BANSAL INSTITUTE OF ENGINEERING AND TECHNOLOGY

Dr. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY LUCKNOW

MINI PROJECT-2 (KMBN-252)

“APPLICATION OF EMERGING TECHNOLOGY IN BANKING
INDUSTRY”

For the partial fulfilment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO: SUBMITTED BY:

Mr. Harvinder Singh Ranveer Pratap Singh

Assistant Professor Roll no – 2204220700044

Batch (2022-2024)
 CERTIFICATE

This is to certify that MR. RANVEER PRATAP SINGH, ROLL NO – 2204220700044 a student of
Master of business administration (MBA) Programme (Batch 2022-2024)

At this Institute he has conducted a mini project titled “APPLICATION OF EMERGING

TECHNOLOGY IN BANKING INDUSTRY” under my guidance during 2nd semester. The mini
project has been prepared towards partial fulfilment for the award of MBA degree from Dr.
A.P.J ABDUL KALAM TECHNICAL UNIVERSITY LUCKNOW. The mini project report is the
original contribution of the student.

The mini project report is hereby recommended and forwarded for evaluation.

Mr. Harvinder Singh Mr. Puneet Tikkha

(Faculty Guide) (Head of Department)

BIET, Lucknow
 ACKNOWLEDGEMENT

It is a matter of great satisfaction and pleasure to present this report. I take this

opportunity toowe my thanks to all those involved in my training.

This project report could not have been completed without the guidance of Prof. Harvinder
Singh

I express my gratitude to all those who have helped me directly or indirectly in

completing thetraining.

Name: R a n v e e r P r a t a p S i n g h

Roll No: - 2204220700044

MBA (2Nd SEM)

 PREFACE

The financial system of a country plays a role in promoting economic growth not

only bychanneling savings into investments but also by improving efficiency of

resources.

The banking industry plays a major role in representing the financial system in India. It

works asan intermediary between individuals, financial institutions and other

stakeholders who directly orindirectly get affected by the industry in 2012-13 banks have

started focusing on lending to moreprofitable segments such as retail and small and

medium (SMEs), improving risk management policies and effective monitoring. In the

near the future, the Indian banking industry is expected to see consolidation in the wake

of future economic growth, timely changes in banking regulations and increase in

competition from foreign banks.

The growth story of banking during the last decade has been spectacular and beyond

the consistent double-digit growth. The trends were strong regulatory framework, use

of multiplechannels and technology; customer-oriented banking services and a

growing economy.

Although the past couple of years have witnessed a slowdown in the face of high

domestic inflation, depreciation of the rupee and the after-math of the crisis in US and

Europe, the sectorstill perform better in our country vs. in many other developing

countries in terms of growth, profitability, capital adequacy and asset quality etc.

2014 promises to be a decent year for India. Even though a series of challenges like the

overallslowdown in the economy impacting credit growth, deteriorating asset quality and

rising NPAs,accompanying financial inclusion and Basel III implementation are all

lingering issues, the sector is well cushioned with factors like a positive demographic
dividend, increasing investmentin infrastructure, innovation in technology and most

importantly constructive regulatory policies.

The most enthusing growing insurance marketplaces in the globe is India. The present

premiumvolume of USD 18 billion has the probable to rise to USD 90 billion

encompassed by the subsequent decade. Particularly, existence insurance that presently

creates up 80% of premiums is extensively tipped to lead the growth. The main drivers

are sound commercial fundamentals, arising middle-income class, an enhancing

manipulating framework and rising chance responsiveness.

 CONTENT

Serial No Content Page No

1 Introduction 6-7

2 Objective 8

3 Banking Industry 9-10

4 Function 10-11

5 Origin of Modern Banking 11-13

6 Bank Regulation 13-15

7 Issue & Challenges of Banking Industry 16-26

8 Methodology 27

9 Application of emerging Technologies in 28-36

Banking Industry

10 SWOT Analysis 37-41

11 Limitation 42

12 Conclusion 43

13 Reference 44
INTRODUCTION

The banking sector is the lifeline of any modern economy. It is one of the important

financial pillars of the financial sector, which plays a vital role in the functioning of an

economy. It is veryimportant for economic development of a country that its financing

requirements of trade, industry and agriculture are met with higher degree of commitment

and responsibility. Thus, the development of a country is integrally linked with the

development of banking. In a modern economy, banks are to be considered not as dealers

in money but as the leaders of development. They play an important role in the

mobilization of deposits and disbursement of credit to varioussectors of the economy.

The banking system reflects the economic health of the country. The strength of an

economy depends on the strength and efficiency of the financial system, which in turn

depends on a sound and solvent banking system. A sound banking system efficiently

mobilized savings in productive sectors and a solvent banking system ensures that the

bank is capable of meeting its obligation to the depositors.

In India, banks are playing a crucial role in socio-economic progress of the country after

independence. The banking sector is dominant in India as it accounts for more than half

the assets of the financial sector. Indian banks have been going through a fascinating

phase throughrapid changes brought about by financial sector reforms, which are being

implemented in a phased manner.

The current process of transformation should be viewed as an opportunity to convert

Indian banking into a sound, strong and vibrant system capable of playing its role

efficiently and effectively on their own without imposing any burden on government.

After the liberalization ofthe Indian economy, the Government has announced a number

of reform measures on the basis of the recommendation of the Narasimhan Committee to

make the banking sector economicallyviable and competitively strong.

