The banking industry’s digital journey is now becoming cognitive, driven mainly by the maturity of Artificial Intelligence (AI). And these when applied at a scale and technology like Cloud, will usher in a sea change to the core of banking and the organisation itself, say IBM experts.

Conceding that the industry has, in the last couple of years, been going through lots of uncertainties, exciting opportunities and disruption from non-traditional players, Arijit Bonnerjee, Director (Financial Services Sector), IBM India and South Asia, said the current pandemic has forced many industries including banks to reimagine their business and operating models.

Cloud system

The highly regulated financial services sector has started to move beyond closed legacy IT systems, while taking cautious steps to begin a cloud journey.

There are imperatives though, driven primarily by rising customer expectation around personalisation and conceptualisation. “Digitisation would have to be across the spectrum – not just the front office, but mid and back offices as well. Today, most banks report very high cost to income ratio (approximately 46 per cent) largely because of inflexible cost structures, legacy systems and operating models. Banks will have to look at hybrid cloud. And as new business models emerge around new ecosystems, the industry will have to look at investing on security and the right kind of technology architecture.”

“Technology is evolving; though banks undertook the digital transformation journey, being digital was never the destination, but the start of a transformation towards a cognitive enterprise,” said Subram Natarajan, Chief Technology Officer, IBM India and South Asia.

Stating that the impact of technologies — be it data, AI, cloud, machine learning, IoT, block chain, 5G and now — edge computing, would over time become mission critical processes — moving from the periphery to mainstream, he said “a core transformation is set to happen.”

Bonnerjee supplemented the CTO’s observation by pointing out that the experience would be a delight for the user, but for the bank to transform itself digitally, its underlying business model and technology architecture should support the sweeping modernisation initiatives. Huge technology revamp has to happen, he added.

Tech interventions

Asked what kind of tech-interventions do banks have to undertake to bring digital transformation to life, Natarajan said: “specifically during times such as the present, when the customer is unable to step out of his home because of the pandemic situation, the banks would need to revamp/reimagine the entire processes. AI and Cloud technology form the core element of digital transformation. Cloud technology allows scalability and digital transformation is reinforced by Cloud.”

When asked where were Indian banks in this digital transformation journey, Bonnerjee retorted stating “it is a mixed bag. Digital initiatives of most banks have been around front office over the last decade or so, but in the last couple of quarters, banks seem to have realised that to compete with non-traditional players they would have to go beyond giving a nice front office experience towards a hassle free user experience end-to-end. Banks are waking up to this reality, are still at a crawling stage in terms of harnessing and monetising the data, establishing a robust platform.”

IBM experts observed that the traditional banking value chain was decomposing into various constituent elements — or components, and many regulators — encouraging active disruption to boost necessary technological innovation.

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