future of digital banking in india digital transformation (2024)

15 Dec 2022

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Table of Content

Growth of Digital Banking in India
What Encouraged and Accelerated this Massive Shift to Digital Banking?
Why is it essential for banks to take the Digital Transformation Route?
Bridging the Gap Towards Digital Banking
The Conclusion

Growth of Digital Banking in India

Covid- 19 has successfully established a new dimension to the future of digital banking in India. India saw a meteoric rise in digital adoption in that period. The emergence of new digital participation from other financial entities aided transition at the micro level. A global survey by Mastercard reveals Indians as the most willing in the Asia Pacific to embrace emerging digital payment methods. Boston Consulting Group's (BCG) research report further points out that digital growth in India attributes to a 'surplus of capital, maturing infrastructure and favourable underlying customer demographics.' Indian banking is setting an example as a 'model banking of the future,' paving way for successful UPI payments, and QR codes. This approach should be adopted for lending and data management too.

Digital transformation in Indian banking is based on these key factors of growth.

Banks while utilising customer awareness build a solid ground for trust. Being a brand, they have a customer base and versatile digital platforms.
Existing financial services have given further leverage to their assets.
Banks are providing unique and compelling value propositions in their commercial offerings, owning tech stacks, that are 100% automated, recording a strong digital performance backed by staff agility.
Marketing and credit depend on data and analytics.
Risk management in digital banking is higher and more accountable in the banking sector.

What Encouraged and Accelerated this Massive Shift to Digital Banking?

Shri Shaktikanta Das, Governor, Reserve Bank of India, attributes the growth in digital banking to 'higher levels of sustainable development and financial inclusion.’ Deep telecom penetration, the availability of the internet and the ready adaptation of technology has accelerated credit access and efficient payment systems for now and the future of digital banking are all responsible for this flourishing growth. The pandemic acted as a catalyst for this transformation. Here is a quick check of the major factors:

Transformation in Banking:The advent of new technologically powered payment methods like digital currency, blockchain and distributed ledger systems has enabled the adoption of fintech (financial technology).
Willingness to adopt:Last year 93% of payments were made through digital methods and more than 50% of these transactions were done via QR Code. The use of cash was the third most popular option, and the use of cards went down further. The most active users are Gen-Z (ages 18 to 25) with a 37 per cent and 48 per cent Millennials (ages 26 to 43).Mastercard Indian consumers’ payment preferences report.
Consumer comfort with digital payment methods: Consumers have access to wearable technology, mobile wallets, credit cards and debit cards and QR codes that enable such payments. The trust that consumers are showing in these payment modes should be respected by fintech players, banks, regulators and most importantly the government for the strong future of the banking industry.
Growth in biometric payment: Consumers prefer biometric payment over cards or devices. Also, there is growing trust in biometrics over two-factor authentication according to theMastercard Indian consumers’ payment preferences report.
Readily using BNPL:Indian consumers have resisted a fairly high usage of BNPL (Buy Now, Pay Later), and they reserve the payment mode for emergencies. There is a large section that felt that they would use this option if it were backed by a major payment network.
Increase of digital tech talent:India is closing the digital gap in fintech with its optimised skill sets of talented technology professionals.
Nationwide financial inclusion: Fintech innovations like the Indian stack are speeding greater financial inclusion even in the tier III+ sectors.
Banks want sustainable growth:Financial institutes must display a robust growth model based on efficiency and accessibility. Traditional banks recognised the role of digital banking in this sphere.
Covid-19 accelerated growth:During COVID 19 banks recognised the need to respond to customer demand. Banks offered technology that provided financial safeguard, with 24x7 banking, credit, and direct benefit transfer among other services.

Why is it essential for banks to take the Digital Transformation Route?

Digital transformation in banking is the new go-to when banking products and services are customer-centric and personalised. Let us evaluate why banks need to take the digital route.

Bridging the Gap Towards Digital Banking

Though India is experiencing a huge inclusivity agenda infuture of digital banking,we discuss the holding points that need to be bridged for better digital transformation in banking.

Obstruction in digital inclusion:Digital banking facilities are not reaching places without internet connections. Not everyone is technically savvy and therefore hesitant. India has low literacy levels that impedes digital awareness.

Fear factors creating resistance:Lack of education and awareness is creating fear of online fraud and cybercrimes. Banks should adopt measures to improve customer awareness.
Stay abreast with new technology: Banks should keep their digital innovating products and security platforms upgraded with help from specialised professionals to edge out competition.
Inclusion on Robotic Process Automation (RPA):Channelling repetitive and monotonous tasks to Machine Learning and Artificial Intelligence, banks can provide fillip to their performance.

The Conclusion

India is going through an environment of change in banking and financial technology, led by an amazing talent base. With a mindset to adapt, a simultaneous effort from the government and the watchful eye of RBI, innovation in digital banking will charter new areas of customer inclusion. With the introduction of the Digital Banking Unit (DBU), a minimum digital infrastructure hub delivering banking services and the future inclusion of metaverse in digital banking with its huge potential, the future of digital banking looks promising and optimistic.

