BFSI Sector Counts on Hyper Automation Initiatives

With new challengers flooding the market with cloud infrastructure and a mobile-first, digital proposition, the fight for market share among the BFSI players has intensified. This is what makes automation such a compelling proposition, as any opportunity to slim down the operational costs will be welcomed to drive increased profitability. From automating on-boarding processes in lending to improving data quality and utility for better decision making, hyper-automation has the potential to augment workers ability, whilst reducing operational costs and human error

Amit Singh

The BFSI sector in India is rapidly changing for the better. Contrary to several gloomy forecasts, the Indian banking sector has been surprisingly resilient in the face of the pandemic. This is because corporates, which account more than half the loans, are in better shape and banks are well-capitalized. This bodes well for loan growth and bank performance post the pandemic.

In fact, Reserve Bank of India’s (RBI) Financial Stability Report (FSR) of July 2021 makes it clear that the impact on the banking system of the two pandemic waves has been less than what most people might have feared. This is a remarkable outcome considering that the banking system had entered the pandemic in a state of stress.

This is reflected on the fact that the share of financial services in India’s market capitalization has increased from ~6 percent in FY01 to ~24 percent in FY21. Despite this considerable growth, we are still under-penetrated in various sub-segments of banking and financial services – be it loan products, mutual funds, demat accounts, insurance – both life and non-life, wealth management, etc.

Modernizing Financial Ecosystem

India’s low penetration across most sub-segments of banking and financial services businesses, coupled with Covid-19 pandemic and high competition has led to financial organizations embracing advanced digital solutions and modernizing banking infrastructure. With the evolution of innovative, new-age technologies like Artificial Intelligence (AI), Machine Learning (ML), and automation, digital banking is climbing new heights.

In fact, we are witnessing a revolution in the Fintech world that has transformed the banking industry into a far more efficient and profitable business. India has indeed become a global Fintech superpower. India is amongst the fastest growing Fintech markets in the world. Of the 2,100+ FinTechs existing in India today, over 67% have been setup in the last 5 years. The Indian Fintech market is currently valued at $31 Billion and is expected to grow to $84 Billion by 2025, at a CAGR of 22 percent.

These trends have many people inclining towards digital interactions and transactions with their banks. As of May 2021, India’s United Payments Interface (UPI) has seen participation of 224 banks and recorded 2.6 billion transactions worth ~$68 Billion representing a jump of 15x from just 3 years ago for the same period in 2018.

In addition, Neo-banks in India are emerging as a key segment for growth in the space – with over 15 Neo-banks currently in India, several of them under development or in beta stages. The segment has been growing steadily, with several private banks partnering with these Fintechs to explore synergies and better means of service-delivery. 

“Unlocking of the true potential of this sector to reach out to crores of Indians has just kicked off with the digital transformation that is currently under way. In light of ongoing pandemic, BFSI organizations today are focusing heavily on the use of technology to enhance their risk monitoring and management capabilities. Indeed, 2021 will be re-imagined by some of these advanced technologies and their impact on all aspects of banking and enterprise risk management,” states Anuj Singhal, Founder & Managing Director, Techplus Media Group.

Reimagining BFSI with Digital Opportunities and Innovation

Innovations around automation have grown aggressively over the last 2-3 years, which is targeted towards driving customer experience and enable them use services seamlessly. “Moving forward, innovation and digitization must be inclusive and be targeted towards customers,” says Rajendran N, CEO, Indian Financial Technology & Allied Services (an RBI subsidiary). Giving an example he highlighted that UPI has created huge changes in the financial service ecosystem. He lists three factors that worked in favor of UPI’s proliferation:

  • Customer experience: UPI enabled customers to use their devices to authorize the payments; cards are no more required.
  • User experience: UPI enabled use of minimal infrastructure to receive payments; just a QR code is required to get the ball rolling.
  • Security: UPI enables end-to-end security of the card and personal details of the customers.

He adds that new technology like AI, automation and RPA are being used to create new experience for customers, new products/services, and enhance current service offerings. “These technologies also enable organizations to identify efficient and trusted partners and supply chain solution providers to build a reliable financial ecosystem of retailers and on-ground force.”

Banking on the Future: Keeping up with the Financial Landscape

BFSI industry experts contend that connected industry will be the future. “Future belongs to the organizations which are doing few things but doing it very effectively. Hence, master of all will not be the future,” shares Sanjiv Bajaj, Joint Chairman and MD, Bajaj Capital.

As customer experience is the key moving ahead, social media is playing a crucial role in overall delivery. “Social media has democratized the voice of every citizen. While we understand that in most cases 90 percent of the customers are satisfied with the services. Efforts are required to satiate the 9 percent with reworked approach. The remaining 1 percent can’t be satisfied even by the God,” he elaborates.

Bajaj further highlights that getting a space on customer’s mobile is an art that organizations need to learn. “We must focus on holistic approach to deliver services and catch the eyeballs among the customers. Today, customer decides how things need to be done and winner takes it all. If we don’t act today, someone else will take away all the opportunities.”

