The digital economy possesses immense potential for improving the lives of people across the world, and its growth prospect is limitless. In the past few years, India has accelerated its transformation to become a data economy giant. Several digital services have proliferated, and people across the country are generating a significant quantum of data daily. 

In the post-pandemic period, the digital banking ecosystem has kicked into the next gear - a shift that can be witnessed in the growing numbers of non-physical transactions taking place across the country. The (Banking and Finance Services Industry) BFSI industry holds assets that are not reflected on its balance sheets. One such asset is data. Converting the latent value of data into commercial value will help the industry to boost organisational success, ensure risk management, provide a competitive edge, and ensure profitable growth and performance.

The industry needs to become insights-driven in order to harness the true potential of data.  

By 2025, India’s fin-tech market is poised to grow to 83.48 billion USD, up from 31 billion USD currently. Customers associated with the BFSI industry are now looking forward to on-demand, fully digitalized experiences, hyper-personalized services, and around-the-clock assistance.

Customer willing to share data in exchange for improved services:

One of the key trends in the BFSI industry recently has been the willingness of customers to share personal information. Despite concerns around privacy, an increasing number of customers are willing to share personal data, including location data and lifestyle data, in exchange for improved services. They are also willing to share information with financial institutions to receive personalized propositions, especially for money management.

According to a recent survey conducted by Accenture, two-thirds of Indian consumers were willing to share data in exchange for benefits such as rapid loan approvals, discount memberships, and personalised offers based on their current location.

For the BFSI industry, the willingness of consumers to share data comes as a boon as it helps them provide tailor-made services for their customers. In other words, the fundamental question of how the right offer, right customer, the right moment, and the right channel can now be accomplished. 

The rapidly evolving technological innovations help institutions capture, store, combine, and analyse a wide range of customer data, including their financial situation, preferences, habits, and physical location. Financial institutions are now trying to utilise the treasure trove of transactional data to which they have access. The more they know about their customers, the better they can provide them. 

Rahul Jain, President and Head, Personal Wealth at Edelweiss Wealth Management, highlighted that relevance is of utmost importance while communicating with a customer. Jain commented, "The bombardment of general engagement from financial services has been so high that it is borderline annoying. People have now stopped using emails because they get so many emails. Since one has insights now, the first and foremost critical part is to create relevance, which will allow customers to achieve their goals."

Financial institutions are at a point where they are beginning to realise that failing to provide personalization, offers, and products that the customers are looking for will force the customers to look elsewhere.

Data is everywhere, but how much of it is relevant?

Financial institutions hold a huge wealth of customer data stored across various spectrums, including business divisions, applications and repositories across the organisation. Banks do not have a shortage of data at all. The main challenge at hand is to successfully combat the poor utilisation of data, which cuts short the institutions' abilities to gain a competitive advantage.

In an era where financial services are becoming a part of a customer’s day-to-day life, a data-driven approach will successfully lead to hyper-personalisation and long-term growth. The out-dated technologies used by several financial institutions are no longer successful in resolving the data management challenges. Understanding and generating useful insights from an enormous amount of non-cohesive and scattered data remains a major challenge.  

Data analytics, besides improving business value and operational efficiency, will help banks evolve into insight-driven businesses. It will help institutions spearhead innovations and meet the changing customer needs. 

To achieve this, institutions will need to generate insights from all the data scattered across the organisation. They will need to use front-to-back insights: analyse and correlate data across applications, controls, events, functions, and processes, adopt predictive operations: combine the knowledge of the current market with past data to predict the future, and enable zero-touch data operations: using machine learning and statistical techniques to generate insights by profiling and correlation of front and back-office data.

Satheesh Krishnamurthy, EVP & Head - Private, Premium Banking & Third-Party Product at Axis Bank, said that in order to stay ahead of the competition, one needs to better understand their customer. He said, "It is of paramount importance how well I know a person as a customer, their family tree, his/her investment philosophy, his/her approach to risk, and multiple other relevant layers of information. So if we can create a storehouse of institutional memory, not as a static item but as a dynamic continuously learning entity, then I think there will be a winner. This is the game in which all of us are in."

The advent of data analytics has helped financial institutions streamline their operations, resulting in improved efficiency and competitiveness. These institutions are now working towards improving their data analytics to get the edge against the competition by predicting emerging trends that can have an impact on their business. While the traditional approach of financial institutions was to generate excel reports, with data analytics they can crunch the information in numerous ways. Data insights can help them compete with their competitors on several key aspects, including profitability, risk management, franchise growth, and product offerings. 

In today's dynamic world, the whole mix of technology, data analytics, creating relevance and providing the right information at the right time becomes very essential.

 Financial institutions need to capitalise on data analytics:

Despite all the advantages that data analytics brings for financial institutions, they have been slow in adopting analytics in comparison to other sectors. Though they collect a large amount of data, only a few are making returns commensurate with their investment.

There is a lack of actionable insights in the banking sector; these insights play an important role in providing tailored, real-time offerings and advice. Institutions need to delve deeper into the breadth and depth of data in a customer segment, product area to identify and target individual customers. 

