Leading From The Front

Banks have always been at the forefront of the digitalisation revolution. Internet banking arrived in India as early as the 1990s and mobile banking became a reality in the early 2000s. The introduction of National Electronic Funds Transfer (NEFT), Real-Time Gross Settlement (RTGS), Immediate Payment Service (IMPS) and, more recently, the Unified Payment Interface (UPI) has continued to revolutionise the way we bank. Fintech apps and platforms have just added to the convenience of customers.

The Covid pandemic gave the entire banking ecosystem, including fintech platforms, a fresh push as even people who were hitherto apprehensive about using digital platforms took to it due to social distancing and restrictions.

“The pandemic has brought unprecedented changes in the way businesses operate. Fintech apps registered high growth, thanks to social distancing norms and lockdowns imposed by governments all across the world. Also, since these apps are easy to use and offer higher convenience than other traditional modes of transactions, more and more customers are drawn towards adopting them,” says Gaurav Jalan, CEO and founder, mPokket, an app lending platform. A study published by Forrester in February 2020, ‘State of Digital Transformation in Financial Services’, reveals that 19 per cent of the surveyed firms were still “investigating how to execute digital transformation” but had yet to begin.

We take a closer look at some of the recent digital technologies that have transformed the way we bank.

Digital KYC

The Reserve Bank of India (RBI) approved digital KYC in January 2020, just ahead of the first wave of the Covid pandemic.
“RBI’s approval of video KYC has come as a big boon to fintechs, and has also been supported and extended by most other regulators. Earlier, based on the Supreme Court decision, non-bank fintech companies were struggling to implement digital KYC using Aadhaar. PAN was also required to (complete) KYC. The video KYC process has actually enabled fintech (firms and platforms) to grow rapidly taking advantage of this progressive RBI move,” says Navin Surya, chairman (non-executive), Fintech Convergence Council, and chairman emeritus (non-executive), Payments Council of India.

The overall adoption and experience of these new digital processes has been well-accepted by the consumers mainly due to the pandemic.

AI-Enabled Chatbots

Nowadays, all banks and lending institutions use Artificial Intelligence (AI)-enabled chatbots to communicate with consumers. Chatbots can converse with millions of consumers at a fraction of the cost of human customer support agents.

“In the initial phase (before the pandemic), AI-enabled chatbots were not equipped to handle complex queries; however, with technological advancements this capability has witnessed significant improvement,” says Jalan.

However, banks need to rethink several aspects of their operational protocols to implement and integrate Conversational AI effectively.

Conversational AI, in particular, has seen much interest in recent years, with numerous banks implementing AI-powered conversational solutions. Voice bots or chatbots can have conversations with millions of customers at only a fraction of the expense required for using human customer service staff. Moreover, its interactive nature, speed and efficiency can go a long way in enhancing customer experience.

However, to deploy Conversational AI more efficiently, banks need to restructure some of their operational processes. Given the long-term benefits, banks have been quick to bite the bullet.

Rise Of Neo Banks

Neo banks operate only online and come without the legacy of physical branch networks. They are also called online banks, digital banks, virtual banks and internet-only banks.

“Neo banks are platforms for digital distribution of financial services, and considering that India still has huge potential for market penetration, these platforms can add value to all existing service providers, taking their services to a larger audience using technology and also making it cost-effective overall,” says Surya.

API Banking

Application programming interfaces or APIs have transformed banks from being just physical institutions to digital-only or digital-first institutions. Customers want to be able to do more with their apps, whether it’s making payments, learning more about certain bills, or keeping track of their money.

“API enables companies to open up their applications’ data and functionality to external third-party developers, business partners, and internal departments within their companies. This allows services and products to communicate with each other and leverage each other’s data and functionality through a documented interface,” says Jalan. Developers don’t need to know how an API is implemented; they simply use the interface to communicate with other products and services.

By providing better means to share data and information, integrations with frameworks and personalisation of services, APIs are assisting financial services businesses to become operationally quicker and more efficient. “The main highlights of API-based banking is data analytics utility, which is actually the center of this transformation. Enabling banks to gather more and effective information to assess consumer behaviour, APIs empower them in designing custom fitted products,” says Reeju Datta, co-founder, to Cashfree Payments, a leading payment and API banking solutions company.

Self-Service Banking

“Year 2020 nudged many consumers towards new ways of making payments and engaging with banks and other financial institutions. As a result, digital saw a surge in adoption. A Deloitte report notes that 35 per cent of customers increased online banking use during the pandemic,” said a spokesperson for Clix Capital, a financial services company.

As bank branches return to normal in 2021, customers who adopted digital during the pandemic continue using digital services for convenience and safety aspects. Though bank branches will remain a vital part of the mix, the transformation to advisory service will witness a similar surge. Also, micro-branch or shared-branch resources may gain popularity.

“Self-service banking has led to an increase in Interactive Teller Machine (ITM) installations during the pandemic. This is expected to continue as ITMs have made their presence felt in regions where they were used. ITMs have enabled face-to-face communication, which customers craved, via video, providing employees and consumers with a safe, interactive and engaging environment,” said the Clix spokesperson.

As more people used Zoom and other video conferencing services to connect last year, banking will also continue witnessing a rise in video use at ITMs because they have grown accustomed to using the technology.

One thing is for sure, the way we bank will never be the same again.

meghna@outlookindia.com