Banks Step Up Investment in Digital Infrastructure in 2023
According to senior bankers and industry experts, large and midsize banks are investing more in strengthening their digital capabilities since the user interfaces of their present mobile applications and websites need to be updated with a more human touch.
In a post-earnings news conference, State Bank of India Chairman Dinesh Khara stated that the firm was actively investing in analytics to attract clients on the asset side. “We underwrote roughly Rs 20,000-odd crore (of loans through digital channels) last year, in the March quarter. We have already guaranteed over Rs 29,000 crore this year, which is the increase we are experiencing.
Federal Bank ED Shalini Warrier stated that modernizing user interfaces is “absolutely” necessary for banks. Her institution has initiated several projects to employ cutting-edge technology to humanize banking. “Banks must make better use of AI while ensuring that their employees are aware of the subtleties of consumer behaviour and can react to it appropriately.
We certainly need to improve our digital capabilities, customer experience, and convenience,” she said, adding that Federal Bank is eager to raise IT spending as a percentage of overall operational expenditure from 5.6% to roughly 8% over the next two to three years.
Debadatta Chand, the MD and CEO of Bank of Baroda, stated that the company is automating all banking procedures and will provide additional funds needed to meet the demand. Executive Director Joydeep Dutta Roy elaborated on the expenditures into the digital sector by saying that the lender will make considerable efforts in automation and enhancing the digital infrastructure.
Due to the lender’s extensive projects on digital architecture and complete cloud migration, there will be at least a 50% rise in digital spending. Its total operational costs from April to June were Rs 6,495 crore, up 18% from last year.
Indian clients’ interactions with their banks are becoming more commercial and impersonal, according to a recent Accenture worldwide study. According to the poll, 36% of respondents gave their banks excellent marks for the variety of products and services, and 35% gave them high marks for the expertise of the personalized financial advice they provided. A recent purchase of financial assistance from a source other than their primary bank was made by about 88% of bank clients.
While banks are making the appropriate kind of digital investments, according to Sonali Kulkarni, head of financial services at Accenture India, much more has to be done.
In times of need or emergency, customers should be able to call a customer representative straight from their banking applications using a “click to call” feature that banks should implement. The problem currently, according to Kulkarni, is that most banking apps have a very basic bot that only performs fundamental tasks.
In recent years, there’s been a burgeoning growth in the digitization of various sectors, and banking is no exception. In 2023, a significant trend emerged: banks around the globe are amplifying their investments in digital infrastructure. This article delves into this strategic move’s reasons, implications, and benefits.
The modern banking customer seeks convenience, security, and speed. Digital platforms cater to this, offering services like instant fund transfers, mobile banking, and online loan approvals. With their nimble operations and tech-centric models, Fintech startups have been rapidly encroaching upon traditional banking territory. To remain relevant and competitive, banks have no choice but to innovate.
Digital platforms can automate many traditionally manual processes, leading to efficiency, speed, and reduced errors. Many governments and regulatory bodies are encouraging, and sometimes mandating, digital transformations in the banking sector, emphasizing the need for more robust cybersecurity frameworks and better service delivery.
Many banks are moving their operations to the cloud to ensure agility and scalability. This provides the flexibility to adapt to increasing loads and roll out new features seamlessly.
Known primarily for its association with cryptocurrencies, blockchain offers significant benefits for banking, especially in terms of secure transactions and fraud prevention.
These technologies are used for credit scoring, fraud detection, customer service (through chatbots), and predictive analysis for investment advice.
With the increasing threats from cybercriminals, banks are fortifying their digital defences by investing in advanced threat detection and prevention tools. Some traditional banks are launching digital-only branches or even entirely new digital banks to cater to the tech-savvy customer.
With seamless online services, customers enjoy quicker and more convenient banking operations. While the initial investment can be hefty, the operational costs of digital platforms are often lower in the long run due to automation and reduced overheads.
Digital platforms allow banks to reach a global audience without physical branches. Digital operations generate a wealth of data. When analyzed, this data can offer insights into customer behaviour, helping banks refine their services and offer tailored products.
With increased digitization comes the challenge of protecting customer data against breaches and ensuring regulatory compliance. Many traditional banks have old, entrenched systems. Integrating these with new digital platforms can be complex and expensive.
For many banks, embracing a digital-first approach requires a shift in organizational culture and new skills and training.
The year 2023 has witnessed a concerted effort by banks worldwide to enhance their digital infrastructures. As technology evolves and customer demands shift, the banks that adapt swiftly and strategically will likely thrive in this new digital age.
The banking landscape is transforming, and while challenges lie ahead, the opportunities for growth and innovation are immense.
