Digitalization in the Banking System: Benefits and Challenges

The world has shifted to the ‘Digital Darwinism’ era, a time where technology and society are evolving faster. Nowadays you don’t have to carry a cheque while visiting the bank for money withdrawal. Majority of the youngsters don’t even know how the cheque book looks like, and the money moves so rapidly like fast food. That is how computerization has changed the world of finance. Digital banking calls for a complete change of mindset amongst bankers.

The digital revolution has flounced across the banking industry. In the last few years, the Indian banking sector has realized the utmost need for digital technologies and thus, rapidly embracing digital banking tactics. The key innovations in digital banking are Digital-only/Virtual Banking, Biometric Technology, Artificial Intelligence, Blockchain Technology, Bitcoins and Robotics.

Banking has its root in money lending. The questions are what would have been life without ATM or credit cards in our hands? And what does ATM do? Is it beats back? The moneylender has the discretion of charging rate of interest according to what business you want the money for. Luckily, the ATM dispenses all that. You can go to the ATM at any point of time for any reason such as personal, medical, shopping or any other emergency. ATM charges you the same rate of interest despite who you are and what kind of compulsion you have.

The Benefits…

Telebanking is at its most advanced stage. Most of us have mobile phones that allow us to do whatever we want to, irrespective of place and time. The advent of digital banking helping youngsters and the coming generations to manage their time smartly as they don’t have to visit the banks every single time. The advantage of digitalization is that you can trace the transactions and at the same time bankers can avail all the information: who got the money, from whom and where it will go.

Bankers always suffer due to lack of knowledge about their depositors, under knowing their customers as well as borrowers. But technology helps in identifying all these numbers. By building portals, information and history of an individual can be traced and shared by the bankers amongst each other. Hence, technology has a significant role in creating transparency in transactions among banks.

The Challenges…

Besides the benefits of digitalization, there are challenges to discuss as well. Massive power cuts being the first challenge in digital banking, it is quite difficult for a country like India to sustain the backup systems for a longer time period. In such a case, technology becomes totally useless. Internet penetration is the second challenge, which is not very high in India but acts as a barrier to digital banking.

There are 4 IT companies across the world deals with the banking sector. The banking sector is going to have a massive hit if anything happens to these companies. It is even better to say that the oligopoly has developed, but there is no back up for the same. There must be a competition within IT companies who can compete with each other, and provide alternatives to the banking sector.

Another most important challenge is the mindset of technology among people. While one is familiar with banking technology, it might possible that other is not. Normally, people with more age are not so familiar with digital banking, and this number is still high in India. There are nearly 15 crore people in our country who are above the age of 58. So the challenge is how to tell them that it is safe. All the transactions are in English and till date, only 11% of the Indian population can read, write and speak English.

The question is how to tackle this issue in a country like India where the messages have to go in different languages. And if the message goes in different languages, then the official statistics say that only 74% of the Indian population can read or write. The last issue is – when you hire technology, it involves a huge cost. Despite Jan Dhan, 30% of the population is below the poverty line and have nothing to do with the scheme because they have nothing to transact.

As a business management student, you should understand the recovery of cost incurred on technology hiring. The decision is even more challenging if the technology changes after every three years. Students who are the future of young India must consider all these challenges critically and provide the solutions.