Technology and Banking Sector - An Essay

This essay has been written by my son, Mohit Gandhi. How do you like it? Do tell.

Technology is the application of scientific knowledge for practical purposes so as to improve overall well-being of humans. Since the industrial revolution, technology has changed our lives drastically, and with the advent of internet the change is happening at a much faster pace. Our phones are becoming sleeker and more powerful, cameras have gone completely digital, and the hand-held devices are giving access to all the world’s music and movies in a matter of a few clicks.

With the pace of technological development, it can be anticipated that we will become an even greater technology-reliant society. Driverless cars will become a truth; the smart will move on from mobile devices to wearable devices such as contact lenses. Even though robots and computers are an efficient means of production, 3D printing will most probably render humans capable of making anything at home.

In the business environment, technology will make businesses more and more competitive, with robots and machines replacing all of the human labour. This will demand long-term investment from companies and will have serious social repercussions. Further, with advancement in data analytics, companies will cater to an individual consumer rather to a region or group. This will also lead to more people taking business decisions based on the information provided rather than following guts and instincts.

Most recently banking was all about real estate and banks were fighting hard to open their branches in prime locations. Multiple branches of a bank in a country used to depict strength, stability and safety. With ATMs, telephone banking and now internet, banks have increased convenience to the customers and helped expand a bank’s reach. However, it seems we are at a digital tipping point, as with rapid technological progress, all the aspects of banking can be conducted online. There is a decrease in face-to-face interaction, and customers are demanding to transact at their own convenience, with all the advice and information to be provided at the click of a button.

Today, banks have developed extremely complex and often costly operating models, with separate operations, technology and risk management process for each of their products. Further, banks are offering multitude of products, each requiring a specific operational customisation to serve. Moreover, most banks have grown inorganically, and thus few have tackled the expensive work of integrating and simplifying their platforms.

In future, for any bank to succeed, it needs to redesign its operating model significantly, with a major focus on simplification and automation so as to improve customer experience as well as reduce costs, operational risk and prepare for the next generation of banking. It can be predicted that by 2020, the distribution of products would change drastically. Products will not only be built into the channel, but rather be developed on shared platforms, thus helping products being shared across all channels. The future in-branch bankers would use the same technology and infrastructure that will be available to branch customers. This would help reduce operational costs and distribution costs significantly.

Thus, banks need to understand that the value of a branch will be redefined. There will be specific flagship stores to offer information, increase customer engagement, and improve loyalty and sales. Further, we can expect expanded ATMs to be placed in in-store as well as other well-marketed sites, and will provide the point for marketing, sale, transaction and cash handling. Further, partnership with third parties in the fintech industry would significantly decrease the real estate costs. These changes will make each and every bank a direct bank, and banking operations will experience a significant and substantial transformation.

Further, with the advancement in technology, new entrants could come up rapidly, thus developing more and more competitors, and reframing and reshaping the entire playing field of the banking sector. Also, banking licenses, and marketing budgets of a bank will become a significant aspect in the banking sector in the future.

With all such challenges, banks need to organize themselves around the customers, instead of on products or on channels. Banks will need to recognize the uniqueness of each and every customer, thus tailoring their product and offerings according to the needs and long-term goals of the customers.

Today, social media channels and traditional channels co-exist, however, in the future, one will see financial marketers focussing more and more on social media. Social media marketing will become the primary medium for the financial institutions to connect, inform, aware and engage the customers. Social media will become a more potent method of understanding customers, helping differentiate the collective social mindset from a person’s unique approach.

Additionally, with digital banking and the pace of innovation because of technology changes and increase in Fintech based companies, there will be compressed revenues for the banks. Thus, banks need to come up with new and innovative products to cater to the masses as well as individuals, thus taking advantage of economies of scale that will come into picture.

Thus, the potential scope of technology is infinite in the next twenty years. The technology that we see in the sci-fi films would become a reality in the near future, thus changing the landscape of banking sector as well as the entire world. As we progress as a human race and see continuous technological progress, however, we must also consider the dire consequences that such technology might pose along with the bright and life-changing future.