The future of the Indian banking industry after a decade of scrupulous control

The Indian banking industry is opening up in a big way with the introduction of Payments Bank along with wallet operators entering the non-bank space.

After decades of rigorous control, the Indian banking industry is opening up in a big way. First, it was the introduction of a new category of banks, namely the Payments Bank, in August 2015.  A month later, the Reserve Bank of India issued 10 Small Finance Bank licenses. And sometime in the future, the regulator hopes to give out banking licenses “on tap”.



The non-bank front has seen even more action, with a host of payment providers, wallet operators, and online lenders entering the fray. In March 2017, Amazon became one of the biggest international names to bring a payments product to India, in the form of Amazon Pay.

A crucial factor is the strong regulatory push in favour of open and inclusive banking. The Indian government launched the JAM trinity – Jan Dhan Yojana, Aadhaar, and Mobile – to give a huge boost to financial inclusion, and the results have not disappointed: Aadhaar registrations now number more than 1 billion, Jan Dhan opened 200 million new bank accounts in seventeen months, and smartphone usage is well on its way to reach 700 million by 2020. The government is also the driving force behind the creation of a revolutionary payments interface in the form of UPI (Unified Payments Interface), which promises to be a real game changer.

These developments have piled the competitive pressure on banking incumbents, who are fighting hard to differentiate themselves amidst a field of new rivals. Also, as more and more Indians, including those who were previously unbanked, start using financial products and services, it is imperative that banks reimagine their offerings, and particularly their customer experience, to stay in the market.

The ideal banking experience is as seamless and intuitive as to be nearly invisible. This is only possible by going all out digital. Here are some ideas on how to get there:

Smartphones are packed with features that can take out the friction from simple transactions. For instance, when a customer opens a new account, the bank should ensure that all the processes, including verification, are completed on digital channels.

That being said, there is no point is loading various services on a website or mobile app in the hope that customers will come. Today’s consumers want banking to be woven within the fabric of day-to-day activity. That ICICI Bank has understood this is apparent from their iMobile SmartKey feature, which allows customers to make fast, secure payments via any mobile activity – chatting, messaging, gaming, and browsing - without leaving the current application.

A seamless experience calls for banks to be present on all existing and emerging channels and platforms. The risk is that the model can turn unwieldy and unviable very quickly unless there is a robust digital banking platform underneath, which centralizes channel rules and business processes so that new products, services and channels can be rolled out with ease.

Banking should be so in-sync with customers that they forget about its existence. For that to happen, the banking experience must have an intuitive understanding of the customers it serves. With Artificial Intelligence technologies, such as predictive analytics, machine learning and natural language processing evolving rapidly, developing this sixth sense, so to speak, is easily possible.  A good example is how banks like DBS are using smart virtual assistants to enhance the experience. At digibank, its mobile-only bank in India, a virtual assistant named KAI talks to customers, and stores away the learning from those conversations for future use. Over time, the assistant starts to anticipate the questions a customer will ask, and is ready with the answers.  Besides providing customer service, the assistant can even match a customer’s financial information with behavioural aspects to make personalized suggestions.

Last but not least, the banking experience should be on top of the latest trends to be relevant always. This means that banks must be able to spin out new offerings quickly when required. Since internal teams are unlikely to have the bandwidth for this job, the solution is to collaborate with Fintech partners and other members of the ecosystem to keep the wheels of innovation turning. Here, APIs are the key. Many banks are taking this route to open up their development environment to third parties so they can build innovative services and experiences on top. In fact, this is the run up to the new future of banking, where a large financial ecosystem, rather than a single monolithic institution, will fulfil the needs of customers, and the goal of every bank will be to maximize value and experience for clients by offering not just their own products, but the best ones available in the market.

The author is the Senior Vice President & Regional Head, Infosys Finacle.

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