INDEX

Sr No Topic Page
1 INTRODUCTION 2-4
2 STATEMENT OF PROBLEM 5
3 REVIEW OF LITERTURE 6-10
4 OBJECTIVES OF THE STUDY 11-14
5 HYPOTHESIS OF THE STUDY 15
6 RESEARCH METHODOLOGY 16-17
7 SIGNIFICANCE OF STUDY 18
8 SCOPE OF STUDY 19
9 LIMITATIONS OF STUDY 20
10 TENTATIVE CONCLUSION 21
11 REFERENCES 22-23

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1. INTRODUCTION

What is Digital Transformation?

Digital Transformation is far beyond just moving from traditional banking to a digital world. It is a
vital change in how banks and other financial institutions learn about, interact with and satisfy
customers.

An efficacious Digital Transformation begins with an understanding of digital customer behavior,

preferences, choices, likes, dislikes, stated as well as unstated needs, aspirations etc. and this
transformation leads to the major changes in the organizations, from product-centric to customer-
centric view.

Four out of five financial institutions believe that digital will fundamentally change banking and
completely transform the industry’s competitive landscape. But according to research from the
Boston Consulting Group, less than half (43%) confess they don’t even have a digital strategy.
And an astonishing one-in-five banking execs consider their bank or credit union “market leading”
when it comes to digital

“The starting point for each financial institution will depend on its business strategy, market
position and capabilities,” Boston Consulting Group says. “But all must consider how they can
reshape their distribution models, improve their value propositions and develop end-to-end
consumer-centric journeys to increase growth and customer satisfaction.”

The strategy can’t be a series of one-off à la carte initiatives taken on by separate and individual
business units. This is the kind of undertaking that will require banks and credit unions to stretch
outside their comfort zone; instead of uncoordinated initiatives they need to tackle digital
transformation as a comprehensive, enterprise-wide strategy — one that’s lead from the very top
by the C-suite, with the CEO firmly at the helm. Without a top-down, integrated approach that
involves every aspect of the organization, traditional banking providers will struggle taking
advantage of powerful new tools such as robotics, big data, AI and blockchain.

How Covid-19 has accelerated Digital Transformation?

The year 2020 threw a wrench into many plans and predictions with the sudden outbreak of
COVID-19, which unsettled every human being on this planet. Digital transformation came to the
rescue at such an unprecedented time. Banking, being one of the core sectors for socio-economic
development, expedited adoption of digital technologies on priority as the lockdown hit.

Many public, private and even cooperative banks that cater to customers who are not digitally
savvy, rushed to meet the demands of their business and customers in the new normal. Within five
months, the banking industry witnessed digitalization that it had not seen in the last five years.
Fintech firms went into overdrive to support the rapid adoption of technology by financial
institutions in response to the pandemic. For instance, introducing video-based KYC has made it
possible to onboard customers virtually, increase customer satisfaction, retain customers and
reduce acquisition costs for banks.

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As 2021 dawns, it will be the year when banks will start reaping the results of the digital
transformation journeys started in 2020.

2020 has been a year that nobody expected. It forced businesses to get out of the comfort zones,
learn and evolve. 2021 is the time to implement those leanings. There’s no question that it is going
to be an exciting year, one we hope will set new landmarks for the banking ecosystem

How to Digitally Transform a Bank or Financial Institution?

To build a digital transformation strategy, Boston Consulting Group recommends that banks and
credit unions focus on four priorities — or pillars:

1. Reinvent the consumer journey

2. Leverage the power of data

3. Redefine the operating model

4. Build a digital driven organization.

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According to Pshenichnikov (2018), in “Influence of Financial Technologies on Changing the
Model of Customer Banking Services. Theory and Practice of Service: Economics, Social
sphere, Technology” the introduction of the above technological components into the banking
sector made it possible to form a new model of banking services, which is a whole ecosystem of
value exchange. Its main differences from the traditional model of banking business are presented
in the below table.

