The point of discussing the scenario of the banking industry, including the opportunities and challenges, is focused around the impact of digital banking or technology. A lot of speculations are being made regarding the state of rural and other branches of the banks. However, it is for sure true that no matter how advanced the digital banking concept gets, it has no chance of taking the place of branches. Rather, the prime intention of adopting these technologies is to enhance customer experience through creative solutions.
Current State of Banking & Financial Industry
Starting from ATMs, mobile banking, or online banking, the core idea of everything is to cut down the time expended for reaching and processing bank procedures. In other words, it has been about providing access to the bank to any place the customer wishes. However, the financial services industry is going to benefit greatly in terms of transparency through the latest technological advancements. The unfortunate scenarios of banks getting merged due to increasing NPAs and fraud cases can be greatly avoided through digital interfaces. In short, there are challenges ahead and also the hopes of opportunities through technological advancements. The following abstracts discuss both challenges and opportunities involved.
Challenges Involved in Banking & Financial Industry
Be it about mobile payments or ATMs, customers have thoroughly welcomed each of the technological interventions in the banking industry. But, it’s not just about customer satisfaction always; only if the core functional strategies are set with perfection, greater customer experience can be expected. However, there is clearly a dearth of credit for MSME around the globe. On the other hand, the allocation has not been encouraging. Naturally, uniformity is not being maintained. If the financial aids are only delivered to the already established ventures, in addition to bearing the NPA burden, the banks may end up struggling to fulfill the need to incorporate new technologies. In such scenarios, problems faced by customers in banks are impossible to get addressed.
1. Challenges of NPAs:
NPAs have always been the biggest burdens on the banking sectors. This is the reason these are termed as bad loans in the banking arena. Upon taking a closer look, around 70% of the bad loans involve the corporate sectors. The percentage of other common people associated with NPAs is less than 7 percent. Needless to say, banks feel more helpless regarding the recovery of those major chunks of NPAs involving corporate groups. Such challenges faced by the banking sector can only be addressed by maintaining proper transparency through advanced technologies.
2. Corruptions and NPAs:
The interesting fact here is to mention that the cases of fraud or corruption are distinguished from that of the NPAs in the banking industry. Regulations in financial services have been modified or introduced much time before. However, the result has never really been up to the mark. In this context, the time has come to differentiate the cases of NPAs and those of the corruptions, and if needed, set the separate platforms for the same. And, the same can be done through strong technological applications. NPA may not always be intentional (farmers failing to pay back, for example), though, on most occasions, corporate groups strategize for it. But, a case of fraud is always intentional. Fraud is not just about loans; it can be about exploiting functional or operational frailty or flaw. It can be with demand drafts, related to accounting, or similar. Putting both fraud and the cases of NPA is obviously not going to address things or solve things for the banks. Using high-end technicalities, those can be promising in terms of maintaining transparency can provide effective solutions to problems facing commercial banks.
3. Reaching Below the Pyramid Customers:
At one end, the banking industry is dreaming about a technological revolution; the other part of the story says that banks still have to reach those at the bottom of pyramids effectively. In fact, the reach is also not significant in small towns. Therefore, at any part of the globe, it’s the small towns, cities, and remote places that provide the maximum customer base. One of the prime reasons is said to be the lack of knowledge of regulations in the banking industry and the facilities. The state was indeed even more unfortunate a few years back prior to the introduction of ATMs. The time has come for the banks to make digital technology as mainstream as of the ATMs for each level of the customers.
Opportunities of Banking & Financial Industry
Challenges facing the banking industry are indeed numerous. However, these challenges give the scope for the innovators. Starting from the challenge of meeting investor expectations to fraud, everything can be addressed upon addressing the current market demands. And apparently, it’s about being part of the digital revolution or technological revolution. It’s the high-end technology that can make things easier in terms of maintaining proper customer data security and those associated with streamlining the services. To reach customers at the base of the pyramid or to have a wholesome customer base, the banks need to first prepare a uniform platform or infrastructure for all the users. Starting from security and authentication to service-related transparency, everything can be streamlined through the process.
1 . Blockchain Technology:
Blockchain technology is indeed looking promising in terms of providing enormous scope in coming future in the banking industry. No one can deny the growing popularity of cryptocurrency in this context. One of the prime advantages of blockchain technology is its ability to make the entire process much more cost-effective. In fact, a leading tech house predicts that the global banking industry can save around twenty billion dollars powered by this technology. There indeed are many banks that have already accepted the technology. But, there indeed remain leadership challenges in the banking industry to optimize it and bring forth mainstream customers.
Along with cutting down the expenses, the technology also promises greater safety towards data storage. The common procedures such as fulfilling KYC processes can be eased down significantly through the technology. Above all, it promises about making the platform the most transparent. Through stages like private keys and features of recording the requests, it has to be the most promising option at present for the banking industry from safety and transparency perspectives.
2 . P2P Lending:
Peer to Peer lending indeed provides the best opportunity for the banking industry. The concept of P2P lending is all about a process of debt financing that lets its customers make transactions without involving any authentic mediator. Involving no middleman and all, it can certainly make the process the most transparent. Any kind of industry studies of banking that minimizes the involvement of middleman or maintains simplicity in the procedure is obvious to make the process more transparent.
3 . Artificial Intelligence Bringing Major Revolution:
Artificial Intelligence is the hottest technology around the globe. The best part about AI is indeed the swift rate of evolvement. It is termed as the hottest technology for companies around the globe in terms of providing a personalized experience. The banking industry is undoubtedly adopting artificial intelligence in the most inspiring way. However, it needs to be explored at a great rate. The biggest advantage of artificial intelligence is the greater application it provides for the customers. Be it about advanced customer service or high-end chat facility; AI has made things incredible. During the initial days, a lot of speculations were being made regarding the privacy of customer data or simply the safety of customer’s financial data. However, reality says that there is no reason to make speculations of such. Data access that technology possesses simply meant to enhance the customer experience. To be specific, the robots used to make it absolutely sleek for the customers.
Moreover, starting from the detection of fraud cases, handling risks, to automation and streamlining finance management, artificial intelligence has been effective in many ways. Through face recognition features with the ATMs, things are expected to be even more streamlined. All that the banking industry needs to ensure, is the security of banking information. In an era of digitization and cloud computing, this should not be a major concern, though. Starting from the access of data to streamlining of the same, if proper infrastructure is set, there is no reason to get frantic. The instances of online hacking threats are simply nominal through AI in the banking industry.
4 . Introducing Innovative Products:
The whole range of technicalities, infrastructure and more is dependent upon customer strength. It is meaningless to spend such huge bucks on infrastructure and all if there is no customer strength. As discussed above, the banking sectors should also not ignore the pyramid customer base. And, the same can be done upon introducing creative financial products with the best profit margin. There are a number of ways to offer these products through strategic technology means as well. In short, industry leaders stepping in and streamlining the procedure has become the need of the hour. The banking industry is indeed not the same as it was a few years back. But, the scenario is certainly going to be changed even more through rigorous evolution. In such scenarios, banks should dig their brains and come up with creative products in accordance.