The real opportunity for banks lies in their ability to win and retain their customer trust with best-of-breed service experience.

The year of the pandemic witnessed banks across the world as well as back home in India, accelerating their digital transformation initiatives. Not only were they forced to condense their year-long plans, but their evolution also came with a tectonic cultural change – one that challenged traditional processes, encouraged innovation, and made them rethink every aspect of their future journey.

This radical shift towards ubiquitous digitization came with both the impetus as well as the opportunity for Indian banks to improve services, build loyalty, reduce costs, and develop the ability to spot bumps crucial to making the banking experience – with data at the heart of digitization. In the new world order where rapid decision-making, action, and response is imperative, financial institutions must now prepare for a holistic banking transformation with technology. Banks are also focusing on ensuring real-time engagement with their compliance and risk management teams, to put appropriate controls for comprehensive governance.

As the dust settles, questions emerge about what is next for the ‘banks of the future’, what gaps are sure to emerge in their technology stack, and which innovations they need in their arsenal for success.

Priorities in successful digital transformation

Simply put, the pandemic has created an environment where banks can demonstrate what’s possible with technology. Given this transformation has become a matter of survival, and the need to adapt quickly has become a norm, we are now witnessing some clear priorities for banking technology leaders in the age of digital banking:

• Frictionless customer experience: Over the past year, banks have introduced a myriad of new ‘customer-first’ services from paperless customer on-boarding, video KYC, contactless debit cards, scan and pay, to tap and pay, UPI-based collections, and chatbots among others. Banks must ensure customers using remote channels go through a positive experience, both during and beyond any transaction.
• Insights-led ecosystem: While lowering costs has remained a priority with digital, unlocking the full potential of this transformation must come from data – not only to provide exceptional customer experience, but also inject valuable insights into their operations to outperform competitors in profitability and productivity. Analytics will play a crucial role in personalising sales and marketing approaches for banks.
• Digital operations: Banks need to reinvent their operating model by placing customers at the centre of their business. This will call for significant levels of legacy modernization, process automation and flawless integration to build a highly connected ecosystem. This is how banks need to operate digitally and deliver highly personalised customer engagement.

A combination of the priorities cannot be addressed in isolation. Banking leaders realize the need for a unified culture, relevant innovations, skill sets and redefined objectives to complete the digital transformation journey.

Essential Innovations – The enablers

It will not come as a surprise to know that banks with better digital capabilities will have an edge on technology laggards. To cope with the lockdown, customers are showing increase in the adoption of digital channels that offer near-real-time services and are looking down on financial systems that feel slow, complex, complicated, or cumbersome.

In fact, digital adoption of financial services is now well entrenched in India, with 1/3rd of Indian households already using digital payments in one form or the other, with access to the internet and smartphone is no longer a bottleneck.

In this context, I believe the following innovation enablers will be an absolute necessity:

• Artificial Intelligence: With the rising adoption of automation, robotics, chatbot and more, greater mastery over artificial intelligence will help banks ensure frictionless customer interactions, predictive support against disruptions, overcoming rising compliance requirements and more.
• API-led banking: Application Programming Interface or APIs will increasingly facilitate synchronisation between various services, reducing dependence on legacy technology environments, and rather improve quality IT through connecting applications, data, and devices. In the Europe, Open banking is a clear example of Open API’s led banking.
• Cloud-led innovation: Instead of upgrading IT systems in the traditional way, cloud computing allows financial institutions of any size to modernize systems and enable innovations with new technologies easier and quicker. In the near future, more use of the cloud for democratized data collection, as well as scale existing abilities with improved capacity and security of information processing, will be crucial.
• Regulatory technology: Reg-tech is increasingly becoming the go-to solution for banks to cope up with the staggeringly high, complex, and strict regulations. Also open to consumption using APIs and SaaS models, Reg-tech will be vital for banks to meet stringent requirements without much hassles.
• Legacy modernization: The continued use of legacy systems ends up hindering most banks’ ability to successfully commit or embark on their digital transformation journey. Modernizing outdated systems and processes will enable banks to respond faster to customers. This has to happen across their internal and external facing systems. Cutting-edge tech will be a key enabler in supporting this journey.

The crucial role of technology providers

While digital transformation is inevitable for banks, each journey has its unique story. Speed will be a common hallmark in each and every digital transformation story. This means, getting it wrong can put

banks reputation at stake. This is why driving banking transformation will require conscious contextualization, core commitment, and comprehensive competencies from technology providers. In the era of ecosystem-led financial solutions, both banks and technology providers must work hand-in-hand.

At the end of the day, the real opportunity for banks lies in their ability to win and retain their customer trust with best-of-breed service experience.

Disclaimer: Originally published on BW BUSINESSWORLD

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