EXECUITIVE SUMMARY

Information Technology (IT) today has become an important tool for an efficient banking system,
and Indian banks have put in place a fairly strong infrastructure to leverage its benefits.

The 'Digital India' campaign has the potential to transform the Indian banking industry.
Highlighting the progress of 'Digital India', more than 12,000 rural post office branches have
been linked into payment banking.

Apart from giving licenses to new payment banks, many other policies and regulations are
expected to be in place in the upcoming years which can bring a paradigm shift in the Indian
banking sector. The Digital India vision aims to transform our country into a digital economy with
participation from citizens and businesses.

JAM (Jan Dhan-Aadhar-Mobile) is another step in digitizing India through a synchronized

banking system covering the whole nation. It is assumed that bank accounts opened under Jan -
Dhan-Yojana now said to have a total balance of almost Rs 26,000 crore.

Over 190 million accounts have been opened under the financial inclusion scheme, with around
38 per cent of these being zero-balance accounts. It aims at achieving the maximum -- maximum
value, maximum empowerment to people and maximum technological penetration among the
masses.

With the increase in convergence of wireless and mobility, it has transformed smartphone into
a fully operational personal bank.

India, being a nation which continues to be driven by cash, is also moving towards a cashless
economy with financial inclusion policy and 'Digital India' campaign by the government, with the
aim of controlling the flow of black money.

It means the flow of cash within an economy is non-existent and all transactions have to be
through electronic channels such as direct debit, credit and debit cards, electronic clearing and
payment systems such as IMPS and NEFT.

The technology being used in a cashless age has the potential to offer security benefits to its
users and make it convenient for users who like to combine multiple functions onto one handheld
device. Making transactions cashless results in curbing black money and in turn makes all
transactions accountable.

Digitization in banking industry essentially means making banking smooth and seamless for the
customers.

In the recent years, there is a notable drop in the usage of branches and tremendous increase
in digital banking consumption. Most of the private banks and public sector banks are focused
on offering new technology-based services to its customers like mobile banking, mobile banking
apps and e-wallets.

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The biggest advantage of digital channeling in banking is its ability to provide new propositions
and customer specific business models by analyzing this banking pattern which explores the
customer value to the maximum.

To create a digital environment is now the priority of all banks and they need to devote a
considerable budget for a full transformation to a completely digitized circle of consumers.

There has been a large transformation in the banking habits of customers including e-commerce
and online shopping. They adopt mobile services for a diverse range of services in day -to-day
routines for ordering food, taxi booking, movie booking, mobile recharging, purchasing, etc. It is
obvious that customers expect a fundamentally simpler way to avail these services with
minimum efforts.

While information technology and digital transactions continue to proliferate at a rapid rate, this
has also opened up potential loopholes which pave the way to various frauds and sec urity
breaches.

High success rate of digitization also raises security concerns that can destroy the business and
the brand name. Cyber risk management in the business environment is one of the complex
issues being faced by the banks, requiring incorporating sophisticated techniques and new skills
and capabilities to be embedded in the people.

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CHAPTER - 1: DIGITALISATION

3
Introduction

Digitalization impacts everything. Especially with respect to finance its impact is transformative: going
far deeper than the cost-saving potential from innovative IT, or even from sourcing new revenue
streams. Digitalization is about taking control of your customer-experience ecosystem by managing
your entire business from your customers perspective and rethinking your legacy business model.

This paper summarizes how the banking industry is being influenced by digitalization: the factors driving
the change in business and the evolution in customer expectations. It then outlines ways to identify
specific opportunities for the realization of digitalizations full potential.

The introduction of digital banking has revolutionized the banking sector and modified the whole
procedure of simple bank transfers. It has facilitated the customers assisting them to check their
account details, pay online bills and transfer money from one account to the other in a faster way. This
has helped the end user to enjoy a methodical financial life. Though the world has embraced the hassle
free online banking, yet it cannot replace its brick and mortar counterparts. Let us pay attention to the
pros and cons of the digital banking along with a brief overview on its evolution.

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Growth of Internet Banking

The invention of ATMs and credit cards paved the way for the digitization of the banks. The commercial
evolution of the internet in the early 1990s completely overhauled the banking sector introducing the
world to the online banking services. This is when traditional street-side banks started considering ideas
to deliver restricted online bank services to cut down the cost of operations. When these efforts proved
beneficial and were acknowledged by all, numerous banks ideate to create their own cyber presence
with newly designed website featuring the various services like opening new accounts online,
necessary form download and processing loans. This has equally affected the hiring process for the
professionals in the banking sector. Apart from the banking examinations that one need to qualify,
career in the banking for freshers requires technology experts.

