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Digital innovations for retail
and SME banking in a post
COVID-19 world
May 2020
Digital innovations for retail and SME banking in a post COVID-19 world
2
Technology-led innovations have become the backbone of modern-day banking, helping effectively meet the
needs of diverse sets of customers. In the past decade, Indian banks and non-banking financial companies
(NBFCs) have adopted technology to drive growth, operational efficiency, and customer experience for retail, and
micro, small and medium enterprise (MSME) customers.
However, the COVID-19 outbreak and resultant government response have triggered significant structural
and behavioral changes across retail and MSME customers. Irrespective of how the pandemic plays out (an
optimistic scenario leading to a “V” shape recovery in the short term or a pessimistic scenario leading to an “L”
shape recovery in the long term), the new normal is likely to see a significant manifestation of social distancing
(preference for contactless and remote business operations) and innovative business models (to survive and
thrive amid disruptions).
Given the divergence of scenarios that the economy could chart, technology is likely to be the single most
important factor to help organisations sail through the chaos swiftly. Although most technologies required to
drive innovation are widely available and quite mature, banks and NBFCs will need to find creative ways to use
these technologies to overcome the challenges posed by the pandemic.
Introduction
Digital innovations for retail and SME banking in a post COVID-19 world
3
Social distancing translates into restrictions on mobility and ways of working for both customers and employees,
thereby resulting in increasing preference for contactless banking and remote working.
1.	 Select contactless banking solutions
a.	 Digital onboarding enabled by video KYC: Adopting Aadhar and Video Customer Identification Processes
(V-CIP) based digital onboarding can help drive new customer acquisition, while offering cost efficiencies and
lowering turnaround time. Artificial intelligence (AI) and facial recognition technologies could help enhance the
veracity of customer data during this process.
b.	 Contactless authentication and payments: Customers are likely to opt for this to minimise physical
interactions. Using technologies such as facial or voice recognition and wearables can help maintain social
distancing norms and enhance customer experience during merchant payments, ATM, and business
correspondent-enabled banking transactions.
Innovations for contactless or
less-contact operations
A bank in Russia is piloting facial
recognition enabled payments in
partnership with retail chains. In addition
to making payments contactless,
the technology also decreased the
transaction time by 75 percent.
c.	 Virtual customer servicing: While many banks and NBFCs have adopted chatbots and voicebots for basic
service requests, contact centres continue to be critical for managing complex requests. The pandemic has
disrupted contact centre operations, affecting response time and quality for a range of services. Enhancing
the capabilities of chatbots/voicebots and contact centre virtualisation through cloud-based systems can help
address this issue to a large extent.
Digital innovations for retail and SME banking in a post COVID-19 world
4
d.	 Immersive banking experience: With substantially reduced human interactions in branches, recreating
immersive experiences virtually can help build a differentiated customer value proposition. Virtual and
augmented reality based technologies can be used to develop interactive banking apps and create a virtual
branch experience.
An Australian bank launched an AR app for car loans
that provide details on make, model, etc., for any car
by just pointing the app towards the car. Users can also
pre-qualify themselves based on these details and obtain
customised quotes through the app.
An Indian start-up offers AI-enabled personal digital
coach, which assesses employees' performance and
behavioural traits to identify improvement areas,
and enhances performance through visual and
cognitive nudges.
2.	 Select remote working solutions
a.	 Remote employee access: As a significant portion of the workforce is expected to continue to work from
home, a robust, distributed, and secure environment becomes crucial for uninterrupted operations. Financial
institutions can consider deploying appropriate cloud-based solutions to offer secure remote access to major
systems. This could also provide flexibility to quickly scale up/down in case of a rise in transaction volumes due
to increased volatility.
b.	 Employee productivity enhancement: The new ways of working have highlighted many limitations of
traditional performance enhancement and training programmes. AI-based productivity enhancement
tools could help assess and predict human behaviour, identify development areas in real-time, and track
performance. Further, virtual/augmented reality based training programmes have the potential to increase the
efficacy of remote learning, thereby improving employee productivity.
c.	 Employee health management: As financial institutions scale up physical branch and office operations to the
pre-COVID levels, their primary concerns would be employees’ physical and psychological wellbeing, and safety
assurance to customers. Touch-free attendance, temperature checking, and video-based social distancing
compliance monitoring solutions can aid overall health management at branches. Staff access to virtual
medical assistants for their physical and psychological wellbeing can further maintain employee health and
morale.
