The banking and finance industry is undergoing a significant evolution driven by digital transformation. This shift is highly revolutionising how financial services are delivered and reshaping the future of banking.
Digital banking has become the norm, providing customers with convenient and secure access to financial services. With the emergence of mobile banking apps, individuals can manage their accounts, conduct transactions, and access a plethora of financial products and services using their smartphones. Integrating features such as real-time notifications, personalised offers, and mobile wallets have fundamentally altered how customers engage with their finances.
This digital revolution is powered by various transformative technologies redefining the banking landscape. Artificial Intelligence (AI) is revolutionising customer service through AI-powered chatbots, offering instant and personalised support. Machine learning algorithms enhance fraud detection capabilities and risk assessment models, enabling banks to make data-driven decisions and mitigate risks effectively.
Another transformative technology is blockchain, known for its secure and transparent nature. It facilitates cross-border payments, streamlines intelligent contracts, and enables efficient identity verification, thereby increasing efficiency and security in financial transactions.
Open Banking initiatives are reshaping the financial services landscape by fostering collaboration between banks and third-party providers. Through secure APIs, customers can share their financial data with trusted third-party applications, resulting in innovative services and financial products tailored to their needs.
Digital transformation is driving significant benefits for both customers and financial institutions. Operational efficiency is improved through automation and streamlined processes. Moreover, digital transformation enables the delivery of personalised and targeted financial solutions. Advanced analytics and data-driven insights empower banks and financial institutions to understand customer behaviour, preferences, and needs, leading to tailored products and services.
In conclusion, embracing digital transformation is vital in shaping the future of banking and finance. With a deep understanding of the industry's challenges and expertise in emerging technologies, Winsoft Technologies is well-positioned to assist financial institutions in embracing digital transformation and driving innovation in the financial services industry.
Financial inclusion refers to the availability to both individuals and businesses of useful and cost-effective financial goods and services, including payments, transactions, savings, credit, and insurance, that are provided in a sustainable and ethical manner.
According to The Committee on Financial Inclusion, whose chairman is Dr. C. Rangarajan, the process of ensuring vulnerable groups, such as weaker parts and low-income groups, have access to financial services and timely, enough credit when needed at an affordable cost is known as financial inclusion. The Indian government places a high premium on financial inclusion. The goal of financial inclusion is to increase access to financial services for the nation’s sizable, previously underserved population in order to maximize its growth potential.
Financial inclusion is a vital step in the growth of a culturally diverse nation like India. Since the nation’s independence, successive governments, regulatory agencies, and civil society have worked together to spread the country’s financial inclusion net.
Compared to before, financial inclusion is currently in considerably better form. Though the poorest of the poor haven’t yet benefited from financial inclusion, there are numerous obstacles and problems that require rapid response.
As a result, there is a huge requirement and the opportunity to reach out to the unbanked and bring them into the financial system.
Why is Financial Inclusion Truly necessary?
According to Franklin D. Roosevelt “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”
Financial inclusion improves the nation’s financial system overall. It improves the accessibility of financial resources. Most significantly, it makes saving more difficult for poverty-stricken people living across both urban and rural locations. This continually contributes to the growth of the economy.
Due to their precarious situation, many impoverished people are prone to be duped and occasionally even exploited by wealthy landlords and unlicensed moneylenders. Financial inclusion can assist to change this dire and dangerous scenario. In order to secure their meager financial resources for the future, financial inclusion involves incorporating the poor into the established banking system.
Schemes for Financial Inclusion in India
The Indian government has been adopting a number of unique programs to promote financial inclusion. The goal of these programs is to give social security to the less fortunate groups in society. These programs were introduced at various times over the years. Here is a list of the national financial inclusion initiatives:
Jan Dhan-Aadhar-Mobile (JAM) trinity
The JAM trinity (Jan Dhan, Aadhaar, and Mobile), which links Aadhaar and mobile phones to Jan Dhan accounts, is a notable advancement for financial inclusion. This has made a number of Direct Benefit Transfer (DBT) systems possible. Up till March 2020, 380 million beneficiaries had been registered for the program.
Aadhaar has fundamentally altered the idea of personal identity and created a system that is both safe and simple to verify as well as simple to obtain in order to aid in the process of financial inclusion.