Distinguishing Features Traditional Model Digital Model

Limited. Service is carried out Unlimited. Possibility of

Customer service time frame
only at a clearly defined time round-the-clock access
Depends on the qualification
The speed of customer service and experience of the Bank Immediate
employee
Flexible, however, is limited to Flexible and carried out
Approach to service a small variety of service through any convenient
channels channel for the client
High, taking into account the
Bank's costs for the personnel Low, often services are
Maintenance cost
and maintenance of provided free of charge
departments
Unlimited, can go beyond the
Limited branching of the
Scope of service geographical location of the
branch network and staffing
banking institution
Functions of the operator is
Status of the operator in the Functions of the operator are
performed by an employee of
service process performed by the Bank's client
the Bank
The procedure for learning Carried out quickly, via SMS
Requires time and cost
new services and promotions and e-mail newsletter
The key articles are articles for
The key models are articles on
Consumable component of the the purchase and maintenance
the staff and maintenance of
operation of the service system of servers and software
departments
package

Source: Centre for Financial Inclusion

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2. STATEMENT OF THE PROBLEM

In light of the above, there are several researches are conducted to analyze The Future of Banking
through Digital Transformation, Trends and Challenges in Digital Transformation of Banks, Role
of Fintech’s in Digital Transformation, etc., however, there are very few researches that focus on
Why and How Change and Innovation impacts Digital Transformation in the
banking/financial services sector?

Digital Transformation impacts everything. Especially with respect to banking and financial
services its impact is transformative: going far deeper than the cost-saving potential from
innovative IT, or even from sourcing new revenue streams. Digital Transformation also includes
taking control of your customer-experience ecosystem by managing your entire business from your
customers’ perspective and rethinking your legacy business model.

The research focuses on understanding the primary factors driving digital transformation:

1) Which objectives initiate digital transformation? (Objective)

a) Time – example – faster services delivery, faster production etc.
b) Finance – cost savings, revenue increase etc.
c) Space – networking, automation etc.
d) Quality – product quality, relationship quality, process quality

2) Which procedure is adopted to execute digital transformation? (Procedure)

a) Sequence of tasks and decisions related to each other in a logical an temporal context
b) Use of technologies/enablers to generate new applications/services
c) Acquisitions and exchange of data including analysis and use for option calculations

3) How intense is the degree of transformation? (Intensity)

a) Incremental (slight)
b) Radical (fundamental)

4) Who are the stakeholders of digital transformation? (Stakeholders)

a) Customers
b) Own Business
c) Partners
d) Industry
e) Competitors

5) What is component which is digitally transformed? (Components)

a) Individual Elements (processes, customer relationships, products etc.)
b) Entire Business Model/Operating Model
c) Value Chains

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3. REVIEW OF LITERATURE

Omarini, Anna. (2017) : the research defines, digital transformation in the banking business,
laying out what banks and FinTech companies are both developing in the market, and furthermore
bringing up that it won’t be simply the innovation that will be the disruptor of the banking
business, yet rather how firm sends the innovation that will cause the disturbance. He claims new
innovations appear to be and remain in the market to upset the retail financial service esteem chain,
just as bringing new players into the competitive field. Incumbents and new comers have
imaginative switches to embrace.

Dr. Arunangshu Giri and Ipsita Paria (2018) : the study focuses “A Literature Review on
Impact of Digitalization on Indian Rural Banking System and Rural Economy”. The present
paper focuses on the review and summarizes various studies which were made by different
researcher of different location across India on the impact of digitalization on rural banking system
of India. The study found that, digital banking is having enormous potential to change the
landscape of financial inclusion.

K. Hema Divya and K. Suma Vally (2018) : the study analysis, The present paper focuses on the
analysis of the adoption level of the digital payment systems by customers. Primary data was
collected from 183 respondents in Hyderabad. The collected data through questionnaire were
analyzed by using chi-square technique. The study found that, the deployment of technology for
digital payments have improved the performance of banking sector and able to achieve the motive
cash less country.

Anthony Rahul Golden S. (2017) the article entitled “An Overview of Digitalization in Indian
Banking Sector”. In this article an attempt has been made to study the overview of digitalization
in Indian Banking sector. Banks are not just a part of our lives but have a significant role in our
daily lives. The study found that, due to the adoption of this digitalization, the banking sectors in
India face some remarkable changes as well as hurdles. The study also found that, as we are in the
digital era, it is not possible to avoid the growth and services or digital banking.

