The Future of Banking

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People living in the suburbs or the rural areas still get overwhelmed by the paperwork required to open a bank account or deposit money, but the cumbersome paperwork of getting the Know-Your-Customer (KYC) process done is gradually becoming a thing of the past. New platforms have come up such as Fino Payments Bank, where a thumb impression can open an account within minutes or just your Aadhar Card is needed to open an account. Such new players in the market have targeted the rural customers and are beating the traditional banks at their own game.

The quest of Digital India has been well received by the tech savvy urban India, but policymakers are having a hard time to penetrate this into the rural areas of the nation. After Prime Minister Narendra Modi’s intervention, banks have started opening accounts for each family. Though, most of the accounts are non-operational, the Union Budget for 2017-18 allocated Rs. 19 Billion over three years to take digital banking to agriculture intensive areas.

The case is different in urban India where smartphones rule the game. Though people have not embraced mobile banking completely, Unified Payments Interface (UPI), BHIM and mobile wallets have changed the scenario. People are more comfortable using cards or mobile wallets as compared to carrying cash when shopping.

Banking and payment services using social media and chats have not been introduced in India so far, as in China; but State Bank of India has adopted a village in Maharashtra, where it is conducting a pilot survey to conduct transactions using Aadhar. Howsoever much we emphasise on promoting digital banking, reliance on cash is not going to end anytime soon. In this $2 trillion economy, only 10-12% of total transactions are conducted electronically, the share can go up but cash will continue to dominate.

BLOCKCHAIN

Along the buzz of cryptocurrency comes the Blockchain technology, which is the next big thing in the banking industry. It is said to be the most secure technology, probably the only reliable technology for cross border transactions so far, and has the potential to penetrate the regular banking in the future. By using the Blockchain technology, each bank’s transactions will be maintained in the books of each bank, thus eliminating fraud.

ROBOTS AND ARTIFICIAL INTELLIGENCE

Without many realising it, the biggest change underway the banking sector is in the field of AI and machine learning. It won’t be a surprise if in a few years’ time most functions in the banks are handled by robots. The primary function to be taken up by the robots would be customer service.  In top private banks, chatbots have already started taking over customer service roles. ICICI bank’s chatbots have had more than three million real-time conversations with customers and cleared six million requests (Source: Business Standard). Similar is the case with HDFC bank. And customers on the other end of the line don’t even realise that they are talking to a robot. Such technologies are being used to slash high back end costs of the banks. SBI has an AI process automation that analyses past customer data, spending habits, and even brands the customer uses frequently, and customises offers around those habits. Once AI scales up, it has the ability to change the dynamics of how services are offered in the banks. Gradually even loans will be designed and structured by AI. Customers will be offered tailor made loans and other services, depending on an analysis of their spending and credit history, which will be done by AI.

The banking industry has always been the earliest adopter of new technologies and hence we ca very well expect to see the dynamics of this industry undergoing a revolution in the coming years.

Author | Akanksha Goel