The administration has also introduced other flagship programs, including the Pradhan Mantri Jeevan Jyoti Bima Yojana, Stand-Up India Scheme, and Pradhan Mantri Suraksha. Atal Pension Yojana and Bima Yojana.
Growth of financial services in rural and semi-urban areas
The National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India (RBI) have taken steps to encourage financial inclusion in rural areas. One of these is the opening of bank branches in outlying regions. Issuing credit cards for Kisan (KCC), Self-help groups (SHGs), and banks are inextricably linked and the proliferation of automated teller machines (ATMs).
Promoting electronic payments
The Unified Payment Interface (UPI) has been strengthened by NPCI, making digital payments safer than in the past.
An Aadhar-enabled bank account (AEBA) may be utilized everywhere and at any time by using micro ATMs thanks to the Aadhar-enabled payment system (AEPS).
Due to offline transaction-enabling technologies like Unstructured Supplementary Service Data (USSD), which enable the use of mobile banking services even on the most basic mobile devices without the internet, the payment system has become more accessible.
Increasing Financial Literacy
Project Financial Literacy is an initiative started by the Reserve Bank of India.
The project’s goal is to enlighten a variety of target groups, such as school- and college-age children, women, rural and urban poor, military people, and older citizens, about the central bank and general banking ideas.
The Securities and Exchange Board of India’s (SEBI) and National Institute of Securities Markets’ (NISM) flagship initiative, Pocket Money, aims to improve school children’s financial literacy. The goal is to aid students in understanding the value of money and the significance of financial planning, investing, and saving.
Breakthroughs in Financial Inclusion
Increased Bank Access
In comparison to the 53% estimated in 2014, 78% of Indian people now have bank accounts, according to the World Bank’s Global Financial Inclusion Database or Global Findex study from 2021.
Escalating Multiplier Effect
Major adjustments have been made as a result of these attempts to improve people connecting the unconnected to financial services. Financial inclusion offers the ability to significantly alleviate poverty and create jobs by giving impoverished and marginalized groups of society access to financial resources.
Increasing Citizens’ Active Participation
Prior to now, private institutions had little interaction with the underprivileged.
Commercial players like Paytm, airtel money, and jio money) are now actively involved in this transition since they have realized how beneficial it is for their business models to include the poor in the financial system.
Financial Services Integration
JAM Trinity’s convergence with the Direct Benefit Transfer (DBT) program has mainly been successful. This has resulted in a notable enhancement in the number of targeted and accurate payments. Additionally, it has assisted in reducing the dependency on cash payments and cleaning out duplicate entries.
The concept of saving among the poor is developed and economic resources are made more readily available as a result of financial inclusion. A significant step toward inclusive growth is financial inclusion. It aids the poor population’s overall economic development. Effective financial inclusion in India is required to improve the underprivileged and poor by offering them tailored financial services and products.
Impact investments are ones that are made with the goal of producing both a positive financial return and a verifiable social and environmental impact. Depending on the strategic objectives of the investor, impact investments can be made in both emerging and mature economies and aim for a range of returns from below market to market rate.
The world’s most urgent problems are being addressed by the expanding impact investing market, which is funding initiatives in fields like microfinance, sustainable agriculture, renewable energy, conservation, housing, healthcare, and education.
As funds in this asset class begin to create more insightful methods of monitoring their outcomes, impact investing has grown significantly more sophisticated. The increasing support of international investors for frameworks like the UN’s Sustainable Development Goals (SDGs) is also boosting awareness of and conversation about this yet relatively specialized investment field.
Why do impact investing?
Impact investing contradicts long-held beliefs that market investments should only be focused on generating financial returns, and that societal and environmental issues can only be addressed through charitable donations. Through investments that also provide financial returns, the impact investing industry provides a variety of realistic alternatives for investors to achieve both social and environmental solutions. Following are some typical investment motivations:
Financial advisors, wealth managers, pension funds, and other institutions can offer clients opportunities to invest, to both people and organizations interested in a broad range of social and/or environmental concerns.
Use significantly greater assets as leverage
Institutional and family foundations have the capability to use considerably greater assets to further their primary social and/or environmental objectives while preserving or increasing their total endowment.
Deliver financial viability credentials
Government investors and development finance organizations have the ability to target specific social and environmental goals as well as provide evidence of financial viability for investors in the private sector.
