India has witnessed a massive increase in digital transactions, from just 2.4 per capita in 2014 to 22 in 2019. The Reserve Bank of India estimates this figure could surge exponentially to 220 by 2022 as digital payment users triple to 300 million.
2020’s explosive growth can be attributed to COVID-19 extended lockdowns, which partially shut bank branches for months, forcing consumers away from physical currency. The strong momentum is set to continue as contactless payments, including direct cash transfers using systems such as United Payment Interface (UPI), become the norm in the post-pandemic world. Research firm Statista expects almost 590 million Indians—or about half the country’s population—will use digital payments in 2020, and that the number will cross the 900 million mark in 2024.
Since 2015, Indian banks have evolved from being branch-centric. They are becoming increasingly digital to provide customers a secure and seamless experience with the ease and convenience of e-commerce. Banks no longer compete only among themselves. Non-traditional players — including FinTech and neo-banks — are entering the global marketplace.
Open Banking is facilitated by application program interface (API) technology and has helped banks to create a digital ecosystem. This includes niche competitors such as e-wallets and a host of payment service providers ranging from FinTech firms to mobile phone companies and corporates. Banks can provide tailor-made financial products to existing customers, particularly payment solutions. This opens the doors to entrepreneurship opportunities and a host of innovations.
The single biggest change that has happened in the banking industry is that the customer has truly become the center of the banking experience. All banks today are working in a collective fashion to ensure that customers get the convenience and ease of banking they expect.
Founded in 1931 in Kerala, Federal Bank pioneered the use of technology in India to improve operations. It was among the first banks in the country to computerize all its branches. Guided by its motto, “Digital at the fore, human at the core”, Federal Bank provides a gamut of digital services to its 10.4 million customers, while also taking pride in its relationship banking capabilities through more than 1,250 brick and mortar branches.
Federal Bank is also focusing its digital capabilities on bridging the credit gap facing India’s vast Micro, Small and Medium Enterprises (MSME) and rural sectors that remain underserved despite being the backbone of its economy. Open Banking has enabled Federal Bank to bring on board FinTech partners as well as exchange houses and other banks to offer plug-and-play solutions to its corporate and retail customers.
When embarking on its digitization journey over a decade ago, Federal Bank recognized that it needed a technology partner that could stay ahead of the technology curve and provide agile, cutting-edge solutions and troubleshooting capabilities.
It chose IBM.
Federal Bank’s mobile banking application, FedMobile, is developed on IBM's MobileFirst Platform and uses IBM Security Trusteer Mobile SDK to enable secure banking. The Bank leverages IBM API Connect (Gateway) on IBM Cloud for its open banking platform and has placed 100 APIs to enhance customer experience through seamless mobile banking.
IBM has been a partner with Federal Bank for 14 years now. Ever since we moved into the core banking solution, IBM has been a very integral part of our technology journey and our technology landscape. We have had remarkable support from IBM.
Data is said to be the new gold. However, despite its potential value, most banks do not always mine and use data effectively.
Cognitive computing systems will soon enable banks to create value and enhance revenue by processing vast amounts of structured and unstructured information and serving it to customers and bank employees through simple, human interfaces. The next stage in the evolution of banks will, therefore, be from digital to cognitive banking.
“How customers request, receive, and act upon information from a bank defines their experience with the brand,” says Likhit Wagle, IBM Global Industry General Manager Banking and Financial Markets.
Banks that best collect, curate, and present information to meet their customers, need both banking and beyond banking — and the front line that interacts with those customers — will set themselves apart.