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IT Adoption Trends in Banking

Banking sector is a highly dynamic area with challenging competitive pressures like changes in customer requirements, stringent regulations and the need to adopt new business models. The pressure is more on streamlining operations and enhancing core processes to make them more efficient and customer friendly. IT systems, software and related technology developments offer support for banks to overcome most of their competitive pressures.

Computerization in banking sector started during 1980s and is still evolving with the advent of new technologies. Banking sector since the last decade is constantly investing on IT to enhance their capabilities by adopting new technologies. Technology adoption is largely driven by changing business trends and globalization which has a direct impact on banks as customer needs evolve in the form of online banking services and transactions. Banks are rolling out core banking solutions in cloud SaaS model to benefit their customers with online access.

IT Adoption Trends in Banking

In addition to these changes, the increased trade flows within regions enabled by the world-wide-web and e-commerce is contributing to IT investments and latest technology adoption by banks. For instance, the use of smart phones by customers is forcing banks to rapidly improve their online services. The Indian banking sector is likely to witness huge growth prospects in the coming years and will extend into the next decade. According to KPMG-CII report India is expected to become the fifth largest banking industry in the world by 2020 and will be the third largest in the world by 2025 as the country’s GDP growth appears promising.

Key business drivers for IT adoption in banking
These promising growth estimates create a need for banks to revamp their existing IT infrastructures and move to the next tier in IT outsourcing for online services. As banks are becoming more customer-centric, they naturally need IT to manage the following aspects:

  • Understand customer insights using analytics, strengthen customer engagement and relationships
  • Enhance customer services and efficiency through message centers
  • Identify potential for growth using business intelligence tools and big data
  • Explore social media platforms for targeting customers
  • Standardize products and reduce lead time using big data analytics
  • Effectively develop low risk products
  • Compliance to statutory regulations and international standards

Banks are high consumers of IT services and technology in their core services to achieve cost efficiencies and scalability. Some of the recent trends driving IT adoption in banks are explored below:

  • Innovative customer engagement: Digital channels such as social media networks provide access to large number of users. These channels present banks with unique opportunities to deliver customized solutions and services. Digital channels also foster communication with customers at individual levels thus strengthening relationships.
  • Data is fuelling innovation in banks: Data available in various sources on the internet provides unique opportunity for banks to capture them and use it to their advantage. IT platforms and tools can analyze huge volumes of data for identifying meaningful information which banks can use in their product and service strategies. Big data tools and in-memory analytics are mostly used by banks to draw insights and realign their products to satisfy existing customers and to leverage new customers.
  • Security systems to minimize fraud: Digital transactions from multiple devices are proliferating at high rates. This proliferation also opens up security issues because banking transactions online must be protected from hackers who try to exploit vulnerabilities in the systems and steal sensitive data. The increasing portfolio of products and delivery channels and trends such as e-commerce and mobile commerce with payment gateways need to be secured well to prevent data leaks. Cyber risk management in banks is quite complex, however IT outsourcing from data centers can take care of this critical area and prevent data theft or fraud. Banks in order to secure their data and services need to engage sophisticated security systems which are ensured by data centers and cloud service providers.
  • Mobile banking: Customers are increasingly using mobile devices largely in banking transactions. Most of the banks offer mobile banking services to their customers and are adopting this technology to develop client relationships. With mobile banking customers can check their account information, withdrawals, payments, transfers and generate mini statements, etc. all from their smart phone. Mobile banking is a popular trend adopted by banks in servicing customers.
  • Business Intelligence: Banks stand to gain from predictive modeling and analysis to fine tune their product and service strategies. For instance, analytics helps banks to invest in channels that offer greater potential for ROI based on customer behaviour and are flexible to market demands. BI involves predictive modeling and analytics which require flexible computing capacities with centralized data stores. Banks adopting such IT systems benefit through lower operational costs, flexibility and deployment capabilities to result in improved time to market.
  • Core-Banking on SaaS: Banks provide core banking services online for customers to enhance significant efficiencies in their operations. Implementing core banking services on the cloud SaaS (Software-as-a-Service) model offers the ability to service customers anytime, anywhere and even when they are mobile. The pay-as-you-go pricing model in SaaS allows banks to save costs on deployment and maintenance of hardware and software as opposed to in-house IT.

Key benefits realized by IT adoption

  • Banks are able to understand customers well through social networking platforms and other digital channels. Using these channels banks strategize their services for targeting individuals and able to efficiently communicate information.
  • Analytics and business intelligence tools support banks with strategies for engaging customers, capturing potential customers and to become more competitive
  • Mobile banking services is becoming a preferred mode to ensure customer satisfaction, offering convenience to customers
  • Cloud SaaS service models provide the advantage of scalable IT infrastructures and multiple operating platforms for deploying applications along with infinite resources thus saving banks from capital expenditure on purchasing hardware and hiring IT personnel.