The current global crisis that hit every country raised various issue regarding efficiency

and solvency of banking system in front of policy makers. Now, crisis has been almost

over, Government of India (GOI) and Reserve Bank of India (RBI) are trying to draw

some lessons. RBI is making necessary changes in his policy to ensure price stability in

the economy. The mainobjective of these changes is to increase the efficiency of banking

system as a whole as well as ofindividual institutions. So, it is necessary to measure the

efficiency of Indian Banks so that corrective steps can be taken to improve the health of

banking system.
OBJECTIVE

1. To find the market share and nature of the competition of Indian

bankingindustry,

2. Determine the demographic of buyer and the market segmentation

of Indianbanking sector,

3. Describe the policy framework (pest analysis) of Indian banking industry,

4. What is the business diversification of Indian banking industry?

5. Identify the merger and acquisition in the banking industry,

6. To know the international exposure of Indian banking industry,

7. To know the marketing initiatives under Indian banking sector,

8. Elaborate the future outlook of Indian banking industry.

9. Bank deals with the foreign exchange as the authorized dealer. They

purchase and sell foreign currencies to the intending sellers and the

buyers at the marketrates.

 BANKING INDUSTRY

The modern banking industry is a network of financial institutions licensed by the

state to supply banking services. The principal services offered relate to storing,

transferring, extending credit against, or managing the risks associated with holding

various forms ofwealth. The precise bundle of financial services offered at any given

time has varied considerably across institutions, across time, and across

jurisdictions, evolving in step with changes in the regulation of the industry, the

development of the economy, and advances in information and communications

technologies.

Banking is an industry that handles cash, credit, and other financial transactions.

Banksprovide a Safe place to Store extra cash and credit. They offer savings

accounts, Certificates of Deposit, and checking accounts. Banks use these

deposits to make loans.These loans include home mortgages, business loans, and

car loans.

A Bank is a financial institution licensed to receive deposits and make loans.

Two of the most common types of banks are commercial/retail and investment

banks. Depending on type, a bank may also provide various financial services

ranging from providing safe deposit boxes and currency exchange to retirement

and wealth management.

FUNCTIONS

Banks as financial intermediaries are party to a transfer of funds from the ultimate saver

to the ultimate user of funds. Often, banks usefully alter the terms of the contractual

arrangement as thefunds move through the transfer process in a manner that supports and

promotes economic activity. By issuing tradable claims (bank deposits) against itself, the

bank can add a flexibility tothe circulating media of exchange in a manner that enhances

the performance of the payments system. These deposits may support the extension of

personal credit to consumers (retail banking) or short-term credit to nonfinancial

businesses (commercial banking). If so, the bank aids the management of liquidity, thus

promoting household consumption and commerce. By facilitating the collection of funds

from a large number of small savers, each for a short period, the bank promotes the

pooling of funds to lend out in larger denominations for longer periods to

those seeking to finance investment in larger capital projects. Financing investment may

take theform of underwriting issues of securities (investment banking) or lending against

real estate (mortgage banking). By specializing in the assessment of risk, the bank can

monitor borrower performance; by diversifying across investment projects, the bank

minimizes some types of risk and promotes the allocation of funds to those endeavours

with the greatest economic potential. By extending trade credit internationally (merchant

banking), the bank can facilitate internationaltrade and commerce. As one last example,

by lending to other banks in times of external pressures on liquidity, the bank can

manage core liquidity in the financial system, thus potentially stabilizing prices and

output (central banking).

To discharge its various functions, banks of all types manage highly leveraged portfolios

of financial assets and liabilities. Some of the most crucial questions for the banking

industry and state regulators center on questions of how best to manage the portfolio of
deposit banks, giventhe vital role of these banks in extending commercial credit and

enabling payments. With bank capital (roughly equal to the net value of its assets after

deduction of its liabilities) but a small fraction of total assets, bank solvency is

particularly vulnerable to credit risk, market risk, and liquidity risk. An increase in non-

performing loans, a drop in the market price of assets, or a shortage of cash reserves that

forces a distress sale of assets to meet depositors’ demand can each, if transpiring over a

period of time too short for the bank to manage the losses, threaten bank solvency.

ORIGINS OF MODERN BANKING

The modern banking industry, offering a wide range of financial services, has a relatively

recent history; elements of banking have been in existence for centuries, however. The

idea of offering safe storage of wealth and extending credit to facilitate trade has its roots

in the early practices ofreceiving deposits of objects of wealth (gold, cattle, and grain, for

example), making loans, changing money from one currency to another, and testing coins

for purity and weight.

The innovation of fractional reserve banking early in this history permitted greater

profitability (with funds used to acquire income earning assets rather than held as idle

cash reserves) but exposed the deposit bank to a unique risk when later paired with the

requirement of converting deposits into currency on demand at par, since the demand at

any particular moment may exceedactual reserves. Douglas Diamond and Philip Dybvig

have, for example, shown in their 1983 article “Bank Runs, Liquidity, and Deposit

Insurance” that in such an environment, a sufficientlylarge withdrawal of bank deposits

can threaten bank liquidity, spark a fear of insolvency, and thus trigger a bank run.

