Since the beginning of civilisation, credit and debit systems have been a part of our lives. Barter system was the initial way of exchanging goods for services, and with the development of society, these turned into banking systems, which acted as safe harbours, where pesople can park their money, while also allowing them to have centralised assets that can be liquidated at any time. Banks, hence, became an age-old centralised system to manage money for civilisations.
While banks across the world start implementing technology solutions to manage customer services, till the late 2000’s, these systems were monolithic, with most of the services being rendered through branch interface.
India changed the game in this sense, with how banking services were to be provided to customers by first making every Indian citizen open a bank account through ‘Know Your Customer’ (KYC).This became a huge step forward, with all banks working on refreshing their technology stacks to facilitate this new process of opening bank accounts.
Further, India’s largest bank, SBI, was way ahead in its thinking when it came to providing customer services. They were the only bank in the world at the time to introduce a full digital bank, where everything from opening an account to taking out a loan, to buying an insurance, could be done from the comfort of one’s home. This digital bank was called YONO, acronym for You Only Need One.
Technology played a very important role in India’s banking transformation. Building a digital bank within a bank, particularly building from the ground up, and using the latest technology, poses its challenges. However, banks in India showed great resilience in the face of these challenges. There are very few examples in the world where organisations have totally changed their strategy to be heavily dependent on technology to meet their business objectives, but banks in India were able to successfully accomplish this.
Banks were able to cleanse their customer data and have early warning systems put up in place for potential Non-Performing Assets (NPAs), and this all was possible as banks had built-in systems, which could provide this information on a real-time basis.
Technology edge provided to the BFSI sector is a credit to Indian fintechs, that have changed the digital banking scenario with their fresh thinking and innovative solutions. Most solutions have been adopted by banks in droves, and India has the best financial ecosystem, spearheaded by banks, to enable fintechs to keep innovating in newer areas.
The banking space is on the verge of a major overhaul, wherein, the next generation would look to banking as an instantaneous personalised service. New-age banking solutions would move from customers asking for a particular service, to customers being suggested personalised solutions and services.
Looking to the future, Artificial Intelligence (AI) is one area where banks have to start investing, not only for retail customers, but for all customers. Some examples can be cited, wherein drone-based agricultural data can been used by AI to provide exact information on the yield of crops in a particular region, and using this data in conjugation with Metaverse can provide prediction models for years to come. Banks can use raw material data, available at manufacturing companies, to provide working capital loan and use AI to provide information to their customers on how to reduce wastage and increase output, thereby helping Micro, Small and Medium Enterprise (MSME) customers. Banks can also give them subventions on reduction in wastage, hence aiding in the decrease of carbon footprint.
The extra steps
Regulators can design mechanisms for reducing complaints of fraud by providing a real-time information broadcast to all banks if a transaction is marked as fraudulent. Personal Identifiable Information (PII) should be a part of this broadcast and Officially Valid Documents (OVDs) used by a fraudster should be fetched from all possible sources, such as the Unique Identification Authority of India (UIDAI), National Securities Depository Limited (NSDL), VAHAN, Election Commission of India, ration card Information, and the passport office, and, should put on a negative list by all banks. All intermediate transactions (hopping money) performed during transaction being carried out should be mapped and all accounts involved should be automatically blocked from further transactions.
As the threat vectors are advancing in banking space, banks should use newer technologies to mitigate all such threats. Gone are the days when transactions were evaluated with HIPS (Host Intrusion Prevention Systems) and NIPS (Network Intrusion Prevention Systems) and firewalls. They are needed but transactions have to be evaluated using Machine Learning algorithms to identify trends and repetition. Currently, there is a growinginterest in quantum computing, and systems would need to be reevaluated if they are not quantum computing safe in the near future.
Banks have to take extra steps with changing technology needs, and cloud computing would need to be adapted by banks with ever-increasing digital transactions. However, thinking cloud computing is a panacea for banks’ever-increasing need for storage is not entirely true. Banks should form a consortium to work with technology service providers, to build interoperability between multiple cloud environments. It would become a need for technology companies and they would be able to spend resources for having interoperability built in.
This is a broad picture for advancing the use of technology-driven solutions in banks in India. In the end, banks trade in the most important commodity in the world – money, and they should make a transformative and integrative change in their way of doing business, with technology at the forefront.