While most banks are burdened by legacy systems and processes, India has leapfrogged into the era of innovation in banking by adopting the latest in technology. Today's digital age and hyper-connected environment requires banks to re-imagine their business continuously, and Indian banks are leading the pack when it comes to transforming from digital to truly digital. The year 2017 will be no different for the Indian banking sector; there will be growth fueled by innovative initiatives such as Unified Payments Interface (UPI) and technology. Our top picks for major technology trends that will reshape Indian banking are as follows:
1. Open banking is the new normal
Open banking—a connected ecosystem for financial and non-financial services with multiple underlying service providers—is the future of banking.
The launch of UPI by the National Payments Corporation of India (NPCI) has thrown open the gates for innovation in the open banking space. UPI will empower payment service providers to create state-of-the-art products/offerings without being limited by the underlying account relationships. Customers will be given the flexibility that they desire and a unified interoperable interface will allow all service providers to innovate for better customer experiences.
2. Banking on the cloud first strategy
Progressive banks are already making strides in cloud adoption. Disruptive technologies that are changing the face of business—Big Data, blockchain, artificial intelligence (AI), IoT—will be leveraged using cloud computing. Indian banks are coming around to the idea that the business agility provided by cloud outweighs the concerns. Business models for emerging banks and fintechs will also be largely driven by the cloud-first strategy.
In 2017, you could expect Siri to help you move funds and open a new fixed deposit account with your bank.
Demonetisation is pushing India towards a cashless society, and as banks prepare to deal with the increased influx of electronic transactions, cloud will provide banks with the required elasticity to meet these demands.
3. Blockchain and the race to production
As banks try to become more efficient and agile to meet the increasing demands of customers, blockchain will be one of the enablers for re-imagining processes. In 2017, banks will increasingly move some projects from pilot to production and leverage blockchain to automate inter-organisational processes. The recent Emirates NBD and ICICI Bank partnership to launch a blockchain pilot network for international remittances and trade finance is a precursor for advances in this technology.
4. Artificial Intelligence—From sci-fi to reality
Artificial intelligence (AI) has the potential to transform both front office and back office operations with its self-improving programs—at ICICI Bank, for example, software robots have been deployed in over 200 business process functions, reducing the response time to customers by up to 60%. AI has already proven itself in providing seamless differentiated customer experience on digital channels, and security measures with its integration within the banking infrastructure. Intelligent digital assistants are commonplace, and these self-learning programs keep getting better with every interaction.
As 2017 progresses, banks will look to explore more proof of concepts to integrate conversational interfaces into their omni channel strategy.
5. More things to bank on
The year 2016 was the year of mobile-first strategy. Indian banks leveraged the increasing adoption of mobile to provide customised offerings on their apps. However, digital technologies are evolving at an unprecedented rate, and so is customer adoption. To keep pace, banks would be required to provide services on a gamut of connected devices and wearables. Apps, while still widely used, are not the only channel for customer interaction. Today we have smart virtual personal assistants on mobile phones that can engage with customers in a more interactive manner. Progressive service providers are taking a lead in enabling their services on these new interfaces—for example, Ola Cabs allows customers to use Siri for cab bookings. In 2017, you could expect Siri to help you move funds and open a new fixed deposit account with your bank. In fact, such services are already enabled by innovative banks globally.
6. Banking architecture simplification
All of these overlying technologies will be built on the bedrock of banking architectural simplification. The new year will see banks move to componentisation instead of the traditional monolithic architecture. In other words, complex architecture will be broken up into smaller bite-sized pieces for ease of deployment and upgrade for specific functionalities. Componentisation will not only increase agility to modernise selectively to keep pace with current technology trends, but also allow for risk-mitigation of projects. Banks will simplify architecture by implementing enterprise-class applications, which will be able to deliver capabilities required across business units and eliminate silos that currently exist.
With initiatives like demonetisation, the Indian government has made it clear that India will be yanked away from a cash-based economy. GST rollout will give further impetus to the Indian economy. In 2017, banks will not only have to keep up with the growing expectations of a billion connected customers, but they'll also have to make sure that they are leagues ahead of the emerging competition.