Glimpse of 40 years journey of BFSI sector, and what future holds

Banking sector has transformed significantly in the last few decades. The technology has gradually taken over the banking system, whether it’s transactions, opening an account or getting a loan.

A few years back, getting a loan was a hectic process. There were rounds of verification, and documentation process before getting the money in the hand. But now the picture has completely changed. You only need to just fill some details on your mobile phone to get work done.

But how was this journey? What struggles the banks have been through to reach till this point? Was it an easy one, and what was the adaptability?

Speaking at the ETCIO BFSI Conclave’23, Parveen Kumar Gupta, Former MD, SBI & Chairman, Utkarsh Small Finance Bank took us on a time-lapse of 40 years banking journey disussing what has happened in the last 40 years in the BFSI space from what we were and where we are today.

Here’s what he shared:

BFSI sector among the first to adopt as well as get impacted by the digital wave

I believe that the BFSI sector was among the first to adopt as well as impacted by the digital wave. Although I've been associated with all segments of BFSI sectors including banks, insurance, mutual fund. But most of my first-hand experiences actually come from banking.

When I joined SBI in 1982, we were not even allowed to use the calculators. We could however use a mechanical device called a facet machine for doing the calculations.

It was a challenging taks to do the calculations as you have to punch a number and rotate the lever and then the number would move up. If you want to add a second number to that, then you have to punch that second number, rotate it again and then that result will show up on the top side of the machine.

From there we moved to calculators and then we got slightly more advanced calculators which could do balancing and then we had something called ledger posting machines.

The unions in the banks became very liberal that they allowed you to use computers but they said those computers have to be standalone computers which can actually have only the data for that particular branch, and you could not have networked computers.

It took long time for the banks to actually move to networked computers and the CPS systems where you are centrally connected.

The speed of change in the BFSI, as well as digitalisation, has been very rapid. We have moved away a lot away from where we were and where we are today.

We have got to a stage where people are saying going forward we don't know whether you actually need the banks at all or not.

The famous quote by Bill Gates said banking is required but the property the banks have, are not.

What is going to be the future of banking at this point of time nobody can really say.

We have seen the banks re-discover themselves, come up with more innovative and imaginative products to take on the competition that has been posed by the new age fintechs.

More collaboration between banks and Fintechs

What we may see going forward is not so much of competition but the collaboration between the banks and the fintechs where the banks bring-in their geographical reach, their access to the customers, and then you work with the fintechs who actually bring lot more innovation, agility to the new product innovation, and you can serve the customers much better.

An important part of the evolution has been the digitization and the data analytics. Even though the banks had a very large number of customers, and processed a huge amount of data on a daily basis but they had no centralized databases.

Nowadays, at the centralized level, the banks have much more data about the customers and about their behaviors. In fact, the banks have more data than the customers would probably like the banks to have.

Also, the data the banks have these days comes from essentially two sources: bank's internal sources of data, and the external sources that includes the bureau data, popularly called the civil data.

Customers turned into bank employees

Banks provide you with internet banking enabling you to do whatever transactions you want to do. While this brought lot of convenience to the customers, but what one does not realize that all the work that the employees were supposed to do was being done by the customer himself.

So in the process, the customers were turned into the employees by the organisations.

If you look at the number of UPI transactions that are happening now, it could not have ever happened in a physical bank branch at all.

It empowered the people to do lot of things but at the same time it actually made the people to do the things which till now was being done by the branches.

The customers don't mind it as long as they are in control of things they get good experience doing out of it and they know that what they are doing is safe and secure.

Going forward, how the customers would be served, and where the organizations will have to invest, would depend on the digital infrastructure they build.

Superior data analytics using machine learning and Artificial Intelligence will be the key drivers of the BFSI sector going forward.

Everyday I hear new ideas in terms of how ChatGPT can be used. Probably all the chatbots will get replaced by ChatGPT. Filling up forms on the internet will also probably be helped by the ChatGPT.

So there are a lot of innovations that will happen and that is where the organizations will have to start investing in terms of how do you make best use of the artificial intelligence capabilities that are getting developed.