Digital innovations for retail and SME banking in a post COVID-19 world
5
Innovations to drive economic
recovery and growth
The COVID-19 crisis has significantly affected demand and supply across sectors, which in turn has adversely
affected credit growth and collections. However, financial institutions are looking to deploy innovative technology
enabled offerings and models to drive lending and revive economic activity.
1.	 Hyper-customisation of offerings
a.	 Micro-market level customisation of financing products: Varying levels of COVID-19 restrictions in different
geographies, sectors and segments have led to increased uncertainty and risk in MSME lending. Geospatial
analytics can provide rich micro-market level understanding of each sector/segment, and enable the
customisation of offerings. These, along with remote sensing solutions, can help financial institutions identify
clusters with business potential and monitor risk levels, especially in sectors such as mining, infrastructure, and
farming.
An Indonesian bank deployed a
GIS-based solution to optimise its
branch and ATM network considering
market potential by region, leading
to a 10 percent increase in customer
acquisition with 40 percent fewer
branches.
A leading global bank collaborated
with a telecommunications player
to develop IoT solutions for trade
financing that help track goods in real-
time and trigger automatic financing
or payment instructions.
b.	 Remote asset evaluation and monitoring: With mobility restrictions posing challenges to physical
movement, remote asset evaluation through IoT-based systems can help drive credit growth. Products such
as trade and lease financing, asset maintenance financing (e.g., car tyre replacement), and manufacturing and
infrastructure financing can significantly benefit from these solutions.
Digital innovations for retail and SME banking in a post COVID-19 world
6
2.	 Innovative business models
a.	 Alternate data based risk assessment: With increased business uncertainty, traditional data sources may be
insufficient for a comprehensive risk assessment of MSME and retail customers. Alternate data, including cash
flows, social media footprint, psychometric analysis, mobile data analysis, and proximity to virus hotspots, can
help assess customers’ creditworthiness. Given this, financial institutions can look to AI/ML enabled alternate
data based risk models to augment their risk assessment capabilities and build robust early warning systems
(EWS) for assistance in monitoring risk. Players can also consider deploying AI-enabled social media cluster
analytics for the early identification of virus outbreak hotspots based on first-hand social media posts.
b.	 Ecosystem financing: Financial institutions can build ecosystem partnerships with corporates by integrating
APIs to offer supply chain financing, marketplace lending, and POS-based lending products to their MSME
partners. This could tap into cash inflows of MSME customers, thereby improving underwriting, pricing, and
collections.
A leading Asian bank partnered with a
consumer electronics conglomerate to offer
low-cost financing to its distributors with limited
paperwork and quick processing.
c.	 Trade assurance through real-time tracking: COVID-19 related restrictions are likely to lead to increased
trade barriers and hence, a higher cost of trade. These restrictions are also expected to raise the importance
of traceability of goods to ensure safety. As a result, distributed ledger-based solutions to connect to the trade
value chain could see a wider adoption. Therefore, trade financiers may consider exploring distributed–ledger
technology based value added services to catalyse trade.
A Chinese bank has launched blockchain-based
supply chain financing product to eliminate
fraudulent transactions and minimise risk.
Digital innovations for retail and SME banking in a post COVID-19 world
7
As financial institutions look to evaluate and deploy these solutions, they would need to be mindful of the
associated challenges. Some of these challenges are discussed below.
•	 Given the limited maturity of some of these technologies, financial institutions will need to ensure adherence
to applicable regulations, especially around data privacy and localisation. They may also engage in discussions
with government and regulators on required policy changes.
•	 Deploying these solutions would require significant capability building in terms of both technology and people.