Santiago Carbo - Valverde (2017) the article entitled “The Impact on Digitalization on
Banking and Financial Stability”. In this article an attempt has been made to discuss the impact
of digitalization on banking activities and challenges that imposes for financial stability. The study
found that, digitalization is an opportunity to reduce marginal costs and increase productivity in
financial services

W. Chan Kim & A. Renee Mauborgne in their ‘Blue Ocean Strategy’ show that companies can
succeed not by battling competitors, but rather by creating Blue Oceans of uncontested market
space. These strategic moves create value for the company, its buyers and its employees, while
unlocking new demand and making the competition irrelevant. Unlike the Red Ocean Strategy, the
conventional approach to business of beating competition, the “Blue Ocean Strategy” tries to align
innovation with utility, price and cost propositions. Similarly, financial sector reforms have
brought about significant structural changes and created several blue oceans. A manifestation of
this development is reflected in the increase in bank competitiveness

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Aggarwal, Vani, Nidhi Ahuja, and Varsha Yadav in their research paper “The Role of
Digitization in the Indian Banking Sector Post Demonetization mentions that Digitization is
not treated as an option in the Indian banking sector, rather it is unavoidable. Post
demonetization, Government has taken numerous digital initiatives to make India digitally
engaged. It is the way to turn knowledge into advanced software, which has a significant hike in
the operational cost of the banks. In India, banking has come up with technological
advancements offered to their customers with high quality services at a competitive edge
by making huge investments in various digital initiatives.

Sharma, Priyanka in her research paper "Impact of digitization on transaction banking in

Financial Industry: An evolving landscape” mentions that digital transformation in transaction
banking is capable of reducing operational costs and overheads leading to increased revenues,
improved performance, stronger regulatory controls with lower risks and collaboration
opportunities for emerging economy partners such as India to benefit from their tech talent to
achieve desired results.

Gupta, Nishu in “A study towards the digitalization of Indian banking sector", Asian Journal
of Multidimensional Research (AJMR) 8.2 (2019): 87-94” mentions that, by adopting business
intelligence, the Indian Banking Sector is evolving and remaining in a competitive environment.
Because of technology millions of people are now accessible to financial services due to wider
scope and low cost of delivery. For financial inclusion, the Indian Banking Sector is developing
new banking and payment networks, digital platforms and as digital is improved there is a
negative impact as well as account hacking etc. Indian banking has a paradigm change from
paper to digital electronic payment system for payment

PwC (Global FinTech Report PwC, 2017) and other authors (Pertseva, 2017) interpret
FinTech as a dynamic segment at the intersection of the financial services and technology sectors,
in which technology start-ups and new market participants apply innovative approaches to
products and services provided by the traditional financial services sector

Deliya in her research “An explorative study on digitalized strategy for banking.
IndianJournal of Applied Research”, 222-224 (2016) says that “An enterprise-wide strategic
initiative whereby the organization does a comprehensive inventory of its core business functions
(e.g., Business Development, Product Development, Pricing, Positioning, Branding, Positioning,
Marketing, Recruitment, Fulfillment, Customer Service, Regulatory, Compliance etc.) within the
framework of the corporate strategy, to determine how and where Digital data and technology can
be leveraged to achieve the organization’s goals”.

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RESEARCH GAP:

In this study, the literature has been used to get an understanding of how the current situation looks
like in the areas of interest for the study and to discover the theoretical perspectives that are of
relevance for the study.

