Banking
Navigating the new normal with Digital Transformation and Banking Innovation
Published by Jessica Weisman-Pitts
Posted on November 24, 2021
6 min readLast updated: January 28, 2026
Global Banking & Finance Review®
Company
Published by Jessica Weisman-Pitts
Posted on November 24, 2021
6 min readLast updated: January 28, 2026
The pandemic accelerated digital transformation in banking, shifting from physical to digital-first models. Banks must innovate and adapt to new business models for growth.
By Sanat Rao, CEO of Infosys Finacle
Once, the earth was believed to be the center of the solar system and the sun was supposedly going around it. After we corrected our paradigm, a great deal of progress was possible. Similarly, the banking industry has witnessed a paradigm shift over the last decade, evolving from a high physical-touchpoint sector to a digital-first industry.
Between 2000 and 2020, banking transactions went from being 50% in-branch to 90% digital. Today, they have started migrating to non-bank, third-party channels as open banking and embedded finance take hold on a staggering scale. For example, in India, in October 2021, payment transactions on the Unified Payments Interface exceeded $100 billion in a month for the first time with 60% of the transactions that happened via UPI being conducted by non-banks such as Google, Phonepe, and Paytm. This is a preview of what banking will look like globally in the near future.
That said, most banks are yet to arrive at a stage of digital maturity. This is corroborated by the findings of the Finacle & Efma annual research on ‘Innovation in Retail Banking’. In the 2020 study, only 7 percent of the 700 banking executives interviewed said that their organization has deployed digital transformation at scale and is reaping the desired results.
Staying relevant is the biggest concern of bank leaders today. Consequently, banks are in a state of continual transformation – an ongoing pursuit of ways to create, deliver, and capture value.
We have come out of the crisis mode of the pandemic and facing a new customer-centric banking paradigm that is open, transparent, real-time, intelligent, tailored, secure, seamless, and deeply integrated into customers’ lives. And embracing digital transformation and innovation at speed and scale is the secret sauce for growth, sustenance, and success.
This is further confirmed by every bank we have spoken to who are driving true digital transformation across segments, keeping the customers at the center of their organization’s mission. We believe that banks can scale their digital transformation in the coming years by focusing on six key themes:
There’s no aspect of banking that is untouched by the new business models possible today. Globally, traditional banks have seen their competitive advantages, whether reach, product choice, expertise, or customer base, erode steadily over the years. To a great extent, this is because of new non-traditional entrants who have differentiated their propositions through innovation, systematically diminishing the competitive advantages – branch network, user base, deep pockets – of incumbents.
With the pandemic intensifying disruption, the gap between the digital leaders and laggards is widening rapidly. This poses serious problems for bank CEOs who are on the wrong side of the divide. For them, the need for digital business model innovation is here and now. And we are not talking about peripheral fixes, which are clearly not enough – but complete reinvention.
As the trusted partner to banks globally, we wanted to highlight the urgency of business model innovation and draw attention towards steps banks can take to succeed. So, over the last few months, we worked with 11:FS to produce a study on this contemporary topic. It highlights eight archetypes that are creating and delivering value to customers in new ways are gaining significant interest globally. These archetypes include – Digital-only Banking, Banking as a Service, Embedded Finance, Digital Financial Advisors, Finance Marketplaces, Financial Institutions led Non-finance Marketplaces, Banking Industry Utilities, and Banking Curators.
In this mobile-first world, banks must place the customer at the center of the banking ecosystem and reimagine their products, processes, and services. The digital-age customer is spoilt for choices, demanding and impatient. According to a PWC study, one in three customers said they would not hesitate to move on from a brand that they love after just one bad experience. And further, with big-tech and fintech companies entering the banking space with innovative propositions and customer-centric experiences, traditional banks must rush to meet or exceed the same standards, else lose customers and revenues.
So, while the need for enhanced customer engagement is clearly the number one priority today, it takes a holistic approach to usher the change. Firstly, banking must be equally accessible on all the channels of discovery and value delivery, including mobile, internet, kiosk, voice banking, ATM and smartwatch. The next step is to embed financial services (payments, loans, insurance) within the lifestyle habits (social media, messaging apps, eCommerce sites, travel portals etc.).
Several pieces such as people, processes and technology must come together to craft a superior customer engagement. This involves rethinking business models, provisioning the right technology to facilitate digital engagements and omni-channel capabilities and finally personalization at scale. Used to personalized experiences from the likes of Amazon, Netflix and Google, consumers expect the same from their banks. The roadmap to a successful and intimate customer engagement must include leveraging big data to anticipate customer behavior and requirements and using these insights and other data, such as location and payment preferences, to push contextual, personalized offers at scale. The spirit of contextual engagement and personalized services must span across the entire lifecycle of the customer – across onboarding, converse, sales, and service.
This is a Sponsored Feature
The article discusses digital transformation and innovation in the banking sector post-pandemic.
Banking has shifted from physical branches to digital-first models, with increased use of non-bank channels.
Key drivers include digital customer engagement, cost-cutting through automation, and leveraging new technologies.
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