The use of information and communications technology (ICT) solutions has altered the digital landscape of the banking, financial services and insurance (BFSI) industry. Owing to the widespread adoption of ICT tools, the industry has transitioned from traditional banking methods to digital banking solutions such as mobile banking and internet banking, which have emerged as the new norm. These solutions, coupled with digital payment platforms, are helping enterprises deliver a more personalised experience in line with the customers’ changing needs. Further, big data analytics-based solutions and machine learning tools are enabling BFSI enterprises to understand consumer behaviour and improve operations to become more efficient and profitable.

A look at the key ICT applications changing the face of the BFSI industry…

The rise of digital banking

The increasing adoption of digital technology has enabled enterprises in the BFSI industry to simplify business operations, improve operational efficiency and reduce costs. All major banks in the country including the State Bank of India (SBI), Kotak Mahindra Bank, ICICI Bank, Axis Bank and HDFC Bank are now offering their own digital banking applications with unique features that enable in-app bill payments, transaction enquiries, etc. apart from providing traditional banking services. These applications also allow customers to check their account balance, carry out monetary transactions and pay bills at the click of a button. Further, the digitalisation of banking operations makes it easier and faster for banks to maintain and retrieve important documents.

Some banks, including Kotak Mahindra Bank and Saraswat Cooperative Bank, have introduced WhatsApp banking services to provide updates to customers as well as other banking services on the WhatsApp messaging platform. In another initiative, seven banks – Kotak Mahindra Bank, YES Bank, IDFC Bank, Axis Bank, Central Bank, Bank of Baroda and Punjab National Bank – have adopted the National Payments Corporation of India’s digital platform. This platform will allow customers to give standing online instructions to banks, authorising them to make recurring payments for a range of services. These include payments made to insurance companies and mutual fund schemes.

Another emerging trend in the BFSI industry is the launch of digital-only banks. These banks provide banking facilities only through digital platforms that are easily accessible on mobile phones, computers and tablets. These banks have cost-effective operating models, which help in providing high-speed banking services at very low transaction costs.

Moving to the cloud

BFSI enterprises are leveraging cloud-hosted solutions to store the massive amount of data generated across the value chain. Through the cloud, banks can leverage an asset-light, low-cost operating model that enables them to outsource various non-core activities. Some of the major banks in India are already collaborating with technology companies for implementing cloud computing in their systems. The use of cloud platforms offers several advantages including simple data authentication, increased speed of services or transactions, fast and easy updation and retrieval of data, and reduced expenses. According to leading global banks, cloud-based banking solutions have made their operations twenty times faster and five times more cost-effective. Further, cloud provides a strong infrastructure that is capable of seamlessly delivering services such as web fund transfers and digital payments to customers. That said, data privacy remains a major concern hampering cloud adoption, and many banks prefer private clouds to public cloud for data storage.

For insurance firms too, cloud has emerged as a critical enabler that can help them reduce costs and enhance operational efficiencies. Meanwhile, cloud-based solutions are making inroads into the payments space. The industry is witnessing an increasing shift towards cloud-based point-of-sale (PoS) systems, which offer several advantages over traditional PoS systems. These include secure transmission and storage of sensitive credit card data, guaranteed system uptime and service availability, and an offline option in case of network failures.

Role of big data analytics

Big data analytics is another key technology that can help the BFSI industry grow in leaps and bounds. Some key applications of big data in the BFSI industry are:

  • Fraud detection and prevention: The biggest concern of the banking and finance industry is the prevention of fraud and cybercrimes. Big data analyses the available data to identify unauthorised and unexpected behaviour, thus helping detect and prevent fraudulent activities.
  • Creating tailor-made campaigns: The technology enables banks to better understand customer expectations, which is important to stay ahead of the curve and strengthen their customer base. For instance, by analysing customers’ transaction history, banks can segregate their customers into different categories. Accordingly, they can create tailor-made marketing campaigns keeping their target audience in mind. Further, customer categorisation can be further leveraged to offer personalised products that meet specific needs and requirements.
  • Risk analysis: Big data also helps in measuring and analysing the risk involved in loan lending processes, which enables banks reduce risks. The insurance sector is also using big data analytics to assess risks, avoid fraudulent claims and underwrite risks.

Owing to these benefits, the technology has found many takers among BFSI enterprises. That said, the industry has barely scratched the surface in terms of adoption.

AI redefining operations

Artificial intelligence (AI) has started playing a significant role in redefining banking operations across private and public sector banks. The most significant impact of AI technology on the BFSI industry has been enhanced customer experience. AI has enabled enterprises to develop automated chat systems called chatbots, which simulate chats without any human intervention. For instance, the State Bank of India (SBI) has launched the SBI Intelligent Assistant, or SIA, an AI-powered chat assistant that instantly addresses customer enquiries and helps them with everyday banking tasks just like a bank representative. SIA reportedly has the capability to handle nearly 10,000 enquiries per second, that is, 864 million in a day. Currently, SIA can address enquiries on banking products and services.

HDFC Bank, has also developed an AI-based chatbot called Eva. Since its launch in March 2019, Eva has resolved over 2.7 million customer queries, interacted with over 530,000 unique users and held 1.2 million conversations. In addition, Axis Bank has launched an AI and natural language processing-enabled conversational banking application to help consumers with financial and non-financial transactions, get answers to frequently asked questions, and contact the bank for loans and other products.

Securing operations through blockchain

The rising adoption of ICT solutions has exposed the sector to cybersecurity threats. In this regard, blockchain technology has emerged as a key tool for securing business operations. It not only helps make the general banking process more secure, but can also play a significant role in facilitating cross-border payments, digital identity management, the settlement of dues, the letter of credit process, and syndication of loans. Further, it can help in reducing the cost of online transactions while increasing authenticity and security. As per industry estimates, blockchain has the capability to reduce costs by up to $20 billion per annum by 2022.

Recognising these benefits, banks have started exploring opportunities in the blockchain space. ICICI Bank has emerged as one of the first banks in the country to use blockchain for a safe and secure paperless trade process. This process is being used for the exchange and authentication of overseas transactions and international trade documents.

The way ahead

The BFSI industry is actively leveraging ICT tools to optimise operations and enhance business efficiency. While cybersecurity remains a key hurdle in stepping up ICT adoption in the sector, blockchain can help address this issue. Further, AI, which has already started making inroads into the sector, promises innumerable benefits that can help reshape the entire banking ecosystem. In the coming years, enterprises in the BFSI industry will continue to move upwards on the technology trajectory to keep pace with the evolving digital ecosystem.

By Kuhu Singh Abbhi