Indian banks to invest on digital channels
The global wealth management industry is expected to make heavy investments in digital channels, according to a recent report by global analyst firm Ovum. The report predicts that the IT spending by the wealth management industry worldwide will reach almost $35 billion by 2016 - most of the investment is expected to be in digital channels. The Asia Pacific (APAC) region will see will increase its IT spend by a compound annual growth rate (CAGR) of 8.5 percent between 2011 and 2016.
In the APAC region, the analyst firm predicts China and Japan to drive the investment in the wealth and asset management sectors. The Indian banking sector is also expected to invest heavily on the digital channels over the next four years.
“For the banking sector in India, expansion is no longer by means of adding branches. Banks are increasingly investing in digital channels including ATMs, mobile applications and web portals to reach out to their customers because that’s where they see maximum growth,” said Anil Kuril, Deputy General Manager - IT, Union Bank of India.
He added that in today’s digital era, online and mobile are not necessarily viewed as alternative platforms. These are increasingly becoming mainstream. Kuril pointed out that of the new digital channels, Internet banking has been there for a long time and has become the most mature channel for customer service and at the same time mobile is fast picking up. He said that The Union Bank offers about 60 percent of its transactions though digital channels.
“Even a few years ago, most customers used to buy wealth management products by consulting an analyst in person. But today, customers are relying more on electronic and mobile channels that are not only becoming convenient and cost effective for the client, but also becoming profitable for the banks,” said Rathin De, General Manager - IT, ADC and CMS at United bank of India.
“Increasing profitability is a priority for all financial institutions,” said Jaroslaw Knapik, Senior Analyst of financial services technology at Ovum. “As the use of digital channels increases, banks will strengthen their focus on mobile channels and self-service functionality in an effort to connect and empower their customers.”
De believes that the mobile platform can create a revolution in the days to come. “Just as banks will empower customers to adopt mobile banking platform in their daily transactions, mobile banking will replace other channels like branches and online banking in the near future,” he said.
Ovum forecasts that investment in Internet and associated technologies by APAC’s high net worth banking and financial planning businesses will reach $150 million. At the same time, retail brokerage and retail asset management organisations will increase their investment to $135 million and $73 million, respectively. Knapik pointed out that the various digital channels in these segments will not only improve customer loyalty and cross-selling opportunities, but also help in lowering servicing costs.
“While the economy is recovering, organisations should focus on the opportunity to increase revenue and improve trust among customers. This, coupled with the increased investment in personal finance management tools, will enable more self-management and closer monitoring of financial assets, helping to increase overall knowledge of finance management,” he concluded.
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