talent and driving improved employee experience to impact end customer experience will be a priority

• Digital payment evolution will continue and expand, there would be some interesting promising use cases that will evolve using block chain technology

• Banks will further their adoption of virtualization technologies