Banks having the ability to access data anytime and derive information are likely to be more competitive in responding to customer needs quickly. With latest trends and user friendly technologies in IT, the banking sector is poised to increase their operational efficiency and profits by responding quickly in the competition.

IT Adoption Trends in Insurance Industry

Insurance companies are investing heavily in IT and related technologies to improve customer experience and reduce operational costs. The advent of new technologies and tools such as SaaS, big data analytics, business intelligence, etc. are offering insurers with solutions to improve efficiency in their core and non-core systems. Recent technology trends support insurers in strengthening customer interactions, target potential customers and provide usage based insurance.

Digital technology is a global megatrend which is transforming a variety of industries that includes the insurance sector. Insurance sector has been a bit slow to IT adoption due to rapid changes in technology and also because their distribution channels are still conservative, i.e., handled by agents and brokers and were in fact not ready to adopt new technology. However, digital technologies adoption by customers that include social media, smart phones, electronic transactions, etc., enabled by cloud service models, e-commerce and mobility are making an impact on the technical and commercial capabilities for many insurance companies. Insurers are quick to capitalize on this trend.

IT Adoption Trends in Insurance

According to EY survey on ‘Global Insurance Market Trends’ the insurance sector is growing and offering potential markets for insurance companies particularly in the Asia-Pacific region. The current growth for insurance in Asia-Pacific region is around 39% of the total world’s economic growth. In the context of India, the insurance sector is having a market share of US$ 60 billion and is expected to increase four fold in the next decade. As per the Indian Brand Equity Foundation (IBEF), December 2015 estimates the general insurance business in India is expected to grow at 17% in the coming years. All this growth generates huge volumes of data and customer information.

EY Global Consumer Insurance Survey 2014 report highlights the need for strengthening customer relationships to achieving customer loyalty in insurance services. This is becoming a strategic imperative for insurance sector to encompass all product categories, geographies and to incorporate complete range of operating models. Growth in terms of increasing insured customers would need superior IT environment and platforms to respond effectively and engage customers with updated information and communication all the time.

Key business drivers for IT adoption in insurance:

  • Engaging customers using multi-channels of customer interaction and include all age segments
  • Devise strategies to include the growing investments in internet and mobile channel strategies for faster and instant communication
  • Collaborate with partners to launch innovative products in areas such as micro-finance, wealth management, etc.
  • Automate underwriting processes using data analytics and business intelligence (BI) and predict real time fraud analysis, risk analysis
  • Leverage Bancassurance banking systems and regulations available in each country to explore cross-selling of insurance products, particularly in emerging markets like India

Digital technologies have the ability to intersect and establish interdependences with different insurance functions and enable collaboration. Based on the above business drivers, the following IT adoption trends can be currently found in insurance companies.

  • Social media analysis: Insurers are turning to social media as a marketing medium and a platform for collaboration. Social media is widely used for networking with friends and business partners. The usage of social media is made easy by smart phones and mobile devices. Insurers are able to target new customers based on their life events and also use social media networks to communicate with internal and external stakeholders.
  • Focus on SaaS solutions: Insurance companies are deploying applications by adopting SaaS solutions because it offers superior infrastructure, high levels of security and low risk. Insurance companies have the advantage of access to latest infrastructure and IT platforms at low cost. SaaS offers a perfect solution for insurance to improve their efficiency at minimal capital costs.
  • Real time architectures for agility: Real time data sources are mobile technologies and social media which can be leveraged by insurance companies to become more competitive. Capturing real time data from online channels is proving a gold mine for insurance companies because they provide insights on customer behaviour based on which insurance products are strategized. Insurance companies are deploying data analytics tools, BI platforms and data visualization tools to derive full benefits of real time data.
  • Data analytics and big data: The ability to capture real time data, big data and analytics play an important role for insurers in terms of potential customers. The recent trend is the adoption of sensor technologies named telematics used to monitor driving behaviours of the individual. These technologies help insurance companies to provide usage-based insurance policies.
  • The above trends offer immense benefits for both, the insurer and the insured.

    Key benefits realized by IT adoption:

    • Social media is proving to be an effective tool for insurers to garner more leads, remediation and retention of insurers along with targeting new potential customers.
    • SaaS adoption significantly reduces cost and lead time for implementing IT systems and applications. Mostly SaaS is outsourced from data centers therefore insurance company can save cost in IT hardware and in hiring IT staff.
    • Development of new products and strategies are possible from data analytics tools that provide customer insights. BI and data visualization tools enable competitiveness and agility.
    • IT improves overall efficiency in operations, communications and instant information sharing with customers and stakeholders

    Information plays an important role in the insurance sector in terms of product pricing, development, risk management, claim processing and fraud detection. These functions can be executed by collecting data from multiple sources and by using software tools to obtain meaningful insights from data. In order to effectively implement insurance operations, insurance sector needs to adopt IT systems, new technologies and networks to capture real time data and bolster their data storage capacity for analysis in order to capitalize more customers.