Reasons to Consider Impact Investing
Impact investments, which produce both financial profits and social or environmental benefits, have long been a specialized market for wealthy financiers. What’s all the fuss about, then? Why are financial backers like us participating?
Combat the world’s problems
Government funding alone cannot address the world’s most urgent issues, such as climate change, extreme poverty, and poor access to healthcare and education.
Obtain market-rate returns
“Do well while doing well” has always been a possibility, but this is much more true today. Global opportunities are global challenges. The financial winners of tomorrow will be those that offer solutions to today’s challenges. The estimated $15 billion impact investment business delivers market rate returns, according to data from the Global Impact Investing Network.
Ensure the stability of your investments
When combined with other assets in your portfolio, impact investing can be a helpful addition. In a recent study, Morgan Stanley looked at over 10,000 equities mutual funds over the course of seven years and discovered that social impact funds on average showed significantly lower fluctuation than comparable non-impact funds.
Align your investments and values
Investors can pursue a triple-bottom-line strategy of “people, earth, and profit” without any problems. Values and profit no longer need to be in opposition with the help of impact investment. Without sacrificing returns, this style of investing enables you to demonstrate your commitment to acting responsibly.
Satisfy customer demand
According to studies, one of the main reasons investment businesses are
increasingly delivering impact investments is client demand. For businesses to remain competitive in the trust-based, the socially responsible investing environment of today, they must provide impact investment services.
Fundamental Trends that Influence Investing
Work is becoming more and more automated, which is seen everywhere. Impact investors place a strong emphasis on the demographic groups that stand to lose the most, at least temporarily, from changes brought on by technology. Investors will need to modify their plans to assist their target beneficiaries through these changes, maybe by investing in skill development or in industries with less susceptible professions, like facilities management or high-end customer service.
Stakeholders in the impact investing sector will need to take into account how fintech is changing investor preferences and ways of doing business as they work to increase access to and interact with a new generation of asset owners. In order to direct more money toward investments that are good for social welfare and the environment, those who are creating financial products should search for ways to benefit from the efficiency advantages of this technology wave.
The world we envision is defined by transparency, particularly when it comes to the impact performance of investments. Increased data sharing could help remove the mystery surrounding where and how money is invested.
The Need for Action to Advance Impact Investing
The Roadmap outlines the urgent measures necessary to drive a long-term transformation. It specifically lists 18 steps (through six categories) that the impact investing community should undertake in order to significantly increase the scope and efficiency of impact investing and hasten the realization of our vision.
Identity- Enhance the identity of impact investing by setting guidelines and standards and expressing a common goal for capital with a range of impact goals and risk-return profiles.
Paradigm that controls investment behavior and societal expectations- This behavior and expectations for finance need to be changed. Capitalists must create incentives that promote beneficial influence. It is also necessary to update the theoretical models that support investing behavior to incorporate impact along with risk and return.
Products- Increase the availability of impact investment products for all types of investors retail to institutions, which would include risk-sharing instruments and items that better address the requirements of investors.
Services and tools- Create tools and services that incorporate effect in addition to risk and return for portfolio management, financial analysis, and benchmarking.
Education and training- Support the education and training of financial professionals in their early and mid-career stages as well as business owners starting ventures to solve social and environmental concerns.
Policy and regulations- Promote legislation and regulations that remove obstacles, such as those relating to fiduciary duty, mandate impact investments, and establish incentives for them.
The year 2022 was significant for the worldwide wealth management industry. Wealth manager scrambled to modernize service offerings and allows remote servicing and distribution in the aftermath of the global pandemic.
As a result of political concerns, global mobility increased or record cross-border capital flows occurred as investors sought sanctuaries for their cash. Think forward to 2023, global economy faces a number of obstacles.
Inflation and headwinds take center stage in the news just as the world is recovering from the worst effects of the COVID-19 epidemic. Along with other things, these advancements will have an impact on how wealth managers think, invest, and work. While there will be problems, there will also be opportunities for those who can adapt.
The wealth management sector has seen a paradigm shift in recent years due to shifting demographics, a rise in millennial investors, and fast digitalization. Today’s investors are better informed, have access to professional information and tools, and actively plan their finances. Self-reliance is becoming more popular than depending on one’s parents to support one’s lifestyle. Millennial investors have distinct perspectives on guidance, as well as new attitudes and expectations, which have an impact on how older investors choose and use wealth services.
