Digital acceleration and strategy for banking sector

The operational strategy of banks has changed over the last few years and will continue to see further changes due to technological evolution. This scenario is due to the increasing economic pressure, updating regulations, changing customer preferences, increasing pressure from the fintechs, and the introduction of digitization. Among all these, digital technologies are widely preferred and adopted by the end-users; hence, banks are investing to accelerate digital evolution as a part of their growth strategy.

The digital revolution has made the traditional banking systems too slow for consumer preferences, thereby goading banks into transforming their processes as a whole. From simple fund transfer to complex credit completion procedures, all banking processes are moving to digital platforms to offer a seamless customer experience. Hence, digital acceleration has led the banks to rethink their existing strategy and implement digitization across all their processes.

The digital revolution in the banking/financial sector will not slow down anytime soon. Banks have to adapt to this new trend by leveraging innovative opportunities to sustain and grow. Choosing the right strategy and reinventing the process depends on the transformation goals and the current infrastructure, workforce skills, and budget.

Traditional banking transformation on digital platforms

Today’s digital landscape has considerably changed the way customers interact with the bank. They have made it easy to handle any complex financial processes while offering speed and convenience. This was not always true; the banks were using conventional processes before finally adapting to digital technology.

Digital initiatives have led banks to reconsider their capabilities and create seamless customer engagement. Furthermore, with the onset of the COVID-19 pandemic, the digital transformation has geared up with an incredible speed and many evolutionary changes are expected in the near future.

Here is a list of popular banking processes that transformed from conventional methods to advanced digital systems.

Transactions: Traditionally, transactions were made through cash, either in person or by deposits or withdrawals at the physical bank branches. This was true even at the commencement of the new millennium with cash being the primary mode of transactions. But the transactions trends have undergone a drastic transformation in the last decade. Digitization has changed the way we send or receive money.

The digital trend started with ATMs, online banking, and mobile banking, which further got easy and effortless with the introduction of UPI payments. The involvement of FinTechs in the modern banking system has revolutionized transactions in today’s times. Banks and other financial institutions are moving towards digitization for payment cycle management, ease customer transaction systems, maintain customer payment records, calculate auto cost sheets, and generate automatic payment reminders.

Sales pipeline: The traditional sales pipelines have limited scope for sales and marketing campaigns, which had a major impact on the ROI. However, digital sales engines leverage modern technology, personalized communication, and integrated AI, to maximize sales conversions through effective digital channels.

Physical branches: Before the digital revolution entered the banking sector, going to banks was an obligation. Even a simple money transfer and withdrawal demanded the individual to be present at the bank for further processing. Physical branches didn’t provide the ease of banking-on-the-go facility, thereby, making it tedious. Digital banking, otherwise, offers effortless banking from anywhere and anytime.

Credit proposal, built-up, and approval: The credit analysis process was, previously, a tedious one. The credit evaluation and approval for an individual or a business had to physically under an elaborate process of lending assessment, interest rate calculation, and the time duration for the loan to be paid off. The conventional way of evaluating and approving credit was tiresome, time-consuming, and prone to errors.

The credit analysis process has witnessed a rapid evolution due to the growing digitization. The complete process of credit proposal, built-up, and approval is carried out on digital platforms where the initiation, assessment, interest calculation, and approval are all done on a real-time basis. Here, the process is efficiently carried out with almost 100% accuracy and consistency within no time. Such digital processes are carried out by powerful software development teams, backed by strong test automation solutions.

Loan closure: Loan closing is an important banking/ financial process where the EMIs paid over the loan period are checked and ensured the customer had repaid the entire amount with the stipulated interest. The conventional loan closing requires the client to visit the physical branch to submit his credit statement and receive a No Objection Certificate (NOC) from the bank as proof of loan closure. With the digital wave taking the banking sector on its side, the modern loan closure often involves updating the details in real-time and issuing a digital NOC.

Compliance: With the digital systems making a strong presence in the banking sector, there are many emerging risks such as money laundering risks, phishing emails, risks due to malicious software, and a lot more. To mitigate these risks, digital banking systems are governed by compliance regulations. The banking compliance regulations have completely transformed ever since the digital systems replaced the conventional ones.

The banking sector has undergone immense changes in the past few years with the non-banking Fintechs entering the market. New technologies are taking over the old ones, and digital banking is replacing the physical branches. These factors have led banks to rethink their strategies to keep up with the changing trends and offer a seamless customer experience.

Digital strategy for reshaping the banking system

Digital banking transformation is the need of the time; with all major industries embracing digitization, the banking sector can be no behind. In addition to improving banking systems and offering unmatched customer service, digital transformation in banks contribute directly to the economy.

Digitization has led banks to face greater competition, like the one offering convenience, accuracy, consistency, performance, and security will only survive in the market, while the others may fade away slowly. The speed of adoption of digital technologies and the system quality will define the success; that’s why banks are creating new digital strategies to embrace the changing trend.