Means of extending short-term credit to support trade and early risk-sharing arrangements

afforded by such devices as marine insurance appear in medieval times. Italian

moneychangers formed early currency markets in the twelfth century CE at cloth fairs that

toured the Champagneand Brie regions of France. The bill of exchange, as a means of

payment, was in use at this time

as well.

Over the course of the seventeenth and eighteenth centuries, the industry transformed

from a system composed of individual moneylenders financially supporting merchant

trade and commerce, as well as royalty acquiring personal debt to finance colonial

expansion, into a network of joint-stock banks with a national debt under the control and

management of the state.

The Bank of England, for example, as one of the oldest central banks, was a joint-stock

bank initially owned by London’s commercial interests and had as its primary purpose

the financing ofthe state’s imperial activities by taxation and the implementing of the

permanent loan. This period was also marked by several experiments with bank notes

(with John Law’s experiment in

France in 1719–1720 among the most infamous) and the emergence of the check as

simplifiedversion of the bill of exchange.

Eighteenth-century British banking practices and structures were transported to North

America and formed an integral part of the colonial economies from the outset. The first

chartered bank was established in Philadelphia in 1781 and in Lower Canada in 1817.

Experiments with free banking—as a largely unregulated business activity in which

commercialbanks could issue their own bank notes and deposits, subject to a

requirement that these be convertible into gold—have periodically received political

support and have appeared briefly inmodern Western financial history. Public interest in

minimizing the risk of financial panics and

either limiting or channelling financial power to some advantage has more often,
however,dominated and justified enhanced industry regulation.

BANK REGULATION

Various forms of bank regulation include antitrust enforcement, asset restrictions, capital

standards, conflict rules, disclosure rules, geographic and product line entry restrictions,

interestrate ceilings, and investing and reporting requirements. The dominant view holds

that enhancedregulation of this industry is necessary because there is clear public sector

advantage, or for protecting the consumer by controlling abuses of financial power, or

because there is a market failure in need of correction.

Where public sector advantage justifies the need for regulation, government intervention

may appear in the form of reserve requirements imposed on deposit-taking institutions

for facilitatingthe conduct of monetary policy or in the various ways in which

governments steer credit to thosesectors deemed important for some greater social

purpose. Limiting concentration and controlling abuses of power and thus protecting the

consumer have motivated such legislation asthe American unit banking rules (whereby

banks were limited physically to a single center of operation) and interest rate ceilings

(ostensibly designed to prohibit excessive prices), as well as various reporting and

disclosure requirements.

The latent threat of a financial crisis is an example of a market failure that regulation

may correct. Here, the failure is in the market’s inability to properly assess and price

risk. The systemic risk inherent in a bank collapse introduces social costs not

accounted for in private sector decisions. The implication is that managers, when

constructing their portfolios, will assume more risk than is socially desirable; hence,

there exists a need for government-imposedconstraint and control. State-sanctioned

measures designed to minimize the threat of bank runsinclude the need for a lender of
last resort function of the central bank to preserve system

liquidity and the creation of a government-administered system of retail banking

depositinsurance.

Regulation explicitly limiting the risk assumed by managers of banks includes restrictions

thatlimit the types and amounts of assets an institution can acquire. A stock market crash

will threaten solvency of all banks whose portfolios are linked to the declining equity

values.

Investment bank portfolios will be, in such a circumstance, adversely affected. The

decline in theasset values of investment banks can spill over to deposit banks causing a

banking crisis when the assets of deposit banks include marketable securities, as

happened in the United States in theearly 1930s.

The Bank Act of 1933 (the Glass-Steagall Act) in the United States as well as early

versions of the Bank Act in Canada, for example, both prohibited commercial banks from

acquiring ownership in nonfinancial companies, thus effectively excluding commercial

banks from the investment banking activities of underwriting and trading in securities.

This highly regulated anddifferentiated industry structure in twentieth-century North

America contrasts sharply with the

contemporaneous banking structures of Switzerland and Germany, for example, where

the institutions known as universal banks offer a greater array of both commercial and

investment banking services. The question for policymakers then is which industry

structure best minimizesthe risk of banking crises and better promotes macroeconomic

stability and growth.

 ISSUE & CHALLENGES OF BANKING
INDUSTRY

The banking industry is undergoing a radical shift, one driven by new competition from

FinTechs, changing business models, mounting regulation and compliance pressures, and

disruptive technologies.

The emergence of FinTech/non-bank startups is changing the competitive landscape in

financialservices, forcing traditional institutions to rethink the way they do business. As

data breaches become prevalent and privacy concerns intensify, regulatory and

compliance requirements become more restrictive as a result. And, if all of that wasn’t

enough, customer demands are evolving as consumers seek round-the-clock

personalized service.

These and other banking industry challenges can be resolved by the very technology

that’s caused this disruption, but the transition from legacy systems to innovative

solutions hasn’talways been an easy one. That said, banks and credit unions need to

embrace digital transformation if they wish to not only survive but thrive in the current

landscape.

1. Increasing Competition

The threat posed by FinTechs, which typically target some of the most profitable areas in

financial services, is significant. Goldman Sachs predicted that these startups would

account for

upwards of $4.7 trillion in annual revenue being diverted from traditional financial

servicescompanies.
 These new industry entrants are forcing many financial institutions to seek partnerships

and/or acquisition opportunities as a stop-gap measure; in fact, Goldman Sachs,

themselves, recently made headlines for heavily investing in FinTech. In order to

maintain a competitive edge,

traditional banks and credit unions must learn from FinTechs, which owe their

success toproviding a simplified and intuitive customer experience.