While strategic partnerships with FinTechs can help address this to some extent, the competition for scarce
and niche talent pools could limit financial institutions’ ability to quickly launch and scale these solutions.
•	 With the adoption of digital by a larger set of customers, fraud and cyber security related challenges are
likely to increase significantly. Financial institutions would need to guard against these through technological
interventions, such as machine learning based fraud detection systems, advanced end-to-end encryption
protocols, AI-based user behaviour validation, and awareness initiatives for employees and customers.
The available technologies are largely sufficient to overcome most, if not all, of the challenges that the COVID-19
pandemic is likely to throw at Indian financial institutions. However, creative adoption of these technologies to
bring about innovation is likely to separate the winners from the rest.
Digital innovations for retail and SME banking in a post COVID-19 world
8
Govind Joshi
Partner
Deloitte Touche Tohmatsu India LLP
govindjoshi@deloitte.com
Sanjoy Datta
Partner, Leader
Financial Services
Deloitte Touche Tohmatsu India LLP
sanjoydatta@deloitte.com
Lakshmisha SK., Kranthi Reddy, Saurajit Goswami, Ridhi Kalra, Avinaash K
Contact us
Acknowledgements
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its
network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent
entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about
for a more detailed description of DTTL and its member firms.
This material is prepared by Deloitte Touche Tohmatsu India LLP (DTTILLP). This material (including any information
contained in it) is intended to provide general information on a particular subject(s) and is not an exhaustive treatment of
such subject(s) or a substitute to obtaining professional services or advice. This material may contain information sourced
from publicly available information or other third party sources. DTTILLP does not independently verify any such sources and
is not responsible for any loss whatsoever caused due to reliance placed on information sourced from such sources. None
of DTTILLP, Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”)
is, by means of this material, rendering any kind of investment, legal or other professional advice or services. You should seek
specific advice of the relevant professional(s) for these kind of services. This material or information is not intended to be
relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking
any action that might affect your personal finances or business, you should consult a qualified professional adviser.
No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person or entity by reason of
access to, use of or reliance on, this material. By using this material or any information contained in it, the user accepts this
entire notice and terms of use.
©2020 Deloitte Touche Tohmatsu India LLP. Member of Deloitte Touche Tohmatsu Limited

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Digital Innovations | Retail & SME Baking

  • 1. Digital innovations for retail and SME banking in a post COVID-19 world May 2020
  • 2. Digital innovations for retail and SME banking in a post COVID-19 world 2 Technology-led innovations have become the backbone of modern-day banking, helping effectively meet the needs of diverse sets of customers. In the past decade, Indian banks and non-banking financial companies (NBFCs) have adopted technology to drive growth, operational efficiency, and customer experience for retail, and micro, small and medium enterprise (MSME) customers. However, the COVID-19 outbreak and resultant government response have triggered significant structural and behavioral changes across retail and MSME customers. Irrespective of how the pandemic plays out (an optimistic scenario leading to a “V” shape recovery in the short term or a pessimistic scenario leading to an “L” shape recovery in the long term), the new normal is likely to see a significant manifestation of social distancing (preference for contactless and remote business operations) and innovative business models (to survive and thrive amid disruptions). Given the divergence of scenarios that the economy could chart, technology is likely to be the single most important factor to help organisations sail through the chaos swiftly. Although most technologies required to drive innovation are widely available and quite mature, banks and NBFCs will need to find creative ways to use these technologies to overcome the challenges posed by the pandemic. Introduction
  • 3. Digital innovations for retail and SME banking in a post COVID-19 world 3 Social distancing translates into restrictions on mobility and ways of working for both customers and employees, thereby resulting in increasing preference for contactless banking and remote working. 1. Select contactless banking solutions a. Digital onboarding enabled by video KYC: Adopting Aadhar and Video Customer Identification Processes (V-CIP) based digital onboarding can help drive new customer acquisition, while offering cost efficiencies and lowering turnaround time. Artificial intelligence (AI) and facial recognition technologies could help enhance the veracity of customer data during this process. b. Contactless authentication and payments: Customers are likely to opt for this to minimise physical interactions. Using technologies such as facial or voice recognition and wearables can help maintain social distancing norms and enhance customer experience during merchant payments, ATM, and business correspondent-enabled banking transactions. Innovations for contactless or less-contact operations A bank in Russia is piloting facial recognition enabled payments in partnership with retail chains. In addition to making payments contactless, the technology also decreased the transaction time by 75 percent. c. Virtual customer servicing: While many banks and NBFCs have adopted chatbots and voicebots for basic service requests, contact centres continue to be critical for managing complex requests. The pandemic has disrupted contact centre operations, affecting response time and quality for a range of services. Enhancing the capabilities of chatbots/voicebots and contact centre virtualisation through cloud-based systems can help address this issue to a large extent.