One of the major reasons for this lag is that the entrenched cultures and operational complexity are such that it makes it difficult to adopt the most successful data and analytics initiatives.

Banks are now seeking talent that can help them build the correct digital, automation, and analytical capabilities that are required to succeed in today’s environment. Though hiring talent is just one part of the story, banks also need to continuously up-skill their present employees.

Maneesh Ajmani, Head Preferred Banking, NRI, Investment Services & Bancassurance at RBL Bank, explained, “With the rapid development and adoption of new-age technology, data, and by extension data culture, have become intrinsic to most businesses. Many organisations are putting a data strategy in place as it is widely seen as a business asset and increasingly critical to operational efficiency and product delivery. While this will, no doubt, help create a business plan for the future and achieve the desired objectives, the real challenge for companies is to have the right set of people, such as data experts or data scientists, who can successfully drive that strategy which is meant for the digital and physical world. As technology continues to evolve, building the right talent will be crucial for most companies, including banks and financial institutions,”

The need for a 360-degree customer view in banking:

Customer Relationship Management (CRM) is a powerful tool used by banks to accurately analyse data, sales forecasts, and build strong relationships with present and future clients.

Financial institutions have aspired for a long time to achieve a 360-degree view of clients. For several years, the objective was limited to securing a comprehensive view of the customer’s relationship with the bank. Banks no longer view their customers solely on the basis of their transactions, but also as individuals.

The goal of CRM is to combine technology and human resources to meet customer demands or predict those demands for the near future. The expanded Customer 360 view brings together the marketing, sales, commerce, service, and IT departments with shared, and easy-to-understand data on one integrated CRM platform. This helps in better understanding the broad 360-degree view of each customer, including their preferences, habits, and history of transactions, to better understand how they like to use their money. 

Abhai Singh, India Sales Head & Scaled Customer Business Lead – APAC at LinkedIn said, "If you want a banking relationship with somebody, you need to think about it from the time the person is born till the time they pass away. At every given point in time, there will always be something or the other that the person needs to do with money. This is true for institutions as well. Right from the time when institutions are formed till the time they start becoming profitable and start expanding, there will be operations that they will need to do alongside the banks. If you know your customer (KYC), the philosophy of KYC will be the differentiator for you to make a better banking relationship and be more relevant."

A good CRM can help a bank boost sales, personalise customer experiences, have more efficient communication, and increase productivity, amongst others, which results in a strong customer relationship with the bank.

The survival of traditional banks in the age of digital:

According to a 2018 Gartner Survey, 80 per cent of legacy financial firms will close their doors by 2030. The report suggests that the banks will exist only on paper but that they will no longer be competitive. Their dominance is challenged by non-traditional players and fintech companies who may hold the majority share of the market pie. These new-age organisations are driven by innovative technologies and customer-centric business propositions. 

Most of the fin-tech institutions have seen a majority of their customers migrate from traditional banking, citing reasons such as a lack of deep insights into customer preferences and behaviours, i.e. the banks are not able to successfully stand up to the consumer’s expectations. One size fits all is an outdated context now. 

As per a 2021 Capgemini Financial Services Analysis, 81 per cent of those interviewed for the VoC (Voice of Customer) suggested that anytime, anywhere accessibility and on-demand banking could motivate them to switch to a new generation of financial institutions. The analysis also showed that 54% of banks struggle to derive insights from data, while 47% of banks fall short of periodically capturing VoC.  

It is high time for the traditional banks to think outside of the box about what they generally do – safekeeping, lending, and transferring money. Traditional banks can reinvent themselves to survive and thrive by taking several measures, including collaborating with fin-techs, creating personalised services for their customers, and harnessing technologies and data analytics to make use of the immense amounts of data they are holding.

Banks should not look at the rising fin-techs as competition but instead, try to collaborate with them. Fin-techs do depend on banks for several processes, including payment settlement, account management, and loan disbursement, amongst others. Meanwhile, fin-techs can help banks come up with the latest products and services at lightning-fast speed, reducing costs and improving scalability.

P D Singh, Managing Director, Head Corporate Banking at JP Morgan, suggested that in the post-pandemic age, the majority of the interactions with customers have gone digital. Singh underlined, "When you think about it in terms of where we all are today, organisation partnerships themselves are now in the digital domain from their inception all the way up. So managing this digital journey will be an important part of that lifecycle. We have to strive for perpetual innovation and a better way to organize financial transactions too, not just infrastructure or business models."

The way forward: 

The BFSI industry has achieved a lot, but the journey ahead remains tricky. Banking institutions must transform themselves into data- and insight-driven organisations in order to create relevance for their customers. Consumers today want to be able to do their banking in the same way that they can order groceries from the comfort of their living room.

In the age of Netflix, customers have gotten used to personalised treatment in the digital world, and financial institutions have yet to do that. This will need an overhaul of the banking legacy systems, the use of AI/ML, data warehouses, and data lakes such that the data is easily accessed by the financial institutions that possess it. Of course, the BFSI industry has developed by leaps and bounds in the past couple of years, but a lot of opportunity remains yet remains untapped.

Demystifying Data Will Unlock Potential For BFSI Industry