Vendor Management Is A Major Issue Facing Indian Banks

Recently PwC along with CII has come up with a report on the technology readiness of Indian banks. Rajarshi Sengupta, executive director, PricewaterhouseCoopers shares some of the key findings of the report.

What are the latest trends in the Indian banking scenario?

The financial sector particularly the banks have started using IT for their day-to-day operations. Banks in India are slowly but surely adopting technology to drive competitive advantage, in addition to operational efficiencies. Banks have extended the reach of core banking solution with the help of technology to remote branches. They have also introduced technology based products and services for their customers like mobile banking, Internet banking, electronic fund transfer, utility bill payments and many more services. In order to provide 24/7 service support to their customers IT infrastructure is the backbone of the banking industry.

What should banks do to gain a competitive advantage and to align their business with IT?

There are a couple of key areas that banks need to take a look into, from the overall business strategy perspective and then align the IT strategy with the business strategy. The areas of concern for banks are Performance Measurement and Management, which could be driven specifically by their business strategy around customer and markets along with a focus on revenue and growth. Similarly, the area of managing risk and regulation would be of key importance to banks. Banks should identify a strategic imperative area, the information requirements that would be needed to both feed into and drive such strategic imperatives and then identify how IT can enable such imperatives through the right data in order to align with the appropriate business process, the right architecture and applications and appropriate technology infrastructure.

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Do you think banks in India have the right foundations in place to leverage technology?

A key part of getting the right foundation in place is to have systems that address core transactional requirements around Core Banking. Banks in India are certainly getting there to get this key part of the foundation right. This is a part of the regulatory framework for banks across the world. Banks in India are gearing up for areas like Basel II and AML. Both private and public sector banks are equally ready. Private sectors have had the advantage of being early movers in both technology as well as outsourcing of IT applications. However, the public sector banks have caught up with huge IT investments and setting up infrastructure in terms of core banking applications, data centers and networks.

What are the pain points of IT heads of various banks?

As per the survey nearly half the banks are facing problems in vendor management (both products and services) with regard to inability of vendors to develop software that matched business needs, difficulty in enforcing and achieving SLAs and overall management of vendors. Some banks are also concerned about their ability to match regulatory requirements on time. Other areas of concern are security, business continuity planning and disaster recovery. While on the analytics side banks are very much concerned about managing the growth in data volumes, managing the quality of data in order to facilitate good decision making, to better understand the customer and implement proper identity management and to ensure Metadata and Master Data Management. The major areas of spending (as a percent of total IT budget) at a high level comprise of various areas. As per the survey, 39% of the total spending goes for infrastructure, 35% for applications (License), 10% for security and 16% for new IT developments and enhancements. Regulatory compliance is the major driver behind the overall spending of all banks in India.

What are your suggestions for banks planning to invest on IT infrastructure in the coming days?

With the increasing competition in the banking sector, banks have to first analyse their cost benefit ratio before taking any decision. The overall technology landscape of the banks should be driven by the requirement for efficient and reliable regulatory compliance applications as well as a strong transaction coverage to ensure customer centricity, performance management and revenue growth. Well architect technology solution would be extremely important to ensure ease of integration and to manage scalability.