2. A Cultural Shift

From artificial intelligence (AI)-enabled wearables that monitor the wearer’s health

to smartthermostats that enable you to adjust heating settings from internet-

connected devices, technology has become ingrained in our culture — and this

extends to the banking industry.

In the digital world, there’s no room for manual processes and systems. Banks and credit

unionsneed to think of technology-based resolutions to banking industry challenges.

Therefore, it’s important that financial institutions promote a culture of innovation, in

which technology is leveraged to optimize existing processes and procedures for

maximum efficiency. This cultural shift toward a technology-first attitude is reflective of

the larger industry-wide acceptance of digital transformation.

3. Regulatory Compliance

Regulatory compliance has become one of the most significant banking industry

challenges as adirect result of the dramatic increase in regulatory fees relative to

earnings and credit losses since the 2008 financial crisis. From Basel’s risk-weighted

capital requirements to the Dodd-

Frank Act, and from the Financial Account Standards Board’s Current Expected Credit
 Loss (CECL) to the Allowance for Loan and Lease Losses (ALLL), there are a growing
number

of regulations that banks and credit unions must comply with; compliance can

significantly strain resources and is often dependent on the ability to correlate data from

disparate sources.

Technology is a critical component in creating this culture of compliance. Technology

that collects and mines data, performs in-depth data analysis, and provides insightful

reporting is especially valuable for identifying and minimizing compliance risk. In

addition, technology canhelp standardize processes, ensure procedures are followed

correctly and consistently, and enables organizations to keep up with new

regulatory/industry policy changes.

4. Changing Business Models

The cost associated with compliance management is just one of many banking industry

challenges forcing financial institutions to change the way they do business. The

increasing costof capital combined with sustained low interest rates, decreasing return

on equity, and decreasedproprietary trading are all putting pressure on traditional

sources of banking profitability. In spite of this, shareholder expectations remain

unchanged.

This culmination of factors has led many institutions to create new competitive

service offerings, rationalize business lines, and seek sustainable improvements in

operational efficiencies to maintain profitability. Failure to adapt to changing

demands is not an option;therefore, financial institutions must be structured for agility

and be prepared to pivot when necessary.

5. Rising Expectations

Today’s consumer is smarter, savvier, and more informed than ever before and expects

a high degree of personalization and convenience out of their banking experience.

Changing customerdemographics play a major role in these heightened expectations:

With each new generation ofbanking customer comes a more innate understanding of

technology and, as a result, an increased expectation of digitized experiences.

Millennials have led the charge to digitization, with five out of six reporting that they
prefer to

interact with brands via social media; when surveyed, millennials were also found to

make upthe largest percentage of mobile banking users, at 47%. Based on this trend,

banks can expect future generations, starting with Gen Z, to be even more invested in

omnichannel banking and attuned to technology. By comparison, Baby Boomers and

older members of Gen X typically value human interaction and prefer to visit physical

branch locations.

This presents banks and credit unions with a unique challenge: How can they satisfy

older generations and younger generations of banking customers at the same time?

The answer is ahybrid banking model that integrates digital experiences into

traditional bank branches.

Imagine, if you will, a physical branch with a self-service station that displays the most

cutting-edge smart devices, which customers can use to access their bank’s knowledge

base. Should a customer require additional assistance, they can use one of these devices

to schedule an appointment with one of the branch’s financial advisors; during the

appointment, the advisor will answer any of the customer’s questions, as well as set

them up with a mobile AI assistant that can provide them with additional

recommendations based on their behavior. It might soundtoo good to be true, but the
 branch of the future already exists, and it’s helping banks and creditunions meet and

exceed rising customer expectations.

Investor expectations must be accounted for, as well. Annual profits are a major concern

— after all, stakeholders need to know that they’ll receive a return on their investment or

equity and, in order for that to happen, banks need to actually turn a profit. This ties

back into customer expectations because, in an increasingly constituent-centric world,

satisfied customers are the key to sustained business success — so, the happier your

customers are, the happier yourinvestors will be.

6. Customer Retention

Financial services customers expect personalized and meaningful experiences through

simpleand intuitive interfaces on any device, anywhere, and at any time. Although

customer experience can be hard to quantify, customer turnover is tangible and

customer loyalty is quickly becoming an endangered concept. Customer loyalty is a

product of rich client relationships that begin with knowing the customer and their

expectations, as well as implementing an ongoing client-centric approach.

In an Accenture Financial Services global study of nearly 33,000 banking customers

spanning 18 markets, 49% of respondents indicated that customer service drives

loyalty. By knowing thecustomer and engaging with them accordingly, financial

institutions can optimize interactions that result in increased customer satisfaction and

wallet share, and a subsequent decrease in customer churn.

Bots are one new tool financial organizations can use to deliver superior customer

service. Botsare a helpful way to increase customer engagement without incurring

additional costs,
 and studies show that the majority of consumers prefer virtual assistance for timely issue
resolution. As the first line of customer interaction, bots can engage customers naturally,

conversationally, and contextually, thereby improving resolution time and customer

satisfaction. Using sentiment analysis, bots are also able to gather information through

dialogue,while understanding context through the recognition of emotional cues. With

this information, they can quickly evaluate, escalate, and route complex issues to

humans for resolution.