The following research gaps were identified from the above literature referred:

1) The researches have not considered the demographic profile acquired in the banking sector
specific to private and foreign banks

2) All dimensions and attributes of change and innovation are not studied viz. Change
(Leadership Alignment, Stakeholder Engagement, Communication, Training and
Organizational Design) Innovation (Collaboration, Ideation, Implementation and Value
Creation)

3) The study is limited to digital transformation in the overall banking and financial services
sector and not specifically in the private and foreign banks in Mumbai

4) The literature review does not consider the impact of digital transformation through change
and innovation in the private and foreign banks in Mumbai

5) The literature review focuses a lot on the transformation brought in by the payments/fintech
industry in India

6) The concept of what drives the bank to implement a new digital model and how does it
release its impact is still unexplored

Thus from the literature it is analyzed that nothing much has been done in the area of impact of
change and innovation on digital transformation in the Indian arena and also specially in Mumbai
region. Thus the researcher has undertaken the study and made an attempt to fill the gap.

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THEORITICAL CONSTRUCT:

A construct refers to a concept or characteristic that can’t be directly observed, but can be
measured by observing other indicators that are associated with it.

Constructs can be characteristics of individuals, such as intelligence, obesity, job satisfaction, or

depression; they can also be broader concepts applied to organizations or social groups, such as
gender equality, corporate social responsibility, or freedom of speech.

The above literature review demonstrates that complete study on the real and intrinsic factors,
affecting the digital transformation in the private and foreign banks in India was not done, though
separate analysis were done on individual factors viz. Customer Relationship Management,
Artificial Intelligence and Machine Learning, Fintech, Payments etc. by these research agencies
and each of them had a view point on what could be the reason contributing to the increase in
adoption of digitalization of the banking industry in India.

Further, most of the studies were focused more on what are the technologies used to execute digital
transformation and however none contribute to understand the important factor of why and how
digital transformation has impacted the functioning of a bank.

Originally, the banking business model has focused on economies of scale and the combination of
retail, investment an overseas banking. Nowadays, a development towards decentralization and
upcoming digital trends force banks to adapt their business model to stay competitive. This threat
is also visible through the observable reduction in physical branches and an estimation of 30
percent to 50 percent net profit at risk.

Banks as an institution are still needed. Thus, the probability that banks will diminish all together
is very low however digitalization has changed the internal and external landscape by having an
influence on the competitive environment and the consequential need for a change in business
models.

There is a definite need for banks to change and adjust. They need to think about how they can
keep the heavily regulated business in the core, but at the same time use the newest technologies to
fulfill changing customer expectations, while keeping a high quality of the bank’s products.

A company's ability to quickly adapt its strategy and business model is of high relevance in these
times of constant technological change

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Independent Variable Moderating Variable Dependent Variable

 Leadership Alignment
 Stakeholder Engagement
 Communication
 Training
 Organizational Design

Change (X1)

Organizational Digital
Performance Transformation
(X3) (Y4)

 Finance
Innovation (X2)  Customer (sales)
 Operations (processes)
 Business Model
 Collaboration  People
 Ideation
 Implementation
 Value Creation

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4. OBJECTIVES OF STUDY

1) To study the significance of change and innovation on digital transformation of private and
foreign banks

2) To understand the trends of digital transformation in various private and foreign banks

3) To identify the components of change and innovation on digital transformation of private and
foreign banks

4) To ascertain the role of stakeholders and its impact on digital transformation of private and
foreign banks

5) To examine the influence of change and innovation on organizational performance of private

and foreign banks

6) To investigate the impact of components of organizational performance on digital

transformation of private and foreign banks

7) To analyze the components of change and innovation impacting digital transformation of

private and foreign banks

8) To develop strategies for digital transformation of private and foreign banks

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IDENTIFICATION OF VARIABLES

Traditionally, banks spent most of their efforts, time and money on transaction execution, which is
nothing but has become a very basic feature of their overall service. While providing expedient,
consistent and precise transaction processing ability is still critical, it is believed that banks can
learn from how retailers see the customers and adopt a robust and flexible approach in delivering
value and experience to their customers, manage and improve their existing business operations.

Digital Transformation in banking is a technology driven change of its existing operating model.
Digitalizing business functions like 1) Customers (Sales) 2) Finance 3) Operations (Processes)
enables cost saving plus income from new revenue streams such as Fintech partnerships,
payments, personal loans etc. Digital Transformation is executed by banks by undertaking change
and innovation of their existing business models, transforming into new and agile ones.