  • 4. Digital innovations for retail and SME banking in a post COVID-19 world 4 d. Immersive banking experience: With substantially reduced human interactions in branches, recreating immersive experiences virtually can help build a differentiated customer value proposition. Virtual and augmented reality based technologies can be used to develop interactive banking apps and create a virtual branch experience. An Australian bank launched an AR app for car loans that provide details on make, model, etc., for any car by just pointing the app towards the car. Users can also pre-qualify themselves based on these details and obtain customised quotes through the app. An Indian start-up offers AI-enabled personal digital coach, which assesses employees' performance and behavioural traits to identify improvement areas, and enhances performance through visual and cognitive nudges. 2. Select remote working solutions a. Remote employee access: As a significant portion of the workforce is expected to continue to work from home, a robust, distributed, and secure environment becomes crucial for uninterrupted operations. Financial institutions can consider deploying appropriate cloud-based solutions to offer secure remote access to major systems. This could also provide flexibility to quickly scale up/down in case of a rise in transaction volumes due to increased volatility. b. Employee productivity enhancement: The new ways of working have highlighted many limitations of traditional performance enhancement and training programmes. AI-based productivity enhancement tools could help assess and predict human behaviour, identify development areas in real-time, and track performance. Further, virtual/augmented reality based training programmes have the potential to increase the efficacy of remote learning, thereby improving employee productivity. c. Employee health management: As financial institutions scale up physical branch and office operations to the pre-COVID levels, their primary concerns would be employees’ physical and psychological wellbeing, and safety assurance to customers. Touch-free attendance, temperature checking, and video-based social distancing compliance monitoring solutions can aid overall health management at branches. Staff access to virtual medical assistants for their physical and psychological wellbeing can further maintain employee health and morale.
  • 5. Digital innovations for retail and SME banking in a post COVID-19 world 5 Innovations to drive economic recovery and growth The COVID-19 crisis has significantly affected demand and supply across sectors, which in turn has adversely affected credit growth and collections. However, financial institutions are looking to deploy innovative technology enabled offerings and models to drive lending and revive economic activity. 1. Hyper-customisation of offerings a. Micro-market level customisation of financing products: Varying levels of COVID-19 restrictions in different geographies, sectors and segments have led to increased uncertainty and risk in MSME lending. Geospatial analytics can provide rich micro-market level understanding of each sector/segment, and enable the customisation of offerings. These, along with remote sensing solutions, can help financial institutions identify clusters with business potential and monitor risk levels, especially in sectors such as mining, infrastructure, and farming. An Indonesian bank deployed a GIS-based solution to optimise its branch and ATM network considering market potential by region, leading to a 10 percent increase in customer acquisition with 40 percent fewer branches. A leading global bank collaborated with a telecommunications player to develop IoT solutions for trade financing that help track goods in real- time and trigger automatic financing or payment instructions. b. Remote asset evaluation and monitoring: With mobility restrictions posing challenges to physical movement, remote asset evaluation through IoT-based systems can help drive credit growth. Products such as trade and lease financing, asset maintenance financing (e.g., car tyre replacement), and manufacturing and infrastructure financing can significantly benefit from these solutions.
