‘Automation’ is clearly one of the buzz words in the banking industry. In fact, experts say that automation is taking precedence not just in banking but in the service sector as a whole. Simply defined, automation is the use of technology and devices to implement various business processes with little or no human intervention. Automation is known to help businesses improve efficiency of service and reduce costs. Over the last two decades, we have seen automation of various functions and services across the globe.
One of the most talked about aspects of automation is digital transformation. In the last few years digitization has taken the banking and finance industry by storm. In other words, digital transformation has reached banking. Banks are seen clamoring to build digital banking solutions and customers are being on boarded with endless promises of digital banking services. This brings us to the foremost question in this discussion.
What is Digital Transformation in Banking?
Digital transformation in Banking refers to the digitization of banking services which traditionally were available to customers when physically inside of a bank branch. This includes functions like funds transfer, current and savings account management, applying for financial products, loan management, paying bills etc.
It’s not just about digitizing your services and products — the front-end that customers see — but also about automating your processes (the back-end) and connecting these worlds with middleware. Digital transformation in banking is about the automation of every step of the banking relationship, and it goes way beyond an online or mobile banking platform.
One of the most significant outcome of digitization of banking services is the advent of ‘digital banks’ or new banks built on a strong foundation of digital technologies. Research has shown that the acquisition rate for digital banks can be as low as one-fifth of the acquisition rate incurred by traditional bankers. Another noteworthy advantage of the digital banks is short duration in which they may configure a new product. A digital bank can launch a new product in weeks while the process to do the same launch in a traditional bank would be months.
What changes has digital transformation brought in the banking industry?
Digitization and automation are redefining banking services at a staggering pace. It has been said that the evolution of digital banking outshines any evolutionary pace seen so far. Experts at Aarav Solutions state five key trends in digital banking that may transform the banking industry as we know it. All five trends point to the role of technology as an enabler and driver of business –
1) Architecture of Online Banking: With a growing number of customers opting for digital banking services, banks may opt for an architecture which is more flexible, scalable and resilient. This is seen in the keenness of the banking industry to take on pervasive analytics, open source and comprehensive automation.
2) Artificial Intelligence: Customer services and fraud management call for the use of artificial intelligence in banking. This technology will find greater use in functions such as compliance, marketing automation and talent management.
3) Advancement to Public Cloud: For banks looking to expand operations will soon begin opting for public cloud. This move will also be driven by new digital channels and API driven business initiatives.
4) Adoption of IoT: Many banks are offering basic banking services using smart voice assistants. Similar services using IoT will help in improving trade finance and lease financing businesses
5) Interactive dimensions: Innovative and interactive features like virtual branches and mobile applications will be the new way for banks to improve customer experience and convenience.
Benefits of Digital Transformation
1) Cost Reduction – Digital banking reduces the need for costly back office operations and maintenance, leads to fewer errors and requires less people to complete the job.
2) Flexibility – Automated functions of a bank may be trained to perform and react immediately to market changes. Agility and adaptability of automated functions help banks adapt to new process regulations and make faster product launches with ease.
3) Viability – Digital banking enables banks to scale up their operations while building closer relationships with customers.
Challenges of Digital Transformation in Banking
1) Technological expertise: Finding the right people to transform a banking process to a digital process still remains a challenge. With ever-changing technology and need for better services to survive competition, banks need exceptional technological expertise that can provide customized solutions.
2) Customer Trust: Maintaining the trust of customers and assuring them that valuable information will not be stolen or compromised in anyway. Cases of phishing and fraudulent payments must be nipped in the bud at all costs to help build customer faith for the bank. Cybersecurity becomes an essential aspect here.
By building upon a combination of data, cybersecurity and artificial intelligence – banks can ride the wave of digital transformation and make a smooth transition into the new era of banking and financial services. Digitization cannot just help banks survive but it can also help them accelerate sales and improve customer experience.
At Aarav Solutions we offer technical expertise in various services like Cloud based operations and artificial intelligence. In a dynamic technology driven business like banking, a good technology partner can make all the difference.
Aarav Solutions is a leading name in IT Infrastructure and Telecom Consultancy Services. We provide a plethora of Consultancy services to Telecom businesses across the country and the globe. Our vision is to transform Indian businesses with the help of innovative technological solutions and our expertise. We aim to provide each of our clients with out-of-the box solutions which are customized for their needs and helps their business surge ahead in today’s dynamic business environment. Aarav Solutions helps businesses gain a competitive edge with the best Consultancy Services.