With the country at the cusp of a massive economic transition, the Indian banking space is undergoing a complete transformation at a pace never seen before. \n\nDigital payments is the new norm, and traditional banks are roping in new age technologies to remain competitive and deliver what customers need. Additionally, Reserve Bank of India (RBI) has recognized the need of the hour, catalysing the digital push.\n\nIn its effort to add thrust to digital transactions in the country, the government launched the Unified Payments Interface (UPI) through the National Payments Corporation of India (NPCI).\n\nAdditionally, the NPCI launched the Bharat Interface for Money (BHIM) app for customers to connect to UPI, as an alternate to apps of various banks. NPCI is gunning for over 650 percent growth in RuPay-based transactions for a targeted three billion transactions in this fiscal.\n\nTransactions via both BHIM and UPI are on a rapid rise with UPI witnessing a 43 percent growth in its total transaction volume between July and August 2017.\n\nIn addition to this, the country\u2019s unbanked population is acting as a deterrent to remonetization. According to the Press Information Bureau, 40 percent of the country\u2019s population lies \u201coutside the ambit of formal banking.\u201d\n\nA conversation with IT leaders in the banking space brought to light emerging trends in BFSI, what ails the industry and the roadmap for 2018.\n\nDigital payments transform banking as we know it \/\/ Digital Payments Transforming Traditional Banking\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \n\n\u201cThere\u2019s a huge mandate in terms of technology and digital transformation, and this drive has been attracting a major chunk of the IT budget,\u201d says Puneet Kaur Kohli, Group Executive VP-IT and CTO at Bajaj Capital.\n\nOver the last two years, India witnessed unprecedented growth in numerous digital payment companies. These companies have proven to be the flagbearers of technology adoption in the banking sector.\n\nRajeev Narayan, Chief Innovation and Strategy Officer at TechProcess Payment Services, says that the company is scaling up its technology platforms and looking at elastic models to deal with the spike in digital payments. \u201cOn the ecosystem side, there has been a substantial amount of healthy investment in stabilizing and scaling up the payment infrastructure,\u201d he adds.\n\nTraditional banks are not too far behind when it comes to adopting newer technologies. Goutam Datta, VP-Technology at ICICI Lombard General Insurance, acknowledges blockchain as one of the emerging technologies in the banking space, in addition to AI and robotics. \u201cAdditionally, we\u2019ve also initiated cognitive some time back and we\u2019ll be implementing it soon,\u201d he says.\n\n\u201cWe\u2019re one of the few general insurance companies in the country to deploy cognitive in its operations. More than one lakh of our customers have drawn benefits brought about by this drive. In addition to engaging and collaborating with our customers, it gives them a clearer picture about policies and comparisons,\u201d adds Datta.\n\nFurthermore, he revealed that some of the company\u2019s production workload is on the cloud that has hugely proven to be hugely beneficial.\n\nKohli points out that \u2018Digital Twins\u2019, which is the concept of digitally replicating physical assets, processes and systems, has been gaining traction in the BFSI sector.\n\nIn fact, Gartner predicts that by 2021, 50 percent of large institutions will use digital twins, and will be gaining a 10 percent improvement in effectiveness.\n\nOn digital payment companies, Datta feels that the industry will become more competitive. \u201cThe competition among digital payment providers will revolve around \u2018owning\u2019 the customer,\u201d he says. \n\nHe believes that we may see increased collaboration between banks and digital payment companies. While the digital payment companies are more likely to drive the end-user interface, it will be the banks driving compliance and other regulatory requirements.\n\nAdditionally, the adoption of cloud in the banking sector, private or hybrid, is gaining significance. An interesting paradox brought forth by CIOs is that although hosting applications on cloud is supposed to be cost effective, securing data on the cloud results in organizations spending exorbitant amounts, compared to the on-premise setup.\n\nSecurity and compliance at the core of it all\n\n\u00a0\n\nCustomer data \u2013 the sanctum sanctorum in the banking space continues to be the top priority for CIOs. \n\n\u00a0\n\nAccording to Balram Choudhary, Deputy VP-IT at RBL Bank, the problem comes from the end-user operating his own device. \u201cPeople are still the weakest link. The BFSI sector will use the latest technology, and may be using cloud but still be vulnerable because of its end users,\u201d he adds. \n\n\u00a0\n\nThe sudden surge in digital payments has also changed the way banks operate and CIOs have highlighted the need for revamping the entire infrastructure.\u00a0 \n\n\u201cAs the number of digital transactions in tier-2 and tier-3 cities in India has gained momentum, a big chunk of our existing infrastructure is not completely secure. Additionally, we could see a spike in fraudulent activities, and I\u2019m not even talking about sophisticated techniques in fraud,\u201d says Datta.\n\nNot too long ago, the Indian banking sector held the dubious reputation of failing to report security breaches and a complete lack of collaboration between banks.\n\nHowever, with RBI mandating banks to report a breach within six hours, compliance has become one of the top priorities for banking CIOs.\n\n\u201cGovernance, risk and compliance is extremely important for financial institutions, and customer data is of utmost importance to us. If the need arises to host all data on the cloud, moving customer data out of the country will pose as a big threat,\u201d says Kohli.\n\nEmphasizing the need for CIOs to adopt a proactive approach and not a reactive one, she opines that CIOs have to carry out vulnerability tests from time to time, and also hire ethical hackers to test cyber-defense.\n\n\u201cBanks need to focus on securing authentication processes, especially when the payment moves from one gateway to another, for which the architecture needs to be robust and smart,\u201d she adds.\n\nCIOs and CSOs in the BFSI sector have pointed out the trend of cybersecurity insurance gaining traction in India. Kohli, for instance, believes that there is an opportunity for banks to offer cyber-insurance as a value added service.\n\nThe scene playing out in the digital payments space is no different. \n\nHarshil Mathur, CEO and Co-Founder of Razorpay, says that payment processing companies now have to be more responsible to ensure that nothing untoward happens at the infrastructural level.\n\nAdditionally, he points out that companies need to watch out for DDoS attacks. \u201cThe added volumes do not compromise security, but DDoS attacks are a concern,\u201d he says. \u201cWe have a CDN web firewall in place and any malicious threat is red-flagged.\u201d\n\nWith increased collaboration between traditional banks and digital payment companies, it\u2019s the customer who stands to benefit.