To sum up,

1. Independent Variables:

 Change (X1)
 Innovation (X2)

In the literature review it has been found out that digital transformation may be primarily
influenced by Innovation and Change. Innovation is incidental and Change is structural.

a) Components of Change:
Leadership Alignment, Stakeholder Engagement, Communication, Training, Organizational
Design

b) Components of Innovation
Collaboration, Ideation, Implementation and Value Creation

2. Mediating Variable:

 Organization Performance (X3)

Components of Organization Performance: Finance, Customer and Operations

3. Dependent Variables:

 Digital Transformation (Y2)

Digital Transformation may be influenced by Organization Performance

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Independent Variables:
1) Change (X1): As Heraclitus, who was a philosopher in Ancient Greece, has stated:
“Everything changes and nothing stands still”. In today’s rapidly changing and digitalizing
world, this statement is truer than ever. Basically, it is moving from a current state to a
transition state and finally arriving at a future state. From this study parlance, change is
movement of the banks from its as is operating model to the to be operating model across
business function viz. Customer, Finance and Operations

Components of Change:
1) Leadership Alignment: Identify leaders and sponsors critical to the success of the
project. Devise a plan to engage and influence them throughout the change initiative

2) Stakeholder Engagement: Identify key stakeholders (employees, third parties, middle

management etc.). Understand their influence and support for the project and devise
engagement plans

3) Communication: Shape the vision for the change. Build awareness of the change and
define strategies to build understanding and engagement from the various stakeholders.
Put in place effective feedback loops.

4) Training: Assess the learning needs required to build the capabilities/behaviors to

support proposed changes.

5) Organizational Design: Define new organization designs/ structures as well as

processes and role changes to support the proposed changes.

2) Innovation (X2): Innovation is a process by which a domain, a product, or a service is

renewed and brought up to date by applying new processes, introducing new techniques, or
establishing successful ideas to create new value. Examples in the context of this research
include: Process Improvement, Product Development, Service Innovation, and Business
Model Innovation.

Components of Innovation:
1) Collaboration: Collaborative process is more than working together. It means the
ability to think together and to act on complex situations. Collaboration answers the
question 1) what can we do together to listen and explore 2) How will we learn together
to learn and adjust 3) What should we do together to focus and align 4) What will we
do together to link and leverage

2) Ideation: Ideation involves thinking like an Entrepreneur. Fresh, new ideas help any
organization stand out. With intense competition for resources, organizations must
differentiate in order to survive. As McKinsey (2016) says, digital transformation is
seen as a do-or-die in the financial sector.

13
 3) Implementation: Implementation involves putting the idea to use. Banks who engage
the best people to champion their ideas and keep those great ideas moving forward
implement digital transformation in a timely manner

4) Value Creation: There is no innovation if the new ideas aren't creating value. The
purpose of innovation is to create business value. Value creation can be for
stakeholders, customers, operations, finance etc.

Mediating Variable (X3)

Organizational Performance: Change and Innovation are executed with an intention to move
from the existing state (as-is) to future state (to-be). Implementing change and innovation is a long
term engagement with an average tenure of 15-18 months.
Assessing whether the bank has reached the desired to be state or not is possible using key
performance indicator across the business functions where the transformation is being executed. In
short Organization Performance indicates the impact of change and innovation on a particular
business function

Components of Innovation:
1) Finance: Increase in cash flows, increase in valuation, increase in stock prices, partnership
opportunities, new revenue streams resulting from offering value to customers etc.

2) Customer :a) Customer Understanding – analytics based segmentation, socially informed

knowledge b) Top Line Growth – digitally enhances selling, predictive marketing,
streamlined sales process c) Customer touch points – customer services (quick and time
resolutions), cross channel coherence, self service

3) Process : a) Process digitization – performance improvement, new features b) worker

enablement – working anywhere anytime, broader and faster communication, community
knowledge sharing c) Performance management – operational transparency, data driven
decision making

4) Business : a) Digitally modified business – product/service augmentation, transitioning

physical to digital, digital wrappers b) New digital business – digital products, reshaping
organizational boundaries c) Digital globalization – enterprise integration, redistribution
decision authority, shared digital services, shift to banking as a service model

5) People – Recruitment of specialists, creation of centers of excellence or hubs

Dependent Variable:

Digital Transformation (Y): To be of future state of the business function, as planned, after
successfully implementing the components of change and innovation thus resulting into tangible or
intangible organization performance

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5. HYPOTHESIS OF STUDY

Following from the literature, an assessment of performance over a three year period will be
assessed as this was shown to be a standard evaluation period.

