Digital trends that will shape banking's future
Blockchain has the potential to revolutionise the global banking sector, as banks take their distribution ledger pilot projects into the production environment to demonstrate feasibility.
This is according to Rajashekara Maiya, VP, global head of business consulting and product strategy at digital banking solutions firm Infosys Finacle, speaking at an Infosys event in Johannesburg yesterday.
Discussing the digital trends expected to shape the future of banking, Maiya explained that banks are now moving away from the blockchain proof-of-concept phase, when they were initially experimenting with the technology, to now deploying it to streamline operations and improve customer service.
"We see more blockchain remittance platforms being used for payment services, and the distribution ledger platforms being applied to conduct trade finance services, and also to verify digital identities, as part of the know your client compliance requirements.
"More and more progressive countries are doing this, such as the United Arab Emirates countries, where some governments have committed that by 2020 all citizens' documentation will be on blockchain. This will enable the creation of digital identities which can be securely shared between organisations.
"While South African banks have also joined this journey, it will take some time before they catch up with their western counterparts," noted Maiya.
Other trends expected to shape the future of banking are banking-as-a-service, cloud computing, application programming interfaces and the omni-channel journey, according to Maiya.
Banks are increasingly strengthening their relationships with third-parties such as fintech players to improve their business performance through open banking models.
As more banks open their application programming interfacesto allow third-parties to create client services and tools, they are now looking at offering a completely packaged banking-as-a-service solution, said Maiya.
"With more countries offering new banking licences to fintech players, instead of offering their application programming interface in silos (an online banking solution, a mobile banking platform, an infrastructure; security capabilities, etc) more banks will start packaging these and offering them to third-parties as a service.
"South African banks, however, are not yet doing this, as they are still dealing with legacy issues, but we are expecting to see these type of collaborations locally soon."
Initially, banks were experimenting a lot with cloud as they were apprehensive to move all their production and operating environment into a cloud environment. This, said Maiya, is slowly changing.
"Banks are now making a comprehensive move towards cloud as they leverage the full benefits of the technology to transform IT infrastructure costs from a capital expenditure to an operational expenditure.
"Furthermore, cloud provides banks with capabilities for scaling up or scaling down transaction volumes, contracting, strengthening data security to meet compliance requirement and it's also a viable cost saving option."
Banks are making a comprehensive move towards improving their customer experience across various digital channels, continued Maiya.
"If you look at how the average customer is exposed to so many digital platforms, such as WhatsApp, Facebook, Twitter and ride-hailing apps, etc, banks are creating a seamless interface between these apps. An on-boarding experience that's highly integrated between the banking platforms and external platforms will play an important role in the success of the digital journey of these banks."
He referenced Paytm, an Indian e-commerce payment system and digital wallet that has partnered with global banks and e-commerce retailers to enable clients to purchase goods, pay for services and book travel trips.
"The impact of the fourth industrial revolution will be felt across all industries, and banks with a digital vision and conviction will be the ones to come out successful."