Monday, December 19, 2016

WHAT IS IN STORE FOR BANKING

What is in store for banking?
At present and in future the banking will face a biggest challenge of Low rates, over regulation, technical revolution and security and millennial. Let us understand as to how these challenges affect the bank.
Low rates
 The low rate post the challenge on profitability and the banks have to work on very thin margin. In order to be cost effective the banks should reduce the operating cost constantly.  This will be difficult in the expansionary phase. 
Over regulation:
The regulationary measures increased day by day both at the domestic and international environment leads to increase in investment in technology and training of staffs. Non compliance attracts heavy penalties which impact the profitability besides causing reputational risk.  It may also leads to losing business license as well.
 Technology:
The technology changes very fast and banks are on the constant look out to update the same which always comes with high cost. Today’s secured environment need not be secured tomorrow. Hackers are getting smarter and smarter and try very hard to find ways and means to penetrate into any system. Even a weak link in the technical environment of a bank will be sufficient to cause a huge loss.  It is believed that the swift system is highly secured but when this can be hacked there is no need to tell about other systems
Millennial
The millennial do not want to visit the bank for completing the transaction, which  helps the banks propel and catalyze digital transition as well as embrace digital excellence to go digital



Need of the hour to meet the challenges and ensure successes in furtre? 
The fundamental common factor in all the four threats are strategic challenges which can be addressed starting from the Board room and the new paradigm between competition and co- operation which addressed by moving from competition to cooperation.
What will the bank/ banking of the future look like, in my opinion?
ü   Banks in 2050 will be cashless and paperless and branchless.  May be there will be couple of branches for a million people.  
ü  All cash transactions will be chargeable including the ATM and cash deposit machines.
ü  The technical team of the Bank will be bigger compare to the operational team who will be working round the clock in upgrading the technology and security.
ü  Everything in banking is digital including compliant / customer relationship management and the human interface will be very few.
ü  Plastic card may vanish and the digital banking will get embedded into the hand-phone of the customer.



ü  Financial inclusion will be better than currently and is near total. People will have the so called One-Number, which, stands for their personal ID, their primary phone number, their primary bank account number, their passport number and their IP address. This One-Number will be globally granted at birth.
ü  Everyone will have a credit score and the loans are decided based on the credit scores. The assets and liability of everyone is linked with their credit score. This will make the processing of loans faster and easier.
ü  Central bank and all global compliance agency will issue their circular digitally which will get automatically updated into the banking system without any human intervention.




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