TRENDS IN BANKING & FINANCIAL SERVICES IN INDIA
This post contains TRENDS IN BANKING AND FINANCIAL SERVICES IN INDIA in 2023 for IIBF Exams 2023 e.g. CAIIB, Rural Banking, IT & Digital Banking & Risk Management etc.
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IIBF EXAM UPDATES 2023 | BANKING UPDATES
As the Indian Institute of Banking and Finance always suggests that the candidates preparing for various IIBF Examinations must keep themselves updated in respect to the trends & updates that happen in their field of work (mostly the banking industry), we are bringing you a list of trends that the Indian Banking Industry will see in the upcoming time & therefore relevant for almost all the exams administered by IIBF such as CAIIB, Certification & Bank Promotion.
These trends are also important from exam point of view as IIBF clearly states in its Rules & Syllabus of Exams that can ask questions from the recent updates that happen in the banking industry.
TRENDS IN THE BANKING INDUSTRY
From ages, banking has been based on face-to-face interactions but modern banking relationships has changed & is rather based on banks’ capability to swiftly provide access of banking goods and services digitally to its customer. If we are to believe Deloitte, only around 11% of world financial institutions have upgraded their core systems while others have difficulty in implementing modern technologies.
PSBs (Public Sector Banks) still struggle to economize & not been able to unleash technology on its full scale to enable low costing banking to consumers. Even though there are different solutions available, more than half of the companies face difficulty deploying artificial intelligence (AI).
Financial Institutions how to start using Technologies to enhance their agility, efficiency, innovation, and security for the future because that is the only key that will differentiate the banks from 2023 onwards. But banks have to deploy the technology in a way so that it essentially and finally improves the digital experience of the consumers.
ARTIFICIAL INTELLIGENCE (AI)
The future is all about AI. So, it is indispensable that Artificial Intelligence and advanced analytics and algorithms are welcome to play a good part in the project reports on the bank’s processes and bankers will be using this data to improve back office processes, revenues, and loyalties while saving money and time simultaneously.
It is of no doubt that artificial intelligence has the capability to provide the greatest value-added services when it comes to the demands and preferences of the clients whether it’s in personalized or contextual communication, AI can use the cost and financial adversities.
It is also submitted at 20% off all the test data will be generated synthetically by 2025 and with the use of digital representation of artifacts, there will be new innovations that will be similar to original without being repetitive.
CONVERSATION – AI BOTS
Nowadays, many organisations are using chatbots for customer interactions by leveraging artificial intelligence. It has led to customer happiness by using cognitive Analytics to enable communication and begin customer relationships.
YES bank has introduced YES-bot to assist its customers. It is a kind of conversational artificial intelligence which have the best financial knowledge that ultimately helps in enabling the clients to conduct financial and non-financial banking transactions.
Following the footsteps, HDFC has introduced – Eva, Axis Bank – AXAA, Andhra Bank – ABHi, BOB – Adi etc.
OPEN BANKING APIs
Open banking APIs: These are typically third-party in developed applications which are used to share financial data with one another. An API can enable both users and providers to gain access to a variety of useful banking services.
The banking industry, for example, can collect data about purchasing habits, financial goals, and risk tolerance both internally and externally. In addition to improving multichannel marketing accuracy, this information can be used to provide proactive solutions and advisory services. In addition to phone banking, peer-to-peer lending, risk management, and loan processing, it can facilitate the implementation of similar services
Along with the advantages, there come the drawbacks in the form of data security and financial privacy breaches, lack of grievance redressal system, issues in the compliances and other cyber security risks.
But still, State Bank and Axis Bank have used the open banking models to make customer connections and transactions easier every day.
Neobank is basically a digital bank having no physical presence (not even branches) and is entirely virtual. There is definitely a broad collection of financial service providers whose main target lies on the tech-savvy customers.
As per Statista, the average transaction value per user in the Neobanking segment is US $4.71k in 2023 and will probably expand @20.60% annually (CAGR 2023-2026).
