The Digital Revolution in the Banking Sector
On 8 November 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series. While the move aimed at cracking down on illicit and counterfeit cash to fuel terrorism, it also considerably inconvenienced the public as there was prolonged cash shortage in the country. Despite its shortcomings, a positive that came out of this change was that a large number of transactions took the digital route. The NPCI data showed that the Unified Payment Interface (UPI) transactions made a giant leap from just 1,03,060 transactions in October 2016 to 91,67,277 transactions in May 2017.Also, the sector of card payments witnessed the growth of up to 65% in this financial year. To begin with, one must define as to what digitation is? Digitization can be defined as the process of converting data into the digital format. With the growth of ATMs stagnating, it is clear that trend for the banking business is towards digitization. This brings us to the role of digitization in banking. With the increase in the use of technology like mobile wallets, it is clear that the banking sector is moving towards overall digitization.
Let’s discuss the pros and cons of Digitization.
Following are a few advantages:
- It improves customer experience.
- Reduction of costs for banks and customers by using ATMs, cashless transactions etc.
- More digital data enables data driven dynamic decisions through the use of digital analytics. This is helpful to both banks as well as customers.
- The number of customers will be increased largely due to the increased convenience of banking.
- It fosters the reduction of human error.
Apart from this, digitization offers the following disadvantages
- It could potentially lead to the loss of jobs while simultaneously reducing the job of employees;
- With the rise in technology, bank branches become more vulnerable to cyber attacks;
- The excessive digitization might lead to data theft.
The Road ahead for the Banking Sector:
However, it is clear the advantages of digitization in the banking sector far outweighs the disadvantages. Even though digitization would potentially lead to the reduction of manpower in banking, it would pave the way for opening in various other fields like cyber security, research team for innovation in technology etc. This change in the role of retail banking would spell nothing but a move in the right direction for the banking sector. With the rise in the use of digital wallets, it is clear that this change would be inevitable. Therefore, the banking industry must adapt to this digital boom.