7. Outdated Mobile Experiences

These days, every bank or credit union has its own branded mobile application —

however, justbecause an organization has a mobile banking strategy doesn’t mean that

it’s being leveraged aseffectively as possible. A bank’s mobile experience needs to be

fast, easy to use, fully featured (think live chat, voice-enabled digital assistance, and the

like), secure, and regularly updated in

order to keep customers satisfied. Some banks have even started to reimagine what a

banking app could be by introducing mobile payment functionality that enables

customers to treat theirsmart phones like secure digital wallets and instantly transfer

money to family and friends.

8. Security Breaches

With a series of high-profile breaches over the past few years, security is one of the

leading banking industry challenges, as well as a major concern for bank and credit union

customers.Financial institutions must invest in the latest technology-driven security

measures to keep sensitive customer safe, such as:

AVS “checks the billing address submitted

Address Verification Service (AVS) by the card user with the cardholder’s billing

address on record at the issuing

bank” in order to identify suspicious

transactions andprevent fraudulent

activity.

E2EE “is a method of secure

communication that prevents third-

parties from accessing data while

it’s transferred from one end

system or device to another.”E2EE

uses cryptographic keys, which are

stored at each endpoint, to encrypt

and decrypt private messages.

Banks and credit unions can use

E2EE to secure mobile transactions

and other onlinepayments, so that

funds are securely transferred from

one account to another, or

End-to-End Encryption (E2EE) from a customer to a retailer.

Biometric authentication “is a

security process that relies on the

unique biological

characteristics of an individual to

verify thathe is who he says he is.

 Biometric authentication systems

compare a biometric data capture to

stored, confirmed authentic

Authentication data in a database.” Common forms of

biometric authentication includes

voice and facial recognition and iris

and fingerprint scans. Banks and

credit unions can use biometric

authentication in place of PINs, as

it’s more difficult to replicate and,

therefore,more secure.

Location-based

authentication (sometimes referred to

as geolocation identification) “is a

specialprocedure to prove an

individual’s

identity and authenticity on

appearance simply by detecting its

presence at a distinctlocation.”

Banks can use location-based

authentication in conjunction with

mobile banking to prevent fraud by

either sending out a push

notification to a customer’s mobile

device authorizing a transaction, or

by triangulating the customer’s

location to determine whether

they’re in the same location in

which the transaction is taking

place.

Out-of-band

authentication (OOBA)

refers to “a process was

authentication requires two different

signalsfrom two different networks

or channels… [By] using two

different channels, authentication

systems can guard against fraudulent

users that may only have access to

one of these channels.” Banks can

use OOBA to generate a one-time

security code,which the customer

receives via automated voice call,

SMS text message, or email; the

customer then enters that security

code to access their account, thereby

verifying their identity.

Risk-based authentication (RBA) —

also known as adaptive

 authentication or step-up

authentication — “is a method of

applying varying levels of

stringency toauthentication

processes based on the

likelihood that access to a given

system could result in its being

compromised.” RBA enables

banks and credit unions to

tailor their security measures to

the risklevel of each customer

transaction.

9. Antiquated Applications

According to the 2017 Gartner CIO Survey, over 50% of financial services CIOs believe
that a

greater portion of business will come through digital channels, and digital

initiatives willgenerate more revenue and value.

However, organizations using antiquated business management applications or siloed

systems will be unable to keep up with this increasingly digital-first world. Without a

solid, forward- thinking technological foundation, organizations will miss out on

critical business evolution. Inother words, digital transformation is not just a good idea

— it’s become imperative for survival.

While technologies such as blockchain may still be too immature to realize significant
returnsfrom their implementation in the near future, technologies like cloud

computing, AI, and botsall offer significant advantages for institutions looking to

reduce costs while improving customer satisfaction and growing wallet share.

Cloud computing via software as a service and platform as a service solution enable

firms previously burdened with disparate legacy systems to simplify and standardize IT

estates. In doing so, banks and credit unions are able to reduce costs and improve data

analytics, all whileleveraging leading edge technologies. AI offers a significant

competitive advantage by providing deep insights into customer behaviors and needs,

giving financial institutions the

ability to sell the right product at the right time to the right customer. Additionally, AI

can provide key organizational insights required to identify operational opportunities

and maintainagility.

10. Continuous Innovation

Sustainable success in business requires insight, agility, rich client relationships, and

continuousinnovation. Benchmarking effective practices throughout the industry can

provide valuable insight, helping banks and credit unions stay competitive. However,

benchmarking alone only enables institutions to keep up with the pack — it rarely leads

to innovation. As the cliché goes, businesses must benchmark to survive, but innovate to

thrive; innovation is a key differentiator that separates the wheat from the chaff.

Innovation stems from insights, and insights are discovered through customer interactions

and continuous organizational analysis. Insights without action, however, are impotent —

it’s vital that financial institutions be prepared to pivot when necessary to address market

demand s whileimproving upon the customer experience.

METHODOLOGY

To test the research forecast, methodology of comparing the pre and post performances

of banksafter Merger and Acquisitions has been accepted, by using following financial

parameters such as Gross profit, Net profit Operating profit margin, Return on equity,

Return capital employed, and Debt equity ratio. Researcher has taken two cases of

Merger and Acquisitions randomly as sample one from public sector bank and the other

from private sector bank in order to evaluate the impact of M&As. The pre-merger

(3years prior) and post-merger (after 3 years) of the financial ratios are being compared.

