A Study On Significance of Digitization in Banking Services

International Journal of Application or Innovation in Engineering & Management (IJAIEM)
Web Site: www.ijaiem.org Email: [email protected]

Volume 7, Issue 3, March 2018 ISSN 2319 - 4847
A STUDY ON SIGNIFICANCE OF
DIGITIZATION IN BANKING SERVICES
Mrs.SaranyaPriyadarshini.C
Assistant professor, Department of BBA (Business Process Management)
PSGR Krishnammal College for Women, Coimbatore, TamilNadu, India.
Abstract : Digital Transformation is far beyond just moving from traditional banking to a digital world. It is a vital change in
how banks and other financial institutions learn about, interact with and satisfy customers. An efficacious Digital
Transformation begins with an understanding of digital customer behaviour, preferences, choices, and likes, dislikes, stated as
well as unstated needs, aspirations etc.. And this transformation leads to the major changes in the organizations, from product-
centric to customer-centric view. This era in which we live today is predominated by the word “Digitization”. This word which
has evolved in recent times has undoubtedly become the crux of “Banking Sector” in our country. Banks in our country are no
longer made of just bricks & mortar delivery channels. They have surely revolutionized into the concept of anytime, anywhere.
New mantra for banks says Digitalize or die. Digitalization is mainly concerned with what all banks are required to do in order
to provide better services to the customers. There are various technologies which are to be adopted for digitalization of back
office. It also ensures self-sufficiency to the customers in whichever way possible. The major importance of digital banks lies in
their ability to be omnipresent. Since challenges often give birth to opportunities, so the major challenge in front of the banks
is to digitalize themselves. Enabling them to meet preferences of the people of all generations has also given rise to enormous
opportunities, resulting into the revolutionized version of banking known as “Digital Banking”.
Key words: Cybercrime, Banking, Digitalization, Technology
1. INTRODUCTION
The banks have evolved since ancient times. It starts from the traditional money laundering & bartering practices for
agriculture and other commodities. Abundant possibilities have emerged in the banking sector. The technology
evolution still shapes the nature of global economic activities. It results into a change in the landscape of banking. The
banks in India have originated in the late 18th century. After independence, the nationalization of major private sector
banks enabled more people to have an access to banking.
Many foreign banks also initiated operations in India. Such banks wooed the customers by providing professional
services through digitalization. This led to an awakening amongst Indian Private & Public sector banks to provide
digitalized services. This turn has evolved the “Digital Revolution” in banking sector in India. The banking industry in
India compared to other industries is considered more flexible enabling it to implement new rules & regulations, and at
the same time it is more clients centric. It will prove to be a great support for the digital banking.
Digital banking will surely provide an opportunity for humongous gains in the coming years.The concerns over the
health of Indian banks have been extensive. The new government also has a bold vision for a “Digital India”. This
vision further helped in ensuring appropriate regulatory measures to ensure digitalization in banks. Digitalization has
an enormous impact on the customer behavior. As a result of the evolution of Digital Banking, Mobile Banking via
smart phones has gained preference. Digital Banking is also known as “cyber banking”, “home banking” or virtual
banking.
2. SIGNIFICANCE OF DIGITALIZATION
It is surely considered to be the de-facto agent, bringing about the whole transformation in the banking sector.
Digitalization has innumerable significances, some of which are:
 Going Paperless: Digitalization leads to immense benefits in the form of eradication of paper based society. It leads
to enabling speedy transactions.
 An increased access by the users: Digitalization increases the access of the users of banking facilities.
 Enhancement in the quality of services being offered: Helps in providing enhanced services. Digitalization
ensures the provision of enhanced services.
 Helpful in building up partnerships: Digitalization helps in building up partnerships in order to enhance the
Volume 7, Issue 3, March 2018 Page 65

