What is Digitization and why it is so hyped up?
As we know that term Digitization becomes a regular word in every business. For what reasons is it so? What is this? It is basically the automation of the manual or paper-based process in the digital information. In different terms, it can be stated that transferring an analogue process to the more proficient digital process. It doesn’t mean supplanting the original documents or images. In this fast-growing industry, everyone comprehended the use of going paperless. Nowadays, the fundamental need of any advanced improvement is to convey the data in an easy to use and fun way to such an extent that client becomes acclimated to it. This causes each business to enhance as far as time, effectiveness, security and money.
History of digitization in the Banking and Finance Industry
Well, the story starts in India in 1988 when the Reserve Bank of India setup the committee under the supervision of Dr C. Rangarajan for computerization in banks. Firstly banks began the individual PCs to enter the data which before long gets exchanged to the Local area network (LAN) connectivity. Due Because of this, the banks made a stride further towards the core banking solution which allows the customer to access their accounts from any part of the world. The major force comes from the private banks and finance industry. To add more oil to the fire, demonetization happens in 2016 which push India towards the cashless society and banks were compelled to convergence the electronic exchanges. Henceforth several banks and finance industries have joined their hands in the race of digital services to stay focused in the market.
Relief on Pocket due to Digitization
As most of the banks and finance industries are burdened with the legacy systems and few undesirable processes, India made a stride further to embrace the more up to date advances. This furnishes accommodation to the clients alongside this they need to make every single exchange cost amicable. As indicated by the figures accessible, it is noticed that each branch saving money exchange costs about Rs 70 which is diminished to Rs 16 by ATM and further diminished to Rs 2 on internet banking and Rs 1 via mobile banking. Aside from this digitization bring the majority of the populace from each class on board as it is effortlessly open and decreased the human error. Henceforth, this will reshape the entire keeping money framework recently.
Technologies adopted by Banks
Online banking has changed the entire face of the Indian Banking framework. The inculcation of Automated Teller Machines (ATMs), National Electronic Fund Transfer (NEFT), Real Time Gross Settlement (RTGS), Immediate Payment Service (IMPS), Electronic Clearing Service (ECS), Prepaid Payment Instruments (PPIs),Online wallets, Debit cards, Credit cards, Mobile banking system, Net banking and a lot more are on the whole noteworthy milestones in the voyage of digital revolution.
The increased market of Prepaid Payment Instruments
PPIs are the method that facilitates the purchase of merchandise, administrations and fund transfers against these value stored instruments. The figures for the PPI cards (gift cards, foreign travel cards, and corporate cards) and mobile wallets have radically expanded as of late in 3 to 4 years as it were. It figures raised from Rs 82 billion to Rs 532 billion from 2014 to 2017. To enhance the advantage of PPI users RBI released operational guidelines for Interoperability in October 2018. Interoperability is the technical compatibility that allows merging of the bank payment process with other PPIs. It allows PPI users, system providers to undertake and clear the payment transactions without participating in actual multiple systems. Once PPI is implemented, the customer will be able to transfer funds between their mobile wallets to their bank accounts.
The collaboration of Fintech startups and Banks
India has just seen the enterance of digital banks in the form of 811 (from Kotak Mahindra) and Digi bank (from DBS) which together holds the market extremely well. The period of predominance by digital banks over the consumer banks is not so far. So the central issue emerge in this dynamic scenario, Can banks and fintech startups be collaborating instead of competing? One can’t deny that banks have the information and experience nobody can question on this. On contrary fintech startups have the newer technologies and fresh brains. So it is good to leverage each other’s strength and collaborate in this revolution. This comes to the consideration from last one year that central banks have promoted the unified payment interface with the mobile wallets rapidly.
Challenges faced by Digitization
Security Risks: Banks and finance industries are constantly exposed to external threats like hacking, sniffing as well as from the internal threats.
Monetary Proficiency: Due to the high illiteracy rate and awareness in India, it is difficult to teach people about the e-banking facilities.
Finding the Expert: It requires a tremendous exertion to discover the blend of talent and technology to lead digitization initiatives.
Limited budget: Budget is dependably the limitation that constrains the wings of any developing technology or business. So need to mindful and arranged for it.
Future of Digitization:
Nowadays Artificial Intelligence (AI) came as a roar in technology which has the capability of recreation of human intelligence processes by machines. Several banks have already intrigued with the idea, for instance, ICICI Bank, software robots have been conveyed in over 200 business processes which lessens the response time of customers by 60 per cent.
Banking on the cloud:
Progressive banks are as of now in transit of adjusting cloud system. It encourages associations to accomplish adaptability, flexibility and productivity. Significant faces of business, for instance, Big data, Block chain, AI are using cloud computing.
this article is written by ceo of afinoz digitalizing finance Rachna Suneja