'Digital' In India - A Vital Imperative For The Banking & NBFC Sector

Date:   Wednesday , August 17, 2016

A subsidiary of the Tata Sons Limited, Tata Capital is one-stop financial services provider catering to the diverse financial needs of retail, corporate and institutional customers across businesses.

Industry disruption has always withheld under itself great threats and greater opportunities. And while disruption is not a new concept, digital capabilities and behavior have quickened the pace exponentially in the recent decade. From \'cab hailing\' services in the taxi aggregator space to the P2P lending models operating in the financial services space - every company is looking for a share of the proverbial digital pie to gain an edge over its competitors. Technology has now ceased to be the prerogative of the few and has moved to the hands of the many - true consumerism of technology. And to add to it all, data is opening up and exploding.

The induction of Digital in most organizations probably happened as a \'sourcing\' and \'servicing\' channel. Most companies look towards providing a superior, seamless and personalized customer experience to gain and retain customers, and have realized the potential that digital solutions have in removing the physical barriers that exist in opening up access to wider and deeper customer segments.

However, Digital is no longer just the shiny front-end of the organization. Its potential lies in being integrated into every process, initiative, and department; basically every element of the business model.

And in this context, one of the sectors most deeply impacted is the financial services. The realm of digital opportunities runs across various aspects of financial services, including but not limited to marketing, customer engagement, channels of acquisition, process re-engineering, cost optimization, superior risk management, product development and even completely new business models.

The current landscape is already flooded with newer players due to the opportunities that manifest itself across digitization of existing financial products, development of new digital financial products and access to newer and wider customer segments via digital channels. Analysts have picked-up three distinct trends that digitization in financial services has given rise to - creation of niche products targeting pocketed needs which were hitherto clubbed together by one-stop financial services providers. Entry of non-financial players who have access to large scale of customers are now expanding their bouquet of services to serve the financial needs and formation of complementary financial and non-financial alliances to form relevant digital eco-systems.

A key enabler of the digital revolution is the Government\'s and the regulators\' focus on Digitization. There are constant efforts to build an entire eco-system to support digital India, and specifically digital financial services. Key pillars amongst these are - e-KYC (Know Your Customer), e-Signature, Unified Payment Interface (UPI), Electronic NACH facility and Central KYC Registry.

This support, coupled with rapid adoption of digitization by the Indian customer reflected in the ever-increasing volume of digital transactions and smartphone users will only lead to an increased demand for digitized financial transactions.

This entire rhetoric gives rise to the question - Is the sector up for the challenge to digitize its business processes further? The good news is that the landscape of India\'s financial sector has already begun changing. On one hand, the sector has seen the emergence of Fintech - a set of technology-led financial startups. On the other hand, the sector is seeing older and larger financial services companies rise up to the challenge. And as these companies draft their digital roadmaps, the advent of newer technologies and platforms compels them to constantly keep improvising, thereby making the race a non-stop journey towards digital \'perfection\'. And in the end, it is this pace of acclimatization and adoption that will filter out the leaders from laggards.