- RBI Governor
Shakkanta Dasrecently spoke about the future of banking in India, saying it would involve the adoption of new technologies and the customization of products and services.
- He advised banks to prepare for the dynamic environment while focusing on appropriate business models, sustainability, stability and consumer-centricity.
- Business Insider India analyzes the future of financial services in India.
The future of India’s banking industry has a powerful weapon in its arsenal – social media and new technologies. The success of banking will be determined by how well banks can leverage the full potential of social media and data analytics to personalize offerings and meet growing customer expectations.
He said retail customers now expect banks to provide them with fast, reliable and personalized services. In order to evolve with the changing times, the governor advised banks to make significant investments in technology and organizational skills.
“The Indian banking system has changed significantly. The increasing adoption of technology by traditional banks for self-improvement or collaboration with fintechs is consistent with the idea of New Age Banking. This leads to innovative products, services and newer business models,” said Das.
“The banking of tomorrow would be about the adoption of new technologies, customization of services, enhanced business and process automation,” Das said of his vision for banking in India.
The future of banking will also involve developing appropriate business models with strong governance frameworks, better information management, changes in working methods, building improved resilience and a more responsible societal and environmental role for banks, he added.
Stressing that the banking sector is going through a period of change and facing competition from fintech companies, Das emphasized that banks should prepare for the future.
“To remain relevant, banks would need to use newer and proven technologies to make effective and timely business decisions, understand their customers’ needs and offer them personalized services.”
While banks’ apps and websites have grown by leaps and bounds over the years, Human Touch’s presence in traditional branch banking could still be relevant to customers in many ways and in many areas, Das said.
A new paradigm of digital banking
In order to introduce a new banking paradigm and benefit the Indian economy, the governor suggested banks actively use social media.
“Analyzing social media usage has the potential to help banks review their strategies related to customer segmentation, customer acquisition and driving financial inclusion. Social media can also be used in customer complaint management. Continuous knowledge acquisition and a head start will become even more important in the coming days,” said Das.
The lockdowns caused by Covid-19 prompted the banking, financial services and insurance (BFSI) sectors to take a closer look at their technology architectures.
“Technological advances in the BFSI sector have brought a wide range of benefits, ranging from fraud and risk management to reduced costs and improved inclusion of the excluded sector in the formal economy,” said Sanjay Sharma, managing director of fintech platform Aye Finance Business Insider India.
Adoption of artificial intelligence (AI) and machine learning models, big data analytics and blockchain technologies by fintech players have enabled customized products and services and radically changed the customer experience, he added.
With fintechs in the mix, expectations of banking are no different. Consumers expect responsive brands that address complaints quickly “on Twitter”.
This puts additional pressure on banks looking for ways to improve their social media strategies, improve customer experience and expand business opportunities.
From AI to blockchain, from machine learning to robo-advisory, there is a new realm of possibilities that banks are now experimenting with.
“An active presence on social media platforms can help banks build connections, provide value to customers, drive sales and increase engagement with prospects,” said Vineet Tyagi, Global CTO of SaaS platform Biz2X to Business Insider India. “Social media can revolutionize the banking sector with an immense customer base.”
For example, banks could create loyalty programs and find specific stakeholders — like seniors, women or farmers — on social media for their various offerings, Tyagi added.
At a time when business owners are used to optimal efficiency and speed in most areas, Tyagi said a slow traditional banking process wouldn’t work well.
Naushad Contractor, Founder and CEO of Fable Fintech, believes the future of banking will be invisible, connected, insight-driven and purposeful.
“Very soon, a few banks will operate as technology companies. The know-how to provide all-in-one access to a range of digital channels, products and services will soon be inevitable in the banking sector. The digitally driven technologies will impact how individuals save, invest and interact with all aspects of their finances,” Contractor told Business Insider India.
Neha Juneja, CEO of IndiaP2P.com, a fintech platform for retail investors, agrees that tomorrow’s banking model will be more personal.
“This personalization and the ability to treat every user as a premium user is only possible by leveraging technology for efficiency and social channels – where users are already,” said Juneja.
It would also leave big banks struggling to keep up with creative fintech startups, said Manoj Mohan, executive director of the Center for Financial Studies.
“We will see the creation of Amazon equivalents that take business away from Walmart. A key reason for this is the dichotomy between the culture of safety at large banks and the culture of innovation at startups,” said Mohan.
He suggested that banks need to form teams or subsidiaries dedicated solely to innovation in order to adapt to the evolving times.
“To be at the forefront of innovation in finance, banks need to transform how they think and approach innovation and the risk of innovation-driven change,” Mohan said.