The hypothesis framed for the study is as below:

Hypothesis 1: Is Digital Transformation essential in banking and financial services?

H10 : Digital Transformation is not highly essential in the banking and financial services sector
HIA : Digital Transformation is highly in the banking and financial services sector

Hypothesis 2: Are the components of change (leadership alignment, communication, training and
organizational design) instrumental in creating a change?

H20 : There is no significant impact of components in creating a change

H2A : There is a significant impact of components in creating a change

Hypothesis 3: Are components of innovation (collaboration, ideation, implementation and value

creation) instrumental in creating innovation?

H30 : : Components are not influential in in creating innovation

H3A : Components are influential in in creating innovation

Hypothesis 4: Do stakeholders play a significant role in digital transformation?

H40 : Stakeholders do not play a significant role in digital transformation

H4a : Stakeholders play a significant role in digital transformation

Hypothesis 5: Is there a significant association between change and organization performance?

H0 : There is no strong association between change and organizational performance

H1 : There is a strong association between change and organizational performance

Hypothesis 6: Is there a relationship between innovation and organization performance?

H0 : There is no strong relationship between innovation and organization performance

H1 : There is a strong relationship between innovation and organization performance

Hypothesis 7: To evaluate the impact of Organization Performance on Digital Transformation

H0 : There is no considerable effect of organization performance on digital transformation

H1 : There is a considerable effect organization performance on digital transformation

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6. RESEARCH METHODLOGY

1) Research Design: Research refers to the systematic method consisting of enunciating the
problem, formulating a hypothesis, collecting the facts or data, analyzing the facts and reaching
certain conclusions either in the form of solutions towards the concerned problem or in certain
generalizations for some theoretical formulation. The study is descriptive in nature, thus it follows
descriptive research design because it studies the attitudes of respondents on digital transformation
by collecting their profile

2) Data Collection: Both primary and secondary data collection methods will be used.

a) Primary data collection method and structured questionnaire will be used and data collection
techniques will assist to bring the real insight to understand the research problem at various levels
Quantitative type of research will be applied by using the questionnaire, testing on a population of
Private and Foreign Banks in Mumbai. Before conducting the actual research, pilot testing will be
done by taking 15 professional individuals for the purpose of checking the reliability of the
questionnaire. Hence, the primary data on dependent and independent variables will be collected.

b) Secondary data will be collected from allied sources like internet, newspapers, reference
books, government offices – RBI, ADB etc.

3) Questionnaire Design: The questionnaire will be designed by using both measurement and
rating scales. The measurement scales include nominal scale, ordinal scale and interval scale.
Nominal scale has been used to understand the profile of the respondents like type of bank, age,
experience, marital status, education, gender and salary.
Ordinal scale is a ranking scale used to rank the attributes for digital transformation. Interval scale
is used as an attitude measurement scale on 1 -5, 1 = Extremely unimportant to 5 = Extremely
important. In this study, interval scale is used to determine the importance of digital transformation
through change and innovation.
Likert rating scale is used as a rating scale used to indicate the agreement or disagreement on a
series of statements related to change, innovation and digital transformation on 1 – 5, 1 being
Strongly disagree and 5 being Strongly agree.

4) Sample Design:

a) Total Population: The population for this study is the total employees of private and foreign
banks in Mumbai

b) Sample Size: The Sample size out of the total population would be 300-350 Senior Level
Employees who are Department Heads, Team Leaders, and Process Owners

c) Sampling Unit: Employees

d) Sampling Technique: A non-probabilistic sampling technique

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e) Sampling Method: Convenient and quota sampling technique will be applied to determine the
sample size from the data collected from respondents. This is because the population in Mumbai is
widely scattered and the response shall be collected from places where the respondents are
available.

