With back-to-back interest rate hikes, financials of banks are under constant pressure. This is pushing bankers towards tightening their budgets and optimising the usage of current resources. Banking is highly technology-driven and eyes are on the CIO's office to come up with means and measures to manage not only IT costs but also give suggestions on how the bank's operational efficiencies can be overhauled.
Banking CIOs have to face a varied number of challenges. They have to work under tight budgets and, at the same time constantly innovate.
Dr K C Chakrabarty, Deputy Governor, RBI at this year's 6th CII Banking summit 2011 gave a broad perspective on the challenges faced by the Indian banker, "The role of the Indian banker is very challenging. At one end of his spectrum lies the demand to achieve financial inclusion as nearly 50 percent of the country's population is yet to be covered under the formal system of banking and at the other end lies the task to fulfil the needs of the existing customer," says Dr Chakrabarty.
With reference to the current global financial situation and what the Indian economy has gone through in the recent past, banks are in a state of dichotomy, "From a banking CIO perspective, should they be doing something that fits a recessionary period or begin investments to prepare for an upturn or simply lie low and stable. This is a tough decision." says Umesh Jain, President and CIO, Yes Bank.
Even after overcoming this dichotomy, the next challenge is to decide on specifics. David Furlonger, VP and Gartner Fellow says, "Creation of new products and services, focus on innovation, improving business processes and cost control are the major business challenges faced by Indian banks."
"Currently, a major issue for Indian banks is the cross-sell ratio, which is essentially an average number of products that the bank has been able to sell to one customer. This ratio in India is one of the lowest in the world. On an average, a customer buys 1.4 products in an Indian bank while the same ratio in best-in-class countries is 2.4, or 2.5," says Neeraj Aggarwal, Partner and Director, BCG India.
Addressing The Challenges
"Efficiency drives should be coupled with investment towards new programmes. There should be a judicious combination of both rather than just a single minded approach," suggests Jain. It has become critical for CIOs to prioritise and invest in emerging technologies. But at the same time, they also have to work towards boosting their bank's operational efficiencies.
The reason for this is the supposed upside curve of the Indian economy, which no doubt is showing some turbulence right now. Banks would definitely not want to find themselves on the wrong foot during the upturn. Let us look at a few technologies that hold promise according to banking CIOs.
Business Intelligence / Analytics: The use of Business Intelligence / Analytics and Big Data will play a major role in driving efficiency as it would bring to the fore the areas that need improvement. It also has the potential to create new business opportunities for Indian banks. Such an initiative will help in understanding the customer better and getting a single view of his profile.
"Making the best out of the available customer information is critical," says Furlonger. Banks should slice and dice the customer data and offer product suites that best fit the customer's profile.
Data Warehouse: Banks can deploy Data Warehouse on top of the (Core Banking Solution) CBS and create a unique customer ID that would give a holistic view of the customer rather than a marginal product-based view, this is assuming the customer has bought a basket of products from the bank. For e.g. A situation wherein a customer's credit card limit has been reduced to 5000, even when he has 12 lakh in the savings a/c with the same bank. "This is a clear case of having an incomplete view of the customer," says Aggarwal.
SOA: The other way to increase the cross sell ratio is by employing Service Oriented Architecture (SOA). Anil Jaggia, CIO - HDFC Bank speaking at the BFTF conference briefed about his bank's SOA plans as a part of a six-point technology focus, "We are not too far away from times when banking services would be targeted to customers based on their individual profile. . The number of services in the bank's service catalogue would prove critical to achieve this."
"HDFC Bank has about 1000 services in its service catalogue and an enhanced focus will be exercised to ramp up the amount of services. This would empower the bank to respond in real time to a specific customer request. Appropriate changes in the architecture engine are being made to bring this into effect," he further added.
Enterprise Mobility: Chakrabarty at the CII summit also acknowledged the importance of BI / Analytics and Big Data for banks. This apart, the role of other emerging technologies such as enterprise mobility and social networking would also fit in the scheme.
The proliferation of social media sites has opened a lot of opportunities for the enterprise space. The uptake of smart devices by the ever growing urban population also cannot be overlooked by banking CIOs as an effective medium to deliver bank services and products. "Yes Bank has invested considerably in social media and mobile technologies," says Jain.
Mobile technologies can fill in the gap of lack of a common channel to conduct mobile transactions, similar to how ATMs interconnect various banks on the same platform. Mobile technologies, irrespective of handset type and bank, can act as a common platform for mobile transactions. l.
Mobility technologies also offer tremendous opportunities to a bank's internal employees and customers. However, the access to mobile applications should be only given to selected employees based on their job roles on a use-case basis," cautions Furlonger.
He added that the perils of providing a blanket access include additional cost of licenses, ramifications from an information security perspective, etc.
Cloud Computing: Regional Rural Banks and other types of banks of the same size can adopt cloud technologies as the banks would not have to make any upfront investments. It should be noted that cloud is still to make significant inroads into the mainstream banking space mainly due to security issues. However, small banks are exploring the cloud option.
N Chandrasekharan, CEO, TCS informs, "India is ahead in cloud computing adoption as compared to the rest of the world. We have a 'Bank-in-the-box model' adopted by about 4000 branches of very small rural banks in India,"
The solution is packaged in such a way that it can host all the banking applications and can then be provided as a service. As a result, the cost of the transaction for all the banks is significantly low which wouldn't have been possible if the banks had used separate IT platforms.
The Road Ahead
The short-term strategy for bank CIOs is to designate people within the team to get an insight on how to sweat out current IT investments to improve operational efficiencies. They should proactively provide suggestions to the top management and other business leaders about various emerging technologies that have the potential to be game-changers and at the same time compliment current investments.
Bank CIOs should sense the ground situation and follow a path that includes investment in an upturn but also be cautious in a recession. It is critical that CIOs don't remain in a status quo. The need of the hour is to review current efficiencies, productivity measures, and costs.
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Updated Date: Feb 02, 2017 23:25:27 IST