The most modern and forward-thinking institutions will utilizes this period to fine-tune their strategy, recognize significant trends and invest in them, improve operational efficiency and cut superfluou costs, and expand their product and service offerings. As a result, when normalcy returns, they will be in a strong position.
Latest Consumer Trends of Changing Wealth Management Techniques
In 2023, we predict that these will be just a few of the major trends affecting wealth management decision-makers.
One of the most prevalent critiques leveled at significant financial entities is that they do not know or understand their consumers well enough. The ability to structurally exploit existing consumer data will enable the generation of findings that may lead to bespoke or semi-bespoke offerings. These will, at a minimum, generate a sense of a unique, personalized service that, if properly formulated, is much more likely to appeal to the targeted subset of clients.
Researchers predict a much wider usage of data analytics to drive hyper-personalization at scale as our capacity to leverage both structured and unstructured client data grows, and as we see a greater focus on cutting operational costs and expanding market and wallet share.
Adoption of Fintech
With rising expenses and clients expecting more than ever, wealth managers, particularly those in larger and less specialized customer segments, will recognize that the quickest way to improve a product or service offering may be to outsource to a specialist service provider or vendor.
Researchers expected more general adoption of bank/fintech partnerships in more specialized sectors, such as news and content management or crypto trading. Clients may seek direct ties with well-established fintech providers to address some of their wealth management needs, particularly from ‘non-financial organizations’ with whom they already have a trusted relationship, such as telcos or super-app providers.
Digital onboarding is a top priority for businesses
In times of health crises, digital onboarding is a top priority for businesses. Digital onboarding is the automatic acquisition of people through a digital device in an agile, simple, safe, and guaranteed manner. The first information-gathering step is minimized, made fluid, and simplified from the client’s perspective due to the safe digital delivery of the relevant papers.
The simplicity of the preliminary phases considerably improves the client experience. For the wealth management firm, digital onboarding streamlines the setup of a new client account and decreases administrative interactions with the client. Furthermore, the dematerialization of documents decreases the use of paper and eliminates the need for the physical storage of paper.
The provision of a digital reporting experience.
In today’s increasingly competitive capital market, a great reporting experience can be critical in retaining clients and winning new mandates. Investors are increasingly looking for wealth managers who provide a digital reporting experience via a client portal, allowing them to monitor top-level performance and risk data in near real-time and delve into specific information at the individual security level. For asset managers looking to differentiate their services, static, periodic reports are no longer sufficient.
Several studies have demonstrated that a younger generation of investors is looking for investments that reflect their core beliefs, and those that are unwilling or unable to meet client demands for ESG-compliant portfolios risk losing those clients to rival service providers.
Despite the fact that the product landscape has progressed to the point in which there are now a plethora of tools available to assist with the development and implementation of a robust ESG framework, wealth managers continue to be reticent to adopt these notions as a core pillar of their service. The misconception that ESG-compliant portfolios lag behind non-compliant portfolios has been dispelled.
The Transfer of Generational Wealth
This trend will continue to be crucial for wealth managers who target customers with higher networth because it is predicted that between 40 and 60 trillion dollars will be transferred from the initial baby boomers to subsequent Gen X and Gen Y children.
Aside from ensuring that an organization has a service offering that appeals to a younger client base, they will also want to guarantee that their consumers can receive valuable assistance in challenging sectors such as medicine, planning for retirement, and inheritance tax.
The growth of alternative investments continues
Private equity, real estate, and hedge funds are just a few examples of alternative investments that have gained traction in recent years. We anticipate that this trend will continue in 2023, as more investors look for ways to diversify their portfolios and potentially earn higher returns. Asset managers who can provide a diverse range of alternative investment solutions will be in a strong position to attract and keep clients.
As we approach 2023, we expect a stronger emphasis on fintech adoption, ESG-compliant frameworks, and hyper-personalization for the wealth management sector to enter the decision-making frame. Likewise, there will be significant generational wealth transfer, as well as a rapid rise in customized or custom indexing.
