How Internet of Everything is Powering Disruption in the Banking Sector
Arindam Mukherjee, Head - Banking & Financial Services Sales, Cisco India & SAARC
The article was published in ET CIO
Banking and financial services have historically been very conventional sectors steeped in traditional practices. However, the industry is experiencing a tectonic shift, it is getting increasingly competitive due to introduction of new players, and complex due to the changes in consumer demographics and behaviour leading to a change in the way services are consumed and, introduction of new services and applications that will require the players to be more responsive.
One concept that is bringing about an unprecedented disruption in the segment is Internet of Everything (IoE) which Cisco defines as the convergence of people, process, data and things. And while adoption of Internet of Everything might be at a nascent stage, a recent Cisco study revealed that using Internet of Everything, banks and financial service providers in India could see their bottom-lines increase by up to 11%.
Besides these, there are some socio-economic factors in India that will drive growth in the sector. For instance the 'Digital India' campaign which, envisions a pivotal role for technology and internet, to transform the lives of citizens. To make this happen, the government is committed to connecting all the 250,000 gram panchayats in India with broadband internet, and while that will happen by 2016, Indians have become one of the largest sets of mobile users in the world with smartphones growing at a breakneck speed.
IoE and Banking
The sheer number of devices (internet-enabled and mobile) that have the potential to be connected offers banks tremendous opportunities to offer cutting-edge services. This includes remote expert advisory using video. These services offer banks a two-fold advantage, one, it enables them to reach the customers where they are - resulting in increased engagement, and two, it allows the banks to save on physical infrastructure costs and deploy additional investments in technology infrastructure that could offer them a better return on investment.
On the economic front, financial inclusion is a focus area for the NDA government which led to the launch of Pradhan Mantri Jan Dhan Yojana under which over 13 crore accounts have been opened so far, close to two-thirds of which are in the rural areas. So, while it may not be feasible to have physical infrastructure everywhere, mobiles and internet could be used to reach out to those customers. This also translates to a lot of information and data that could be analysed by these banks to derive insights into the habits of this newly banked audience to offer them relevant and enhanced services.
The other crucial element, perhaps the most detrimental factor that will shape the banking industry in the years to come is the segment of users comprising of millennials and tech-savvy customers. According to a recent Cisco survey, 46 percent of these customers feel that their banks do not understand their individual needs, as a result close to 30 percent of existing customers are willing to try other banks for the subsequent financial needs. So now it is the responsibility of these banks and financial services providers to address the situation to retain their customers and attract new ones.
According to the same survey over 60 percent customers are willing to shift to banks that offer virtual advice, nearly 70 percent would do the same if they are offered analytics-driven investment advice and nearly 90 percent of users would move if a bank offers one or more mobile-enabled solution. While this clearly spells out what the banks need to do, it also offers them an opportunity to innovate and bring in technology-enabled services to cater to what could be their largest segment of users in the next few years.
However adopting Internet of Everything also comes with a unique set of challenges that the industry will have to address before they start reaping the benefits. To begin with, players would need a robust information management system capable of handling large amounts of data in a secure and reliable manner with the ability to scale based on the demand.
The other challenge, and critical from a business perspective is the ability of banks to maintain the same levels of delivery and customer experience of services offered through multiple touch points including social media, mobility and video. And finally banks and financial services companies will have to address compliance and regulatory issues related to managing sensitive information.
A good case of what Internet of Everything and digitization can do, and what the future banks could be like is SBI InTouch. Launched by State Bank of India, In Touch is the digital avatar of a traditional bank which brings together the best of a traditional branch and internet-enabled services. The services include automated kiosks that deliver instant services such as account opening and facilities that offer remote expert advisory through high definition video conferencing. And at the backend, powerful analytics engine collate data and analyse them in real-time to offer insights enabling the bank to offer better services and cater to the new age customer.
While the need to adopt Internet of Things to survive and grow is a foregone conclusion, it will be the pace at which it happens combined with the creative and innovative way it is done that will determine the future of the industry. And the future is almost here.