5) Statistical Tools
The following statistical tools have been used to study the impact of change and innovation on
digital transformation of private and foreign banks in Mumbai like
1. Chi Square
2. Pearson Correlation
3. Multiple Regression Analysis
4. Factor Analysis
5. Reliability Analysis
6. Structural Equation Modeling (SEM)
7. Simple Percentage Method

1) Chi-Square is called as goodness-of-fit test. It is used to test how observed frequencies differ
from expected frequencies. Chi-Square test between two variables has been used to find out the
symmetric association between the variables.

2) Pearson Correlation is a bivariate analysis which is used to determine the degree of association
between the variables. It is also used to determine the strength and relationship between the
variables. It is denoted by r called as Correlation Coefficient. The value of ranges r from +1 to -
1[+1 indicates positive correlation, -1 indicates negative correlation]. If the value of r is between
[0.75 to 1 (it is high association), 0.5 to 0.74 (moderate association), less than 0.5 (low
association].

3) Multiple Regression Analysis has been used to test the effect of independent variables on
dependent variable. This allows researchers to assess the strength of the relationship between an
outcome (the dependent variable) and several predictor variables as well as the importance of each
of the predictors to the relationship, often with the effect of other predictors statistically eliminated.

4) Factor Analysis is a multi-variate analysis used to test the variables simultaneously. It is used
in data reduction and data summarization.

5) Reliability Analysis has been used to test the internal consistency among the variables. Factor
Analysis is a multi-variate analysis used to test the variables simultaneously.

6) Structural Equation Modeling (SEM) has been used to test the equations of multiple
regressions simultaneously.

7) Simple Percentage Method has been used where a percentage is used to determine relationship
between the data series

17
7. SIGNIFICANCE OF STUDY

In light of the above, there are several researches conducted to analyze The Future of Banking
through Digital Transformation, Trends and Challenges in Digital Transformation of Banks, Role
of Fintech’s in Digital Transformation, etc., however, there are very few researches that focus on
Why is Digital Transformation is required in the banking/financial services sector?

This research will help in understanding the basic factors which drive digital transformation in
banking and financial services since the start of the coronavirus; consumer demand for digital
banking has never been greater. Unfortunately, many organizations that were delaying digital
transformation efforts have been caught flat footed, without the ability to deliver a positive digital
experience. The good news is that, with overall transaction volume low, the opportunity to build
improved digital platforms has never been greater.

COVID-19 has become a digital banking ‘reality check’ for both financial institutions and the
federal government. Despite all of the talk over the past several years about becoming a ‘digital
banking ecosystem’, many basic digital banking deliverables are falling far short of expectations at
a time when the consumer has few options.

2021 will see the entry of several new players into the banking ecosystem. The recommendation by
the Reserve Bank of India's (RBI) working group on permitting corporate ownership in private
banks will drive a new era in Indian banking. Aditya Birla group and Tata Sons that already have
non-banking financial company (NBFC) arms bigger than many medium-sized banks will be keen
to take up the opportunity. Along with larger players, the sector will also see the emergence of
smaller Fintech players, offering advanced digital banking solutions. Blockchain and Artificial
Intelligence (AI), which have been buzzwords for a few years now, will become mainstream. The
virtual banking ecosystem will explode with hi-tech digital initiatives that new and existing players
will introduce. This will spell growth for areas usually neglected by the banking operations and a
huge step towards financial inclusivity.

2020 has been the year that no one expected. It forced banks to get out of their comfort of
traditional banking business models and forcefully transform themselves, learn, unlearn and evolve
in order to stay in business.

Impactful initiatives like combating loan cyber frauds, cybercrimes, voice recognition for
customers, contactless payments, video interactions with banks, OCEN (Open Credit Enablement
Network) etc. shows how by leveraging digital and technology the banking industry can be
transformed resulting into low costs, high revenue, effective customer relationship management
etc. ensuring ease and convenience of doing the banking business

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8. SCOPE OF STUDY

Digital Transformation has been the norm across many industries since the last few years. Fast
Moving Consumer Goods, Consumer Durables, Education, Banking, Insurance, Automobiles,
Pharmaceuticals etc. have been the frontrunners in accepting and adopting digital transformation as
a part of their business model.

