India has seen a fintech adoption rate of 87%; the figure is 64% in the rest of the world.

The banking industry has undergone an extensive transformation over the past decade buoyed by the advent of digital technologies. Technology companies that are operating in the financial services sector have also leveraged emerging technologies such as artificial intelligence (AI), internet of things (IoT) and machine learning (ML) among others to transform the banking sector.

This disruption has also caused a shift in customer preferences and expectations by moving away from traditional banking practices and opting for online, branchless banking that offers a one-stop destination for all banking needs.

With the emergence of fintech companies and neobanks, India witnessed a fintech adoption rate of 87%, in comparison with its global counterparts (with only about 64%), making the country the third largest fintech market in the world.

Banks require the right software that allows not only to connect front and backend systems but reduce costs that could be incurred from revamping their entire technology.

Given that traditional banks have an edge over fintechs in terms of customer trust and customer data, the deployment of the right software can help banks enhance customer experience and offer personalized services. For example, with the right software, banks can suggest personalized loan plans and financial schemes to rural customers. Today, banks need to expedite their digital transformation and position themselves as a one-stop shop for all banking services, thereby deepening their relationships with customers and retaining their trust.

With the onset of the covid pandemic, banks pivoted the way they functioned by embracing leading-edge technology to evolve and transform their business. Customers are today deeply rooted in the digital or mobile-first approach and are looking for better hyper-personalization from banks.

Traditional banks thus need to reimagine everything from their people and their data to their architectures and ecosystems, by seamlessly transitioning to digital and accelerate adoption of digital banking and payments tools and platforms among banking customers.

Ramping up their spend on newer technologies, increased investments in infrastructure and upgrading their IT systems are some of the key areas that Indian banks must move towards to close the digital gap. Banks can do this either by partnering with fintech companies or by building digital capabilities in-house.

The Trust Factor

Customer retention and trust are vital for a bank’s success. Therefore, it is imperative that banks create ecosystems that offer value-based engagement and hyper-personalized services and meet their short- and long-term needs to build and retain the loyalty and trust of the consumer.

Digitizing pricing and billing processes to prevent any revenue leakages by deploying the right solutions can help in the consolidation of products and services. Banks and financial companies must focus on expediting their digital transformation journeys and modernizing their legacy core systems to increase agility, scalability and innovation.

Legacy data systems are typically siloed and designed to support human decision-making. As a result, more and more banks are adopting new data-driven technologies such as cloud, AI and ML that will enable them to make real-time, at-scale, automated decisions which will radically speed up their primary processes.

With tech and fintech companies offering digitized products to customers, banks must also focus on leveraging concepts such as open banking and application programming interfaces (APIs) that enable access to data and account information of customers. Digital transformation helps banks in driving customer relationships to ensure higher levels of loyalty, improve product depth, retain existing customers and attract new customers through cross-selling. Banks must focus on always being one step ahead of the customers and become financial supermarkets (offering all banking services under one roof) for their customers.

It is also important for banks to understand the significance of delivering value to their customers in every transaction.

The challenge leading banks are working on solving is how to create a differentiated experience, innovative propositions and a human connection when banking is in danger of becoming a faceless, price-sensitive commodity. It is imperative that banks develop a roadmap to create a differentiated experience, innovative tech propositions and a human connection with their customers.

Those in the banking industry who embrace leading-edge technology to evolve and transform their business will ultimately be able to meet changing customer expectations and emerge as winners.

This article was originally published in livemint.com, Read More.

“The views or opinions expressed in this article are those of the author. They do not purport to reflect the opinions or views of SunTec’’.