The concept of online banking has transformed more taking into its purview transfer of funds, bill
payments, Income tax filing, opening recurring accounts, fixed deposits and many more

Benefits of Online Banking

The digitization of banking has brought the joy of luxurious banking from anywhere, anytime. It has
grace our lives with the following advantages:

1. Banking made easier: If you have an internet connection, you can bank from anywhere anytime.
Except when the website is down for maintenance, the online services are available round the
clock throughout the year. Customer support team is there to take up your issue when the
internet is not available. You will have the summary of your account displaying your account
balances real-time. Banking is made easier, faster and more efficient through the internet.
Consumers can always keep a check on their account balances through this mode of banking.
Even if you need to change your contact details or your mailing address then you can do it
through few clicks, making it effortless.
2. High interest rates: When a bank is going full online with its services, then the reduction in
infrastructure and overhead cost leads to an increase in the interest rates on your savings
account and also lower loan and mortgage rates.
3. Advanced websites: The banks that have chosen to go online with their services ( which
comprises of all the banks- national and international, public and private) have well-developed
sturdy services with added features that includes financial planning tools, loan calculators,

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 premium calculators, tools for analyzing investments, budgeting and forecasting tools, tax
preparation and tax paying platforms online.
4. Mobility of services: Virtual banking is now available on mobile. Banks are developing responsive
mobile websites so that it can be easily accessed via smartphones or tabs on the go. Money can
be transferred and bills can be paid through these mobile websites.
5. Eco-friendly: This can be categorized as the environment-friendly initiative. Digital banking saves
paper discarding the need for office space, construction, and vehicular movement. Thus giving
their customers a pollution free experience.

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Drawbacks of Digital Banking

Though online banking has bestowed us with heaps of benefits but it has a flipside to it as well. They
are as follows:

1. Personal relationship with the Bank is not established: The traditional brick and mortar bank
interacts with the customer developing a mutual bond. Acquainting with the professionals
working in the bank in your area can be beneficial during the time you apply for a loan or if you
require any special service. They might help you to deal with the issues of service charges or
cutting down on the fees. In case of business loans, especially this bond will help you to get the
required capital.
2. Issues with transactions: When you have to deal with a complex transaction, it is better to sit
and resolve it face to face. International transactions also have many concerns that need to be
looked after. It is advisable that in these cases you should sit and consult with your bank official
to resolve the issues. Making them online might lead to link failure hampering the mode of
transfer.
3. Security issues: Identity theft is an issue to consider these days. If robust encryption software is
not in place then all your confidential account information will be available in the web posing
serious threats to your finances.

The banking sector has become competitive over the years due to the digitization of banks. Weighing
the pros and cons, it will not be wise to depend only on one method of banking; be it the virtual one or
the traditional one. The best approach would be to break up your banking needs between online and
in-store services to enjoy the benefits of both.

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What is meant by digitization: -

Digitization is the process of converting data into digital format. Digitalization means the adoption
of technology. But these two words are being used interchangeably.

Role of digitization in banking:-

Banks are not just a part of our lives, but have a significant role in our daily lives. For many, day
will not end without at least a single financial transaction. Thus banks always try to adopt latest
technologies to enhance customer experience.
Digitization is not an option for banking industry, rather it is inevitable because every industry is
being digitized and banking sector is no exception.
Mobile banking is increasing at a fast pace more than online banking.

Opportunity space
Digitalization is a trend one being driven by three major forces:

Customer experience: Customers are accelerating the drive to digitalization. They are leaders not
laggards, having readily adapted to the digital environment as consumers and retailers. Customers
expect a seamless multichannel experience and a consistent, global service. They judge their
experience on three levels: how well companies meet their needs; the ease of doing business, and;
how enjoyable it is. One of the main challenges for banks is, therefore, adapting their existing service
models to changing customer expectations and cost-awareness.

Technology push: Digital technology is rapidly expanding its influence. Digital infrastructure provides
billions of customers with affordable broadband and low-cost devices. Meanwhile, cloud computing
with its vast information processing machinery is rapidly evolving.

Economic benefits: Digitalization accelerates economic growth and creates jobs, it allows companies
to save costs and generate revenue. Indeed, digitizing information-intensive processes can cut costs
by up to 90% while improving turnaround times. Software also allows businesses to collect data that

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helps them understand process performance, cost drivers and risks, which enables managers to
proactively address problems.

To benefit from digitalization, however, companies must develop a clear strategy that optimizes
processes and costs, manages rising data volumes, connects data to the business and fulfils the
growing number of regulatory requirements. Indeed, when

Implementing a digital business model and when redesigning processes it is critical for companies
to develop an end-toned response that goes beyond fragmentary changes in technology.

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CHAPTER 2: DIGITIZATION IN BANKING
INDUSTRY

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Digitization in financial services: the story so far

Thus far, digitizations impact on financial services has been on non-knowledge-intensive services that
can be standardized.

This includes areas such as a payments solutions, online banking and automated financial services,
as well as financing products such as consumer credit or the allocation of venture capital.

