YES Bank: What's in store for 2017?

Expectations from the banking and fintech sectors

The Indian economy has been given a new lease of life that can be seen as a 'reset' - with huge positive implications for liquidity, inflation, fiscal and external deficit in the short-term.
Over the next two to three years, improvement in India's position on transparency and anti-corruption in the global league will further add to its investor appeal. With GST on the anvil, India is now on the cusp of higher growth in the medium-term - to be steered by organised sectors, including MSMEs and the revival of the private sector capex cycle.
Against this backdrop, I am confident that the banking sector will lead transformational growth of the economy in 2017. Following the successful demonetisation exercise, as well as the ongoing transition to digital payments and a less-cash economy, the fintech space assumes significantly larger importance.
Over 2017, I believe the following will be the top trends to watch out for in the banking and fintech space:
Increasing remittances to India with digitisation of banking channels: Now with the push from the government, growth of digital transactions is imminent. The year 2017 will be an interesting period that could probably give birth to new payment instruments and we may march into a world beyond PoS, IMPS, UPI, etc. Alternative digital channels are tantamount to increasing efficiency, improving service, enhancing customer experience, as well as reducing operative costs in the long run. With Internet and mobile becoming the preferred mode of transactions increasingly, banks are presented with a plethora of opportunities to capture newer horizons while achieving interoperable convergence between traditional and modern banking.
Chatbots, robotics and artificial intelligence (AI) will enhance the experience of customers: The year 2017 is going to be big for chatbots and robots as many banks are lining them up for launch, following YES Bank's successful launch of chatbot banking last year. These chatbots reduce the effort of the customer and gives a conversational touch to do banking on digital channels. Some banks have also expressed interest in introducing physical robots to aid the customer in bank branches. Artificial intelligence is driving this innovation and the intelligence of the robots gets refined with more usage. This gives an ever-improving experience to the customer. In times to come, we may find that customer service is largely automated and available round the clock at the fingertips.
Front-end innovation will gain prominence with multi-lingual support and localisation of services using AI: Faced with diverse groups of customers in India, there is a pertinent need for localised services in native languages. This will particularly help in improving the financial literacy of the unbanked and under-banked customers. Augmented reality may come handy to further come up with location specific products and services.

Predictive analytics will result in a personalised experience for customers: With ever-increasing data points and more demanding customer base, customisation and personalisation will be key. In this context, analytics framework with robust algorithm and sophisticated predictions will play an important element in designing the entire banking experience. These analytics are generally iterative and with growing digital footprint of a customer, products and services will be more relevant to the customers.

Banks and fintech startups will try to innovate blockchain technologies to increase efficiencies: Crypto currencies like Bitcoin are a long shot in India but the technology powering them, blockchain, is fast entering the market with the potential of increasing efficiencies and reducing transaction failures. Banks have already started to enlist the key use cases with the help of fintech startups and have executed blockchain transactions to test their efficiency. The advent of blockchain technologies is expected to bring more efficiency and bring down turnaround time in key banking functions.

Smart Cities, Internet of Things (IoT) and Cybersecurity: Smart cities are incomplete without smart payments. Citizens living here will have ubiquitous data connectivity and it is important that IoT as a concept becomes a reality when it comes to payments. IoT also provides more data points and this would help financial institutions to learn more about the customer and interact appropriately. This would also open a window of data privacy and cyber threats. Hence it is very important that investments are made both in innovation and cyber security.

Analytics of Things (AoT) will transform credit scoring models to accurately underwrite the customer: Internet of Things is useless without analytics and this has given rise to the term "Analytics of Things". AoT helps to find a pattern and understand the behaviour of customers. This learning can be extended to relate the behaviour and creditworthiness of the customer and this will help in accurately underwriting the customer. This will bring down the risk component of banks drastically and is expected to take off as many fintech companies are working in this space.
While there may be sufficient progress made along these above trends during this year, it is difficult to expect banks or fintech firms to dedicate their own resources to research on these areas and implement solutions on their own. This is where we believe A-R-T of banking (Alliances, Relationships and Technology) plays an extremely important role to identify specialists in each area and foster a strong partnership and work along all identified areas.
The writer is the Managing Director and CEO, YES Bank, and Chairman, YES Institute.

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