Embracing Digital To Drive Financial Wellness of Banking & Financial Services Industry

By Vijeth Shivappa

Banking , Financial Services & Insurance Industry what we refer as BFSI , is at a crossroad today. FinTech innovation and new digital technologies such as Blockchain are disrupting the market. While it creates disruptions, it also brings multiple opportunities for financial services to reinvent itself and prosper.

The RBI has also issued minimum guidelines in relation to a bank’s compliance function. A bank must comply with Various statutes such as the Banking Regulation Act, RBI Act, Foreign Exchange Management Act and Prevention of Money Laundering Act.Standards and codes prescribed by bodies such as the Basel Committee and the Indian Banks Association. Its internal policies and fair practices .Adhering to existing and emerging compliance will come at a higher cost to the Banking and Financial Industry.

The emerging data-driven world and rise of non-banking platform companies are disrupting the most profitable parts of the banking value chains, compressing margins as competition rises. Even more disruptive transformation is on the horizon with Blockchain technologies and the rise of intelligent things and agents.

These changing times also bring major opportunities for building next-generation, data-driven financial services digital backbone. Financial Services that leverage digital to reinvent their approach to customer experience, operations, business model design and trust and compliance have great opportunities to prosper. These changes bring major opportunities for companies in the Financial Services space that are willing to position themselves at the core of next-generation and data-driven ecosystems.

75 % of banking customers execute half their financial transactions online. Willing to receive automated support, they swipe to pay, categorize expenses automatically, and turn to robo-advisors for smart asset management.
Looking ahead, smart automated cars and virtual assistants – Google Assistant, Apple Siri or Amazon Alexa – could become ‘customers’ in their own right, acting on behalf of their owners.

Banks should shift from product-centric approach to a platform-centric approach focused on customer-driven strategies. By blending digital and human interactions across each channel, banks can perform personalized customer behavior analysis and proactively respond to an individual demand.The potential of digital is immense. Retail banks that digitalize their customer journeys see a 5% to 20% boost in revenue from improved service, network cost reductions of 15% to 35% and increases in customer satisfaction of 10% to 15%.

Data infrastructure and technology resilience – More than ever, data is critical to identify and manage emerging risk and develop risk mitigation responses. This results in a need to look at a technology strategy alongside a data strategy and consider integration and legacy systems; data availability across the firm; privacy, protection, and data security; and analytic capabilities and resiliency.

Cyber and operational resiliency – Increase in cyberattacks, data breaches, and service outages have steered bank leaders and regulators to focus on managing operational and cyber risks.

Digital assets – In 2022, regulators will likely take a more active role in regulating digital assets in two areas: (1) regulated financial instruments (e.g., deposits, futures, securities), and (2) regulated entities (e.g., banks, broker-dealers, money transmission entities). Flexibility will be essential as the rules unfold, and firms will need to respond quickly.

Adapting to the new digital era requires a quantum leap. To embrace the challenges of a digital world and take a winning position within it, three important principles will be essential for banks:

• Become wholly customer-centric, ensuring 360° omni-channel engagement with clients, smart devices and machines.

• Provide intelligent data-driven orchestration, enabling adaptation to market changes and evolving customer demands in a real-time, prescriptive way.

• Adopting open platform foundations, providing the best financial utility services.

Technology can bring about a revolutionary shift in NPA management in India. Automated solutions can not only assist in better data analysis but also enable early indicators that will alert before the situation nosedives. Therefore, this will give banks time to take appropriate measures.Technology and data analytics should be leveraged to identify red flags and early warning signals.

To thrive, banks will need to create the right partnerships and bring together the entire ecosystem to enrich their offering, monetize their data and turn it into profit. Banks should begin building new supporting architectures today. Modernizing legacy IT and fully embracing the latest cloud, automation, big data and mobile technologies is only the beginning of their digital journey.

–  All views expressed are personal