Historically, banking practice has focused on product push (i.e. increasing sales targets) rather than
understanding how best to meet the needs of customers. The result: retail banking has been rocked by
a series of mis-selling disasters while wholesale banking continues to uncover significant market
abuses.

As a consequence, retail banks are keen to become more customer-centric. Yet given their legacy
infrastructure, culture and established business models this is clearly a challenge, while wholesale
banks are still defining what client-centricity means (given established reciprocities with counterparties
and the level of sophistication of their clients).

A number of players are responding to the digitalization challenge, however. Barclays was one of the
first banks to switch to internet and digital banking, revealing that its customers now visit their branch
on average twice a month, while using the banks mobile services 18 times in the same period.
Meanwhile with seven day flexible opening Metro Bank is another successfully-digitalized retail
bank. Whats more, Metro Bank has entirely outsourced its IT component, ensuring that its digital
offering is infinitely scalable and always state-of-the-art. There is at all times a single client view, and
the bank is able to fulfil regulatory reporting requirements fast and cost-effectively.

Digitalization also facilitated opportunities for new business models for example in the retail space, e.g.
Atom Bank. Atom Bank is due to open in 2015. This is a mobile-based bank offering a range of financial
products. Yet there are no retail branches, and it has even dispensed with telephone banking. Its
customers will transact purely online or via a mobile device. While traditional bricks and mortar banks
are ridiculed for their lack of innovation, some appear to seem to be taking it pretty seriously. From the
looks of the innovation centers of Standard Bank Playroom Innovation Centre, Capital One Labs (they
have three), Commonwealth Bank Innovation Lab, Citi Innovation Lab, Visa Innovation Center and

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Chase Bank Branch Design & Innovation Center to name a few; they are like digital playgrounds,
idea labs and test kitchens built looking to keep pace with the wave of digital disruption sweeping the
industry as mentioned above.

Additionally there is a movement by several banks to acquire innovative payment companies as a way
to bring innovation in house and leverage new evolving technology.

On the wholesale side, banks are investing in enhanced cash management capabilities, building e-
platforms, implementing more straight through processing of trades and simplifying bank-to-corporate
connectivity. For example, XML messaging and ISO 20022 have emerged as standards for
international payment transactions, while SWIFT has opened its network to corporations. As things
stand, some 900 large companies worldwide including GE, Microsoft and T-Mobile have used
SWIFT connectivity to rationalize banking platforms. Certainly, ISO 20022s deployment has been
welcomed by companies seeking more transparency into their payment providers processes.

Harmonized standards in cross-border payments at least in the Eurozone have also been facilitated
by the Single Euro Payments Area (SEPA) project. Migrating small and

Medium size corporate customers to the new standards has been the biggest adoption issue for many
banks a complex process given the number of varying payments systems across the Eurozone.

Transforming customer experience is a difficult process: one that must be taken seriously and treated
as a business discipline. Indeed, to achieve the full potential of digitalization, customer-focus must
become an essential part of business strategy.

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The roadmap to digital success

In order to remain competitive, companies must commit to transforming themselves into fully-digitalized
businesses. According to McKinsey, successful digital enterprises share seven traits:

1. An obsession with the customer experience. They find ways to constantly improve the
experience and learn from every interaction. Indeed, they are obsessive about this.

2. They are unreasonably aspirational. They make someone accountable at the ExCo level. They
also create stretch visions. And they measure digital value, not digital interactions.

3. They ring-fence and cultivate digital talent. Key personnel must be protected from business as
usual. They forgo existing HR models and, instead, set up a separate business unit that nurtures
digital initiatives. Within the unit, many remove organizational hierarchies in order to increase
collaboration, productivity and mind-shift.

4. They acquire new capabilities. They invest in scarce talent, en masse. They hire digital skills not
industry experience if required, moving into adjacent markets to do so.

5. They are quick and data-driven. They continually evolve their value proposition. They embrace
live testing, and they adopt methods such as agile development and live beta supported by
big-data analytics in order to increase innovation.

6. They follow the money. Successful digital enterprises create a zero-based technology budget
aligned with the value at stake. They also invest across the value chain though not haphazardly
across the organisation (perhaps under the halo of experimentation). That said, they rapidly
scale success.

7. They challenge everything. Questioning the status quo, they create plans covering all functions,
products, business units and locations. They examine all aspects of the business: embracing
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 both customer-facing and back-office systems and processes. They look up and down the supply
chain. They also think expansively about partnerships.

From the above, it is clear that a key differentiator is the intelligence they build on their customer base:
information about the customers that competitors lack. Critically, they constantly listen to customers
and ask the right questions often those never asked before.

The threats to commercial banking

1. Technology disrupting banks value chains

Industry outsiders have been successful in offering simple financial services. Many anticipate
technological developments optimally linking service suppliers with customers to best fulfill their
needs. These technology-driven competitors often gear their business models to market conditions and
customer preferences, and usually avoid the cost-intensive revamps of infrastructure required of the
incumbents.