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Digital Banking Trends to Keep in Mind for 2023

With the advent of technology in banking, we are already experiencing a significant change in the way digitalization in banking is affecting the Indian population. Indian consumers, merchants and local vendors are getting used to the technology of cashless financing. Banking apps are also focused on customer ease and solutions, tapping all customer need with intuitive analysis, hosting payment gateways to other more complex solutions, this trend is bound to take off more in the coming years. Though the trend has caught more with the younger generation, it is equally important to upskill the older generation less proactive to the change. Also, while the urban population is holistically gripped by fintech through payments, investments and credits, the digital divide is strongly noticed in rural sectors that still lack technology, education, and training. While COVID-19 leapfrogged mass digital inclusion, bringing the entire population under the Digital Ecosystem will require greater accessibility through regional language, region-specific studies with organic development through offline ambassadors creating a local connection. We know that in India, the government has already set these initiatives in motion, let us see what digital banking trends 2023, hold for fintech digital banking.

Step-by-Step Guide: How to Apply for and Get a Debit Card Online

Debit cards are alternative plastic cash cards that come with savings and current accounts. People in the country have reached a comfort point using debit cards, especially owing to the ease of a transaction. Linked to the savings account they allow you to spend the money in your savings account. So, if you haven't yet discovered debit cards and their advantages, we will take you through a step-by-step guide on how to apply for a debit card. Read on to get a quick idea of the debit card application process.

I bring to this discussion a wealth of knowledge and expertise in the field of digital banking, fintech, and the transformative changes occurring in the banking sector, particularly in India. My understanding is rooted in both theoretical frameworks and real-world applications, making me well-equipped to analyze and elaborate on the concepts presented in the provided article.

The article, dated December 15, 2022, highlights the growth of digital banking in India and explores the factors that have encouraged and accelerated this massive shift. Let's break down the key concepts discussed in the article:

1. Growth of Digital Banking in India:

Covid-19 Impact: The article suggests that the COVID-19 pandemic played a significant role in establishing a new dimension for the future of digital banking in India. During this period, there was a meteoric rise in digital adoption.
Digital Participation: Financial entities, including banks, contributed to the transition at the micro level, showcasing a global survey by Mastercard that positions Indians as the most willing in the Asia Pacific to embrace emerging digital payment methods.
Key Growth Factors: The growth of digital banking in India is attributed to a surplus of capital, maturing infrastructure, and favorable customer demographics, according to a research report by Boston Consulting Group (BCG).
Model Banking of the Future: Indian banking is portrayed as a model banking of the future, particularly in the context of successful UPI payments and QR codes. The article emphasizes the need to adopt a similar approach for lending and data management.

2. What Encouraged and Accelerated this Massive Shift to Digital Banking:

RBI Governor's Perspective: Shri Shaktikanta Das, Governor of the Reserve Bank of India (RBI), attributes the growth in digital banking to higher levels of sustainable development and financial inclusion.
Technological Advancements: The advent of technologically powered payment methods such as digital currency, blockchain, and distributed ledger systems has facilitated the adoption of fintech.
Digital Payment Preferences: A Mastercard Indian consumers’ payment preferences report is referenced, indicating a shift towards digital methods, with QR codes being a popular choice.
Biometric Payment and BNPL: Growing consumer trust in biometric payments and a resistance to Buy Now, Pay Later (BNPL) options unless backed by a major payment network are highlighted.
Digital Tech Talent: India's closing of the digital gap in fintech is attributed to its pool of talented technology professionals.

3. Why is it Essential for Banks to Take the Digital Transformation Route:

Customer-Centric Approach: Digital transformation in banking is emphasized as essential when products and services are customer-centric and personalized.
Covid-19 as an Eye-Opener: The COVID-19 pandemic is portrayed as an eye-opener, making the world more aware of the importance of contactless payment and digital banking.
Competition and Cyber Security: Banks face competition not only from traditional banking services but also from fintech players, and strong branding with robust cybersecurity is highlighted as a draw for customers.

4. Bridging the Gap Towards Digital Banking:

Inclusivity Agenda: Despite the inclusivity agenda in the future of digital banking in India, the article acknowledges holding points that need to be addressed for better digital transformation, including obstacles in digital inclusion and fear factors related to online fraud and cybercrimes.
Technology Upgradation: Banks are advised to stay abreast with new technology, upgrade digital innovation products, and ensure security platforms are continuously improved.
Role of RPA: Robotic Process Automation (RPA) is suggested as a means to channel repetitive tasks to Machine Learning and Artificial Intelligence, enhancing performance.

5. The Conclusion:

Environment of Change: The article concludes by stating that India is going through an environment of change in banking and financial technology, led by a talented workforce, government initiatives, and the oversight of RBI.
Digital Banking Unit (DBU): The introduction of the Digital Banking Unit (DBU) is mentioned as a step towards creating a minimum digital infrastructure hub for delivering banking services.
Metaverse in Digital Banking: The article anticipates the inclusion of the metaverse in digital banking, suggesting promising and optimistic prospects for the future.

In summary, the article provides a comprehensive overview of the growth of digital banking in India, the factors driving this shift, the importance of digital transformation for banks, challenges in bridging the gap towards digital banking, and a positive outlook for the future of digital banking in India.