After identifying the subject (research area) and referring the relevant literatures, it has been found
that in most of the literature, the information technologies digital transformation have a wide area
of application. Financial services and majorly banking was the first to weave digital transformation
as a part of its way of doing business.

In India, banks can be classified into Commercial Banks (Public, Private, Foreign and RRB),
Small Finance Banks, Payments Banks and Co-operative Banks. Due to such a wide area being
available for research the study will be focusing my study on Private and Foreign Banks in
Mumbai. Private and Foreign banks have been growing in India in the last 5 years. Private and
Foreign banks have total loan market share of 40% in 2020 as compare to 20% in 2000 and their
total deposit market share has increased from 20% in 2000 to 35% in 2020. Since a lot of digital
transformation has been happing in the last 5 years these banks seem to have hit the nail on its
head in terms of making digital transformation a success for them.

This research could be helpful for the banks and financial institutions based on the outcome. If the
outcome of the study indicates which factors drive digital transformation then the banks and
financial institutions in Mumbai could look at effectively and efficiently initiating and executing
the digital transformation having a clear goal supported by Objective, Procedures, Stakeholders,
Intensity or Components being the driving force beyond the transformations

Being aware of the drivers of digital transformation would enable the change management
components like project plans, manpower, budget, investment etc. to assist in execution of the
transformation in in an agile and timely manner.

Change is the only constant. If the outcome of the study indicates that there is no need for digital
transformation or none of the factors drive digital transformation then the banks and financial
institutions in Mumbai could consider making their business and operating models effective
enough to support the constantly changing business environment and customer expectations

9. LIMITATIONS OF STUDY

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1) The information collected for research might reveal variations, as the nature and extent of
Digital Transformation varies in different areas of the banking sector.

2) The study focuses only on 5 drives of Digital Transformation namely Objective, Purpose,
Intensity, Stakeholders and Components. The other drivers of digital transformation are not
considered.

3) The study would be limited by the access to banks and financial institutions in Mumbai that the
researcher has due to professional connections in the field of Banking and Financial Services
Strategy.

4) Due to budget constraints for the research the sample size may reduce based on budgetary and
topological and availability constraints. It would, however, be sufficient to encompass a fair
and accurate indicator of the target population.

5) The study can’t be exactly interpolated due to the volatile economic and political factors such
as M&A of major banks in India, Restructuring, Rise of Fintech’s, Covid-19 etc.

6) Due to strong competition and most banks in the sample may not share deeper information
about technology they use, introduce and develop in real time. Thus, the perception and review
of a bank digital transformation process could be distorted.

10. TENTATIVE CONCLUSION

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The Indian Banking Industry is witnessing significant double digit growth. The sector is slowly
emerging into a market and is becoming increasing, keeping with global trend and practices. Some
of the key growth areas within the banking sector are private banking, wealth management and
investment banking; they showed potential to become significant businesses in the coming years.
With this high growth activity increasing competition in the banking sector has emerged as the key
differentiator in the marketplace.

The primary target behind coordinating banking services with innovation is, without a doubt,
accommodation. Innovation has now become commonplace to most people, to an extent that it
impacts their way of life. It, at that point, becomes fundamental for businesses to separate
themselves in the digital space with one of kind contributions.

The new experts have made the capacity to utilize the networks and data that they make around
their customers, products and services to produce an exceptionally customized customer
experience. Digital experience is unquestionably increasingly customized

In spite of all the challenges associated with digital transformation namely technology fitment, lack
of training on computers, fear of fraud, high investment involved, non-timely completion of
transformation shall result into escalation of costs etc. the future of banking is dependent on how
digitally include the operating model of the bank is going to be.

Covid-19 has left banks with no choice; they must confront the challenges of digital structural
change and redesign their operating models. By strategically connecting their businesses with the
vast amount of data available to them, they can build intelligence on customers’ evolving needs,
which can drive value.

11. REFERENCES

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