The diversified Indian financial sector always encounters rapid changes. Change is inevitable if any industry wants to update itself with time and enhance the customer experience. The emerging trends are supposed to bring some useful features in the industry by updating the operational procedures with innovative technologies, maximizing the satisfaction level of both the customers and service providers and boosting the industry growth factors. The Indian financial sector has experienced versatile types of trends which have impacted the economy from time to time. The emerging trends of recent times are expected to make the growth trajectory of the finance sector smooth and worthy. Some of the emerging trends are as follows:
- Blockchain:
Blockchain is a decentralized system of recording and verifying any transaction electronically over a network of computers rather than by any single entity. Each of the blocks are basically the storage of data related to the transaction of individuals. The overall system of Blockchains is distributed across peer-to-peer networks which are continually updated and kept in sync with a single change in every transaction. All the information stored in the blockchain are time-stamped, encrypted and easily traceable. This makes it impossible to change or alter the unique identification code if someone wants to fraud.
A consortium of India’s eleven largest banks including ICICI Bank, HDFC Bank, Yes Bank, Standard Chartered Bank, Axis Bank etc. have launched the first ever blockchain-linked loan system in FY19. This system can be used for automated account opening process, completing KYC details, international payment and in many more procedures. Besides, the features of it like maintaining smart contracts, built-in governance help the banks dealing with trade finances, insurance, digital transactions and several types of cross border payments easily in a very short time span.
Though the blockchain solution is still in its infancy but the value of it is expected to cross US$ 5 billion across all the sectors in India in the next five years. The system is capable to bring operational efficiency, simplicity and transparency in banking operations. Proper guidance to the users and service providers and implementation of suitable polices can be helpful to the industry.
- Artificial Intelligence
Artificial intelligence (AI) is a part of computer science which aims to create intelligent machines as a simulation of human intelligence. Speech recognition, learning, reasoning, planning, perception, problem solving etc. are few examples of its features.
- Adoption of AI helps to empower
banking sector by establishing innovative products and services. Humanoid Chatbot interfaces to interact with customers, - OCR or Optical Character Recognition system for capturing documents,
- Use of machine learning for generating insights from the text data,
- Use of Bot Advisors for managing the personal portfolios of the clients for estimating risk and expected return on any investment,
- Image/Face recognition facility in the ATMs by using real camera with advanced AI techniques to prevent frauds,
- Anomaly detection system for detecting fraud and anti-money laundering etc. are some of its specialties.
Though just like the other types of innovation, the AI is still in its nascent stage but the use of it in the Indian banking sector can be helpful. Increasing population, initiatives of financial inclusion, huge addition of data and rising chances of corrupted insights from falsified data require some advanced and sensitive services like AI. Multiple banks in India like HDFC & ICICI bank have started using chatbots for customer service. Last year, Canara bank installed robots in some of its offices to interact with customers.
The appropriate use of AI expects to add nearly US$ 1 trillion in the Indian economy by 2035. However, key challenges like availability of persons with proper skill of data science, inserting the details of 150+ languages with sizable spoken population in the robots and system can be hectic.
- Cloud Computing
Cloud Computing or Cloud Storage is a technology for storing data over the internet rather than any computer device. Companies who are designated as cloud providers deliver this service to the user company via internet. The user can have their own private cloud or they can rent a certain portion of any public cloud.
Cloud service is regarded as better source for securing information rather than conventional hard drives. With cloud services, information is encrypted and backed up continuously. The cloud-based services can be used for accounting, inventory control, human resources, and customer relationship management. The capital expenditure and ongoing operational costs can easily be reduced if the traditional storage process gets eliminated with the cloud service. Besides, the data stored in cloud can easily be accessed by the workers regardless of their location. Moreover, it also allows the users to pick and choose the services required on a pay-as-you-go basis.
Cloud computing enables the banks to upgrade with the changing market, customer and technological needs. Citibank Wealth Management replaced its fragmented CRM system with a unified cloud-based solution for providing customers a better experience. Besides, Yes bank also moved all its applications to private cloud back in 2011. Greater use of it in coming years can help to reduce costs, increased productivity, speed and efficiency, performance, and security.
- Application Programming Interfaces
Application Programming Interfaces or API is a software intermediary which allows two applications to communicate with each other.
The application of APIs helps banks to 
collaborate with their stakeholders like Fintechs and third parties to achieve their digital targets and create innovative products. Integrating with ERP systems of the corporate clients, verifying eKYC and PAN, recovering credit scores, association with third parties for creating innovative products, collecting customers’ data across various platforms for understanding their preferences, controlling digital traffic, monitoring the access of various types of users, maintaining security etc. are some of its special features.
These kinds of role of APIs guide the banks to add suitable features in the procedures of online banking, customer data, cards, payments, and accounts and strengthen their revenue structure. In India, YES BANK was one of the first banks to launch API banking services to digitise B2B supply chain. Moreover, ICICI, RBL Bank, Kotak Bank, DCB Bank, Citi Bank and several others have seemed to be adopted this approach.
- Cyber Security
Cyber Security or Information Technology Security is the protection of devices, network, programmes, hardware, software and data from any attack from unauthorized access.
With the emerging threats in the banking and financial sector, cyber-attacks are now a global issue. Improper encryption of data leading to data theft, lack of protection towards CCTV cameras and connected devices, unprotected third party services, fraudulent activities by expert hackers leading to theft of high value payments, theft of credentials from customers’ accounts are some of the critical examples of cyberattacks.
The cyber security threats need to be managed with the technically advanced protection system. A severe level of cyber-attack in banking sector can definitely lead to the failure of any bank. In India, new private sector and foreign banks accounted for 36 % each of all cyber fraud reported in debit, credit and ATM cards, among others.
According to a report, between 2008 to 2017, Indian banks faced INR 700 billion worth of cyber fraud cases. The banking system needs to prepare itself to address the risks and challenges. Proper IT system, regular scrutiny for appropriate policy and supervisory intervention, offsite monitoring mechanism, structured audit management system, active cyber security cell with advanced infrastructure are highly required.
Impacts of Tech Trends in Indian Banking sector:
- Emergence of the technological trends have caused huge expansion of fintech companies across the country. Their Independent and collaborative work with banks are providing the mass multiple opportunities to access the banking activities in easier way.
- The technologies have made mobiles not only a device for communication or connectivity but a crucial source for dealing with banking activities.
- The emerging trends are raising competition among the banks for adopting different technologies appropriately and providing customers better services.
- Besides, installation of ATMs, Cash Deposit Machine, Cheque Deposit Machine, Passbook Printing Machine across innumerable corners of the country have made the banking work easy.
- The trends are also increasing the requirement of skilled workforce in the domain of Information Technology for handling such advanced system proficiently.
- Interest towards the adoption of 5G network has also emerged in recent times.
With the advanced, fast and unique features, each of the trends is capable to bring revolution in the Indian banking industry. However, many remote parts of this country are still unbanked and a significant portion of the population is comfortable using the traditional banking system. Hence, smooth expansion of all the mentioned trends might take some time. Hopefully, with the increase in numbers of digitally literate people and better digital infrastructure, the growth prospect of these trends will be good.