Giving Fillip to Financial Services

Applying for loans, opening bank accounts or undertaking any financial transactions no longer needs to be done manually. The coronavirus pandemic has an open horizon for millions of Indians who upgraded to dealing with transactions almost overnight. Consequently, a paperless E2E digital process has taken a leap instead of years has happened within weeks.

The digitisation has a shift in mindset to provide documents electronically. Loans are now underwritten via AI-enabled algorithms without any human involvement. The life cycle of these financial products, all customer service and support requirements can now be offered digitally via bots or AI-enabled means avoiding human intervention.

Larger benefits

Undoubtedly, the pandemic has come as a big opportunity in disguise in driving a shift towards digital for varied stakeholders – customers, companies, government entities or regulatory authorities. Apart from the conducive environment created by the government earlier, the extended lockdowns across India together with health and hygiene fears stoked by COVID-19 have hastened the digital delivery of myriad services.

The ongoing behavioural changes and the transition towards digital will remain permanent due to the coronavirus outbreak, which has become a potent threat for a couple of years or so. Many domains have seen online arise as robust sales channels. Some of the major beneficiaries are e-retailers, online pharmacies and e-commerce entities and financial services. Be it monthly utility bills, taxes and other periodic payments, all have witnessed an unprecedented rise in transactions in 2020.

Nonetheless, one must acknowledge that the initial breakthrough in the digitisation of financial services happened decades ago when the first ATMs made their presence felt. Visits to bank branches soon became passé. The only exceptions – when money was required in high denominations, making a bank visit was mandatory. The second watershed mark came with the advent of Internet banking and the third with the mobile telecom revolution. Thereafter, the world was destined never to be the same again.

Coming to the new millennium, the first dramatic drive towards digital occurred with demonetisation on November 8, 2016. Within weeks, digital wallets and other online modes saw a sudden spurt in transactions. Nonetheless, as cash came back into circulation over the coming year, digital payments began dipping.

But the current scenario under the pandemic is different. As individuals and institutions discover the comfort, convenience, cost-effectiveness, safety and security of online trades, the digital framework is being institutionalized. Now, even long-term adherents of branch banking would grudgingly admit that digital is more efficient, time-saving and beneficial than the traditional physical model.

As things now stand, branches will slowly be visited only during emergencies or for banking services that require in-person verification. This may vanish in some time with KYC being done electronically across all sectors. Within a decade or less, bank branches could completely vanish from the financial landscape.

Scalability and efficiency

Yet, customers won’t be disadvantaged in any manner whatsoever because digital means quick and efficient to fill this void. Taking proactive cognizance of this shift, the RBI and other regulatory authorities have been enacting many conducive regulations in supporting the country’s digital mission. Due to these initiatives, people can open an account online and get their digital KYC done via Aadhar o-KYC or video KYC.

Subsequently, people can avail loans and receive the requisite funds in the account through an E2E digital process. What’s more, a few conventionally-digital lenders will even transfer approved loans into their borrowers’ accounts in minutes.

With digitalisation occurring across the varied front and back-end activities as well as banking touchpoints, customers are enjoying seamless experiences. Even a critical sphere such as Collections is witnessing speedy digitalisation. There is no denying that the pandemic has dispelled the notion that efficient collections must be backed by a heavy human hand. Understanding this, almost all lenders have enhanced their digital touchpoints while simultaneously minimizing human interventions in collections. The latter is reserved only for special accounts or occasions.

In the case of NPAs (non-performing assets) too, artificial intelligence and machine learning tools are increasingly used in EWS (Early Warning Systems) for steering the collections strategy. In future, AI or ML-based algorithms leveraging bureau, financial and/or alternate data would underwrite most loans. Human reviews will be reserved for special cases only. No doubt, though this was seen even before the COVID-19 outbreak, coronavirus has fast-forwarded this shift.

For example, digital assists lenders in curtailing risk by using AI and advanced analytics during due diligence of loan applications. Furthermore, digital tools assist lenders in scrutinizing data from conventional and non-conventional data dumps for periodically reviewing the risk profiles of clients.

Finally, digitalisation offers tremendous scalability in a cost-efficient manner. Both service providers and customers are benefitting from the salient features of the digital universe. Without any doubt, the best days are yet to come.

The author is Chief Digital Officer – Clix Capital