 An acute escalation in costs: Automation of the back offices might enable the banks to realize tremendous cost
savings. Lack of digitalization often leads to high costs in the form of error costs, maintenance costs, labor costs, and
infrastructure costs.
 Countering Inefficiencies: Lack of efficiencies in the banks is a result of the lack of digitalization, as digitalization
is the most effective way to counter these inefficiencies.
 Enhancing Connectivity: Digitalization in banking is mainly concentrated upon connecting people to their money
more accurately & speedily.
 Ensuring Consumer satisfaction: Helps the consumers to maintain a more organized life. There has been a
dramatic transformation in the level of customer service.
 Widened area of reach: The bandwidth of reach of the banks has also been on an all-time high as a result of the
digitalization. It has also led to a penetration in the banking sector in India. It helps to lead to financial inclusion of
people in the most effective manner.
2.1 Advantages of digitization in banking

 Improved customer experience.
 Reduction of costs for banks and customers as well by using ATMs, cashless transactions etc.
 Technology is non-discriminatory. Everyone will be treated same at banks.
 It reduces human error.
 Repetitive tasks will be eliminated by automation.
 The rural and urban gap will be eliminated.
 Productivity will be increased.
 With the increasing cashless transactions, fake currency threat will be reduced.
 Cashless transactions ensure transparency and reduce black money formation.
 In digitization Cashless transactions counter tax evasions.
 The problem of fake currency notes can be eliminated by digital payment.
2.2 Disadvantages of digitization in banking

 Digitization reduces the effort of employees and hence results in loss of jobs. Loss of jobs will be compensated
through a creation of new jobs such as cyber security, research team for innovation in technology etc.
 Banks will be more vulnerable to cyber-attacks as Cybercrime sand other modes of thefts will be increased.
There is a lack of digital awareness in the country, forget about awareness about cybercrimes.
 A large part of Indian population is digital illiterates so they are not comfortable with banking digitization.
3. DIGITIZATION ON 5 BUILDING BLOCK

 Process Optimization using Lean Principle
 Document Management System for Reduced Paper Work - Some of the prominent tools that could be used are
Kofax, TWAIN, Captiva, Open text, Data cap, WIA, ISIS and SANE.
 Robotics Automation to reduce Manual Effort and build system Intelligence - The prominent tools used in
using Robotics where human intelligence can be set as Business rules are Blue prism, Automation Anywhere, UI path
that can replace human beings where decisions are not required.
 BPM and EI for integrating legacy systems and arriving at one integrated system. Intelligent BPM tools
compress the observation to action to outcome and help Transformation Leaders to handle big change. Some of the
prominent leaders in IBPM are IBM, Oracle, PegaSystems, Kofax, Newgen Software, auraportal and DST. While few
of the organizations who does not want to build a top of the layer above their existing systems, they can also use ESB or
Java tools to integrate multiple Legacy systems. Few prominent ESB providers are Mule soft, JBOSS, Talend, Oracle,
IBM and WSO2.
 IOT - Facilitate Customer with mobile app and use data for Analytics
4. ROLE OF TECHNOLOGY IN BANKING SERVICES

Big data analytics and cloud: Data is obtained from customer posts on social networking platforms, websites, past
purchases, and browsing history. Data collected by tracking email ids that customers use to log in to and access social
networking sites is linked to the email ids they use to register on the website. Various investing options browsed and
liking behavior towards any specific sector or company should also be taken into account. Using big data analytics, this
data is processed and used to generate recommendations for customers when they log in to the website/mobile
app/digital display. Software, which can pull product reviews from social networking sites or review given by financial
experts, is used to display reviews in the review section of the website. A database management software is required to
record data obtained about customer activity/interaction and processed data. This software is linked with the cloud, so

that the data can be accessed from anytime, anywhere. The cloud server also needs to store information about the
availability of products and their locations.
Mobile app/surface: These platforms can help browse through catalogues, check availability and accessing current
status of the finance, buying any product, getting intelligent suggestions, etc...
Biometric: Biometric credentials cannot be lost, stolen or forgotten. Also it cannot be socially engineered, shared or
used by others. There is no requirement of remembering the password or PIN. Also, it's always available with the
respective individual. It provides highest levels of security and assurance of safety. Although biometric provides highest
level of security, it is not as easy to implement as normal username and, password. Also, it brings high cost of
implementation along with care, which need to be taken care since its implementation will is always going to be with
another system / software.
Smart Phones/surfaces/tablets: These products will be used to raise requests and also, provide assistance. The Also
user will be able to review the portfolio of the products. Linkage with the personal portfolio will show impacts of
markets up/down and opportunities & threats too.
Source: http:// Technology in banking services.com

