Emerging technologies in digital banking in India

Published: 23, Aug 2017

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Image: Shutterstock (For illustrative purposes only)
Image: Shutterstock (For illustrative purposes only)

The world has entered what some regard as an era of 'Digital Darwinism', a time where technology and society are evolving faster than many organisations can adapt to the changes. The emergence of the digital five forces - Social, Mobile, Analytics, Cloud and Internet of Things (IoT) - is creating new and valuable sources of business information, ways to interpret data and the means to do so cost-effectively. The value of digital in India is huge; as per a study by the World Economic Forum just four digital initiatives could unlock US$ 1.2 trillion of value for the Indian industry and society over the next decade, representing about 40percent of national GDP in 2015.

Evolving technologies
It was only in late 1990s that some private sector banks introduced non-branch banking services through use of information technology. Initially transactions on internet banking were viewed as insecure. However, internet banking witnessed growth in 2000s owing to initiatives taken by the government, the RBI, falling internet costs and increased awareness. Online banking has enhanced customer satisfaction by providing anywhere anytime banking and benefitted banks through cost savings and increased penetration.

In last few years, the Indian banking sector has realised the need of digital technologies and is rapidly moving to embrace digital banking. They are making considerable investment in creating digital infrastructure in order to offer various solutions like mobile banking, e-wallets and virtual cards, etc. The key innovations in Digital banking are Digital-only/Virtual Banking, Biometric Technology, Artificial Intelligence, Blockchain Technology, Bitcoin and Robotics to mention few.

Digital-only bank provides end-to-end services through digital platforms like mobile, tablets and internet. It is paperless, branchless and signature-less banking offering 24*7 services to its customers. In India, the digital-only banking is based on Aadhaar infrastructure. The digital-only banks offer various services like account opening, term deposits, loans as well as financial products like insurance and mutual fund. While digital banking is simple and cost effective, there are still security risks. The pace of growth in digital-only banks will depend on their ability to address security concerns. Innovations like Biometric technology allows the person to be identified uniquely by evaluating one or more distinguishing biological traits like face, hand, retina, voice and ear features. The use of biometric authentication can eliminate the requirement of multiple passwords and PIN codes. The Indian banking sector is also gradually adopting biometric authentication to provide simple and secure banking experience to its customers.

Artificial Intelligence (AI) can provide quick and personalized services by dealing with each customer and focusing on their specific requirements. It can be used to collect information, automatically build models based on that information, inference and communicate in natural way. In India, only large banks are currently seeking to introduce AI in their services. The key components of AI are machine learning, computer vision, natural language progression and natural language generation. Indian banks are likely to use AI like machine learning to re-engineer back office processes. Robotics is a technology that mimics the actions of human performing simple rule-based processes. The use of robotics in the Indian banking sector though not yet widespread, is expected to gain ground in the coming years. Robotics is expected to automate processes which are repetitive, rule based and require less human judgement. Also, being scalable and cost effective, it could help automate processes with high transaction volumes. Presently, some Indian banks have started deploying robots to answer customer queries related to banking transactions, demat account, locker facility, fixed deposit, loan, etc. Apart from humanoid robots providing customer service, software robots are also getting deployed in functions such as retail banking operations, agri-business, trade & forex, treasury and human resource management to name a few.

Globally, banks are seeking to use block chain technology (BCT) for operations such as money transfer, record keeping and other back-end functions. Block chain technology can be used in banking activities like secure document management, reporting, payments, treasury & securities and trade finance. Banking industry can benefit from block chain technology as it helps in fraud prevention, increasing the resilience of the bank's IT infrastructure and also increases transparency of processes. Besides these advantages BCT is also cost efficient and provides auditability & provenance. Bitcoin is the decentralised digital currency as well as the decentralized peer-to-peer payment network that is powered by its users with no central authority. In India, the RBI hasn't yet authorized use of bitcoins and issued a press release on Feb 1, 2017, cautioning the users, holders and traders of bitcoins about the potential financial, operational, legal, customer protection and security related risks. Despite this, bitcoin exchange platforms like BTCX India, Coinsecure, Unocoin and Zebpay have been developed in India.

Other upcoming technologies
Apart from these technologies, there are many other technologies which Indian banks could harness in future. Banks can use google glass technology to locate the nearest bank branch/ ATM, check account balances and use video conferencing for technical support. Augmented Reality (AR) app is integration of digital information with the user's environment in the real world. In India, AR mobile app has been launched by a bank which lists all dining destinations, property lists, and shopping centres, bank ATMs, branches etc with real life pictures along with distance and directions. Installing Bluetooth beacons at bank branches could allow banks to integrate physical and mobile channels to provide effective communication. Although the adoption of beacon technology by Indian banks is very less, it is expected to increase going forward with many Indian companies engaging in beacon technology and growing smart phone users. Indian banks are yet to experience extensive adoption of many technologies, however, significant investments and developing dedicated teams to test these technologies is a positive sign.

- By Dr Arun Singh, Lead Economist, Dun & Bradstreet India

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