Everybody says to start investing early to reap a lot of benefits. But we have only just started our first job, and we have rent, bills, and commute charges to pay for. We know that savings and investments are just as important as starting to study early for exams, or starting to exercise early. The same is true for investing and saving money. You’ll be in better shape later on if you start sooner. We know that it will benefit us a lot but are we ready for it? We just have started to earn and expenses are a lot to deal with do we have enough to even start investing? Can’t we invest after some time when we are stable in our careers?
Even though many people believe that one should put off starting to invest until they are older like when they are in their 30s and 40s, this is not the wisest course of action. So let’s understand why we should not delay in planning our investments.
Types of Investments:-
Due to the enormous advantages that investing gives, the majority of financial experts advise that one begin investing as soon as feasible. Early investment promotes systematic wealth growth and long-term security. Winsoft technologies provide support for hassle-free investments in multiple digital application channels, Some of the investment types are:
Mutual funds – One may not have enough opportunity to monitor the stock market and invest in any direct investments if one is too busy with work, career, or business. Mutual funds can be useful in situations like this. You have a variety of options, including debt and equity mutual funds, balanced funds, and other similar vehicles.
Provident Funds (PF), and Fixed Deposits – These are the safest investments with mediocre returns. These provide greater safety and liquidity.
National Pension Scheme- NPS offers double tax advantages and is created to help people build retirement assets through methodical investments in the capital market. Section 80CCD(1) of the ITA permits deductions for investments up to Rs. 1.5 lakh. Additionally, Section 80CCD(1B)* of the ITA allows for an additional deduction of 50,000.
Pension Plans- They are made to offer a consistent income stream after retirement. Under Section 80CCC, an individual may deduct up to 1,50,000 from their taxable income for investments made.
IPO – Equity investments include those made in IPOs. They, therefore, have the potential to provide significant returns over time. Our earnings can assist us in achieving long-term financial objectives like retirement or home ownership.
Endowment Plans – They are for long-term objectives including retirement, home ownership, child-care costs, and more. They are designed to help you develop a disciplined saving habit that will enable you to reach your long-term objectives. They give you the chance to increase your money while also providing life insurance in case something unfavorable happens.
Sovereign Gold Bond – In India, gold is regarded as one of the most secure investment options over the long term due to the ease with which it may be liquidated in the event of a financial emergency.
Reasons to plan early investment:-
By making little investments early in life, one can create a second source of income. Early investment also aids in accomplishing other life objectives, such as planning for retirement, purchasing a home, and paying for a child’s education. In order to maximize investment returns, one should always start investing as soon as possible. Here are some of the reasons explained in detail to tell what should plan for investment as early as possible:
Our liabilities are typically lower when we initially start working, leaving you with more income. As a result, one can set aside some of the money for future requirements. It is advantageous to start early since it provides us the freedom to take chances by making investments in high-risk, high-reward investment products that accelerate the growth of your money. Later, when family dependents, life ambitions, and financial responsibilities increase with age, one can rebalance their portfolio.
Increase in the investment value with age
It makes sense that the sooner we begin, the more we can accumulate, and the greater our chances of achieving our financial objectives. We can begin our investment journey with modest sums, and if our income rises, we can increase the investments at the same time. Gradually increasing the investments reduces the strain on the paycheck, and when we invest in this way for a long time, our money grows. This way investment quantity may be modest due to the extended investment term.
Early investment helps you develop better spending habits
Early savings and investment habits will immediately enhance our spending patterns. We must set limits on our spending by making a monthly budget for ourselves if we wish to save a certain amount from our fixed wage. And creating a budget is the best approach to change our spending patterns since it allows us to keep track of how much money we spend each month on things like food, utilities, rent, fun activities, etc. Additionally, with years of practice, this simple task becomes a natural habit.
Higher ability to take risks
We have the opportunity to take more risks when we are young than when we are older. As we get older, we have fewer financial responsibilities, therefore we don’t have to consider an investment in a dangerous product as carefully. And even if something goes awry with our investment portfolios, we would still have plenty of time to fix it and go on. Additionally, while equities carry a higher level of risk than fixed-income investments, they may provide us with higher returns over the long term, allowing us to build up a larger corpus with a smaller initial investment.
More equipped to face challenges
Our finances may at some point become unstable, but if we start investing early, we’ll be ready to handle these difficult times. As we would have enough money to get through difficult stages, early investing can assist us to get through such difficult times. In the words of the Chinese philosopher Confucius, “A man who does not plan long ahead will find trouble at his door.” The same holds true when it comes to investing. Start early and embark on the path to financial independence.