5. TRENDS AND OPPORTUNITIES
 Changing consumer behavior in favor of digitalization
As the market is exposed to disruptive digital services, it is now putting its hands on changing client preference from
traditional banking to its digitalization.Also, India’s demographic dividend is well suited to switch to digital behavior,
with the median age of an Indian expected to be 29 years by 2020 and 900 million population falling in the age group
of 15-60 years by 2025.People have actively started using technology to do banking transactions and avail other
services because they want more convenience at the cost of paying additional price.
 Unpenetrated areas and government initiatives

Around 50% of the non-banked population is targeted and progressing towards the goal of financial inclusion, around
160 million accounts have been opened under PMJDY (Pradhan Mantri Jan Dhan Yojna) with Rs. 500 billion being
targeted to be transferred directly under DBT (Direct Benefit Transfer).
With this much non penetration and government initiatives to push digitalization, banks have tremendous opportunities
and advantages in adopting digital infrastructure.
 Leveraging increased smartphone usage and mobile penetration

Mobile penetration of around 90% is likely to drive financial inclusion.Mobile phones are likely to spearhead the
digital growth in India, taking into account the expected level of penetration and because the youth of India prefer to
use smart phones rather than stand in long queues to avail banking services.

6. CHALLENGES
 As per the report of BCG, FICCI, and IBA; 17% of the respondents were unaware about bank’s digital
offerings, 35% were aware but were not using, 7% were unsatisfied user and 42% were satisfied users. The challenge
here is to convert awareness into usage.
 70% of the MSME and 90% of the shopkeeper transactions were done through cash & cheque, only 9%
MSMEs collect orders online, and only 5% accept payments online. This is completely unacceptable in a digital world
and thus becomes a challenge.
 The research on retail customers show that out of people not using Mobile Banking apps, 22% do not know
how to use it, 18% don’t know about bank’s app and 14% of them have fear of hacking.
7. CONCLUSION
Utilizing digitalization in an efficient manner holds a great importance in India. It is also depicted by the quote of
Nassim Nicholas Taleb, “Banking is a very treacherous business because you don’t realize it’s risky until it is too late.
It is like calm waters that deliver huge storms. Despite the huge potential and well-established promise of digital
financial services, there is a need for the players to adopt a holistic approach on going digital and fusing business
strategy with all the elements of their operating ecosystem to create a remarkable customer experience. Banks may also
need to invest in supporting mobile platforms and analytics, customer service through models like multi-lingual voice-
based interaction and simplified service offerings.
REFERENCES
[1] https://www.linkedin.com/pulse/successful-digitization-banks-through-right-tools-krishnappa
[2] http://cib.db.com/docs_new/Digitalisation_and_the_Future_of_Commercial_Banking.pdf
[3] https://www.sapling.com/8749594/advantage-disadvantage-banking-technology.
[4] http://www.happiestminds.com/whitepapers/digital-transformation-in-banking.pdf
[5] https://assets.kpmg.com/content/dam/kpmg/pdf/2016/05/DigitalBanking.pdf
[6] https://home.kpmg.com/in/en/home/insights/2015/08/financialsectorpov.html
[7] http://indiainbusiness.nic.in/newdesign/upload/Productivity-in-indian-banking-2016- digital-and-beyond-new-
horizons-in-indian-banking.pdf
[8] https://home.kpmg.com/in/en/home/insights/2015/08/financialsectorpov.html

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International Journal of Application or Innovation in Engineering & Management (IJAIEM)

Web Site: www.ijaiem.org Email: [email protected]

Volume 7, Issue 3, March 2018 Page 65

2.1 Advantages of digitization in banking

2.2 Disadvantages of digitization in banking

3. DIGITIZATION ON 5 BUILDING BLOCK

4. ROLE OF TECHNOLOGY IN BANKING SERVICES

Volume 7, Issue 3, March 2018 Page 66

Source: http:// Technology in banking services.com

 Unpenetrated areas and government initiatives

 Leveraging increased smartphone usage and mobile penetration

Volume 7, Issue 3, March 2018 Page 67

Volume 7, Issue 3, March 2018 Page 68

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