Banking in India is in a state of flux. Interconnection of banks and branches has streamlined processes and compliance. There is higher transparency and visibility. Automation has rewritten how customers approach banks and banking for the better. What is interesting is that most of these changes have been driven by non-banking factors, primarily technology. However, technology has brought along its own set of problems that banks today are hard-pressed to deal with.

The biggest challenges that banks today face, despite technology and often because of it, are meeting customer expectations and regulatory requirements while keeping a handle on the bottom line.

1. Customer expectations: Technology has changed the way people interact, consume, and transact. The customer demand is for an extended value proposition that is more personalized and instant. Information is no longer a luxury or a perk. With the click of a few buttons, everything you need is right there in the palm of your hand. This has redefined the way people transact. An increasingly online and mobile customer base is rewriting the meaning of quality service.

These days, it is all about customer experience. The e-commerce trend of comparing and shopping for the best deals is making its presence felt in the financial sector as well, and many banks are feeling the pressure to deliver the level of service that consumers are demanding.

2. Compliance: The transparency and speed that technology enables has enhanced its appeal not just among customers but also regulators. This has given rise to various regulatory compliances, especially around data confidentiality and integrity measures for customer data, authentication, access control, etc. However, these regulatory requirements change and continue to increase with time, and banks are under pressure to be compliant, and build systems and processes to keep up with the escalating requirements.

3. Cost: All the efforts to meet these expectations and compliances can be financially draining. There is the expense of regularly upgrading legacy systems, with the definition of legacy rapidly varying from decades old to months old at times. Then there is the cost of all the enhancements, additions, replacements, and vendor contract negotiations. All these make it harder each day for financial institutions to deliver measureable business results from their technology investments.

Coupled with this is also the indirect cost of creating and managing a highly cost-intensive business unit with its own chain of command, strategy, and workforce, which requires a lot of investment in terms of time as well as expertise. These challenges continue to escalate and banks that fail to innovate, risk losing a significant amount of business. A holistic solution would be a sustainable, scalable technology that can meet all existing regulatory and customer demands of the present and future, and integrate smoothly with the existing infrastructure. Such a solution can turn each of these challenges into opportunities. The Fintech sector, which evolved as a response to the demands of the BFSI sector, both the consumers as well as the industry, is uniquely poised to deliver these benefits.

Automation has rewritten how customers approach banks and banking for the better. Most of these changes have been driven by non-banking factors, primarily technology

On one hand, as an enabler for the core business of the banking sector, an online marketplace can help financial companies cut down on associated establishment costs without compromising on the quality and range of services they can offer customers. For one, it takes up the entire onus of setting up, maintaining, and managing a technology platform that provides all the benefits without the associated headaches in an extremely cost-effective manner. Then again, it gives an impetus to enable the automation and digitization demanded by the mobile online customer. Online platforms have the ability to make the entire process of documentation and verification paperless and presence-less without compromising on an individual’s security requirements. While this can win them big brownie points from customers, they also help financial companies avoid recursive and, at times, redundant manual processing and verifications, making the process simpler, faster, and less expensive.

On the other hand, they provide attractive additional benefits in the form of visibility and reach. A platform like BankBazaar.com sees over 9 million visitors per month on an average. Attracting this high a footfall is not impossible; however, it would not be easy or inexpensive for any stand-alone financial company to achieve. More importantly, it is difficult to justify such a cost and time-intensive activity when there are readily available low-cost, high-technology options that provide not just this level of visibility, but also a much higher reach. Online platforms, especially through the medium of smartphones, can reach customers residing in remote and difficult-to-reach locations and cater to their banking demand very effectively without state-of-the-art brick and mortar infrastructure. This opens up new geographies that were previously inaccessible to financial institutions at no extra cost.

None of the problems that the banking sector face is insurmountable, especially if banking and Fintech work together cohesively as one unit. What is more, they can complement each other to provide exceptional services to the consumers, which is ultimately the one thing that will help both the sectors succeed.