Benefits of compounding
Compounding allows our money to grow and earn more money for us. On the money we initially invest, interest is earned. Then, the interest is applied to that sum, increasing the amount originally invested. An even greater interest rate is attracted by the increasing investment amount. With such growth over time, we generate substantial profits.
Making early retirement plans boosts our likelihood of achieving financial security in our senior years. A lengthy investment horizon smoothes the effects of market changes in addition to compounding. Therefore, the longer our retirement savings grow, the higher they will be after our paycheck quits.
Wealth can be amassed more quickly by managing money and taking responsibility for our finances by making the appropriate investments early in life. We can assist our loved ones in accomplishing their objectives and desires by having a stable financial situation. So start the investment process right away if you haven’t already. Start out small, keep it straightforward, and keep learning over time. There is no shortcut to wealth generation; it is a long-term process. The biggest benefit we have as young earners is time!
Digital banking in India is on the cusp of phenomenal growth with over ninety crores of smartphone users, cheap data, 5G, and innovative tech solutions. The government of India is taking aggressive strides toward maximum financial inclusion with digital banking services.
According to a press release published by PIB (Press Information Bureau), IMF and World Bank have praised the digital banking infrastructure of India. Recently Prime Minister of India dedicated 75 digital banking units for 75 districts across the nation to celebrate the 75th year of Indian Independence. .
Digital banking is the current and future of financial transactions, savings, and investments. It is in the evolution stage, and you will experience several innovative tools over the years.
What is Digital Banking?
It digitizes your banking details and minimizes the need to visit physical bank branches.
Technologies Shaping the Next Evolution of Digital Banking in India 2022-23
Cloud-Based Digital Banking
Digital banking is a set of complex technologies and systems that need to integrate for a smooth workflow.
Cloud-based technology integrates multiple platforms. It develops a responsive system and minimizes operational bottlenecks.
5G and advanced technologies will further increase traffic and therefore pressure on the digital banking infrastructure. Cloud technology will enhance UI and UX.
It will make banking commercially profitable and boost its reputation.
Recently global organizations Wells Fargo, Deutsche Bank, Goldman Sachs, and HSBC have partnered with Google Cloud, Azure, and AWS for cloud-based front and back-office operational models.
Big Data Analytics
People generate more than 2.5 quintillion bytes of data in a day. This mammoth data needs advanced tech support to manage, analyze, and utilize.
Digital penetration in remote corners of India will further increase data output.
Data helps to analyze product information, customer base, and market trends, and detect financial frauds.
Prescriptive Security System
This cutting-edge technology recognizes multiple problems in milliseconds. This system uses machine learning and analytics for analyzing historical data.
Less threat means a safer system for banking.
It minimizes the time taken to recognize the threat to the system and saves lots of banking time.
It improves faster resolution of problems and better UX.
Less threat means a safer system for banking.
The system can adopt and implement services at a greater speed.
A multi-layered decentralized system for safe fund transfer, deposit, and many more services
A cost-effective and faster method for international financial transactions
We live in an age where information flows globally in less than a second. Blockchain will provide reliable technology for international digital banking.
Lending is the primary activity of the banking system, and this technology makes lending faster, safe, and hassle-free.
These tools of Industrial Revolution 4.0 and Web 3.0 are disrupting banking system in India and across the World.
Next, we will go through the types of digital banks operational globally and what India is doing for the next wave of digital banking services.
Types of Digital Banks
Neo-banking is modern virtual banking. It does not require any physical visits and transactions.
Customers can access the banking services remotely using a mobile app.
These are cost-effective and customer’s friendly online banks. They function as the challengers to the traditional banking system.
Challenger banks are popular in the UK for underserved customers.
New Bank and Non-Bank are other end-to-end full-stack digital banks operating globally.
Status of Digital Banking in India
RBI does not provide a license to banks offering services through the internet without a physical branch or office. Therefore, digital banks in India work as the distribution channel for existing banks.
Some neobanks and challenger banks also work as innovation or capability partners of licensed traditional banks in India.
RBI Stand on Digital Banking
RBI Governor Shashikanta Das said, “RBI receives several suggestions on digital banking, but we believe end-to-end digital banking has few risks. Therefore, we have not accepted the format as an independent banking system.”
