How financial institutions are empowering themselves through the use of cutting-edge technologies.
To succeed in a connected world, a financial service provider must do more than just manage money it needs to manage customer experience, drive operational excellence and develop higher quality leadership and talent, all the while responding to constant change and unlocking new possibilities grounded in data. Globally, financial institutions are increasingly recognizing the threat of disruption from new age players and are committing to innovation. We believe the key focus areas of empowerment and improvement for financial institutions will thus be customer engagement, operational efficiency and exploring growth avenues. As technology has increased information exchange and reduced transaction costs, financial institutions must grapple with continuously created new and useable data.
- Taking service to the customer: The goal of innovation will be to make financial services omnipresent. To this effect we are seeing financial service providers go increasing digital as cost of transactions continue to decrease. Financial service providers are experimenting with technology that enhance consumer experience. We may eventually see financial services evolve from a product based to an experience-based sale.
- Ensuring service delivery standards: Sale of financial services is one of the hardest sales to close thus banks witness one of the highest churn rates at the Relationship Manager (RM) level. This leads to customer dissatisfaction as continuity of service is not maintained and service levels are dependent on the quality of RMs. The role of RMs can be partially digitalised or automated with a digital sales assistant that can help reduce the learning curve of new RMs and ensure the level of service is maintained. In the post-pandemic world customers also seem to be more open to self-servicing options. Many financial service providers are already experimenting with this model.
Operational efficiency :
- Automation : The efficiency of employees is a function of the tools they have available to them. In a post pandemic world, the growing importance of remote working technology can improve employee performance by giving them real-time inputs on evolving data points and clearing bandwidth for more complex and knowledge-oriented tasks . It can also help financial service providers keep track of regulatory requirements and record keeping
- Underwriting and Collection: Technology can fortify lending decisions by adding non-traditional parameters to the decision-making engines. For instance, a signal methodology for identifying developing stress in a portfolio. Such kind of predictive technology will likely reduce delinquencies and boost profitability.
- HR and performance management: Technology-driven performance tracking can help the ‘fleet on the street’ align with business objectives better and can be capitalized for improving performance and overall attrition
- Fraud identification: Technology can also used to reduce the chances of money laundering by identifying suspicious activity patterns such as moving money to multiple accounts, finding large single-day cash deposits, opening many accounts in a short period, or activity in dormant accounts.
- Cybersecurity: Technology improves the effectiveness of cybersecurity systems where it builds on data from previous threats and then learns the patterns and indicators to pre-empt any security breach. AI is also used for monitoring internal threats or breaches and suggests mitigative actions, resulting in the prevention of data abuse or theft.
- Increasing cross-sell within existing customer base: Analytics can help sales teams establish a better customer need and product match, thereby increasing the probability of sales. Artificial Intelligence tools and data scanning can help pinpoint the customers’ preferences and thereby helping to reach the customer with the right combination of products
- Sourcing new clients: Banks are sitting on one of the most fertile consumer data in the country: Payments. UPI payments in the country reached a cumulative over 6 billion with transactions worth more than INR 10.5 trillion in July 2022 alone. Banks form the backbone of the UPI network with RBI, the banking regulator in process of crystallizing regulation around customer consent for data sharing. Banks can leverage payment aggregators for mining new clients. This in combination with the use of analytics for cross-selling could translate into multi-fold revenue options.
Innovation is now a key component for successfully running a financial institution. With more transactions going digital, soon financial institutions will be differentiated not only based on their product offerings but by the service experience they provide to both internal and external stakeholders. Thus, technology not only empowers financial institutions but also its consumers.
Views expressed above are the author’s own.
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