 "Tech Innovation To Catalyse Growth Of Financial System")
The first wave of automation and technology adoption in the Indian banking arena came in the form of moving branches on Core Banking Solution (CBS). ATMs, online banking comes next in the evolution phase. And, now gradually Mobile banking is touted to be the next big thing in banking with its potential to fulfil the Financial Inclusion agenda, which remains on top of the list of the regulator and the government.
RK Saraf, Chief General Manager - IT, SBI , who has been associated with SBI since 1975, has closely seen through this transformation. Sharing from his experience, Saraf expresses his views on how technology and innovation will play a key role in the growth of the financial system at the BFTF summit in Mumbai.
Banking On Tech
Saraf broadly touches upon the key trends defining technology adoption in India’s banking sector, and is it turns out a majority of the technology decisions are in response to the challenges as well as the opportunities before the banks today. Saraf provides an overview of some of these challenges and opportunities.
The growing importance of non-traditional and non banking players providing banking and financial services is posing a growing threat for the incumbent banks. Players like NBFCs, MFIs will pose a challenge to these traditional banks to retain market share with products/services with a more advanced technology architecture vis-à-vis the legacies of veteran banks. This includes intelligent Micro ATMs, PDA devices and associated hardware to capture customer information and deliver services at their doorstep.
Security is another challenging arena with Information Security threat is reaching alarming levels, and as Saraf likes to put it - “Banks still do not appreciate the huge operational risks faced on an ongoing basis.” The recent incidents of breach within large organisations are an indication of the kind of daunting times we are stepping into. While banks have implemented fraud management and Anti Money Laundering (AML) solutions as a part of compliance, an additional sense of vigil is being practised by banks.
In terms of opportunities, Saraf sees the growing proportion of the 20-40 age group in the country’s overall population mix as an untapped opportunity, and not to forget the influential class of High Networth Individuals (HNIs). The banking community will have to find a way of approaching this opportunity with the right products. The use of advanced analytics and Business intelligence has a role to play if these customer segments are to be targeted with the right product mix , believes Saraf.
“The effective use of Data Warehouse and Analytics will provide the answer to the quest for targeting the right products to the right customer at the right time. It’s more about the future than past. Appropriate use of analytics will help banks to predict and pre-empt rather than respond and react,” he explains.
On the other hand, Saraf views Financial Inclusion as an opportunity cum challenge, where the banks will have to get their business models right while also ensuring that the financial products/services offered are cost effective and customised for the rural masses. The use of advanced mobility technologies will boost the financial inclusion drive of banks with the advantage of offering a cheaper way of conducting transactions both for the customer and the service provider. Banks are already using intelligent Micro ATMs, Biometric devices for delivering financial services.
SBI’s own efforts in the financial inclusion domain are effectively driven by IT. SBI’s satellite banks viz. Regional Rural Banks (RRBs) are enjoying the economies of scale using the cloud model. SBI’s RRBs have done significant work in the area of financial inclusion in the remotest areas of the country. The RRBs were hooked on to the Core Banking Solution (CBS) in a matter of months using the private cloud model. About 3000 branches were moved on to SBI’s CBS in approximately six months.
According to Saraf, SBI, in order to stand out in the competition will have to create its differentiator and IT can prove a catalyst. “How technology can be used to scale this opportunity will be the key,” he adds.
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Innovation A Must
Innovation around technology will be critical to help improve the experience that the banks offer to their customers. According to Saraf, the two areas where technology can serve to change the customer experience are - firstly, a service that allows customers to continue the bank transactions on any medium that was disrupted on any other medium due to operational constraints, and secondly, a platform that allows cash transactions to be carried out in a non cash mode.
Saraf advocates a uniform cross channel experience where the customer can start and end a transaction on the channel of his choice. In case he wants to continue the transaction on the mobile after beginning it on the online medium he would not have to start the entire process all over again. For example, if the customer begins any typical banking transaction on the bank’s website online but wants to discontinue and end the same transaction on the mobile device, it would be possible without going through the process again.
Innovation will also hold the key for banks to move more and more of their customers towards non-cash mode transactions. According to some reports, ATM transactions are increasing multi-fold and efforts will have to be made to encourage banks’ customer to move to non-cash mode, like use of Debit cards at POS. “Almost 75% of cash transactions happen on ATMs, with 17 cr. transactions amounting to Rs.45000 cr. a month whereas the debit card usage on POS has been limited. Hence, banks will find it challenging to find ways to move cash transactions to non cash,” he concludes.