What is the impact of technology on the banking sector in 2022?

The banking sector has experienced a tremendous technological revolution that has paved the way for creating newer, better opportunities for its customers. The impact of technology on the banking industry is manifold and can be witnessed with the speed at which banks operate in the country today. Gone are the days of standing in long queues to open an account, receive a physical statement of account, or wait days for loan approval. Each of these processes and more have improved with accuracy and precision, thanks to the positive impact of technology!

The technological disruption in the banking space has encouraged each banking or related entity to adopt this radical shift to sustain and thrive. An absence of this critical business resource could not only lead to poor business decisions and ultimately a failure but also render them irrelevant to the current landscape of meeting banking customer expectations that are increasingly becoming digital savvy.

Let’s understand a few critical changes that have resulted due to the impact of technology on the banking sector and how swiftly banks have adopted them as a part of their internal work process.

Impacts of new age technology

There was a time when huge databases existed in silos, and churning out meaningful data from the same consumed endless time and energy. New age technologies such as Artificial Intelligence (AI) and Machine Learning (ML) have radically shifted the way banking works today. Thanks to AI, it is possible to conduct real-time data analysis from a large volume of data sets and provide customised solutions to banking customers.

With powerful AI tools, banks can make informed decisions faster by using predictive analysis, which is at the core of AI and ML. As soon as a potential customer searches for something online, the AI tools pick it up and serve related content that leads to quick sales. This improves customer service tremendously as tailor-made solutions are provided to the customer without as much human intervention.

Banks’ lending processes have also improved considerably as they can analyse customers’ spending patterns, study different customer data points, and determine borrowers’ creditworthiness. A lot of paperwork has also been reduced owing to this.

Customer-centric banking has become indispensable with the introduction of chatbots and chats agents that utilise Natural Language Processing (NLP) to read, process and understand text and speech. Banks have successfully deployed chatbots to answer customer questions, which has helped them reduce the time and effort of human capital and provide quick and consistent service. Using chatbots, banks are expected to save $7.3 billion in operational costs.

Changing customer profile
 

The changing profile of banking depends a lot on the digital ecosystem around them to meet their needs, especially the millennial generation. Their expectations from their banks to provide an omni-digital experience have enabled the shift, allowing them to fulfil their banking needs sitting from a remote location. Rightly so, banks quickly jumped onto the digitalisation bandwagon and refreshed their services in line with their requirements.

Mobile banking, for example, has already found deep roots amongst millennials. An Insider Intelligence’s Mobile Banking Competitive Edge study indicated that a staggering 97% of millennials use mobile banking! Right from transferring funds, checking their transactions online, downloading their account statements or even applying for a loan, everything can be done through a click of fingers on their mobile phones. This has also eliminated the need for physical branches, enabling banks to operate in a lean manner and cut unnecessary costs.

The usage of credit cards, debit cards, mobile banking apps, mobile wallets, third-party payment apps, etc., have all shot up considerably, indicating an essential shift in the mindset of customer preferences. Banks have streamlined their processes and broken the barriers between the different entities involved, such as branches, ATMs, and online banking, to create a seamless flow for their customers.

The changing customer profile inclines towards bringing both physical and digital worlds closer, and this is impacting the finance and banking sector favourably. Banks heed this need for digitalisation to retain their customers in the long run.

The emergence of new business models
 

The pandemic of COVID-19 helped the banking industry to depend heavily on digital technology and tech-enabled systems to stay alive. The aftermath of the pandemic, however, resulted in new beginnings in the form of huge digital transformation and newer business models to be explored for the banks.

Open banking has also gained huge traction recently, allowing open access to consumer banking, financial and other customer data to third-party financial institutions through APIs. It is considered a significant point of innovation for the various parties involved, which has the potential to reshape the entire banking sector.

In Conclusion

The favourable impact of technology can be clearly felt across banking institutions. Even though the banking arena has made huge strides in achieving digital immersion, many more untapped opportunities exist for banks to leverage and uncover. That being said, it remains unto the banks to maintain the sanctity of their customers’ data and serve them with better solutions without having to forego their security. The few challenges the banking sector still has to figure out are data breaches or leaks, lack of e-banking knowledge amongst their customers, and the ever-evolving technological landscape that requires constant training and updating. It is possible to find plausible solutions to the above with a positive partnership between all stakeholders involved, such as government, industry professionals and, of course, different banking institutions.

Amidst this, IDFC FIRST Bank has emerged triumphant in providing viable banking solutions to all its customers through various banking products by leveraging technology.

Disclaimer

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