The Indian banking sector is witnessing an Information Technology (IT) revolution and is marching towards digitalisation. The banking system has become easier with technological assistance. Digital banking is one of those verticals that has made the sector faster with access to the internet and offers unprecedented advancements in reach. Earlier, it was mandatory for a customer to visit the bank’s branch physically for taking any banking service which is now fast changing. Now, with paperless services, no one needs to keep track of transactions or banking history through physical documents. All information is stored digitally. It also gives the opportunity to avail the services 24*7 online from a laptop or PC or a mobile phone.
Mobile banking applications are making the procedure much easier. For example, SBI has its own mobile application called YONO SBI, HDFC has PayZapp. Through these applications, the customers can check their balances, banking transactions or statements, borrowings (loans), insurance, deposits and apply for loans online. In addition to that, filing income tax returns, electricity bills, gas bills, phone or other bills has become easier. Obtaining statements online has become easier too. Through multiple platforms like Groww and Zerodha, a customer can choose and invest in various mutual funds or SIP or other equity profiles. They can also buy government bonds from these platforms.
UPI is a mobile interface where people make instant transfers between accounts in different banks. UPI allows peer-to-peer and consumer-to-merchant transactions online in any e-commerce platform. The digital banking system has been a blessing for the e-commerce segment in the last five years, which has boomed. Since 2020, during the pandemic, people are stuck at their homes, but they are not away from the stores. The stores came much closer to them through their phones and during that time, the e-commerce segment reached its zenith. Without safe digital transactions it would never be possible.
Apart from these services, one can also block the ATM or debit card online when needed. If a customer loses the mentioned card in any case, as an immediate action the cards’ pin can be blocked by the website or mobile application. Stop check is also an option that can be availed. Stop check is a formal request for a financial institution to cancel a check or payment which has not yet been processed but applied for.
Online services come with ease but invite many safety issues. The customer must be aware of the fact that a fraudster can try to hack into any account by accessing the correct pin number and unique ID. One must be very private about the unique ID. OTPs that come through SMS in the linked phone number should not be shared with anybody else. If one identifies any abnormal activity, an immediate action has to be taken by blocking the profile or cancelling the transaction. The concerned branch can also be communicated in such cases. Additionally, if any abnormal transaction happens through the bank accounts, the customers will know about it immediately. They are no longer required to wait in long queues at the bank to track their transactions. An immediate knowledge gives the scope of an immediate reaction which is quite essential in the banking sector.
Banks are at ease
As the banking system goes digital, the bank’s management can reduce their staff strength to some extent and improve the productivity of their staff. They can train their staff technologically to empower them digitally. Digital systems can lead to improved CASA results; the use of information bureau and analytic – based early warning systems can reduce bad debt substantially as shown by the continuously reducing NPA in retail.
Promotion of digitalisation
The Union government is aggressively promoting digital banking. The launch of United Payments Interface (UPI) in April 2016 and Bharat Interface for Money (BHIM) in December 2016 by National Payments Corporations of India (NPCI) were two important steps in India for innovation in the digital banking domain.
A report titled ‘Digital Banking: A Case Study of India, Solid State Technology, 2020’ states, “In August 2016, around 93,000 UPI transactions (cumulatively valued at `3.1 crore) took place through 21 banks. This, in July 2018, multiplied manifold to 23.5 crore transactions (valued at `45,843 crore) through 114 banks. The shift towards UPI gathered pace post-demonetisation, when there was a scarcity of cash in the market. BHIM application, which was launched in December 2016, has also seen a huge jump in transactions from a mere 43,000 at the beginning to 1.64 crore in July 2016. The value of transactions has increased to `6692 crore from `1.83 crore. It saw million downloads within a week of its launch. It has reached more than 32 million downloads now.”
Why is digitalisation important?
According to the report “Internet in India 2017” published by Internet and Mobile Association of India (IAMAI) and Kantar IMRB, the number of internet users stood at 481 million in December 2017, which is second highest in the world. This internet boom also started to push the digitalisation of the banking system in India.
India is a growing economy and the population growth is considerably significant. But an Ernst and Young report of 2015 stated that there were only 693 banking machines per million of India’s population, compared to Brazil with 32,995 terminals per million people and China and Russia had around 4000 terminals per million people. This directly indicated that the growth of digitalisation in the banking system in India is not only a luxury or comfort, but also essential to roll out financial activities regularly with ease. The Government of India is trying to cope up with the new technological advancements in the economy. It can be expected that in the upcoming few fiscal years, the digitalisation boom in India will reach new horizons.