Banks Need To Further Move Towards Electronification

Payment systems form the backbone of every financial infrastructure and as banks in the country aspire to become global institutions, they will have to incorporate payment systems that are efficient, reliable and of global standards. This was the view expressed by various experts present at the third annual conference on payment systems organized by Banknet India.

Themed, “Moving Towards Electronic Payment Systems,” the gathering witnessed several industry experts including regulators, bankers, vendors and CIOs presenting their views on the issues and challenges pertaining to payment systems in banks.

Speaking on the occasion Madhabi Puri Buch, group corporate brand officer & head operations, ICICI Bank said, “If the Indian banking fraternity is to repeat the success of the Indian IT industry, then it can’t do without technology. We have to employ technology and transform our old, predominately manual paper based transaction systems into electronic ones.”

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Speaking further she added, “Estimates suggest that even now the majority of our transactions are cash and paper based, which are time consuming, error prone and expensive. This presents a strong case of changing our current systems and deploying electronic clearing services (ECS) to speed up the process of entire process. RBI’s initiative to introduce ECS which covers both debit and credit clearing has helped banks greatly in processing large volumes of small amount instruments such as dividend warrants, interest payments and also periodical disbursements such as salary, payment of utility bills, recovery of EMI etc. There have to be more such initiatives both from regulators side as well as banks’ side if we want to change the current scenario.”

Many present at the event believe that the pace of ’electronification’ in the banking sector is slower than needed and one of the main reasons for it is their slow adoption among the banks. For instance, Real Time Gross Settlement (RTGS) system introduced in early 2004 by RBI hasn’t found many takers up until now and users, including banks have been lethargic to adopt it.

S.K. Sehgal, GM-IT, State Bank of India said, “Banks have to be more proactive do deploy technology in order to elevate to the desired levels of electronification. However, when deploying technology, banks have to see to it that the technology platform they invest in is scalable enough to meet the huge volume of transactions. Not only this, but the platform also has to be secure in nature so that users have faith in it.”

The event also saw participants discuss alternate delivery channels of payment including internet payments, mobile payments and other channels that could be used by banks to facilitate faster payment and non paper transactions, especially for retail users.

In his concluding remarks, M.V. Nair, Chairman & MD, Union Bank of India stated, “Efficient payment systems help in financial inclusion and implementation of such systems increases efficiency, lowers transaction costs, improves operational efficiency of trade and commerce. It is these benefits that the banks should view as incentives and incorporate technologies to move to electronically driven payment systems.”