The observation of each case in the sample is considered as an independent variable.

Before merger two different banks carried out operating business activities in the market

and after the merger the bidder bank carrying business of both the banks. Keeping in

view the purpose & objectives of the study independent t- test is being employed under

this study. The year of merger was considered as a base year and denoted as 0 and it is

excluded from the evaluation. For the pre (3 years before) merger the combined ratios of

both banks are considered and for the post-merger (after 3 years) the ratios of acquiring

bank were used.

APPLICATION OF EMERGING

TECHNOLOGIESIN BANKING INDUSTRY

Banking is undergoing a technological churn right now due to rising competition from

fin-techstartups and increasing concern for cyber-security. Today, we are going to look at

10 technologies that are going to impact the future of banking sector!

FSI sector in general, and Banking in particular, are undergoing a technological churn

right now.The reason is two-fold: changing customer expectations and improved

technological capabilities.The rising competition from Fin-tech start-ups that use

technology to create unique customer experiences around banking & other financial

services has forced the large banks to respond by innovating themselves. Further, the

threat of cyber-security breaches has meant that banks need to be more agile than ever

before. Today, we are going to look at 10 innovative technologies in banking that are

shaping the future.

For long, banks have been reluctant to update their systems – and for good reason. The

currentsystems that they use are the product of years of continued innovation to meet

immediate customer requirements.

But this has resulted in siloed systems being used for the transaction, savings,

investment and loan accounts. This is not suited for the digital age when the

competition for banks is comingfrom technology-based FinTech startups.

Banks and other traditional financial service provider have had to respond with an array

of digitization and innovation initiatives. These initiatives employ cutting-edge

technologies toensure a customer-centric perspective rather than the traditional focus on

products, real-timeintelligent data integration rather than slow analysis being performed
after-the-fact and openplatform foundation.

1. Augmented Reality

Immersive technologies such as Augmented, virtual, and mixed reality are enhancing

customerexperience across the board. So why can’t they do the same for banking

customers?

The possibilities of the implementation of augmented reality technology in banking

sector are only limited by imagination, though these are still in a very early stage of

development. The end-state is to give customers complete autonomy in actions and

transactions they could perform at home. Hybrid branches are envisioned by technology

experts who believe that bank branches as we know them today are a thing of past.

One of the implementations of augmented reality technology in banking sector, that is

already live, has been made by the Commonwealth Bank of Australia. They have created

a rich date augmented reality application for their customers who were looking to buy or

sell a home. It provides them with information like current listings, recent sales, and price

tendencies to help thecustomer make better decisions.

2. Blockchain

Blockchain is a catchall phrase used to describe distributed ledger technologies. You

could thinkof it as a distributed database with no DBA involved.

It allows multiple parties to access the same data simultaneously, and at the same time

ensuresthe integrity and immutability of the records entered in the database. At present,

leading banks

around the world are exploring proof of concept projects across various aspects of

banking andfinancial services.

The first major implementation that we are likely to see is in the areas for clearing and

settlement. Accenture estimates that investment banks would be able to save $10 billion

by

deploying blockchain technology to improve the efficiency of clearing and settlement

systems. Another major area in which banks will see a huge saving by using blockchain

technology is KYC (Know Your Customer) operations. Business models being developed

at the moment would turn KYC from a cost centre into a profit centre for banks – as they

would come to rely on

a shared blockchain for this activity. Syndicated loans, trade finance and payments are

otherareas where the smart contracts on blockchain could be highly effective.

3. Robotic Process Automation

The volume of unstructured data that the bank has to process is increasing exponentially

with therise of the digital economy. This is not just banking transaction data, but also

other behavioral data that could potentially allow the banks to improve and innovate

customer experience.

This has made bankers realize that they need to find technologies that can mimic human

actionand judgment but at a higher speed, scale, and quality. The answer that has

emerged is a combination of various technologies that enable cognitive and robotic

process automation in banking.

These technologies consist of machine learning, natural language processing, chatbots,

robotic process automation, and intelligent analytics in banking that allow the bots to

learn and improve.

It is no surprise that Deloitte’s 2017 State of Cognitive survey found that 88% of

financial service professionals believe that such technologies are a strategic priority. That

said, the currentstate of the art in robotic automation is still quite weak at the cognitive

and analytical aspects ofthe processes.

In the years to come, we would see the current cognitive capabilities being bundled

with the robotic process automation to achieve even better results. This is already being

implemented inpoint-of-sale solutions that automatically suggest marketing

promotions that would be most effective for an individual customer.

4. Quantum Computing

Quantum computing is a way of using quantum mechanics to work out complex data
operations.As is common knowledge today, computers use bits that can have two values

– 1 or 0. Quantumcomputing uses “quantum bits” that can instead have three states – 1

or 0 or both. This unlocks exponential computing power over traditional computing –

when the right algorithm is used.

This represents a huge leap in computing power, but any commercial implementations are

still decades away. Nevertheless, firms like JPMorgan Chase and Barclays are investing in

quantumcomputing research in partnership with IBM.