The Transformative Power of AI in Banking & Financial Services

Jaspreet Singh, Partner and National Leader, Client & Markets (Technology and Transformation), Grant Thornton Bharat, during a recent keynote stressed that digital transformation has been the most used and abused word over the last couple of years. “When we talk about digital transformation, we talk about digital agility, maturity, incubation or entire organization being digital. As per a WHO report released in 2019, the probability that a pandemic affects more than 30 countries was just 7 percent. However, as we are 19 months in the pandemic, it has affected more than 180 countries forcing businesses to go digital. Covid-19 has propelled the digital transformation to the forefront.”

The focus is now how do we become more digital and agile as an organization. He underlines that with the use of AI and ML technologies, majority of banking experience has become digital; banks are taking decisions much faster. “In loan approval processing, it now take less than 5 minutes to take the decision against earlier norm of 7-10 days.  In fact, in the micro-financing businesses AI and ML technologies are doing great job. Entire business processes in the BFSI are becoming more connected, evolved with next generation tools coming to the forefront. Banks are now accessible through any digital device.”

In addition, BFSI firms are using AI to mitigate threats from external and internal vectors. All this is contributing to the rise of Quantum Computing and the entire digital transformation scenario is maturing from an AI perspective. “In fact, the world is changing because all this has become part of our lifestyle. This change is majorly driven by Fintechs, which have been the leaders in integrating AI/ML in their processes for an excellent customer experience. Digital technologies are driving omni-channel customer experiences. Data and analytics-enabled business models have become the most crucial part of this transformation.”

Singh adds that BFSI organizations need to look at digital transformation and AI/ML technologies through a six-point agenda:

  • Changing the Game: Understanding the new market dynamics and calibrating customer expectations.
  • Digital Tech: Indentifying and adopting the right technology capabilities to enable the digital transformation journey.
  • Integrated Enterprise Architecture: Successfully integrating and managing legacy and new technology within an extended enterprise.
  • Organizational Transformation: Re-invigorating the organizational models and systems to the new normal.
  • Market – Global/Local: Selectively investing in markets and focus sectors; expanding locally to capture niche markets; and global aspirations and readiness-to-serve.
  • Data & Analytics: Manage data models and real-time insights, and data governance.

Improving Business Growth with AI-Powered Automation

Businesses that invested in technology have been able to survive and thrive and in many cases were able to improve their performance with high customer experience. “Laggards had to over-invest on digital transformation as we saw the pandemic forcing digital shift with 10 years of digitization happening in less than 1 year. Enterprises which don’t invest in digitization will be left behind,” discloses Richard Heitmann, Vice President, Automation GTM, IBM.

As most of the people are working from different locations, it’s important to see where they work and how they work in the new world order. This is where AI-powered automation comes in. “Leaders which are investing in digital transformation are making fundamental changes to their business. They are innovating and deploying digital systems as well as connecting and automating their systems across complex hybrid cloud environment. They are assuring application performance at lower costs with reduced downtime. They are doing this through AI-powered automation as it really connects business and IT. In addition, it maximizes revenue per employee and simplify otherwise complex operations,” explains Heitmann.

He further adds that organizations are turning to AI-powered automation to improve speed, utilization, and service delivery. However, automation can’t happen without proper integration. In fact, 70 percent of digital transformation projects fail due to lack of integration quality, he concludes.

Empowering Digital Transformation with Intelligent Automation

As the BFSI sector is going through a course of disruption which marks the emergence of new gene of banking businesses, new agile business models and intelligent automation. “It’s a huge transformation that is going on in the industry with the large data generation, integrated and automated workflows. In order for the BFSI industry to scale up, it is imperative that they employ the use of intelligent automation,” says Rajeev Seoni, Director, Digital Futurists Angels, and Former CIO, E&Y.

Since majority of people have been working from home, there was extensive demand for IT support which overwhelmed the IT team. “Hence, there was a demand for automating the response on the technology support requests. That’s where automation started to play a major role in redefining the processes,” shares Malcolm Ong, IBM Automation Leader, IBM Asia Pacific.

Pandemic led to huge focus on automation in order to reduce dependencies on human interventions. “Automation made us run the show even when key people were not reachable. It also enabled faster go-to-market with lesser errors. In this scenario, AI played a vital role as it helped on bringing in lot of human intelligence to the processes. This enables us to be more predictive in terms of predicting growth of various sectors and modify our approach and strategies. Hence, predictive analytics enabled the fund managers to take crucial decisions more effectively,” states A Shiju Rawther, Head – IT, SBI Mutual Fund.

