How digital payment solutions will shape the future of banking
The future is digital - even for banking, as modern-day technology takes over one of the most traditional sectorsAnand Kumar Bajaj
As modern-day technological tools transform next to every action today, financial transactions have also undergone a sea change, from the way they are initiated to intermediate processes and eventual execution. Over the years, banks have built a tech-oriented framework step by step, keeping pace with the times to enhance customer service and experience. Today, the opportunities offered by digital innovation have only helped consolidate these fragmented pieces of evolution to present a more unified and comprehensive virtual banking experience.
The advent of e-commerce brought a range of new payment capabilities and financial services to the forefront. In order to fulfill an unprecedented rise in the demand for augmented user-friendly payment experiences, banks today have become the most proactive adopters of these exciting developments across functions. They are rapidly partnering, supporting, and promoting players in the fintech space and adopting software, programmes, and applications.
Amid this surge of innovations in the payment space, a new class of non-bank payment providers has also come to being, ranging from renowned non-payment industry players to new-age fintech startups. They are collaborating with banks and leading the charge of taking the concept of payment to a new level altogether by persistently innovating, speed, accessibility across different channels, convenience and efficiency, thereby supporting their core business of non-payments. The banks, on the other hand, are performing the task of marketing these products differently and taking them to their end destination, i.e. the smartphones of end users!
Leveraging data and technology to evolve customer experience
While technological advancements have been revolutionising the banking space in terms of biometric security through unique identifiers like fingerprints, facial recognition, and voice recognition, the advent of ‘big data’ is one of the most crucial interventions for the banking industry. Through effective storage, analysis, and interpretation of vast and complex sets of data, previously untapped patterns and trends can be uncovered for new client insights. This may result in significant commercial benefits while assuring privacy.
Further, data management has the potential to make payments, finance, assurance, engagement, and banking more effective and tailor-made for each client, helping industry partners to optimise their internal processes and add value through a data-based business understanding.
By extending these augmented data management competencies directly to clients, banks can make use of insights such as consumer-spending habits as a means of promoting cost saving by identifying frauds or errors, proving to be a source of competitive advantage.
What is exciting is that the data can help one compare what people of similar profile like him/her are doing with their money and help to decipher corroborative buying behaviour.
Trends influencing finance and payment
The change in this sector cannot be accredited only to the new technological capabilities but also the ways and the extent to which such advancements are being harnessed. In the globalised world, the emerging markets have been discerned with the ability to go beyond their developed contemporaries wherein the transfer of information is instantaneous and the adoption and impact are more robust and rampant than ever. In fact, the breakneck rate of adoption is an enormous driver of change in itself, with innovations achieving mass-market penetration at a far faster pace than was ever thought possible.
● Bolstered consumer demands due to increased mobile ownership and digital penetration: The
phenomenal rise in the ownership of smartphones has placed digital possibilities in the hands of digital savvy consumers, delivering richer and value-driven experiences. With better connectivity and ubiquitous use of cloud-based technologies, smartphones have enabled easy access to digital services by anyone, anywhere and anytime. Such proficiencies are significantly impacting the emerging markets, particularly among rapidly-progressing middle-class populations. The previously unbanked population has now access to assisted digital financial services at a connected retailer nearby. One can remain oblivious to high-end tech and yet benefit from all the niceties of government schemes through this dedicated physical infrastructure of retailers.
● Changes in the industry
Like changing consumer trends, changes in the industry have also asserted the need for innovations in payments. For instance, the global financial crisis only forced the introduction of numerous regulations among the banking industry in order to regain consumer confidence. This resulted in enhanced transparency and better data visibility, which further helped in cash management and cost-saving measures. Likewise, the element of security and interventions like big data have emerged as key strengths for the financial services industry.
The Bank-Fintech partnership
Bank-Fintech partnerships have proven to be an effective way to reach high-end fintech to the first mile (as Sanjay Jain ex-Chief of product UIDAI says) and take the constantly innovating digital world to them. This brings both opportunities and challenges to the table. Digital innovations have increasingly been placing banks at the very core of the industry reshaping the payment space.
While fintech startups are open to experiments at speed and loop up to banks to support new use cases, they also bring a differentiated way of thinking and problem solving, technological knowledge and expertise to the platter. Banking has evolved well over many years and in the best interest of scale, it has standardised a lot of practices.
This era brings an opportunity to revisit the standardisations by opening the cookie jar and allowing new experiments to suit new use cases and help them scale again by standardisation. Supplemented by an increased speed of design and development by fintech startups and banks’ knowledge of particulars and pragmatism of functioning payment systems, this will help generate new concepts that can realistically be applied to the payment space. For instance, banks have access to a larger pool of clients when compared to fintech companies and can offer guidance with regards to regulatory requirements and security standards that fintechs are less acquainted with. This combination is helpful best for everyone.
The creativity and flexibility of fintech players help them draw the attention of regulators, NPCI, banks and ecommerce companies, who have begun leveraging the platforms through a process of co-creation to enhance their own end-user experience. They are actively seeking collaboration opportunities with these startups to become a part of the digital world of payments. Such fintech-fuelled allegiances are helping banks to bridge the gap of Old vs new and big vs small. The limitations and divisions are fast dissolving in the digital age, wherein the one who is adoptive and fast leads.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)