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Tech in the future of Indian banking

India’s Policy Commission or the National Institution for Transforming India (NITI Aayog) organised a conference on Indian banking and the role of technology in its future, earlier this week.

According to a press release, the conference aimed to increase discourse on the banking sector and help develop insights to inform its continued evolution by supporting the growing credit needs of India’s economy.

Predictably, technology was identified as a key factor. It is critical in the financial sector already and will continue to become more important in the future. Technology will not only bring banking closer to the customer, including those in rural areas but also enable the efficient and economical delivery of banking services.

To keep up with “best credit practices and the new technology-based banking paradigm” the adoption of technologies must also come with the appropriate skilling of banking human resources.

Over the last few years, the country’s banking sector realised the need for technologies and began to embrace digital banking. The government started making substantial investments to develop a secure and effective digital infrastructure.

Recently, India has seen an increase in the use of mobile banking, e-wallets, and virtual cards. In fact, according to Reserve Bank of India (RBI) data from a 2017-18 report, mobile banking services witnessed a growth of 92 percent in terms of volume and 13 percent in terms of value. The number of registered banking customers rose by 54 percent to 251 million in 2018, from 163 million in 2017.

In addition, during 2017-18, the number of transactions carried out through credit cards and debit cards was 1.4 billion and 3.3 billion, respectively. Prepaid payment instruments (PPIs) recorded about 3.5 billion transactions. PPIs can be issued as smart cards, magnetic stripe cards, Internet accounts, and e-wallets, among others.

The digital payment application Bharat Interface for Money (BHIM) had over 600 million transactions in January 2019 alone.

These figures are expected to increase over the next few years.

The future of the financial sector is likely to consist of blockchain technology, which will decentralise banking management from a central authority to a widespread network of computers. Better ATMs that facilitate contactless transactions through smartphones and use biometrics will also be available.

AI is not new in India but will be implemented in a much wider variety of banking applications in the future. Many of the country’s banks use chatbots for customer service and some have even placed robots at their offices. According to several industry findings, more than about 36 percent of financial institutions are investing in such technologies, and almost 70 percent are planning to in the future.

Machine learning and cloud computing, which automate many financial services, could potentially replace human staff. Wearables, like smartwatches and smart glasses, might also be a thing of India’s banking future. Smart glasses could process customer banking information for the employee as the employee is simultaneously doing other customer service tasks.

However, moving into the next phase of the digital revolution could come with several cyber threats and lead to digital vulnerabilities. The country’s banking industry must be equipped to handle fraud and cybersecurity risks. Implementing safety features, such as cryptography and biometrics, can help reduce scams.

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