The Potential of Digital Innovations Navigate Financial Services Industry
Most of the organizations in Financial services, who are aspiring to move to the next league in business is constantly innovating in the IT Space and want new technologies to impact business sphere. The emerging trends in the financial sector, is establishing a common language to improve collaboration which could enable consistency in services across all the customer touch points. The capability to utilize available business data from the enterprise, can generate new business, retain existing customers and cross-sell new products.
Digital Innovation offers a unique opportunity for banks & lending institutions to drive growth and profitability. The very first role of Digital Innovation in banking sector, is to transform legacy banking operations. New competitors, technology, and consumer expectations are impacting banking industry to a more significant degree than ever experienced. More tech-savvy consumer base with higher expectations of digital delivery and reduced loyalty to traditional banking organizations will force all customer segments to shift to new banking methodologies.
Certainly, technology has become an intrinsic part of the business strategy at financial services firms. Banks are facing critical decisions about strategy, cost reduction and implementing regulatory change. The combination of rapid technological innovation, outdated information technology (IT) infrastructures and new post-crisis regulations have created an urgent need for increased technology expertise on boards. However, digital innovation transforms financial services industry and enables banks to better serve their customers, however they require massive IT investment and changes to existing systems. Additionally, these innovations are equally available to big technology companies that are increasingly acting like competitors. That’s creating an immediate threat to financial institutions that fail to embrace technology.
Besides, regulations are also driving technological changes. Complying with new regulations whether around ringfencing or money laundering, invariably requires extensive reprogramming or changes to IT systems. With IT accounting for a significant slice of the cost base, financial institutions have to rebuild IT infrastructure, sometimes extensively. The capacity of financial institutions to manage their existing IT infrastructures, cope with the changes taking place and address growing cybersecurity risks, is being closely scrutinized by regulators.
Having said that, CIO’s should expand their ambit and embrace a more expansive view from fintech entities, start-ups and also other emerging trends that support and drive digital innovation. In case of any upgrade in mobile/E-banking solutions, there is a need to evaluate digital solutions that support traditional and mobile browsers as well as native and hybrid technologies. There is a need to develop a delivery architecture to separate customer facing presentation from bank transaction and support delivery of functionality to any browser.
The rise of digital payments in India is undoubtedly a boon for the country. Increasing digital payments are a direct invitation to cybercriminals across the globe, making India more prone to cybercrime. India is already hailed as the fifth most attacked country across the globe with ransomware or Business Email Compromise (BEC). A recent study jointly performed by ASSOCHAM and EY states that mobile fraud cases in India are expected to rise by 65% in 2017. The 'new internet users', with no or low information about cybersecurity, are most susceptible to cybercrimes. As the digital wave is penetrating tier II, III, and even rural areas, the apprehension has become more significant.
However, cybercrimes in India are also getting more complicated. The following approaches will help organizations in financial services address cyber security issues and other risks.
- Proactively manage cyber-risk and regulation
- Build and execute a strategic cybersecurity roadmap
- Establish a commercially reasonable cyber-security
- Acquire, develop and retain key talent
- Align cyber-security team with business.
The other challenges are mobile phone security, absence of incident response plans at enterprise level, third-party vendor risk, and lack of information security measures. As international cybercriminals eye India with greater alacrity, the need of the hour is to consolidate the digital infrastructure across multiple levels.
The potential of future scenarios in digital innovation led financial service space could be operations without infrastructure, payments without middleman, choice without brands, lending without deposits, service without bankers and banker without bankers.
At operational level, the current advancements in market place in the form of artificial intelligence and robotics will play a major role. Big data about customers provides an amazing opportunity to all and unlock the information inside and give customers what they really want.
Besides, with the ability to automate operations, reach more customers and provide a more friction-free banking experience, Chatbots are streamlining and optimizing many banks’ digital services. Also, there are Payment modes like NFC (Near Field Communication), a contact less payment system, where all documents can be stored in the mobile and financial transaction can be completed with the stored information. Furthermore, Aadhar Enabled Payment or Fingerprints enabled payments thereby reducing the need to carry physical wallets.