He continued, “We believe the best way for digital banking in India is to strengthen existing infrastructure for future banking challenges. Our Banks and NBFCs can apply tech solutions and deliver digital banking services.”
Minister of Finance and Corporate Affairs Nirmal Sitharaman launched EASENext or EASE 5.0 in April’22. It will pave the way for the next wave of digital banking for Public Sector Banks and customers.
Key Features of the program:
Indian Public Sector banks under Enhanced Access and Service Excellence (EASE 5.0) will establish separate verticals for analytics and big data.
The purpose of the program is to integrate all data sources. It will prepare the Indian banking system for shifting towards a data-based decision-making system.
EASE 5.0 will develop an inclusive, integrated, and data-driven digital banking system.
PSBs will come with several ‘digital only’ products and services in the next year.
The focus will be on minimum manual data entry, efficient underwriting for MSME & retail customers, and automated checks.
All banks will expand their portfolios with digital-only banking services and products. They will introduce enhance value-chain financing with innovative digital banking solutions.
Banks will leverage the latest technologies like analytics, AI, and ML for fraud detection, traffic analysis, customized recommendations (like Amazon, Flipkart, etc.), and so on.
India is on the threshold of the digital banking revolution. The latest technologies, research, and government support make banking feasible and accessible for all.
Digital banking has democratized banking. Join the virtual banking revolution today.
The phenomenal growth of disruptive technologies has broken all records in the last decade. The banking industry has also evolved to move away from traditional processes and systems to embrace new-age technologies. One such paradigm is that of big data.
About ten to twenty years back, banks usually operated smoothly with employees recognizing most of their customers. Employees of branches knew their loyal customers with their details on their tips. Things are much different today. Situations have changed radically only to make things more complex and intricate. Banks have digitalized their services; remote banking has become a reality and customer retention has become the number one priority. .
Amidst all this, big data helps banks interpret the electronic trail of every customer. With information flowing in from multiple sources, big data helps in the online monitoring of clients and analysing user behaviours. .
Big Data – What does it mean?
The term ‘Big Data’ refers to a burgeoning volume of data or information. Two peculiar things about the data or information, in this case, are multi-structured and multi-format presence. Additionally, the data comes in from multiple sources for example, social media platforms, websites, blogs, e-commerce sites, data from desktops and mobiles, databases and archives, search bars, etc.
The need for Big Data technology arises from the fact that conventional computing systems are unsuitable for processing data of such complicated nature.
Role of Big Data in the Banking Industry
Most banks today aim at offering their customers very focused and user-centric services. With personalization and customization becoming the core value add-ons in most industries, the banking industry too realizes the importance of delivering tailor-made financial solutions to their customers.
Big data facilitates banks in doing so seamlessly. A growing number of banks today are using AI-powered apps that use predictive analytics to offer financial advice, recommendations, alerts, and notifications on spending, savings, investments, etc., in real-time to customers after duly understanding their financial dynamics.
The use of Big Data enhances customer experience as banking apps powered by analytics come up with useful recommendations based on their specific queries. Hence, users are offered advice on ways to reduce costs, enhance savings, make better investment decisions, and more. All such services have helped hundreds of users in making wiser decisions and avoiding defaulting or making incorrect payments for services.
Since the prompts are in real-time, it has helped customers in upholding prudent customer behaviours and identify opportunities to make meaningful profits and gains.
Banks on the other hand can apprehend customer spending habits, and earnings, and track the ever-changing patterns in consumer behaviour. This helps them offer optimized and personalized services to their clients, and that too, just at the right time. Thus, the likelihood of enhancing conversion rates and increased returns make lucrative business sense.
Financial institutions and banks can readily access customer data that can be easily analysed at the backend to base decisions regarding extending credit to customers, etc. They can conduct risk assessments effectively helping in making informed decisions and preventing fraud. This also is a big asset in maintaining compliance issues, helping reduce overhead costs.
Thus, banks use Big Data and associated technologies to help prevent fraudulent transactions, and money laundering. Banks reduce their credit risks, keep a close watch on the earnings and expenditure of clients, and most importantly, personalized products and services can be offered to clients clinching customer loyalty like never before.
