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(GIST OF YOJANA) Tech-Innovation in Banking

[JUNE-2022]

Tech-Innovation in Banking

Context:

The banking sector is rapidly adopting new emerging technologies to draw the customers to park their wealth in attractive bank products and schemes. Latest technologies like Artificial Intelligence, Big Data, Deep Machine Learning, and Robotics are being used to understand the customers and their needs better. Established 252 years ago, banking system in India has left its traditional way of functioning far behind and has emerged in a new avatar with the advent of new technologies.

Key areas:

ATMs: In the beginning, only money could be withdrawn from ATM, but now money can also be sent to anyone’s account through ATM. Also, many banks have started the facility of deposit through ATMs; only the account of the sender and the receiver should be in the same bank.
From Banking Correspondent to Mobile Banking: Banking Correspondents are important for unskilled workers, labourers, and less educated people in rural and urban areas. They help people in several ways, including depositing or remitting money and opening an account. A banking correspondent can also be a grocery store or other retail outlet in the neighbourhood. With new technology and increasing competition, tech-savvy people have easily shifted to their mobile phones for banking purposes, and banks are constantly upgrading their technology to make it more convenient.
New Mobile Banking Apps: Banks have launched different iOS and Android phone Apps. Using Mobile Banking, one can do everything– funds transfer, getting the bank statements, mobile recharge, and train or hotel booking directly through the bank’s App.
NEFT-RTGS: National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) are the facilities with the help of which individuals, companies, and firms can easily transfer money from one bank to another. Many banks in India operate as banking agents for international money transfers that can now also be transferred on mobile.
National Automated Clearing House (NACH): Launched in December 2012, the National Payments Corporation of India (NPCI) runs this service. This service also plays an important role in data management, along with transparency and security.
Core Banking Solution (CBS): Today, the facility of Core Banking Solution is being provided all over the country by commercial banks and cooperative banks. As a result, anytime, anywhere, banking has made life easier. This trend points towards the fact that these digital solutions are gaining momentum as mobile banking customers increase.
New-Age Innovation Robotic Process Automation: With the rapid growth of the digital economy, the amount of unstructured data processed by banks is increasing. It is not just banking transaction data but also behavioural data which banks can adopt to guide their customers to a new world of innovation. By combining various technologies that enable cognitive and robotic processes, bankers can make quick, large-scale, and quality decisions by predicting customers’ actions. Smart Virtual Assistants are helping customers by handling banking transactions and providing relevant information. Robotic process automation uses bots to do repetitive tasks without human intervention in a more efficient manner.
Data Analytics: Today, banks are meeting customers’ needs faster by analysing their business data. Technology and digitisation have enabled the banking sector to make informed decisions with actionable insights in real time, face market competition, understand future launchable products and ensure customers’ satisfaction.
API Platform: Today, through the API Platform, banks are engaging with Fintech, which allows them to become a platform on which customers and third-party service providers can connect to deliver a flexible and personalised experience to the end-user. API Banking Platform is designed to work through Application Programming Interface, which is a software intermediary that allows two applications to talk to each other. They allow banks to adopt entirely new business models and use new technologies such as blockchain at a lower cost. APIs also help banks to make their systems future-proof.
Cyber Security: The banking industry deals with sensitive and personal information, so cybercriminals are in ambush for such information. With the increasing use of technology in banking, cyber risks are also rising. Banks are becoming more alert concerning cyber security. They are gradually implementing advanced, analytical, real-time monitoring and biometrics, and behaviour analysis software to detect threats and prevent them from disrupting systems. They are also using anti-hacking tools that provide network level security.
Cloud Computing: Cloud Computing is another technological advancement revolutionising the banking sector. Cloud is an important tool of the service delivery model and enables banks to find new business opportunities and access new distribution channels. By leveraging cloud-based services, banks, while ensuring the security of customer data, can reduce data storage costs by saving on capital and operating expenses. Cloud computing also promotes secure online payments, digital money transfers, wallet payments, etc.
Biometrics: Companies are inventing new payment systems due to a gradual decline in dependence on cash. Customers can pay within seconds by simply verifying their identity through their fingers or face.
Chatbots: As voice-based interactions with customers continue to grow, banks are rolling out new financial chatbots that save up to 4 minutes per transaction. Banks are also getting feedback from customers immediately and at a nominal cost.
Wearable Smartwatch: These give customers a unique digital payment experience. A rapid rise in their usage amongst the Millennial and Gen-Z generation will surely revolutionise the digital payments arena.
Zero-Trust Security Model: Banks and customers are losing their trust in the old IT models. The zero-trust security model is the way to deal with the growing cyber risk. It ensures strict adherence to the user and device authentication across the network without relying on implied trust.

Way Forward

Considering the importance of digitisation as the need of the hour, especially in the pandemic era, all Indian banks, government or private, are now focusing on the digitisation of loan products after the digitisation of payments systems. The country’s Central Bank, RBI, has also set up a Fintech Department with effect from 4 January 2022, which along with promoting innovation in our banking sector, will focus on the challenges and opportunities which keep coming in the banking sector through technology every now and then, and this department will continue to engage in research to find their solutions.