The novel corona virus has brought daily life to a standstill. Businesses are struggling to remain afloat in the pandemic-stricken world. Almost every sector of the economy has taken a hit; even banks are not immune to the shock waves of COVID-19. How has the pandemic impacted the banking sector, and what does the future look like? Let us dive deeper.
Banking is the backbone of a country’s economy as it facilitates the flow of funds across sectors and industries. Before the pandemic, India was at the cusp of becoming a cashless economy, with the current government undertaking reforms to promote cashless payments. As the most significant financial intermediary in the country, the banking sector had a pivotal part to play in these amendments.
Since banking services are classified as ‘essential’ in India, lenders and NBFCs have had to continue their operations under numerous constraints. With social-distancing becoming the new norm and employees working remotely from home, customers are relying on digital platforms for their needs. Banks are treating this period as an opportunity to conceptualize new products and reinvent the wheel to adapt to these evolving times.
Usability of banknotes and coins has become a public health concern. Cash is a frequently accessed touch-point, and, has thus come to be perceived as a potential route for viral transmission.
While scientists have stated that the probability of transmission through banknotes is low as compared to other frequently-touched objects, perceptions that cash could spread COVID-19 have brought contactless digital payments to the forefront.
While the last decade witnessed the advent and rise in internet banking, enterprises and lenders themselves were still warming up to these measures. The efficacy of digital banking operations has been put to the test during these catastrophic times. This has compelled lenders and NBFCs to re-imagine their future and build a technologically-driven business model.
Digital innovations enable banks to focus on technologically-geared products and services, use cases of artificial intelligence in banking as well as digital marketing and distribution channels, online and mobile banking, electronic wallets, and the likes.
A remotely accessible, network-based, shock-proof digital infrastructure could be the future of banking. This will involve assisting customers as well as employees to transition to digital banking to better their banking experience.
Besides convenience and faster transactions, there are plenty of other advantages to digital banking. Here is how it has affected the following:
When it comes to the impact on the overall banking industry, digital banking has led to increased financial inclusion, customer loyalty, reduced physical footprint, and significant competitive advantage for the players.
The NBFC and banking space is focusing on moving beyond traditional systems and bolstering digitization with the help of these critical strategies:
Digitization, across front-end and back-end operations, can further galvanize India’s banking revolution. As banking operations are becoming more dependent on technology, the future calls for tighter cyber-security measures. Through these times, digital transformation and technology-based solutions will eventually prove to be the vanguard for reforms in the banking industry.