A comprehensive report from Deloitte looks into the core areas that firms need to keep an eye on.
Banking has witnessed a significant change in recent times. Owing to the increasing consumer expectancies, regulations, economic changes and constant competition, modern banking has embraced technology. Digital platforms, mobile, internet banking, and payments bank have revolutionized the sector in a substantial way. “The Digital India Moment” has also given the much-needed impetus to the digitization efforts in the banking sector.
Deloitte, a multinational professional service and one of the Big fours, studied these fluctuations in financial structure and banking landscape and recently released a report “Banking on the Future: Vision 2020” along with the Confederation of Indian Industry. The report highlights the role of technology in banking and how technology-oriented innovation will disrupt the market.
Here are the five crucial changes that will disrupt the Indian banking sector in 2020, according to Deloitte.
1. Payment banks to pave the way
The report highlights the growing importance of payment banks in the ecosystem. In India’s cash based economy, digital payment instruments will drive growth in non-cash payments. PBs will have long term implications on the syntax of large financial institutions as they disintermediate the value chain, by leveraging innovations in “Financial Technology”, investing in innovations, and lowering transaction costs—the report highlights. The reports also states that “Digital footprint” will be the way forward for all PBs. How well PBs engage in coopetition with Fintech startups playing in emerging technologies will determine how they can differentiate in an increasingly crowded market.
2. Role of Artificial Intelligence
Artificial intelligence will be an integral part of smart banking. Banks can expand their consumer base by learning what clicks with their users. Cognitive technology with AI can offer features like cognitive engagement, cognitive automation, cognitive perceptions, and cognitive strategy formation. Through AI, a support system can be developed that targets the user’s personal preferences, reduces human intervention, catches data patterns and devises strategies based on market subtilities.
One such example is Bank of America that has introduced the chatbot ‘Erica’ for customer assistance.
3. Blockchain & Distributed Ledger Technology
The concept of the banking system with Distributed Ledgers supported by Blockchain will no longer be far-fetched. This step can initiate an uninterrupted and fairly tamperproof information inter-changes between the involved parties in real-time. Through a distributed network of computers, a common pool of information is maintained. However, transactions are unassailable and inviolable due to cryptographic algorithms. The financial services industry may be one of the firsts to be impacted by wider adoption of Blockchain and its associated DLT, the report says.
4. Cyber Security: Upping the ante
Proliferation of internet and mobile banking is posing new security challenges to financial services firms across the globe. Security measures are present in the form of KYC, 2 step authentication and EMV chip cards. However, the game needs to be upped with looming threats like phishing fraud, app misuse, cyber intrusion, magnetic strip duplicating of cards and so on. The report underscores the need for enhanced cyber risk assessment framework and testing methodology to continuously detect and protect against evolving cyber threats.
5. Increasing use-cases of RPA:Robotic process automation will see more use cases in 2020 due to its benefits as compared to the traditional automation technologies. The Deloitte reports lists down a number of use cases that are already prevalent in the financial services sector, including global investment banks and insurance firms. The challenges in adoption are primarily around change in mind-sets, and building the right business use case and operating model for RPA, the report adds.