New banking is a very cost-effective substitute to traditional banking. It is very convenient, and user-friendly and aimed at specific audiences or customers. They are fully capable to provide savings accounts, prepaid card services, bill payment services, and money transfers along with financial Management Services that too 24 by 7 with the highest security features.
The applications which are provided for the purpose are user-friendly, straightforward and intuitive. It is basically a transparent structure where the customers get real-time notifications.
The companies in neo banking business such as Niyo FamPay, Fi & Jupiter had raised 230 million dollars in year 2021. Commercially, the whole new banking industry was reported to be valued at 500 million dollars. India has a lot of space for new banking to grow with the growth in the users of smartphones.
It is estimated that by 2024, the percentage of corporate banks in India, that will be using cloud Technology to run their business will be 80%.
Provide a solution to the banks to react on a timely basis or react fast to the changes that happen in the market conditions. It will also help them in obtaining and analyzing the data in your time which will result in higher engagement and personalization across all their channels. As far as we can see, it will also be a means to increase the customer base bam making available a variety of mobile and application-based capabilities for the customers to enjoy banking anytime and anywhere and as per their convenience.
It has provided and Ecosystem where any organisation can offer various innovative Financial Solutions on one single platform which can span across credit card transactions to insurance double into payments and all this without much human participation.
Embedded finance has a crucial role in increasing the adoption of digital payments that is UPI in India.
As per the data published by Statista, in 2021 (fiscal year), the transactions conducted in Indian rupees were worth more than 41 trillion in INR. This increase has been observed in the peer to merchant transactions which basically implies that UPI had a larger role to play in financial inclusion by bringing people from tier 3 cities and beyond into the digital economy.
It is expected that the country’s transaction value will exceed 128 trillion INR by the fiscal year 2025.
Metaverse, in simple words, is the hypothetical imitation of the internet as something one universal and immersive virtual world. And when we talk about metaverse banking, it means lending and insuring against the virtual currency, virtual reality state and NFTs.
A matter was bank will be able to provider communicating clays to employees which will allow the customers to roam around in their own virtual fun Asia down where they can interact with the content and the real-life agent through a video chat.
Customers will be able to visit virtual branches of the banks and receive excellent customer service. Even have a real-time mortgage broker visit their home, they could discuss the time and plans with an advisor, attend an event or participate in a bank-sponsored community program. It will basically open so many new ways to interact and to reach out new people and people who have more experience in NFTs.
We should also keep in mind that the metaverse ecosystem is still in its early stage, but its potential is so that every organisation of any size and background is going to flock to it like a moth to a flame. Even HSBC is investing 3.5 billion dollars into its wealth and personal banking division.
EXPANSION OF DIGITAL BANKING
It’s been years since digital banking became prevalent in India but it did not lead to much decrease in branch visits. It was during the lockdown that required urgent digitization in the banking and finance industry and banks will continue to offer retail services through digital banking to make the paperless trade, banking, and other services possible.
STANDARDISATION OF FINANCIAL SYSTEMS
One other step towards a payment transaction experience for customers is the implementation of a common standard on global level such as ISO 20022 for domestic as well as cross-border payments. With standardization, there will be an increase in business efficiency in the banking industry will be in line with global industry progress. It will also lead to improved Analytics, and straight-through processing rates as the banks will get equipped with richer, structured and meaningful data.
Today in the demands for seamless, secure, fast and cost-efficient while when done frictionlessly, we provide competitively and to the institutions. With the help of emerging Technologies for example: Blockchain, tokenization, internet of things and smart contracts, banks can provide efficient payment transaction experience by streamlining their services.
A robust security system is also important for fraud prevention and compliance measures.
All these trends point towards the need to adopt the Technologies quickly. The main concern of Indian banks and their customers is the data security. Installation of biometrics in various apps has provided an extra layer of security to stop the fraudsters from their operations.
As digital banking is increasing, cyber-attacks are becoming more common where check boxes and captures are no longer adequate. It requires that banks and Financial Institutions invest a great deal of money in data security and protection as well as consumer awareness. And the most important thing that banks need to take care of is that privacy policies should not become a roadblock for customers in all this technology implementation and updation.
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