How Digital Banking Units Can Change The Financial Services Landscape In India

 

Digital Banking Units can be branded as new-age banks and provide personalized finance management tools.  They can also be high-yield units for parent banks, encouraging greater financial literacy and boosting credit flow. In short, digital banking has enormous potential. Let’s look at some of its benefits. Read on to discover how digital banking units can change the financial services landscape in India.

Banks should produce a comprehensive set of distinct digital credentials

As digital banking has become the norm, banks should focus on enhancing their own digital capabilities. Traditionally, banks have remained on the sidelines of two-way communication, praising discretion and secrecy. However, this culture has not kept pace with the speed of change in the online world.

Customers do not change banks voluntarily, and the bank’s traditional banking business model may no longer be fit for the digital era. While depositors traditionally have been held hostage by long-term commitments and automatic paycheck deposits, more digitally literate younger customers are increasingly tempted to defect to competitors. The ability to stay competitive and meet customer demands requires re-mapping the entire customer journey and incorporating the latest digital tools.

To stay relevant, banks must reinvent themselves into bionic organizations powered by AI. To do that, they must evolve into AI-powered bionic organizations that serve their customers in new ways. Taking the initiative will give them a leg up on their competition. However, it will take a while before banks can achieve a high degree of differentiation.

AI-powered solutions can make banking easier for consumers. Artificial intelligence is important for chatbots, banking apps, and single-person segmenting. Most banks have access to a large quantity of data, and AI can harness that data and make it more useful for customers. AI-powered applications can follow their progress and search history, personalizing their experience. Personalized interactions through artificial intelligence applications can also help banks to direct their customers to a customer service representative. Latest News of Digital Banking 

Data providers are critical components of the ecosystem

The Indian financial services ecosystem is undergoing a profound transformation, driven by data-driven digital disruption and operational processes. Rapid smartphone penetration, affordable high-speed internet, and mainstreaming of artificial intelligence are propelling the ecosystem. Public policy-led financial inclusion is also driving ecosystem transformation, with banks and fintech firms expanding into unbanked areas. In response to these challenges, data-led business models are powering the evolution of banking services, from hyper-personalization to behavior-driven insurance.

The fourth layer in the India Stack – the Consent Layer – is essential to a content-driven data-sharing ecosystem. Account aggregation facilities are built on the Data Empowerment and Protection Architecture, allowing for secure and free data movement. In addition, the Consent Layer facilitates the secure and anonymous movement of data to support the delivery of digital public goods and broader financial inclusion.

Amazon is an example of a digital financial services company. While it was recently blocked from investing $200 million in Future Group in India, the antitrust authority based its decision on a lack of transparency. In Mexico, the company has been rolling out Amazon Cash debit cards since March 2017. The company’s approach is to create a low-friction fee service for the developing market. The company is launching a new credit card in Mexico and aims to expand operations in this market.

Banks should be focused on building a high-yield unit

The government is pushing financial institutions to focus on digital banking in the country. While most people now bank with a mobile application or a web browser, a large segment of depositors still stand in long queues to deposit money. The lack of trust in online banking makes even the most internet-savvy depositors wary of using it. The Finance Minister’s Budget announcement is likely to help close that gap.

One of the biggest challenges facing banks is long-term planning. Unlike fintech startups, banking teams rarely have the luxury of planning years in advance. They’re often caught up in tackling the day-to-day fires of getting to their targets, and longer-term planning is often left to the last minute. That’s not good for bank customers and a bank’s bottom line.

While banks in India should not focus solely on digital banking, they should try to build an aggregation platform to offer new services to existing customers. Aggregation companies are already selling 60 percent of auto insurance policies in the UK. Bank Bazaar, a pure-play financial supermarket in India has 23 million users. It is important to build a strong back-end and technical talent around APIs.

To survive and grow, banks should invest in innovative new technology. While the traditional banking industry has been fragmented, big tech and challenger banks are chipping away at it. Banks should focus on integrating critical support functions into the front-office operation. The digital transformation of banking is not going to wait for banks to catch up. Embracing cloud technology, embedded machine learning, and robotic process automation is key to building a competitive digital banking unit in India.

Banks can become more helpful to consumers by giving them advice on saving for retirement or borrowing for a new home. Banks can also provide information on which rates and maturities are appropriate for their customers. With this kind of information, consumers are more likely to make smarter decisions.
Challenges for digital banking innovators

While the digital banking ecosystem has become more mature in urban areas, the rural and semi-urban markets are still far behind. Developing connectivity in these regions is one of the key challenges facing digital banking players in India. However, with the growing number of internet users in rural India, establishing digital connectivity is imperative for the sector’s future.

Every transaction needs to pass through a bank’s server and deep integration with core banking systems. This process can be complex and time-consuming, especially for smaller banks. Regulatory bodies often require approval of new products before they can be launched. Further, there is a lack of adequate digital infrastructure in smaller banks. As a result, the pace of innovation is severely slowed. Latest News in India

Conventional banks faced a new challenge when the COVID pandemic hit the country. As a result, they were forced to offer better services to consumers and limit physical access to trusted bank branches. Increasing reliance on mobile banking and internet banking has forced banks to increase the use of human agents. Further, the use of chat bots by banks has skyrocketed. A recent Gartner study reveals that chat bots are essential to improving customer experience.

Traditional banks are increasingly moving towards an API-based approach for securely sharing data and services. This approach can provide more access to financial services, especially for rural users. But it is important to note that private sector banks are more likely to have young and computer-literate employees than public sector banks. However, public sector banks have been doing very well on computers for decades. This will require new technology to be developed and implemented in smaller steps.

As financial technology evolves and helps consumers and investors make better decisions, the use of technology is a growing trend in India. With the COVID virus pandemic, technology will play an even bigger role in broader financial inclusion. The digital banking model will allow banks to take advantage of technological solutions to increase their customers’ eligibility for loans and financial products. Furthermore, data analytics will improve the efficiency of lending and improve customer relationships.