The term used to describe the digitalization of the financial sector is fintech, new technologies that
enable or directly provide financial services such as internet-based technologies in e-commerce, mobile
payments or early-stage crowd-based financing of startups. Fintech has become highly competitive.
Driven by the accelerating pace of technological development, the rapid growth in data volumes,
increasingly sophisticated methods of data analysis, and the pressures of regulatory scrutiny, the sector
is also highly investable. The 1,027 fintech companies worldwide attracted US$3.1 billion in investment
in Q4 2014 across 214 deals. In the UK alone, the sector is worth an estimated US$20 billion in revenue
to the economy predicted (by the CBI) to grow to US$300 billion by 2020.

Meanwhile, traditional firms including banks struggle to monetize even modest digital offerings.
Given that the central role of banks is to provide markets with liquidity and customers with credit, few
are early adopters of new technologies. However, it is essential for them at the very least to deploy
technologies that speed up and optimize processes, as in the banking landscape of the future only the
fleet of-foot will survive.

One solution is for banks to follow many other industries and move to the Cloud. The benefits are clear
in terms of reduced cost, better infrastructure and more investment in development. Often, the
challenge is to successfully migrate data from legacy systems, as well as to overcome the commonly-
held belief that data is less secure in the Cloud (though industry leaders agree it is just as secure, with
the added benefit of enhanced control). While banks are generally good at gathering data, they are not
always good at interpreting it and extracting the insights from it that are required to provide sophisticated
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new experiences to customers. Additionally, many operate using archaic back-end systems that lack
the required functionality to support these at the front end.

The Cloud allows organizations to undertake big data analytics faster and more cheaply. More than
that, it can also enable them to reshape their business models. BBVA, for instance, has been an early
adopter of cloud-enabled

Virtualized banking. Driven by a desire for digital transformation, the bank saw the Cloud as a route
towards improved multi-dimensional scalability, a more elastic infrastructure and the potential
development of parallel agile models. Meanwhile, Atom Bank and Starling Bank are leveraging client
data to build new business models using Cloud technology and predictive algorithms to play back
information to customers in meaningful and beneficial ways. Useful insights may also be gained from
the experiences of early adopters of cloud technology in the public sector.

2. Block chain technology

Asked to name just one event reshaping finance in recent years, fintech companies are likely to cite
the launch of Satoshi Nakamotos Bitcoin in 2008. While Bitcoins long-term prospects have been
questioned since its 2004 value tumbled, many believe that the technology underlying it the Block
chain has a bright future. The Block chain is a ledger listing transactions credits and debits in the
form of an ever-expanding computer file. Split up and distributed over thousands of computers across
the world, it uses cryptography to ensure each block is digitally signed in such a way that changing an
entry invalidates every other entry preceding it, all the way back to Block 1. This ensures all entries in
the Block chain are immutable. Indeed, to hack the system requires commandeering over 50% of the
systems computers: possible, but unlikely.

It is genuinely new, and its applications are infinite. Block chains can be used to record any transactional
data requiring immutability including smart contracts, royalty payments, certificates authenticating art,
electronic voting, patents, even government budgets. Indeed,

NASDAQ announced in May 2015 that it is using Block chain technology to offer fully-electronic issue,
transfer and management of private company securities. Anti-corruption group Transparency
International believes Block chains are a potential tool to eliminate corruption in voting or allocating aid.

As a system of consensus by distributed co-operation, Block chain allows value to be transferred

without a central, controlling authority or a middleman to verify the transaction. Its advocates think it
can change the centralized, institution-dominated shape of modern finance. Indeed, since being a
15
trusted third party has traditionally been a large part of banks raison dtre, Block chains are potentially
a greater threat to them than all other fintech inroads.

3. The risk of commoditization

A further consequence of digitalization is the commoditization of traditional services, one of which is

payment processing. For decades, networks of correspondent banks moved money from one country
to another. Yet many new companies are disrupting this model.

One example is Earth port, which as a cross border payments service provider partnered with the
digital currency network provider Ripple Labs to allow enterprises (including banks) to transfer money
more efficiently. Ripple Labs provides a network enabling real-time payments across borders in
different currencies. Its clients include two of the top four global banks and four of the top 20 U.S. banks
Bank of America, HSBC, Western Union, Xoom and American Express among them. Within
correspondent networks, a handful of banks set the foreign exchange rates, while with digital currency
systems such as Ripple banks are likely to compete on every single global payment, pushing down
the cost.

Another type of digital competitor are the personal finance companies. They are finding a highly-
profitable niche disrupting a market that banks had underserved that of small, short-term loans. These
companies are leveraging the internet to transform relationships between lender and customers. This
may be the most radical financial-sector disruptor in years.

