The Rapid Changes Brought Into Banking Due To DigitalizationMay 17, 2018
We have well and truly arrived into the digital era, and every facet of our lives is seeing change on a scale never seen or imagined before. People are buying clothes, ordering food, booking tickets, conducting meetings with colleagues or clients and doing so much more in a remote, digitized way. The modes of communication have changed beyond recognition in today’s age. Just like all these sectors, the banking and financial services industry has also been hit by digitization. Transactions, compliance, and customer acquisition are just a few of the banking activities that are now digitized and done in ways very different from how they were being done half a decade ago. Let us look at some areas where change is upon us, and also look at what bankers need to be doing to adapt to this change seamlessly.
New Customer Acquisition
Gone are the days when multiple visits to bank branches would be required in order to open a new account or create a deposit. Numerous forms were filled up and several documents and signatures were needed, and it used to take weeks, if not months before a new account was opened and operable. Today, bank officials can go to a customer’s premises with just a smartphone and initiate the process of account opening. Every document gets scanned there, and details are input directly into the device. The account gets opened either the same day or within a few days at most. Potential customers can also download the app of the bank and initiate the account opening process by themselves.
Artificial intelligence and machine learning have begun to be used in a big way to ensure the bank’s compliance with regulatory requirements. Fraud, Risk, and Money Laundering are some of the areas where artificial intelligence is being used to detect patterns in banking activity of clients or to detect unnatural activity in order to forecast possible fraud. The regular compliance reporting and vetting of transactions for risk are also being automated to a large extent. What this does is to reduce the risk of human error, and it also reduces the chance of a particular bank official taking an individual judgement which could be biased.
Banks actively discourage clients from visiting banks to carry out their regular banking transactions. Banks now have apps where regular transactions like transfers, cheque book requests, submission of compliance forms, and even requests for address change can be done remotely through the app or through internet banking. This also frees up bank employees for more productive work, and a contrarian point of view says that this paves the way for reduction of manpower.
These were just three examples of how digitization has changed the way we bank. But the change affects not only customers of the bank. It also changes the way bank employees go about their business. As banks grapple with the challenges of coping with these changes, some of their employees who have been in banking for a decade or two are finding it a big challenge to adapt their working style to the new requirement. The leaders at these banks need to sensitize the earlier employees and take them along on this journey of change. A few decades back, when computers began to be used by all bank employees, a similar churn had been noticed among employees who had so far been used to maintaining the ledgers in hard copy. Those who could adapt and train themselves did survive, while the rest perished. Similarly, the bank employees of today would need to be completely attuned to the digital way of doing business with the bank’s customers.