Banking's Daily Tech: From Disruption to Essential Service
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Banking's daily tech, no more just service - The Economic Times
The RBI noted that technological shifts, including cloud computing, data analytics, and generative AI, are transforming Indian banking. While these technologies boost efficiency and balance sheets, middle-tier jobs are diminishing. Regulatory constraints protect against disintermediation. Improved risk management and credit appraisal are essential for banks to thrive in the evolving financial landscape.
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Banking's daily tech, no more just service
The RBI noted that technological shifts, including cloud computing, data analytics, and generative AI, are transforming Indian banking. While these technologies boost efficiency and balance sheets, middle-tier jobs are diminishing. Regulatory constraints protect against disintermediation. Improved risk management and credit appraisal are essential for banks to thrive in the evolving financial landscape.As RBI notes as part of a recent report, digital banking is hollowing out mid-tier employees as bigger chunks of the business are handled by tech. Three distinct tech transformations are underway in Indian banking, now among the most digital globally. One, cloud computing, which helps banks to keep costs low. Two, data analytics that offer banks deeper insights into customer behaviour and risk management. Three, generative AI, which is shaping the client interface. Future of banking is decentralised, and that knocks off a considerable part of complex organisation structures banks have built up. There is also the remote existential threat of widespread disintermediation if digital currencies have interest programmed into them. The prospect is remote because of regulatory, not technical, constraints. These transformations are improving bank balance sheets. But the efficiency gains aren't as much on display in spreads between lending and borrowing rates. Banks have absorbed a wave of financial tech disruptors because of their access to data, but also face continuous disintermediation from capital markets. Regulators are also asking banks to work on their risk management in a new era of high global interest rates. Banking has to gear up from being a service to being embedded into customers' daily interactions. This requires improved banking processes like credit appraisal and tech platforms to deliver them. This transition is happening in relatively sheltered conditions, with a protective moat against competition from abroad. The country's banking system operates under conservative regulation that complements internal risk management. Changes to bankruptcy resolution have freed up bank capital locked in zombie companies. Financialisation of the economy provides banks a one-off opportunity. HR adjustments to technology transformation should lead to a more efficient and robust banking system in India. Future of banking is already upon us. Indian banks must be ready for the accelerating changes.
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The evolution of banking technology from a disruptive force to an essential service, highlighting the normalization of digital banking and its impact on the financial sector.
The Normalization of Digital Banking
In recent years, the banking sector has witnessed a significant transformation, with digital technology evolving from a disruptive force to an essential service. This shift has been particularly evident in India, where the adoption of digital banking solutions has become increasingly widespread
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.From Disruption to Everyday Utility
Initially, fintech innovations were viewed as potential disruptors to traditional banking models. However, they have now become an integral part of daily banking operations. This transition reflects a broader trend in the financial industry, where technology is no longer seen as a revolutionary force but as a fundamental component of service delivery
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.The Role of UPI in India's Digital Banking Landscape
A prime example of this evolution is the Unified Payments Interface (UPI) in India. Once considered a groundbreaking innovation, UPI has now become a standard feature in the country's financial ecosystem. Its widespread adoption has significantly altered how Indians conduct financial transactions, making digital payments a norm rather than an exception
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.Implications for Traditional Banks
This normalization of digital banking technology has profound implications for traditional banks. Financial institutions are now expected to offer seamless digital services as a matter of course. The focus has shifted from merely introducing new technologies to enhancing the overall customer experience through these digital platforms
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.The Future of Banking Technology
As digital banking becomes increasingly embedded in everyday financial activities, the future of banking technology is likely to focus on refinement and optimization rather than radical innovation. Banks and fintech companies will need to concentrate on improving user experience, ensuring security, and expanding the range of services offered through digital channels
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Regulatory Challenges and Opportunities
The normalization of digital banking also presents new challenges and opportunities for regulators. As these technologies become essential services, there is a growing need for updated regulatory frameworks that can ensure consumer protection, maintain financial stability, and foster innovation in the sector
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.Impact on Financial Inclusion
The widespread adoption of digital banking technologies has significant implications for financial inclusion. As these services become more accessible and user-friendly, they have the potential to bring a larger portion of the population into the formal financial system, particularly in developing economies like India
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