The pandemic ushered in structural changes in the operations of banks / financial institutions (FIs) regarding technology, and a shift in patterns of customer behavior. This is clear from the increase in technology-enabled digital (retail) payments, according to the Reserve Bank of India’s annual report for fiscal year 2020-21.
Indian banking’s journey towards technology adoption began with the recommendations of the C Rangarajan Committee on Mechanization in Banking (1984).
Then came the introduction of ledger display machines (1990), full branch automation (1995) and Core Banking Solutions (CBS) in the early 2000s.
RBI licensed next generation private sector banks in 1996 to provide a modern, fully computerized banking experience for customers, instilling competition and improving productivity.
The RBI has also established institutions such as the Institute for Development & Research in Banking Technology (IDRBT; 1996), Clearing Corporation of India Ltd (CCIL; 2001), National Payments Corporation of India (NPCI; 2008), etc. . payments market infrastructure and stimulating the use of technology.
The IT Act, 2000 gave fintech operations a further boost by providing sanctity. The exponential growth in the number of mobile phone users and increased internet penetration have boosted banking and financial services over the past decade.
According to RBI, total retail payments through various digital channels were 184.108.40.2065 crore in fiscal year 2020-21 compared to 220.127.116.11 crore in fiscal year 2018-19. Of these, the national electronic funds transfer (NEFT) takes the lion’s share (70%), followed by the unified payment interface and the immediate payment service in fiscal year 2020-21.
According to the CACI Channel Impact survey (2021), the mobile phone was widely used for conducting retail banking (87 percent), followed by the Internet (7 percent). While more than two-thirds of millennials (ages 18-37) were comfortable with banks / FIs that use artificial intelligence (AI) to access personal data to improve customer service, up from 55 % of Generation X (aged 38 to 53) and 42% of people over 54.
Using AI, ICICI Bank introduced locker services to deliver an immersive and personalized banking experience in India.
The Covid crisis can be turned into an opportunity if banks / FIs take advantage of new technologies such as AI, blockchain, cloud computing, Internet of Things (IoT), etc. With the growing preference for contactless banking and remote employee access, banks / FIs may consider digital integration enabled by Know Your Customer (KYC) video, virtual customer service, authentication online and payments to maintain the health care of their staff. Additionally, personal digital coaches can be deployed to assess employee performance to improve productivity through visual and cognitive nudges.
Banks may face a shortage of qualified staff with data science skills. For this, banks must focus on constant training and capacity building of their human resources.
Banks need to invest in upgrading their technology platforms for their digital transformation and delivering a premium customer experience. They must listen to the customer to gain customer trust and also act as a firewall against possible cyber attacks. Banks must focus on protecting consumers and resolving grievances to prevent unscrupulous people from exploiting loopholes in digital systems.
India recently joined the Global Artificial Intelligence Partnership (GPAI) and set up a special task force to chart a future course. Convergence between banks, telecom players and tech companies can accelerate and boost digital financial inclusion. Concerted efforts should be made to impart financial and digital literacy to all stakeholders through electronic / print media.
In addition, the Information Technology Act, 2000, KYC / Anti-Money Laundering Act, 2002, Bankers Book of Evidence Act, 1891 and Banking Regulations Act, 1949, etc. need to be changed to allow for faster adoption of new technologies in the post-Covid period. period. The creative adoption of high-tech digital solutions for the next generation of banking will separate the winners from the rest.
Srikanth is Associate Professor and Director (Finance), DDU-GKY, National Institute for Rural Development and Panchayati Raj, Hyderabad, and Prasad is former Deputy Director General, SBI. Opinions are personal.