Technology competitors have even upped their push into the investment world. One example is the
Alibaba Group, which is launching a stock market index (CSI Taojin Big Data 100 index) based on its
proprietary data thus highlighting the potential for technology companies to diversify into asset
management as well as the drive towards using big data in investment decisions.

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How to Develop and Execute a Digital Banking Strategy

We are in the midst of one of the largest transformations in banking history. One where a coffee
company such as Starbucks runs one of the most successful mobile payments systems in the world,
and Internet firms such as Alibaba and Ten cent are offering financial products around their core
services. Disruption is everywhere and this leaves banks to be up against a new reality where changing
consumer behavior fast and financial technologies are rolling traditional ways of doing business.

Banks are aware of such disruption. Hence, globally, more innovative incumbent banks and financial
institutions are moving swiftly to embrace digital by investing heavily in transaction migration. They
have also significantly upgraded web and mobile technologies and created both innovation and testing
centers. To ramp up their efforts further at succeeding in the digital transformation race, they adopt the
habits and culture of digitally native companies. For example opening up their banks application
programming interfaces, pursuing agile development, or hosting hackathons to foster intensive digital
collaboration.

Over the next five years, digital sales have the potential to account for 40 percent or more of new inflow
revenue in the most progressive geographies and customer segments, according to McKinsey. By
2018, banks in Scandinavia, the United Kingdom and Western Europe are forecasted to have half or
more of new inflow revenue in most products coming from digital sales.

Banks have a limited amount of time to adapt as other industries are catching up with their digital
strategies. Successful strategies need to be based on a clear understanding of how digital creates
value; of granular perspectives on consumer behavior and market dynamics, and careful prioritization
by top management among hundreds of potential digital investments.

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Capturing the Value of Digital

There are four primary ways in which digital capabilities can be used by banks to create value:

Digital technologies increase a banks connectivity - not just with customers but also with
employees and suppliers. This extends from online interactivity and payment solutions, to mobile
functionality and opportunities to boost bank brands in social media.
Digital draws on big data and advanced analytics to extend and refine decision making. Such
analytics are being deployed by the most innovative banks in many areas, including sales,
product design, pricing and underwriting, and the design of truly amazing customer experiences.
Digital creates value by enabling straight-through processing, i.e. automating and digitizing a
number of repetitive, low-value, and low-risk processes. Process apps for example, boost
productivity and facilitate regulatory compliance, while imaging and straight-through processing
lead to paperless, more efficient work flows.
Digitization is a means of fostering innovation across products and business models. Examples
of this include social marketing and crowdsourced support, as well as digitally centered
business models.

Most banks may somewhat capture the value of digital by developing user-centric, easy-to-use and
speedy customer journey design, leveraging data and advanced analytics and implementing rapid
experimentation and agile development. But whats missing is the organizational orientation and
mindset to have small, cross-functional teams working together through rapid testing and improvement
programs. While it is a CEOs job to notice or become aware of the need for change, it is imperative to
take leadership in the development and execution of a holistic change program that simultaneously
addresses the culture, systems and capabilities required.

At the same time, the battle for digital talent is on, and banks are in a good position to attract those with
the skills they need; but the question is can they keep them?

Banks and financial institutions should be prepared to undergo major fundamental changes. Trying to
bolt on widgets here and there or tackle the project in isolated chunks could create major issues down
the road. Many banks and credit unions are still using ancient systems and models from the 1980s,
and there is no sense automating poorly designed, inefficient or outdated processes. In order to emulate
FinTechs agility, speed of decision-making and innovation, banks need to gear their internal structures

18
and processes towards facilitating experimental thinking. Hence, in order to keep banks digital talents
and execute a holistic change program, be ready to retool everything.

The scope of these changes demonstrates that digitization is a tough, complicated journey. It
involves rewriting the rules of how banks compete. Incumbents that fail to grasp this may risk
damaging franchises built over generations. But if CEOs can manage to address the multiple
strategic challenges posed by digital advances, they can position their institutions to compete
effectively and capture an emerging, long-term growth trajectory.

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Types of Online Banking

Account Management

Online banking systems allow you to log in through their website and view your account information.
There may be several passwords or log-in codes you have to input to gain access to your account. You
can check your current balance and balance history, initiate transfers between accounts, and view
account activity. You can also order checks and view check images with this type of banking service.

Deposits and Payments

Direct deposit is a type of banking that allows you to provide a routing number so money can be
transferred into your account automatically. For example, employers often use direct deposit to
automatically deposit paychecks. This is an electronic deposit done online. It is also possible to set up
automatic payments so that you can pay bills and have the amount withdrawn electronically from your
account. This type of banking is an easy way to pay recurring bills like utility payments and insurance
premiums.

Debit Cards

Debit cards work like credit cards except that they automatically withdraw money from your bank
account, and are one of the most common types of online banking transactions. When you use a debit
card, information about the purchase is put into a computer system and then transmitted online to your
bank, where the transaction is processed within your account.

