How digitization is shaping the future of banking (2024)

The banking sector has been growing at a steady pace since its inception. The evolution of banking can be traced through the years. Back in the day, people had to wait in long queues in banks to withdraw money, but today, there are cards that can help one pay for things or withdraw money. With technology developing, the ways people have been doing banking have also been changing. In the past decade, the banking sector has experienced significant changes due to the impact of digitization. The digital revolution has transformed the way customers interact with their banks, and the way banks operate their businesses. A few years ago, traditional banks were the only trustworthy space for banking. But today, there are NBFCs, MFIs and neo banks that exist in a digital space and provide financial services.

From receiving cheques that need to be deposited for salaries and payments to developing an online salary payment system, we have come a long way. While digitization has integrated almost all industries, the banking sector has been actively making efforts to embrace the new technological banking solutions and boost efficiency and productivity.

The financial sector has witnessed one of the most significant evolutions and continues to grow and expand. One of the biggest changing factors for the banking sector was the pandemic. With the lockdown enforcement, people started moving more towards digital banking for their financial needs. While digitization has been integrated into this sector for some time, it was only during the pandemic that people had to actually take the time to understand its benefits and make the most of these services Digital technology has enabled banks to offer a wide range of financial services to customers through online platforms, mobile apps, and other digital channels , allowing customers to understand the many benefits being offered and choose between different plans and packages.

Enhanced Customer Experience:

Digitization has made banking easier and more convenient for customers. Customers no longer have to wait in long queues at the bank or worry about bank hours. With the help of online banking and mobile apps, customers can perform banking transactions anytime, anywhere. With mobile banking, the transactions have also become quicker. Earlier, it used to take 3-4 days for banks to transfer money given by customers to other accounts. But today, with online payment methods, this process is being done within seconds. People can check their account balances, transfer money, pay bills, and apply for loans from the comfort of their homes or offices, efficiently and receive quick responses.

AI-driven customized services empowering customer service:

Digitization has enabled banks to leverage the power of data analytics and artificial intelligence (AI) to make better business decisions and offer personalized services to customers. By collecting and analyzing customer data, banks can tailor their services to meet the specific needs of each customer. Banks can collect and analyze vast amounts of customer data to gain insights into customer behavior and preferences while improving customer experience and developing new customized products and services. Banks are also using this data to offer customized investment options based on a customer's risk tolerance, investment goals, and financial situation or offer personalized loan options based on a customer’s risk analysis, requirement and repayment strategy. This personalized service not only enhances customer experience but also helps build customer loyalty.

Innovation boosting new-age business model operations:

Digitization has spurred innovation in the banking sector, leading to the emergence of new business models. The rise of the fintech industry in India is being witnessed by all. These fintech companies have different working structures and service models than the traditional banking model by offering innovative products and services that are often more customer-centric and cost-effective. These companies leverage digital technology to offer services such as peer-to-peer lending, digital wallets, automated portfolio and wealth management and crowdfunding. Banks are also partnering with fintech companies to enhance their services and reach new customers. Fintech NBFCs are addressing the issue of traditional banks reach. These NBFCs are working towards making their services available in all areas of the country, including the rural areas, and encouraging financial inclusion in the process. This can be a game-changer for the banking sector as it continues to become more accessible and efficient.

Hyper Automation through Data Collection for Enhanced Customer Experience:

Hyper automation can help banks collect and analyze vast amounts of customer data, including spending habits, transaction history, and account balances. Using this data, banks can offer personalized banking experiences to their customers, such as customized product recommendations, targeted marketing campaigns, and tailored financial advice. AI is also being used to automate routine tasks and improve decision-making. Hyper automation can be used to detect fraudulent activities in real-time by analyzing large volumes of customer data. This can include using machine learning algorithms to detect patterns and anomalies in customer behavior and flagging suspicious transactions for further investigation.

Leveraging Blockchain technology for operational efficiency:

Blockchain technology can potentially revolutionize the banking industry by providing secure and transparent ways of storing and transferring information and assets. It has the potential to improve the efficiency, security, and transparency of banking processes, while reducing costs and risks. Blockchain can be used to create a tamper-proof digital identity for customers, which can be used to verify their identity in a secure and efficient manner. This tamper-proof feature makes it an effective tool for preventing fraud by providing an immutable record of transactions. Blockchain technology can be used to streamline trade finance processes by enabling the secure and transparent sharing of information between banks, importers, and exporters. One of the biggest advantages of this technology is its ability to comply with KYC/AML regulations by providing a secure and transparent way of storing and sharing customer information.

Utilizing IoT Technology to revolutionize the banking sector:

The Internet of Things (IoT) technology has the potential to revolutionize the banking sector by improving operational efficiency, enhancing customer experience, and enabling innovative services. One of the primary applications of IoT in banking is the use of sensors to collect data from devices such as ATMs, point-of-sale terminals, and mobile banking apps. This data can help optimize operations and enhance cyber security. These sensors can be used to monitor the performance of ATMs and alert maintenance teams when there is an issue. This can prevent downtime and ensure that customers have access to banking services around the clock. Another application of IoT in banking that we could experience in the coming future is the use of wearable devices such as smartwatches and fitness trackers to enable contactless payments. Additionally, with the integration of hyper-automation and blockchain technology, it will become easier for banks to ensure a robust security to protect customer data and prevent cyber-attacks.

The banking sector has been evolving to better serve the customers, boost financial inclusion and keep up with the changing times. With the integration of digitization, there is vast potential for the services this sector could provide, revolutionizing how we do banking and boosting the economic growth of the country through credit access, innovation and risk mitigation.

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