5. Artificial Intelligence

The explosive growth that the last decade has seen in the amount of structured and
unstructured
data available with the banks, combined with the growth of cloud computing and

machine learning technologies has created a perfect storm for Artificial Intelligence to

be used across thespectrum of banking and financial services landscape.

Business needs and capabilities of AI implementations have grown hand-in-hand and

banks arelooking at Artificial Intelligence as a differentiator to beat down the emerging

competition.

Artificial Intelligence allows banks to use the large histories of data that they capture to

makemuch better decisions across various functions including back-office operations,

customer experience, marketing, product delivery risk management, and compliance.

Artificial intelligence would revolutionize banks by shifting the focus from the scale of

assets to scale of data. The banks would now aim to deliver tailored experiences to their

customers rather than build mass products for large markets.

Instead of retaining customers through high switching costs, banks would now be able to

becomemore customer-focused and retain them by providing high retention benefits.

Most importantly, banks would no more just depend on human ingenuity for improving

their services. Instead, performance would be a product of the interplay between

technology and talent.

6. API Platforms

The time when banks could control the whole customer experience through a monolithic

system that controlled everything from keeping records to every customer interaction is

long gone. Both

the regulatory requirements and the revolving customer needs have turned this

humongoussystem into dinosaurs.

Today banks need to instead build “banking stacks” that allow them to be a platform

to which customers and third-party service providers can connect to deliver a flexible

and personalized experience to the end user. To do so, they can use API platforms for

banking.

API Banking Platform is designed to work through APIs that sit between the banks'

backend execution and front-end experiences provided by either the bank itself or

third party partners.

This allows the banks to adopt completely new business models and use cases (for

example, enabling salary advances) and experiment with new technologies like

blockchain at low cost.APIs also help banks to future-proof their systems as the front-
end is no more tightly coupledwith the backend.

7. Prescriptive Security

The nature of cyber risk changes at a great speed. This makes the traditional approaches

to risk management obsolete. It is now clear that it is impossible for organizations to

eliminate all possible sources of cyber threats and limiting the attack footprint at the

earliest is the best way todeal with these. The banks will have to be nimble in the way

they approach cyber security.

Increasingly banks are deploying advanced analytic, real-time monitoring and AI to

detect threats and stop them from disrupting the systems. The use of big data analysis

techniques to getan earlier visibility of threats and acting to stop them before they

happen is called prescriptive security.

While the disruption brought by implementing the new technique may lead to an increase

in vulnerability at the start, this is the way forward to stop the ever increasing data

breaches thatvarious organizations are reporting.

8. Hybrid Cloud

One of the biggest challenges that the digital age has brought to banking is the need to

respondquickly. The constantly evolving market that banks operate in requires them to be

as agile as possible. They need to be able to provide resources across the enterprise in a

timely manner to address business problems faster.

High performing banks have discovered that the most cost-effective way of achieving this
is

through an enterprise-wide hybrid cloud. This allows them to pick benefits of both

public and private while addressing issues like data security, governance, and
compliance along with theability to mobilize large resources in a matter of minutes.

Hybrid cloud also allows banks to offer innovative new offerings to its

customers. For example, ICICI Bank has partnered with Zoho to allow

businesses to automate the basic

reconciliation process through Zoho Books, a cloud accounting software. The partnership
does

away with the need for data entry and also makes it easier to offer multiple payment

options tothe customers.

9. Instant Payments

As the world moves towards a less-cash economy, the customer expectations around

paymentshave changed dramatically. Both customers and business expect payments to

happen instantaneously, and this is where instant payment systems step in.

Instantaneous payment is a must if online payments need to replace cash transactions.

Therefore,banks around the world are finding ways of providing their customers options

for instant payment, even when the infrastructure required for the service is lacking.

For example, banks in Kenya are partnering together to provide P2P payment experience to
their

customer base. You would soon see banks combining their instant payment

capabilities withthird-party e- and m-commerce solutions to develop a new portfolio

of services.

10. Smart Machines

You must have already seen assistants like Amazon’s Alexa and Google Home in

action. Canyou imagine the impact these could have on banking applications?

In fact, Bank of America has already developed Erica as a virtual assistant specifically for
banking operations. These smart machines are beginning to act as digital concierges for

thecustomer in interacting with banks as well.

SWOT ANALYSIS OF BANKING INDUSTRY

SWOT Analysis of Banking industry focuses on strength, weakness, opportunities and

threats.Strength and weakness are the internal factors opportunities and threats are

external factors.

SWOT Analysis is a validated framework that helps to evaluate business

performance ofBanking Industry.

Banks are the need of today’s world. Everybody needs banking. Banking fulfills need

of Industries and individuals. Bank provides various types of services to the people who

are in business or in Service. Banking Industry is taking new shapes to provide financial

services tocustomers. Banking has developed from traditional banks to mobile banking,

and internet banking solutions. Banks provide loans to SMEs Individuals and

Corporate. For a very long time, one of the oldest remaining styles of financial

institution banks has been around.

Strength: -

• Banking Industry is the Oldest Industry: Due to Technological advancement

Industriesare changing their structure. Banking has also changed its structure and

system. Banking Industry has proved to be one of the wide spread and widely

acknowledged industry. It has also supported the human race. Banking has

adapted and updated itself to suit the new needs. Banks today play a critical and

indispensable role in society, from inculcatingthe habit of savings to helping

people with financial instruments.