Digital strategies considered by banks

Considering new business models: With the increasing emphasize on digitization, banks are actively creating new plans to redefine their traditional business models. The older operating models will not fit in the current digital scenario; hence, banks and other financial companies are working on creating strong digital models to ensure a smooth and effortlessly working system.

Strong development and testing teams: The success of any digital process lies in the hands of the engineers to build a flawlessly working system. The same is applicable for digital banking too. The modern banking systems work on the concept of continuous integration/ continuous delivery, where the software development, testing, and delivery takes place hand-in-hand. With further technological advancement, banks are preferring to use test automation solutions instead of manual software testing.

Data analytics: Banks leverage the power of data to understand customer preferences and behavior. Such data analysis process helps banks to define new business opportunities, this may include a new service, expanding to a new geography, or even changing the business strategy.

Data analytics is a great marketing tool to analyze the market and use the data to ensure optimal performance. This can be used to analyze functional parts like risk, fraud, compliance, etc. Data analytics is important for any business to have a check on the exiting strategy and restructure according to requirements of the new trends.

Improving the consumer journey: Gone are the days when customers had to stand in never-ending bank queues to make a deposit or perform a withdrawal. All transactions, whether regional or international, are done with just a few clicks. Digital platforms offer great user convenience by offering the ease of performing the transaction through any digital device. Even complex banking processes like credit origination, FD or RD initiation, or fund advisory services can be easily done digitally, without having to visit the bank.

Embrace innovation: Innovation is the key to success in today’s technology-driven world. Therefore, banks and other financial institutions are making significant investments to harness technology and redesign the business landscape, not just for the better but the best. Innovations open new opportunities to create value, progress, and flourish.

Banks are incorporating innovative systems to improve the existing process and customer experience. The transformation not just redefines the business model, but also empowers individuals associated with the organization who will be exposed to new opportunities for upskilling and reskilling.

Mobile banking: As a part of modern digital strategy, banks are slowly moving towards mobile apps, leaving behind the traditional bank delivery or online application services. This move came after the mobile revolution that has led everyone to have a mobile device. By incorporating mobile banking, banks are offering ease of payments on the go. Such services are gaining popularity due to the ease they offer.

Furthermore, banks are collaborating with Fintech companies to come up with more advanced solutions. This enables users to instantly send or receive money, make payments, start the loan process, pay credit card bills, shop online, pay at a vendor by scanning QR codes, and a lot more. The future scope of mobile banking is bright which might replace the other means of banking.

Cloud computing: With the growth of the banking/financial sector at the technological front, there is a gradual transition from on-premises services to Cloud-based ones. Banking systems are moving on Cloud for increased agility, uninterrupted resilience, reduced risk, and excellent performance. The different Cloud models available are:

  • Business process-as-a-service (BPaaS): This is suitable for a standard business process like billing, payrolls, etc.
  • Software-as-a-Service (SaaS): Here, the user can access the software and data through a web browser. This type of service includes accounting, invoicing, customer relationship management, etc.
  • Platform-as-a-Service (PaaS): Cloud is used to streamline the entire business process platform for application development, interface, database creation, testing, and storage.
  • Infrastructure-as-a-Service (IaaS): Cloud can be outsourced as an infrastructural service by avoiding the cost of purchasing servers, network equipment, data centers, and software.

Cloud, therefore, helps banks to improve performance by ensuring business continuity, cost saving, and improved business agility.

Internet of things (IoT): IoT technology has greater growth potential in the banking/financial sector. It will change the way we bank, invest, and manage & monitor assets. With incorporating financial IoT, banks have access to more data available allowing them to gather insights on predictive analysis on market, thereby, helping them to take immediate measures to solve any issue.

Digital technology will reorganize the banking/financial industry with new technologies and business opportunities to strengthen the core system and create positive outcomes.

The changing role of software testing with increasing digitization, how Yethi can help?

Traditional banking is obsolete! We have stepped into a new year of the new decade which has seen technology grow like never before. The rapidly evolving technological advancement has changed the course of banking systems, both at infrastructural and operational levels. Digital processes have replaced the previously tedious manual processes that has led banks and financial companies make huge investments in software development.

As the software development continuous to grow, the need for a strong testing process also increases. The role of software testing has moved beyond being a mere support team, to acting as an essential, independent team. This change is required to ensure that the developed software is free from any errors or discrepancies; failing which, it can negatively impact the customer experience, brand value, and ROI metrics.

Yethi is a market leader in offering QA solutions for banks and financial companies across the world. What makes us unique is our exclusive service for the BFSI industry. Our test automation platform, Tenjin, is a 6th generation robotic platform that has a simplistic plug and play design. It can offer high test coverage with end-to-end testing approach, and capable of testing even the complex software system with utmost ease. Tenjin Digital is designed to keep pace with digital consumers in the fast-changing trend of digital banking. It uses the Enterprise Mobility Testing Solutions to offer accurate and consistent results, across multiple devices and networks. With real-time testing, it removes delays and redundancies to ensure the system works at its best and offers a seamless experience to end-users.