Digital Banking and Road map, Study notes of Banking and Finance

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DIGITAL BANKING

TRENDS AND INNOVATIONS

A UST Global POV

September, 2016

USTGlobal^

DIGITAL BANKING

TRENDS & INNOVATIONS

Introduction

Digital banking is not an option; rather, it is a

must-have strategy essential to surviving in a

highly competitive environment. The strong

growth in the digital banking has made it

imperative for banks to transform their existing

operations into an omni-channel approach.

In other words, provide the same banking

experience to customers irrespective of the

channel - be it web, mobile or physical branch.

The development of a strategy towards

achieving supremacy in digital banking must

consider core elements in their entirety to

achieve desired goals. The primary element is

innovation - the ability of the bank to develop

unique ideas to transform itself. The next

element is automating processes, systems

and organizational design in order to provide a

superior experience to the bank’s customers.

These elements must then be aided by other

facets such as mobility and big data. Big data

allows banks to take informed decisions by

leveraging the capabilities of data analytics.

Similarly, banks need to leverage mobility

tools, web and social media platforms and

other connectivity options to build even closer

relationships with their customers.

Recent Trends in Banking:

All Roads Lead to Digital

There are several trends making a strong impact on the digital banking space. Some of these trends are relatively mature, whereas a few recent developments still have fairly low penetration or usage among banks.

Mobile Banking In emerging markets such as China and India, the penetration of mobile banking is stronger as compared to developed markets. Most banks today offer mobile banking, ranging from basic mobile applications to more sophisticated apps comprised of unique value added services and features - such as social media integration and augmented reality. Many new mobile-only banks have cropped up across the globe and are threatening the market share of traditional banks.

Blockchain

Blockchain, or distributed ledger technology,

is expected to transform the entire financial

services space - be it back-end banking

operations, trade finance and lending,

payments or insurance. Banks around the

world are either exploring usage of blockchain

or testing it in their operations.

Wearables

Wearables are being evaluated by banks

as a new interaction and authentication

medium. With increasing penetration among

consumers, wearables are poised to become

a mainstream digital banking application.

Disruptions & Innovations

• What Does the Future of

Banking Look Like?

New innovations and disruptions in the

banking and financial services industry make

the future look very exciting and technology

focused. Blockchain is already creating ripples

in the banking technology space with a myriad

of new applications being explored with the

distributed ledger technology. Similarly, the

wealth management space is being disrupted

by 'robo advisor' platforms that are not only

automating portfolio management, but also

integrating innovative technologies.

Several new innovations are redefining

the payment landscape, such as near field

communications, biometrics and blockchain.

Another notable disruption is branches are being transformed to create true omni-channel banking experiences with new and innovative digital technologies - ranging from portable bank to video tellers and 100% digital or paperless branches.

Image-based banking that utilizes smartphone cameras to capture deposits, checks or bills is another disruptive technology making waves in the banking industry. Virtual agents, live chats and social media-based support channels are being offered by banks to provide an enhanced service experience to customers.

The internet-of-things, which has revolutionized many industries, is also making its presence felt in the banking space. Machine learning and artificial intelligence are also being explored to enhance the customer experience.

Many banks have set up their own innovation labs to explore new banking applications and disruptive technologies. They are also organizing hackathons and participating with fintech accelerators to explore new disruptive technologies. Banks are collaborating and establishing strategic alliances with fintech companies, as they do not want to lag behind in the race towards innovation and disruption. Banks are making APIs open to third parties to scale up their ecosystem of strategic partners and speed development of disruptive applications. New banks such as Fidor and Atom have emerged as serious threats to traditional banks and thus it has become imperative for traditional banks to adopt new technologies through strategic alliances with fintech players.

BFSI IT Vendors &

Consulting Companies -

What Are They Doing to

Remain in the Race?

IT companies such as UST Global,

Infosys, Accenture and others are

focusing strongly on disruptive banking

technologies such as AI, machine

learning and blockchain, and making

digital a strong priority across all financial

services verticals. Consulting firms

such as McKinsey and Bain are also

increasingly focusing on transforming

the existing operations of their banking

clients towards the digital ecosystem.

IT companies are organizing fintech

hackathons and investing in startups that

are coming up with novel technologies to

disrupt the banking space.