Digitalization in Indian BFSI sector: 2017 & Beyond

by | Feb 23, 2017 | Banking, Benefits of Digitalization | 0 comments

The big push towards digitalization has begun

The push towards digital has been significant in India, especially with the Digital India campaign and demonetization, which resulted in a huge upswing in online transactions, card payments and mobile wallets. This shift towards internet banking is especially necessary considering that projections state that by 2020 the average age of an Indian will be 29 years, a customer base that is internet savvy and relies on real-time information. Gartner, a global technology consultant, has predicted that IT spends by domestic banks and securities firms are expected to grow by nearly 10 per cent to $8.9 billion in 2017. In order to remain competitive, financial institutions must transform into fully-digitalized businesses. Customers are a major determining factor in this regard with their expectations of a seamless experience that is efficient, enjoyable as well as multi-channel.

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Digitalization has its effect on everything and when it comes to banking, it is particularly transformative. From retail banking and micro-finance institutions to NBFC (non banking financial institutions), digitalization can revolutionize the customer-experience ecosystem and streamline registrations, approvals, collections and make banking operations incredibly smooth sailing and nimble. Digitalization would enable financial institutions to take data-driven dynamic decisions using digital analytics, implement strategies rapidly using digital interfaces, capture customer and operations data in real time. This would help increase sales, improve customer experience and reduce costs for themselves as well as their customers. Furthermore, it would move to reduce the significant rural and urban gap in banking.

Digitalization would enable financial institutions to take data-driven dynamic decisions using digital analytics, implement strategies rapidly using digital interfaces & capture customer and operations data in real time.

The Story So Far

Since 2006, a few state governments have been experimenting with electronic cash transfers via bank accounts, delivered through bank agents. By 2013, the central government had selected some of the largest cash transfers to the poor to shift to an electronic system, including benefit transfers from the National Rural Employment Guarantee Act (NREGA), a cash-for-work program, National Social Security Pensions and Liquid Petroleum Gas subsidies. The value of these transfers is estimated to be Rs 70,000 crores ($11.3 billion) per annum.

The country’s goals include delivering electronic welfare payments, banking services, and digital local government services to each of its 638,000 villages. This ambitious aim is immensely challenging considering that 60 percent of the country’s 1.2 billion live in villages, which lack connectivity and infrastructure. Then to be considered is the large-scale re-organizing that this campaign would take since the subsidies are spread across ministries, departments and numerous state governments. India’s Rs 65,000-crore microfinance industry, in its bid to keep pace after demonetization is coming up with low-cost models for payment. With payments as low as Rs 50, micro finance institutions are looking at low-end modes of digitization. So, while there have been many moves taken towards digitalization of financial institutions in India, numerous loopholes still remain.

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An opportunity rich space

Though internet banking and mobile banking apps have made their presence felt in India, the transformation has been slow because decision makers tend to view digitalization in a narrow manner, as a cosmetic feature of sorts. The documentation requirements and paper approvals needed at various stages of availing banking services mean that the customer would still experience a response lag because all processes haven’t been brought under the digitalization flag. While security concerns are still a big factor, there are numerous agile platforms that make seamless digitalization with tight data security a no-brainer today.

The paper based KYC & approval processes mean that the customer would still experience a response lag because all processes haven’t been brought under the digitalization flag.

It is time for banking and financial institutions to become nimble in their functioning. Strategies need to be implemented to optimize processes and reduce costs, manage big data volumes, connect data to business goals and fulfill regulatory requirements. Additionally, the software framework employed needs to be scalable and most importantly – reliable. Digital interfaces need to be in place for every channel (apps, web interfaces, chatbots), and digitization should connect front-office workflows to back-office processes seamlessly and coherently. All of this while ensuring that security is maintained.

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Digitalization when executed well would provide a cross-channel journey for the customer, as well as continuous and real-time engagement with customers, partners, employees and investors.

How to go Digital

If a financial institution wants to take the path towards digitalization, PricewaterhouseCoopers lists a five step approach that can transform the operation model in such cases. While the approach will obviously be determined by the goal, whether it is to improve customer experience, streamline processes or reduce costs, these five steps can guide digitalization of banking operational model. They are:

  1. Customer-back process transformation,
  2. Product and service simplification,
  3. Aggressive digitization,
  4. Governance and performance management transparency and,
  5. Delivery model optimization.

When it comes to aggressive digitization, a framework such as Enterprise Tiger can ensure that the business needs of financial institutions are met in the most reliable and efficient manner possible. Nimble, secure and mobile, this agile digitalization platform for enterprises can serve to close the loopholes that otherwise plague financial institutions when digitization is carried out in only a cosmetic manner.

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When it comes to aggressive digitization, a framework such as Enterprise Tiger can ensure that the business needs of financial institutions are met in the most reliable and efficient manner possible.

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While digitalization might seem like an intimidating and intensive process, the process can be smooth and efficient if a platform that provides you with the right technology, know-how and the latest tools is used. It is the best strategy available to get ahead of competition in the market. By assessing and adopting digital technology for their needs, banks will be able to ride the digitalization wave and become increasingly agile, differentiate themselves from their competitors and make their business processes seamless and digitally enabled.

Sridevi Padmanabhan
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Sridevi Padmanabhan

Communications specialist

As a communications specialist, Sridevi Padmanabhan delights in weaving magic with words. She has accomplished this with academic research, television scripts and articles for print and the web. Now, she writes about art, food and technology. When she is not writing up a storm, you can find her planning dinner parties and pottering around in her fledgling garden.

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