By Dilipkumar Khandelwal
It’s impossible to think of banking without technology. Most financial institutions offer digital services that are quick, safe, and easy. Let me ask you, when was the last time you stepped into a brick & mortar bank? In India alone, RBI estimates that digital transactions could reach INR 15 trillion a day by 2025. Clearly, technology is firmly embedded in banking!
And banks are feeling it, as they race to use the immense potential of technologies to shape the future of the industry. Technologies such as artificial intelligence (AI), machine learning, and cloud are allowing them to improve the way they operate, become simpler, more efficient, and make interactions with clients easier and more impactful. For example, clients can now discuss their requirements with banks in multiple ways, improving speed of advice and execution times.
Banks know that technology is the foundation for future growth. And accelerating the adoption of tech is one of their biggest priorities.
Here are five tech trends that will continue to revolutionise the banking space:
Data, AI and automation
Data, AI, and automation continues to shape financial services. They enable banks to get closer to clients, be in constant dialogue, increase click-through-rates and conversion on platforms, and foster growth. At the same time, a significant challenge for the financial services industry is the accuracy and integrity of business control data which is used for risk and financial reporting. Gaps in data can result in regulatory audits/fines. But banks are committed to eradicating these gaps. For example, data quality and lineage problems can be solved with an enforced firm-wide data standard with inbuilt data life cycle management and governance.
AI and ML can boost the creation of personalized services from the creation of custom-made websites, to real-time recommendations, and learning capabilities. Robotic Process Automation (RPA) can increase efficiency and accuracy, as it reduces human error, enables bank employees to handle more complex enquiries, and improves customer service.
That banks have been slow to adopt cloud computing is a thing of the past. Recent reports** suggest that the appetite for cloud adoption is high and is set to treble by 2025. Moving workloads into the cloud has led to lower operating costs, a modern IT environment capable of processing vast amounts of data quickly and accurately, highly automated operations, and increased accessibility for customers so that they can bank anywhere, anytime.
Using the cloud allows banks to benefit from a constantly updated technology environment, which can react flexibly to trends. And in leveraging technologies such as AI to develop new products and services for customers.
For banks, cloud should be the technological foundation of transformation. The use of cloud offers the opportunity to increase the stability and security of banks’ IT systems on the one hand, while reducing complexity and eliminating the need to operate own physical data centres on the other. Clients will benefit from products and services being developed and brought to market faster.
As cyberattacks become more frequent and sophisticated, the race to stay ahead of a breach is critical. A ‘zero trust’ framework means nothing (no user, workload, device, or network) can be inherently trusted in a digital transaction. Every access request should be validated/authenticated throughout the network and on all available data points, including user identity, device, location… and not just on the perimeter. Zero trust is not a single solution, rather it is a set of controls that guides decision-making in your security architecture. Further simplifying, integrating, and automating the security technology stack are also part of zero trust, and helps improve the efficiency of security teams and streamline security processes and operations.
Application Programming Interface Platforms
What started with National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), and Immediate Payment Service (IMPS) has progressed to Application Programming Interface (API)-led or open banking, another paradigm shift for the financial sector. APIs are a technology that allows client systems to communicate directly with a bank’s systems via a standard format with high security. For clients, this means that rather than manually calling or emailing for data requests or status updates, they can pull their data directly from a bank’s systems.
APIs improve the speed and effectiveness of financial services by strengthening their data exchange, system integration, and personalisation capabilities. Today’s API banking decentralises control and consolidates all products on a single platform at competitive prices. By providing users with transparency into their financial activities, API banking is preparing the way for a new banking environment in which clients have a great deal more power and are free to swap service providers.
Real-Time Payments (RTPs) are one of the decade’s most critical financial advances and has significantly altered the fulfilment experience for individual and corporate customers. We are now in a world where cash moves in seconds. RTPs have gained from exponential adoption growth and have helped micro digital economies in both developing and wealthy countries. According to FIS, India was the worldwide leader in 2020, completing 41 million transactions per day with a 213 per cent growth rate. According to research by ACI Worldwide, India led the globe in real-time transactions in 2021 with 48 billion, over three times that of China (18 billion) and 6.5 times that of the United States, Canada, the United Kingdom, France, and Germany combined.
In a post-COVID world where social distancing is normal, tech has been an invaluable agent of change. As banks reinvent themselves to take advantage of the constant advances in technology, they will increasingly rely on emerging technologies like AI, cloud computing, and machine learning to provide the best possible outcomes.
And the question of what tech lies beneath will become far less relevant than what tech can achieve for banks.
The author is CEO, Deutsche India and Global CIO Corporate Functions.