New-age technologies like Gen AI, blockchain, and cloud computing will pose a challenge to traditional banking operations and business models, but lenders can adapt these new-age tolls to enhance their business processes, bankers said in the latest journal of Indian Institute of Banking & Finance (IIBF).
“Technology advancements like Gen AI, blockchain, cloud computing etc, will challenge traditional banking operations and their business models. While the good old banking is still unmatched in its stability and dependability, we can adapt these technologies into our processes and services to make them more affordable, efficient, and secured,” said Rajneesh Karnatak, Bank of India MD, CEO.
India’s demographic, marked by growing population of ‘Gen Z’ and ‘millennials’, Karnatak said, are fast emerging as major consumer category in India whose demands differ from traditional consumers.
To attract such customers, banks will need to rethink customer engagement strategy and provide hyper personalised, end-to-end digital journeys.
“This level of broad-based but bespoke solutions requires employment of advanced data science and modelling tools,” he said. However, he said that as digitisation grows, so does the risk of cyber threats.
The scale and frequency of cyber attacks are on this rise, transforming cyberspace into the new frontier of geopolitical rivalry.
While banks have taken steps to counter cyber frauds, they must focus on strengthening their human firewall through training and customer awareness.
Banks to support economic growth
Debadatta Chand, MD & CEO at Bank of Baroda, shared similar views. He said that while all lenders attempt to harness blockchain, AI, banks also confront the inherent unpredictability and interconnectedness of global financial system. Accordingly, resilience of banking system will be monitored on real time basis.
“This is so because as the economy expands, growth will never be smooth and there will be different phases that have to be traversed. This is where banks need to be nimble and perspicuous during good times and have buffers in place to be used when the business cycles are not favourable,” he said.
India is expected to become a $5 trillion economy by FY28 and $10 trillion by 2034, and such economic expansion would need significant funding, where banks will play a key role.
“While there has been some diversification in Indian financial landscape, the banking sector still remains the most relevant. This is due to the relatively underdeveloped capital markets, which are still not positioned to provide the scale of financing needed for large infrastructure projects,” he said.
Further, as India’s banking sector continues to evolve, it faces both opportunities and challenges in coming years.
Digital transformation and consolidation of public sector banks will shape the future course of the industry, he said.