By Rana Kapoor
The Indian economy has been given a new lease of life that can be seen as a ‘reset’ – with huge positive implications for liquidity, inflation, fiscal and external deficit in the short term. Over the next 2-3 years, improvement in India’s position on transparency and corruption in the global league will further add to its investor appeal. With GST on anvil, India is now on the cusp of higher growth in the medium term – to be steered by the organized sectors including MSMEs and the revival of the private sector capex cycle.
Against this backdrop, I am confident that the Banking sector will lead transformational growth of the economy in 2017. Following the successful demonetization exercise as well as the ongoing transition to digital payments and a less-cash economy, the fintech space assumes significantly larger importance.
Over 2017, I believe the following will be top 10 trends to watch out for banking and fintech space:
More small merchants and low income customers will move from cash to digital transactions:
Post demonetization, small merchants risk losing sales in the wake of cash shortage, and they are flocking to digital payment methods like never before. Now with the push from government, growth of digital transactions is imminent and 2017 will be an interesting period which can probably give birth to new payment instruments and we may march into a world beyond PoS, IMPS, UPI etc.
Front end innovation will gain prominence with multi-lingual support and localization of services using AI:
Faced with diverse groups of customers in India, there is a pertinent need for localized services in native languages. This will particularly help in improving the financial literacy of the unbanked and under banked customers. Augmented reality may come into handy to further come up with location specific products and services to service local needs of the consumer. This trend is expected to even excite the local businesses which will be a key driver to make this efficient.
Chatbots, Robotics and Artificial Intelligence will enhance the experience of customers:
2017 is going to be big for chatbots and banking robots as many banks are lining up their chatbots for launch, following YES BANK’s successful launch of chatbot banking last year. These chatbots reduce the effort of the customer and gives a conversational touch to do banking on digital channels. Some banks have also expressed interest in introducing physical robots to aid the customer in bank branches. Artificial intelligence is driving this innovation and the intelligence of the robots gets refined with more usage. This gives an ever improving experience to the customer. In the time to come, we may find that customer service is largely automated and available round the clock at the finger tips.
Aadhaar based fingerprint, biometric and other authentication technologies will get more sophisticated:
As financial inclusion deepens, the need for simpler but secure authentication technologies becomes paramount. With multiple digital products hitting the market, it would be impossible for customers to remember many passwords. Biometric authentication could be the way to solve this problem, Apps and smart phones would be surely working to address this.
Predictive Analytics will result in a personalized experience for customers:
With ever increasing data points and more demanding customer base, customization and personalization will be key. In this context, analytics framework with robust algorithm and sophisticated predictions will play an important element in designing the entire banking experience. These analytics are generally iterative and with growing digital footprint of a customer, products and services will be more relevant to the customers.
More banks and non-bank entities will open their APIs for a seamless and omnipresent experience for customers:
With India stack, the market has already signaled that open APIs is the way to go for payments. YES BANK was one of the first banks to open up its APIs for commercial consumption and we definitely understand the power of the open architecture. In 2017, we expect that more industries or enterprises who wish to give a seamless experience to their customers will follow the suit and open up their APIs on cloud for external entities to consume. Instant apps can be another trend that could pick up in 2017 and these developments will provide new opportunities for fintech focusing on developing Seamless Customized Industry Solutions.
Banks and fintech startups will try to innovate blockchain technologies to increase efficiencies:
Crypto currencies like Bitcoin are a long shot in India but the technology powering them, blockchain is fast entering the Indian market with the potential of increasing efficiencies and reducing transaction failures. Banks have already started to enlist the key use cases with the help of fintech startups and have executed blockchain transactions to test their efficiency. The advent of blockchain technologies is expected to bring more efficiency and bring down turnaround time in key banking functions.
Smart Cities, Internet of Things & Cybersecurity:
Smart Cities are incomplete without smart payments. citizens living here will have ubiquitous data connectivity and it is important that IoT as a concept will become reality when it comes to payments. IoT also provides more data points and this would help financial institutions to learn more about the customer and interact appropriately. This would also open a window of data privacy and cyber threats. Hence it is very important that investments are made both in innovation and cyber security.
Analytics of Things will transform credit scoring models to accurately underwrite the customer:
Internet of Things is useless without analytics and this has given rise to the term “Analytics of Things”. AoT helps to find a pattern and understand the behavior of the customers. This learning can be extended to relate the behavior and creditworthiness of the customer and this will help in accurately underwriting the customer. This will bring down the risk component of the banks drastically and is expected to take off as many fintech companies are working in this space.
Increased competition will lead to Frictionless Customer On boarding and Credit Underwriting :
With entry of new players as a result of payment and small finance banking licenses from RBI, we can look forward to some innovative ways to reach out to everyone including low income households and rural segments in this hotly contested market space. With new e-KYC guidelines, on-boarding will be paperless and this will intensify the competition in the market and industry wll move towards frictionless Banking especially in the areas of customer on-boarding and credit underwriting areas.
While there may be sufficient progress made along these above trends during this year, it is difficult to expect banks or fintech firms to dedicate their own resources to research on these areas and implement solutions on their own. This is where we believe A-R-T of banking (Alliances, Relationships and Technology) plays an extremely important role to identify specialists in each area and foster a strong partnership and work along all identified areas.
Rana Kapoor is the MD & CEO, YES BANK and Chairman of the YES Institute.
Publish date: January 12, 2017 3:57 pm| Modified date: January 12, 2017 3:57 pm