With several innovations and technological challengers in the BFSI space, traditional banking will continue to be the backbone of the BFSI space. While most transactions have moved to the virtual space, the physical touchpoints of bank branches will continue to exist. However, only single digit percentage of transactions will happen through physical bank branches, says VV Balaji, CIO (CGM), ICICI Bank.
Speaking to Financial Express for the LeadershipConneX podcast series, Balaji says
“Branches will still be one of the big touch points as far as banking is concerned. The other point is that there is scope for many banking players in the country, despite many fintech players coming in. They will not be able to replace banks. Banks are about trust. Banking is a trust business and creation of trust is a long-term act.”
Despite the influx of fintech players, banks will continue to provide the foundation of the BFSI ecosystem. “Fintechs can disrupt the payment space. Fintechs can disrupt a bit of the loan space. But the liabilities part is where the banks come into the picture,” says Balaji. However, he points out that fintechs aren’t to be seen as competition, but as a co-option, partnering with banks.
With artificial intelligence (AI) becoming a part of the tech innovation happening in the banking space, Balaji sees this as a welcome part of the tech evolution. He points out that when computerisation came in there was a fear that there would be a job loss, but to the contrary, banks have been net adding manpower. With the Indian economy growing, he says, and with the increase in financial inclusion, there would be an increase in the demand for banking services and the core banking function will not be disrupted.
AI, in fact, would see a lot of use cases, from powering some of the decisions to improving accessibility. “AI can bring down the language barrier. With so many languages in the country, a customer can talk in X language and it can be translated to Y for us to reply. AI can also help in document reading in multiple languages,” says Balaji.
Even with AI and new technologies coming in, banking in India is still one of the safest in the world, because there are multiple measures India has taken to make it safe, assures Balaji. For instance, India introduced two-factor authentication years ago. There are process-level controls and system-level controls, and with digital inclusion in the JAM trinity, all built in a secure manner. “Even with mobile phones, all the digital guidelines that RBI has issued has lots of safeguards for banks. We have excellent identity and access management solutions, we are securing the customer’s debt. In a world, where there is a lot of data intrusion into the system of banks globally, I think India has far fewer incidents compared to its global peers,” adds Balaji.
The increasing use of AI in fraud through digital cloning or morphing is a concern not just for banking, but for everybody. AI in the wrong hands can wreak havoc. “It’s like a knife – it can cut vegetables or it can kill. Balaji assures that customer data is safe with banks, as AI is not allowed to look at or use personally identifiable information. He also adds that the “Reserve Bank of India is one of the toughest regulators in the world and they get into everything. To be fair to the regulator, they handled crisis like the Covid crisis very well.” Contrary to popular belief, tough regulations don’t stifle growth. He says the regulator is encouraging growth along with technology changes.
Along with growth, he says ICICI Banks is also looking at sustainable growth. It regularly publishes ESG reports. In its data centres, for example, it has using solar power for 10% of its needs and feeding it into the grid.
He says that in the banking space challenges will keep coming up. “It’s not like one can do a heart transplant while running, but still one has to run and keep changing, that’s a huge challenge.” And with quantum computing coming in, it can break any sort of encryption – so banks need to come up with one better, a quantum proof encryption.
He signs off saying, “You can’t go to sleep any day thinking that everything will be fine, because by the time you wake up, things have changed globally. This is a challenge for future bankers. No architecture is relevant for eternity, it has its shelf life.”