 • Financial Stability of Nation: In ensuring a nation’s economic growth and

financial stability, the banking industry plays a vital role. By fostering prosperity,

banks contributeto the economy. They assist the masses to maintain their

resources and become importantcontributors to both the national and

international economy.

• Supplier of Financial Instruments: Banks have a wide range of financial

instrumentsfor their customers. Fixed Deposits, Stocks, bonds, insurance and

savings accounts aresome of the varied products sold by banks. Furthermore,

to provide online banking solutions, banks have also embraced and

incorporated digital technologies.

• Good Employment Source and Helps in GDP growth: There is a widespread

consensus that perhaps the improvement of the financial system leads to

economic growth. Financial development establishes encouraging conditions for

growth by either supply-led (financial development stimulates growth) or

demand-driven growth. It is thisindustry that works constantly to ensure financial

stability, encourage foreign trade, promote jobs and reduce poverty around the

world.

• Financial Assistance: whether natural calamity or man-made calamity banks

alleviate the after-effects of disaster by offering financial assistance to victims to

rise up and lead apeaceful life again.

Weakness: -

• Global Economics Susceptibility: Due to Exchange Rate changes and changes

in worldeconomy banking Industry is effected. It is also seen that slight shifts in
 the exchange

rates of currencies or the spending and saving patterns of the citizens of one

major nationcan directly impact the entire banking industry.

• Non-Performing Assets: The major weakness of the banking sector is NPAs

(Non- Performing Assets). Typically, NPAs denote loans that are not

recoverable. This leads tofinancial losses for the bank, inevitably. For the

banking sector and the economy as a whole, NPAs can have a debilitating

impact. Developing countries like India face instances of high NPAs that have

dealt a significant blow to the nation’s banking industry.

• Lack of coverage in rural areas: It has been observed that the banking industry

focusesmore on urban areas in most countries, while rural regions are ignored. In

the banking sector, this is a considerable weakness. Villages are now home to a

significant majority ofthe world’s population. In developed countries, this is

more. Banks are working in main stream don’t want to concentrate on

mainstreams. Banks must try to capture Rural Markets.

Opportunities: -

• Advancements in Technology: The banking industry has always

based on technology. This is evident that digital services provided
by banks today are

totally based on technology. However, banks should continue to adopt the

latest
technological advances. To draw future generations, they should focus on

puttingout newer goods and services.

• Opportunities for rural growth: One of the banking industry’s weak

 points is its limited presence in rural areas. But this vulnerability can

actually be turned into an opportunity. Banks will increase their customer

base considerably by expanding intovillages and providing their services to

the rural population.

• Societal Evolution: Both economically and culturally, human society is

changing. The needs and demands of customers with increasing income levels

are bound to change in this complex landscape. It is necessary for banks to

adapt to this changing society. The sector will solidify its position in the future

by offering better services.

• Rising in the private banking sector: the banking industry around the world

is highlyregulated by public sector banks and their respective central banks.

With the emergenceof private sector banks, this sector is experiencing structural

and functional shifts, primarily due to the adaptation of new technology and

intensified competition, therebybenefiting end-customers.

Threats: -

• Lack of Cyber Defence Proper: The current banking industry relies entirely on

the cyber-world. Whether it is data storage, monetary transactions or personal

information, everything is stored digitally. This makes the banking sector a

primary target for hackerswho are seeking to benefit financially by leveraging

flaws in the banks digital

infrastructure. Unless banks take effective cybersecurity steps to safeguard their

records,they will face a significant cyberspace threat.

• Competition Stiff: Worldwide, banks face stiff competition. Not only from

other banks,but also from institutions like Non-Banking Financial Companies

 that sell a range of financial products that are not available to all banks. This has

contributed to a change ofthe consumer base from banks to NBFCs, which are

more embraced by the new skilled breed.

• Global Uncertainty in Economics: The world is going through difficult

economic timesat present. The international banking sector has all been affected

by trade wars, protectionist policies, and economic downturns. If the world’s

economic conditions do not change, banks will face a bleak future.

• Recession: This is one of the biggest challenges to the nation’s financial

system. Thetraumatic shock of economic crises and the collapse of a number

of companies will impact the banks and vice versa.

System stability: the failure of certain poor banks has also undermined the stability of the
system. Government Regulations can directly affect the Banking Sector of a country.
LIMITATION

1. Use of leverage means everybody cannot withdraw deposit at the same

time, whichwould cause a run of the banks and precipitate bank failures

and depression.

2. Individuals cannot compete with banks to earn high interest on debts of

similarquality

3. Chance of Bank going to Bankrupt

4. Risk of Fraud and Robberies

5. Risk of Public Deb

CONCLUSION

Banking Industry is one of the fastest changing and growing industry in the world.

Banks are adopting new technologies to increase their business. They have also

contributed in general tothe world’s economic growth.

But their own shortcomings, such as NPAs and a lack of adequate rural presence, must

be tackled. The good news is that by providing quality service and growing into

untapped regions,they will work towards turning this weakness into opportunities.

This would allow them to counter the global challenges of recessions and intense

competition more effectively. Another factor that banks have to take care of is ensuring

that their digital infrastructure is up-to-date and running correctly. The banking industry

will therefore ensure thatit continues its successful march. Banking is changing due to

UPI payments and Payment Wallets like PhonePe, Amazon Pay, Paytm, etc.
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