  • 6. Digital innovations for retail and SME banking in a post COVID-19 world 6 2. Innovative business models a. Alternate data based risk assessment: With increased business uncertainty, traditional data sources may be insufficient for a comprehensive risk assessment of MSME and retail customers. Alternate data, including cash flows, social media footprint, psychometric analysis, mobile data analysis, and proximity to virus hotspots, can help assess customers’ creditworthiness. Given this, financial institutions can look to AI/ML enabled alternate data based risk models to augment their risk assessment capabilities and build robust early warning systems (EWS) for assistance in monitoring risk. Players can also consider deploying AI-enabled social media cluster analytics for the early identification of virus outbreak hotspots based on first-hand social media posts. b. Ecosystem financing: Financial institutions can build ecosystem partnerships with corporates by integrating APIs to offer supply chain financing, marketplace lending, and POS-based lending products to their MSME partners. This could tap into cash inflows of MSME customers, thereby improving underwriting, pricing, and collections. A leading Asian bank partnered with a consumer electronics conglomerate to offer low-cost financing to its distributors with limited paperwork and quick processing. c. Trade assurance through real-time tracking: COVID-19 related restrictions are likely to lead to increased trade barriers and hence, a higher cost of trade. These restrictions are also expected to raise the importance of traceability of goods to ensure safety. As a result, distributed ledger-based solutions to connect to the trade value chain could see a wider adoption. Therefore, trade financiers may consider exploring distributed–ledger technology based value added services to catalyse trade. A Chinese bank has launched blockchain-based supply chain financing product to eliminate fraudulent transactions and minimise risk.
  • 7. Digital innovations for retail and SME banking in a post COVID-19 world 7 As financial institutions look to evaluate and deploy these solutions, they would need to be mindful of the associated challenges. Some of these challenges are discussed below. • Given the limited maturity of some of these technologies, financial institutions will need to ensure adherence to applicable regulations, especially around data privacy and localisation. They may also engage in discussions with government and regulators on required policy changes. • Deploying these solutions would require significant capability building in terms of both technology and people. While strategic partnerships with FinTechs can help address this to some extent, the competition for scarce and niche talent pools could limit financial institutions’ ability to quickly launch and scale these solutions. • With the adoption of digital by a larger set of customers, fraud and cyber security related challenges are likely to increase significantly. Financial institutions would need to guard against these through technological interventions, such as machine learning based fraud detection systems, advanced end-to-end encryption protocols, AI-based user behaviour validation, and awareness initiatives for employees and customers. The available technologies are largely sufficient to overcome most, if not all, of the challenges that the COVID-19 pandemic is likely to throw at Indian financial institutions. However, creative adoption of these technologies to bring about innovation is likely to separate the winners from the rest.
  • 8. Digital innovations for retail and SME banking in a post COVID-19 world 8 Govind Joshi Partner Deloitte Touche Tohmatsu India LLP govindjoshi@deloitte.com Sanjoy Datta Partner, Leader Financial Services Deloitte Touche Tohmatsu India LLP sanjoydatta@deloitte.com Lakshmisha SK., Kranthi Reddy, Saurajit Goswami, Ridhi Kalra, Avinaash K Contact us Acknowledgements
  • 9. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. This material is prepared by Deloitte Touche Tohmatsu India LLP (DTTILLP). This material (including any information contained in it) is intended to provide general information on a particular subject(s) and is not an exhaustive treatment of such subject(s) or a substitute to obtaining professional services or advice. This material may contain information sourced from publicly available information or other third party sources. DTTILLP does not independently verify any such sources and is not responsible for any loss whatsoever caused due to reliance placed on information sourced from such sources. None of DTTILLP, Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this material, rendering any kind of investment, legal or other professional advice or services. You should seek specific advice of the relevant professional(s) for these kind of services. This material or information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person or entity by reason of access to, use of or reliance on, this material. By using this material or any information contained in it, the user accepts this entire notice and terms of use. ©2020 Deloitte Touche Tohmatsu India LLP. Member of Deloitte Touche Tohmatsu Limited