Public and Private Sector Banks – Embracing emerging tech to drive digital transformations and customer-centricity

-By Kunal Pande and Amit Wagh, Partners at KPMG in India

The Indian banking industry is expected to see a transformational change over the next few years with customer-centricity taking center stage for most banks. Private banks and public sector banks (PSBs) will play a significant role in driving major transformation initiatives, through strategic partnerships with fintechs and digital financial service enablers.

Today digitalization and innovation have become strategic priorities for the banking industry following the emergence of fintech firms and modern agile banks. Banks which can quickly adapt to next-generational technologies can disrupt the market faster than their peers, while delivering better customer experiences and improving operational efficiencies across the spectrum of lending, payments, credit underwriting, investment management and more.

Private sector banks are embracing emerging technologies to drive bold transformations with customer centric approach:

Digital capabilities have played a critical role in bringing resilience during the peak of the COVID-19 pandemic, increasing customer demand for better speed, transparency and ease of convenience all of which are now re-defining the new ways of banking. Customer-centricity has undoubtedly become one of the key success factors for most banks in the post-pandemic era.

Several private banking players now are increasingly deploying emerging technologies like AI-ML to aid their customer-centric approach. From enabling video KYC, to digital customer onboarding, from account conversions, to risk management through predictive analytics to providing real-time assistance to the customers through chatbots, or mobile applications – next generational technologies like AI-ML have found a place across the banking value chain.

Additionally, private sector banks are also looking to develop super applications that can integrate e-commerce data and other customer related public information with their banking applications and analyze customer behavior and historic trends to create tailored and ‘fit-for-purpose’ banking products. Banks in today’s digital era are thus looking to leverage real-time actionable customer insights to provide customer-centric offerings and drive business value.

Further, to enable customer centricity in the true sense, platform business model will increasingly become= vital for private sector banks in the coming years. Banks should look to provide open banking and integrate various APIs/microservices into their processes enabling banking-as-a-service (BaaS) and infrastructure-as-a-service (IaaS). Fintech collaborations, and measures such as sandboxes collaboration and conducting accelerator programs can also help banks in building the right strategic partnerships to deliver the right kind of customer-centric products and services to their customers.

Additionally, while these transformations come in place, it is extremely vital that banks put in huge importance to data security and governance and integrate it across all their underlying capabilities. With more product specific and detailed directions from RBI, Cert-In and upcoming Data Protection Bill, private banks should lay huge focus on enhancing cyber security maturity and building data governance capabilities across their range of products and services, including collaborations to realize the true business value of their transformational initiatives.

Public sector bank leaders (PSBs) are moving towards tech-enabled, simplified, and collaborative banking:

In the last few years, financial services landscape has gone through drastic changes with the emergence of fintechs, challenger models, next-generation private banks, account aggregators and other tech-enabled financial service providers. PSBs, as a center of banking sector in India are looking for new ways to embrace these transformation initiatives to bring in customer centricity, agility, and inclusivity across the banking sector.

However, to successfully drive these transformation initiatives forward, PSBs will have to overcome some challenges including high dependence on traditional business models, resistance to change, perception of workforce to new initiatives, pressure of regulatory/compliance requirements, and lack of marketing efforts which can communicate or advertise tech-enabled offerings to its end customers.

PSBs are also partnering with fintechs, account aggregators, payment providers and digital financial service enablers to drive large scale transformation initiatives across customer acquisition, risk assessment, credit underwriting, lending, and customer service.

Some of the major areas where banking collaborations can add value are:

— Adoption of communication technologies to bring in more customer engagement and educate customers about technology-enabled service offerings.

— Leveraging technology enabled solutions to improve the entire credit underwriting and loan disbursement process which will lead to shorter processing cycles.

— Investments in technology solutions to enable people strategy and improve workforce capabilities such as training employees using AI, minimizing their efforts by leveraging bots and automating repetitive tasks.

PSBs are also planning to make huge investments in emerging technologies like AI, RPA, Cloud, technologies in the coming years and, simultaneously are also conducting trials/tests on various blockchain platforms with the RBI and other member banks to launch solutions across payments, trade finance and internal banking use-cases.

At an overall level, banks should adapt newer and innovative technologies which automate tedious customer tasks to offer better customer experience, operational and business excellence. Measures of customer value (including performance, experience, and business), integrated with traditional business outcomes-focused metrics (for example, increasing revenue, increasing tenure, lowering costs, and increasing advocacy) can help banking companies produce a comprehensive value scorecard that identifies both customer and company benefits.

To summarize:

As private and public banks become digitally mature, seamless and trusted customer experience will act as one of their key success factors while offering multiple dimensions of value. With strategic fintech and technological collaborations, banks can identify key customer requirements and integrate emerging technologies like AI, ML, RPA, and predictive analytics across their value chain to deliver enhanced customer value

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members

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