E-statements

E-statements, or electronic statements, are your regular bank statements made available online.
According to GSA Federal Credit Union, e-statements are guarded by electronic safeguards, and are
actually less likely to obtain by identity thieves than a paper statement sent through the mail. Many
banks and credit unions recommend this type of online banking for security reasons.

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Future of Digital Banking 2016 2017

Pretty much all of the major retail Banks now have banking apps for smart phones and progressive-
designed (i.e. it scales well on any screen size) web banking. But digital banking should - and will soon
- go further than that. There are trends in digital design that are common place in other sectors as well
as some interesting developments in smartphones and omni-channel retail (i.e. coordinating your
strategies for both bricks and clicks) that will start to have a massive influence on banking from 2015.
There are also opportunities behind the scenes that digital could bring - in areas such as in-branch
productivity, customer analytics and what I call Embedded Digital Banking.

In this article I run through some key trends and give a sporting prediction about whether or not each
will be offered by the mainstream Banks in 2015.

1 - Your phone is your wallet, just tap-to-pay

The idea that your phone could replace your payment cards has been around for several years.
However, recent developments are about to make that a reality. NFC chips have been embedded in
most Android phones for around two years. These allow your phone to work like a contact-less card.
Furthermore, Android 4.4 (also known as Kit-Kat) has supported HCE (host card emulation) for a year
now. This is a change in how the security of the NFC chip is managed and means that we should expect
mainstream Android banking apps to begin to support tap-to-pay in 2015. There are early adopters
rolling this out in New Zealand and Australia already.

More recently, Apple announced the availability of NFC chip in the iPhone 6, as well as a payment
method called Apple Pay - which will allow you to pay by tapping your phone and authenticating by
swiping your fingerprint. This simultaneously offers the Banks opportunities to have tap-to-pay on their
iPhone apps and brings up the specter of Apple as a competitor.

It's not just Banks. Businesses in many sectors will release apps that will allow you to 'store' debit and
credit card numbers in your phone and use tap-to-pay (as in Google wallet.) Watch out for Tech
companies, Telcos, and payment companies/consortia like PayPal and Zapp. I would expect the entire
pre-paid card industry to switch from using physical cards to purely virtual cards stored in apps before
long. Countries where pre-paid is big (Italy, South America) should lead the way.

A whole new sector of businesses providing methods to authenticate and secure these payments is
emerging, and Visa have announced their Visa Digital Solutions service to make it easy for phone
21
manufacturers and financial institutions to deliver these mobile-based payment services. This is an
important area because the potential for fraud is huge.

Tap-to-pay will be big, but Banks will be followers if they don't get busy

2 - Gamified banking

Gamification is the application of computer game concepts to day-to-day software applications, apps
and web sites. It doesn't just mean the making the user interface work like Space Invaders, it could
equally apply to adopting concepts like collecting points or spotting matching visuals. In terms of
banking there are many experiments going on from apps that reward users with points when they
explore new services, to ones that unlock in-app game levels when saving deposits are made.

Banking gamification will generally be targeted at encouraging regular engagement - i.e. logging on
more often. This will drive more use of digital - which drives down the use of branch-based banking
(which costs more.) I would expect it to be a feature that many users will not be interested in - so it will
be optional. Ultimately I can't see it making enough measurable difference versus other digital
initiatives.

Banks will abandon most gamification after early experiments

3 - Banks bringing out multiple Digital products

At the moment the main Banks tend to focus on their core retail banking App as the core platform -
which makes perfect sense. But as they begin to move from just using digital banking as a replacement
low-cost channel, to using it as a competitive differentiator, they may start to think about releasing niche
apps aimed at customer acquisition.

As an example, one area that I am very familiar with is remittance or international money transfers. This
is a huge global industry dominated by cash-to-cash players like Western Union and Money gram.
However, it is moving inexorably online with players like Xendpay (which I started), Transfer Wise and
Xoom entering the market and winning substantial market share by being more convenient and
significantly cheaper. Whereas Banks can easily bundle this functionality into their standard banking

22
app, they could also use it to acquire new customers with a targeted money transfer app and digital
marketing campaign.

The same could be done with things like US, Eurozone and Indian P2P transfers and bill payments,
mobile wallets, share trading, pension management and switching, money management and so on.

4 - Omni-channel banking

Omni-channel banking is a combination of branch banking and digital banking. There are countless
interesting scenarios that merge the customer experience of both of these channels to a seamless,
integrated one.

For example, as you're watching a programme about moving to Spain one night you browse your banks
web site or app for Spanish mortgages. Later that week when you enter the branch to take out some
money from the ATM (now deliberately moved inside) a smart Bank employee approaches you holding
a tablet and asks if you are Mr. Smith, and would you be interested in reviewing the Bank's range of
overseas mortgages. They know it's you because either the ATM told them, or your phone told them
(see location based services below), or possibly the door face scanner recognized you! It sounds
intrusive, but you could have clicked on a button on the app or web site requesting information the next
time you entered a branch.

