Indian Banks To Speed Up Digital Transformation
IT spending by banking and securities firms in India will grow 8.6 percent in 2017 to reach $8.9 billion, according to Gartner. While, demonetization is the primary reason for the slowdown in the banking and securities market in India, the analyst firm believes that the effects will be short-lived. In the long run banks are speeding up their digital transformation efforts. They are increasingly investing in strengthening their tech backbone in the areas of data center systems, devices, software, IT services and telecom services for boosting customer experience.
“The Indian banking sector has undergone a transformation. Banks are gradually lowering the number of branches and increasing capability in terms of their existing infrastructure,” said Moutusi Sau, principal research analyst at Gartner. “Despite effects of demonetization in the banking sector, banks will continue with digital transformation projects.”
According to Gartner, IT services will grow the fastest at 13.8 percent in 2017 followed by software at 13.4 percent. Firms in the banking and securities industry are investing more in enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM) to upgrade their existing infrastructure.
The Gartner report comes soon after Amitabh Kant, CEO of the government think-tank NITI Aayog, predicts that banks will soon go the online way, and that ‘physical banking’, as it exists now, will be extinct in a five years.
“It will be very difficult for physical banks to survive, because the cost of physical banks will be so enormous. It will be so enormous compared to an online instrument, many of the fintech start-ups, and their ability to do data analysis (and) providing lending,” Kant said at an event.
What Kant is talking about are the technological innovations that will allow internet-based banks (including the physical banks of today as well who adopt new technology) to be more cost- as well as time-effective.
Whenever that happens, it will be smooth transition. With new breakthroughs and improved laws to govern such technology, the physical banks of today would either adopt the new technology, or perish, said Kant.
In a recent article on CXOToday, Virender Jeet, Sr. VP Technology at Newgen Software mentioned, “A true and real digital experience is paperless and branchless. Enterprise mobility technology powered with strong imaging capability can help banks move towards branchless banking.”
The falling cost of Internet access has facilitated the adoption of digital technologies by banks and other enterprises, said a McKinsey report. According to a Digital demand has shot up in consequence—exponential growth in the number of users and Internet use. More consumers rely on the Internet and mobile phones to meet their banking needs. The Indian Banks’ Association’s 2016 survey shows that almost 80 percent of transactions in the newer banks are made through digital channels, according to authors, Aditya Sharma and Renny Thomas.
However, instead of allowing technology to take its own course, the Reserve Bank of India (RBI) announced that it will soon come out with final guidelines on customer protection that will limit client liability in the event of unauthorised electronic banking transactions. In the event of severe cybercrime incidents impacting banks across the globe, in August last year, the RBI had issued a draft circular on limiting the liability of customers in case of fraudulent electronic banking transactions, resulting in debits to their accounts or cards.
Traditional players face huge disruptions, while digital growth is propelling changes in technology and customer mind-sets. This period of disruption presents tremendous growth opportunities. Old banks will need to make bold moves and initiate major transformations to take advantage of them, said McKinsey authors, adding that those that master these new realities could build truly world-class banking businesses at scale.
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