Conclusion – Big Data’s Impact on the Financial Industry
The entire contribution of Big Data in the financial industry revolves around three crucial pillars:
Human Resources – due to Big Data, workflows have been optimized with a reduction in manual errors and removal of redundancy in work. Employees are empowered to take bigger challenges helping improve their performance and meet their KPIs. The technology has also helped in reducing back-office processing costs.
End-user Experience – with Big Data, the industry players are now able to offer optimized services to their customers in terms of tailored and personalized packages and products. The BFSI sector which includes banking, financial services, and insurance service providers is now better able to grasp the pain and gain points of their customers and accordingly offer services.
Enhancing Operations – Big Data has helped the sector revert to clients and assist customers in a short duration. Bulk transactions can be processed in minutes and with agility. Fraud can be detected successfully, illegalities can be removed, compliances ensured, and all of this in a cost-effective and timely manner.
Open Banking is one of the modern methods adopted by the banking industry wherein third-party services providers are involved in payment and financial services. These service providers can offer their services by accessing data from banks and FIs using APIs or application programming interfaces. This form of banking is gaining popularity as it facilitates faster and more secure transactions, is remotely available, and can be accessed from across the world.
Open Banking has been a part of the disruptive technology culture that has hit the financial service industry. As it puts the entire control in the hands of the consumer, it is more powerful than intended. The fact that open banking helps create value add-ons, for example understanding consumer buying habits and their financial situation to empower customers to make better decisions and budget optimally.
This article will talk of how open banking can help the pensions industry. It is imperative to say that the technology can be used by the industry but the responsibility of using it is completely on the players of the industry.
What is Pension?
Before we explore how open banking is and can make a difference to the pensions industry, let us understand what a pension fund is. It is a fund where capital is accumulated so that it can be paid out to employees on retirement at the end of their careers as a pension.
Here are the ways that Open Banking can be used in the pensions industry:
Open Banking is helping the pension industry go paperless.
Open banking is a technology that helps makes the countless back-office processes related to opening pension accounts a hassle-free affair. Part of it is because customers can use their phones to open their pension accounts without the need to involve papers and documents. Take the case of Bank of India which has recently joined hands with the Provident Fund Regulatory and Development Authority (PFRDA), the pension fund regulator in India that enable customers to use their phones to open their National Pension System or NPS accounts. With the help of the third-party app, customers can scan a QR code that will take them directly to the homepage of NPS. All they need to fill in is their Aadhaar details and their photos and other details will automatically be updated from Digi Locker.
Open banking makes payments and contributions a simple process.
Customers who need to have their payments initiated can take the help of the pension management app without leaving the app, they can select the concerned bank from the list. The app then directs the customer to the banking service provider’s app. The need for manual presence or transaction is completely removed which makes it all very convenient. Customers also are spared from queuing up at banks for depositing money in their pension accounts. Customers can also choose to automate their savings. Open Banking analyses the balance in the bank account of the customer every month and if there is any money left, it is automatically transferred to the pensions account. It works like auto-enrolment with the objective that all concerned benefit from pension schemes.
Account Information Services
Open Banking helps customers have a better view of their financial standing. It helps them get valuable insights with all the consolidated information in one place. This is done through AIS or Account Information Services. AIS simply integrates banking apps and other financial services apps so that customers get a holistic view of their financial condition in one go. This means that they can see the balance in their pension account live and in real-time.
Keeping a track of old pensions
When customers change jobs, they can very well lose track of their old pension funds and accounts. But with the help of this new technology, it is possible to consolidate all the pension funds and stay informed. This means that users are in control as they have information not just about the pensions in their existing workplace but also all the old pension accounts. They can initiate the transfer of all the old pensions to a single account – that of the present employer.
Users no longer need to remember the pension policy numbers or the old employer/provider’s name and other details. The entire information is available in the apps thanks to open technology. The transfer of pension funds also becomes faster for all the stakeholders including pension providers. It also facilitates quicker processing time for providers as customers no longer need to engage with the customer service department to source information about their pension account and other details. This leaves them more time to focus on processing pension transfers and disbursements.
Open Banking has evolved pretty fast in the last couple of years. In India, 2021 can rightly be called the ‘Year of Open Banking.’ Even as Banking-as-a-Service gained momentum in the country, most financial institutions including banks and pension providers are gradually adopting this new-age technology to optimize their services.