All Banks make efforts to characterize their customers and there would be profiling to try to predict
which customers would like this type of merged experience, and which ones would not.

Not for 2015, commonplace by 2017

5 - Location and activity-based services and offers

Your phone, tablet and computer all know where you are and have a pretty good idea what you are
doing; e.g. at home watching TV (or Netflix), out running (or out shopping), or even out of the country.
E-Commerce businesses are tapping in to this information to offer targeted, relevant services and offers
to their customers.

We all see this in the way image ads are targeted at us as we search or browse. Based not just on
where we are but also our online history, our demographic, even our marital or social status.

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Will Banks be using the same information to offer us specific products and services? Well they already
are, via targeted advertising on platforms like Google Ads, Facebook Ads, LinkedIn, etc. So it's not a
huge leap of imagination to begin to do the same via their own web sites and apps.

I have already described the idea of omni-channel banking, but there is lower-hanging fruit that the
Banks could consider.

For example; you are at home and have logged on to internet or mobile banking for more than 10
minutes. You have paid a few bills, deleted a couple of standing orders and/or moved significant amount
to or from your savings account. Yes, you're having a financial tidy-up! What a good time to offer you a
bit of in-branch facetime with a Relationship Manager. Or an online financial health check. Or the Bank's
new Financial planning app?

Or in another example, you are out shopping and are in a shopping mall (as reported by your phone's
location tracking via the radio mast triangulation, GPS or BLE*.) You have made several card
purchases. You have spent much more than in previous months on clothes or consumer electronics.
Yes, you're having a splurge! Maybe now would be a good time to offer an unsecured loan? OK maybe
this is a bit too cynical, but you get the idea.

It will become more obvious in 2015 - 2016

*BLE is Bluetooth low energy, known as iBeacon on Apple. A way to identify your location to within a
few 10s of meters that doesn't drain your battery. This will be big in retail for shopper identification and
targeting.

6 - Customer analytics and lots of lovely data

Digital platforms offer marketing managers and data scientists huge opportunities. With the financial
and purchasing information available to Banks, they will have the potential for understanding their
customers in great detail.

This does bring issues of data governance, data management and privacy, which Banking Regulators
are rightly keeping a close eye on.

The opportunities for using this data to improve digital offerings (usability, experience) and banking and
associated services are massive. It could be the biggest ROI from digital banking of them all.

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It's not just about understanding individual customer behavior, it's also about optimizing app and web
user experience through A/B or multi-variate testing. Essentially using data-driven methods for
improving the business value derived from online experiences rather than design-led or feature-led
approaches.

Banks that really exploit it will pull ahead in 2015 - 2016

7 - Embedded Digital Banking

The idea here is to deconstruct banking services and offer them digitally embedded in other products.
This is not uncommon for payment services - for example with Sofort and iDEAL. These allow you to
pay for a purchase at an e-Commerce checkout directly with your bank account.

So why not expose parts of the banking service to other web based businesses who have relevant
customer interactions? For example, if someone is buying a new car online (which I have done so yes
it does happen) the car sales web site could offer a Bank loan at the point of sale to pay for it. Or more
obviously, the foreign exchange if that car is to be imported.

Banks are slightly resistant to this kind of approach - not least because of the impact of Regulators and
the potential for fraud. But I do see some Banks beginning to really deconstruct what it is to be a Bank
and think how to offer those services in the best way possible.

Only modest experimentation in 2015 - 2016

Summary

Digital banking is in its infancy and, if the Banks are smart, they will attempt to learn from the experience
of industries like retail, gambling, gaming, news and entertainment.

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 RESEARCH METHODOLOGY

Objectives of the Study

The following are the objectives of the study: -
To understand the various trends in banking industries over the years.

To evaluate the impact of digitalization on banking sector.

To understand the consumer perception of digitalization.

To study the impact of digitalization on the consumers.

Research approach-the respondents are consumers who are interested to
cooperate.to collect the data a questionnaire was prepared.

Sample Size-
The sample size of 40 respondents has been taken.

Sampling Method - Sampling method used for the survey was Probability Sampling - Simple
Random Sampling.

Research instrument: contacting the respondents through mails and studying the
response from the questionnaire filled.

LIMITATIONS OF THE STUDY: -

The data collected for this research is collected from Delhi region and within limited respondents.
The result received from this research may or may not be suitable for application to due to wide
geographical approach of Region.

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DATA COLLECTION

The data collected by the researcher is purely primary data and is less dependent on secondary
data.

PRIMARY DATA

The primary data is collected as sales data from retail outlets and a structured questionnaire
from the customers through personal interaction/ interview method which was adopted.

SECONDARY DATA

The secondary data is collected from various marketing books, internet and journals.

