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November 30, 2016

Powering New Digital Business Models in Banking

Posted by Sanat Rao (View Profile | View All Posts) at 12:35 PM

Powering New Digital Business Models in Banking

Innovative digital models are making their way into banking and the recently launched Marcus by Goldman Sachs is one such example. A subsidiary of the investment bank, Marcus will offer customers a fixed-rate, no-fee, unsecured personal loan, which enables customers to personalize monthly payments and thus better manage their finances.

Marcus marks Goldman Sachs's digital shift from Wall Street to Main Street, and is an example of how banks are rapidly adopting new technologies. Another example of progressive incumbent banks going digital is India's ICICI Bank which has continually transformed itself to keep pace with changing customer requirements. Since 2015, the Bank has refreshed its core banking platform, launched #icicibankpay - a comprehensive Twitter based banking service, Pockets - India's first Visa-based open digital wallet, iWear - the country's first multi-platform smartwatch app, SmartKeys - a smart keyboard for banking where one can chat and pay, and most recently, a pilot on Blockchain based remittances and trade finance. All these initiatives are designed to comprehensively transform the bank to fulfil emerging customer expectations.

Even banks with excess legacy and complexity are setting up distinct digital entities which are sometimes called 'Bank-in-a-bank' strategies. I believe this is a good strategy to leapfrog technology and operational complexities and create a value proposition which aligns to customer's expectations.

On the other hand, Fintech-led competition continues to grow. Fintech investment hit a new high of $12.7 billion in the first six months of 2016. Fintech expansion will continue so long as there are gaps between a customer's expectation and bank services - whether it is in lending, payments, wealth management or deposits. India's Paytm is a case in point. It aims to replicate its success in e-commerce and payments by growing into a bank that will challenge traditional financial institutions and has set a goal of enrolling 200 million customers in its first year of operation.

Then there are entities from other industries that are trying to establish a presence in banking. These organizations, such as a retailer like Tesco and mobile operator, Airtel, hold on to their original business models, and strategically use the strengths of their core business (reach, customer knowledge, brand and so on) to leverage opportunities to enter the digital financial space.

Clearly, these changes have large implications for partners of the financial services industry who also have to evolve in sync with their clients. Infosys Finacle, for instance, has been able to support changing business models of clients such as ICICI Bank, Airtel Money, Marcus and Paytm, by making relevant upgrades in its product portfolio.

Finacle continues to build on its successes by investing aggressively to expand its product offering. Its focus is on the four tenets of what is called 'Truly Digital Banking' - enabling frictionless banking experiences for end-consumers, helping clients build value-based ecosystems with a large number of partners, automating client operations extensively to improve efficiency and service, and equipping clients with advanced analytics capabilities that can be deployed to create personalized, relevant and enjoyable experiences for customers.

Given the dynamic environment, banks, non-bank providers, and their partners need to prepare to make many more changes in the future. That's the only way to succeed in an era of 'Truly Digital Banking.'

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