In a move towards driving automation, NIIF Infrastructure Finance reviewed its data loss prevention process and realized that there are many logs that got created and majority of them were false positives. “We got experts to read through logs and this enabled us to quickly classify the false positives and real threats.  With this approach we are now in far better position to manage the threats. With automation, majority of the logs with false positives get filtered out and we need to focus on very selective logs which pose real threat. In addition, we reduced repetitive tasks of comparing MIS reports by integrating intelligent automated system,” reveals Madhusudan Warrier, CIO, NIIF Infrastructure Finance.

Seoni further highlights that organizations need to decide on what to automate and what not to automate. That’s the first step towards building intelligent automation architecture. This determines the benefits businesses would reap with their initiatives and hence would guide their focus areas.

“Businesses have lot of legacy processes and applications; hence, as we move towards digital transformation on the front-end, we need to check what processes at the back-end we could automate. We created a RPA Center of Excellence couple of years back and identified over 35 processes to be automated, which we executed gradually. As an organization, we are learning to take our automation journey to the next level. So far, we have automated the low hanging processes to redefine the customer experience and the overall service delivery,” divulges Prasanna Lohar, Chief Innovation Officer, DCB Bank.

By leveraging AI, BFSI organizations are enabling claims processing of motor accidents through customers uploading images through the mobile app. “AI engine assesses the claim based on the images and communicates the approved amount within 20 minutes. So what used to take over 3-4 days earlier now happens within 20 minutes. In addition, bulk of the customer servicing is now taken up by the mobile app, WhatsApp, customer portal and AI-driven chat bot, against 80 percent of customer servicing driven by contact centers earlier,” underscores Dipu KV, President, Head Operations & Customer Service, Bajaj Allianz General Insurance.

Further, automation is enabling BFSI players to offer secured loans more effectively. “During the Covid-19 restrictions business managers couldn’t call upon customers for personal discussions and video interaction was the only option left. Automation enabled us to effectively manage video-based KYC. Hence, RPA, AI and automation played a decisive role in the housing finance industry to help us disburse loans and take timely decisions,” adds Dominic Vijay Kumar, VP & CTO, ART Housing Finance.

Elaborating on the available solutions, Malcolm says, “During the pandemic, lots of people were looking for business loans, which overwhelmed the banks with huge number of loan applications. We worked with banks to implement solution infused with AI engine. It not only offers task automation but also offers OCR capability and a native chat bot. This enables banks to service customers even after bank working hours. The chat bot enabled with OCR allows customers to enquire about their loan status and upload documents in case of any particular requirement. This tool also offers end-to-end solution for claims processing including data capture from documents, analyzing data and feed that into various applications.”

CX2.0 in Retail Banking

While banking is becoming more and more digital, experts opine it should become more human. “The amount of data which can be mined and the intelligence that can be created out of it is enormous. Most importantly, BFSI organizations must appreciate the privacy of each of the individual customers. These three points play major role in defining and building customer experience,” shares Harshit Desai, former Head, Customer Experience, Alliances (Partnerships), & Automation, Aditya Birla Finance.

BFSI organizations’ emphasis must be on leveraging data in a better way to create better products and services. “The focus should be on how the products or services are changing the lives of the customers. If we offer transactional banking then it’s not very memorable. CX 2.0 will expect technology to be warm and caring for the customers; where people look forward to interact with technology tools. Currently, the first interaction with technology during a banking transaction is crude as we need to verify ourselves with OTP, passwords or biometric details. The CX 2.0 envisages technology to enable these transactions to be seamless and effortless.  Moreover, the relationship banking must graduate from speech-driven faceless one to a digital avatar with face and personal connect. This will also build trust between customers and banks,” underlines Desai.

The Larger Picture

India’s BFSI sector is gradually moving away from the clumpy rigidity of a monolithic set-up. With customer experience gaining traction in the industry, next-generation financial organizations need to be fluid as well as highly responsive. The adoption of a lighter and flexible micro-services architecture will be critical to achieving this.

For financial institutions that are still on the fence about cloud adoption, there are many flexible options to choose from. Hybrid Cloud, for one, offers the convenience of lower Capex, along with the security of on-premise set-up. With the advent of better cloud security, banks could even look at public cloud ecosystems as viable, long-term options.

We are also seeing trends favoring the inclusion of blockchain in banking. The shared infrastructure of blockchain ensures the veracity of information, making it easier for banks to detect fraud and eliminate risks. With the potential to reduce operational costs while improving efficiencies, blockchain will be a potential game-changer in the near future.

In addition, as customers explore ways to bank as per their preference and convenience, we expect radical developments in the open banking space. API banking is already accelerating processing times, reducing go-to-market cycles, and improving decision-making and responsiveness. All roads in open banking will eventually lead to data democratization and socioeconomic upliftment.

Most importantly, keeping the bulwark of infrastructure through state-of-the-art datacentres, BFSI is veering towards Robotic Process Automation (RPA), which is being enhanced and refined by technologies like artificial intelligence (AI), natural language processing (NLP), process mining, advanced analytics, Blockchain and more, to reduce costs, maintain accuracy and speed up processes.

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