DATA ANALYSIS

In this study both primary and secondary data are used for data analysis. For data analysis
statistical tools like mode, frequencies, chi- square test, etc. has been undertaken.

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CHAPTER-3 FINDINGS &
ANALYSIS

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1. How long have you been using the WWW?

Interpretation - 1-6 months is the longest the respondents are using the WWW.

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2. How many hours per week do you use your computer for fun/play?

Interpretation - Over 20 hours is the least hours respondents use computer

for fun/play.

30
3. How many hours per week do you use your computer for work?

Interpretation - 10-20 hours per week is the most time respondents use the
computer for work.

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4. Have you performed any of the following activities on-line?

Interpretation - 50% of the respondents answered neither of these.

32
5. How frequently do you use telephone banking services per month (for
example, balance inquiry, fund transfer between accounts)?

Interpretation - 1-3 times respondents use telephone banking services per

month.

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6. How frequently do you use an Automated Teller Machine (ATM) per month?

Interpretation - 3-8 times respondents use an Automated Teller Machine per

month.

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7. What is the main reason that you typically visit your bank branch (please
choose the single most important reason)?

Interpretation - Majority of respondents visits the bank branch to make a

deposit.

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8. Have you purchase any product through www?

Interpretation - 46.7% have purchased a product through WWW.

36
9. Approximately how many times have you purchased any product through
the Internet in the last 12 months?

Interpretation - 1-3 times have purchased a product through the internet in the
last 12 months.

37
10. How many hours per week do you use your computer for personal
reasons?

Interpretation - Majority of respondents spends 1-5 hours per week in using

computer for personal reasons.

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 FINDINGS

1-6 months is the longest the respondents are using the WWW.

Majority of respondents visits the bank branch to make a deposit.

3-8 times respondents use an Automated Teller Machine per month.

10-20 hours per week is the most time respondents use the computer for work.

1-3 times respondents use telephone banking services per month.

46.7% have purchased a product through WWW.

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 CONCLUSION

With the increasing usage of smartphones, digitization of banking sector is inevitable to catch
up the increasing expectations of the world.

It indeed reduced human errors and increased convenience.

The fact that cyber threats are on the rise, banks must be very careful and should be prepared
to handle cyber-attacks.

With more digital data available with banks, they can take data-driven dynamic decisions by
using digital analytics. This would benefits both customers and banks.

Repetitive tasks will be eliminated by automation.

Digitization reduces the effort of employees and hence results in loss of jobs.

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 RECOMMENDATION

Efforts should be made to aware more people about digitization.

Customers should be given training as per to using online banking application.

Focus should be on providing smooth user interface.

Cyber risk management in the business environment is one of the complex issues being
faced by the banks, requiring incorporating sophisticated techniques and new skills and
capabilities to be embedded in the people.

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 BIBLIOGRAPHY

https://mostlyeconomics.wordpress.com/2015/07/16/what-does-
digitalisation-mean-for-banking-sector/

http://www.groupdiscussionideas.in/role-of-digitization-in-banking/

http://www.business-standard.com/article/opinion/aditya-puri-digital-
banking-in-a-digital-india-116032700601_1.html

https://www.credit-suisse.com/us/en/articles/articles/news-and-
expertise/2015/02/en/digitalization-banks-are-at-a-crossroads.html

http://www.gizmodo.in/techgig/Technologies-for-banking-industry-
Leveraging-Digital-India/articleshow/51790750.cms

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APPENDICES

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QUESTIONNAIRE

1. How long have you been using the WWW?

Less than 1 month
1 to 6 months
6 to 12 months
More than 1 year

2. How many hours per week do you use your computer for fun/play?
Less than 1
1 to 5 hours
5 to 10 hours
10 to 20 hours
over 20 hours

3. How many hours per week do you use your computer for work?
Less than 1
1 to 5 hours
5 to 10 hours
10 to 20 hours
over 20 hours

4. How many hours per week do you use your computer for personal reasons?
Less than 1
1 to 5 hours
5 to 10 hours
10 to 20 hours
over 20 hours

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5. Have you performed any of the following activities on-line?
Tax filing
Purchased/sold financial product
Neither of these

6. How frequently do you use telephone banking services per month (for example, balance inquiry,
fund transfer between accounts)?
Less than 1
1 to 3 times
3 to 8 times
8 to 12 times
over 12 times

7. How frequently do you use an Automated Teller Machine (ATM) per month?
Less than 1
1 to 3 times
3 to 8 times
8 to 12 times
over 12 times

8. What is the main reason that you typically visit your bank branch (please choose the single most
important reason)?
To make a deposit
To get advice for investment options
To inquire about a balance
To withdraw cash
Other

9. Approximately how many times have you purchased any product through the Internet in the last
12 months?
Less than 1
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 1 to 3 times
3 to 8 times
8 to 12 times
over 12 times

10. Have you purchased any product through WWW?

Yes
No
maybe

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