From providing basic banking services, Indian banking has gradually transformed themselves into universal banks. ATMs, Internet banking, mobile banking, and social banking have made ‘anytime anywhere banking’ the norm now. Balram Choudhary is one of the leading tech leaders in the BFSI space speaks on exclusive about the way technology is unleashed in the banking sector. Edited excerpts.
Today, the word banking does not mean a physical bank. Payments happening from different sources and what are the key challenges for the bank’s IT infrastructure?
Limited infrastructure catering to rural needs, fewer touchpoints for accessibility in a rural area, connectivity in a rural area, customer awareness while accessing banks system, consumer security, leveraging multi-cloud environment, system upgrade failures and legacy technology infrastructure are key challenges. For many retail banks, flawless integration with a network that’s able to scale and perform at the level now required requires a considerable change to the network itself. This type of network would be able to cope with fluctuating demand and ensure that the advantages of newer technologies can be harnessed, rather than them overloading the network. In many cases, this requires a complete switch to incorporate fast and reliable optical and Ethernet services.
Retail banks must achieve seven key attributes in their network: accessibility, dependability, affordability, availability, scalability, security and responsiveness. Ensuring access will mean that services won’t suffer due to network issues, regardless of the level of customer requests. Dependability will keep customers happy while ensuring that legislation is adhered to when it comes to delivering a certain level of service. Affordability is important to keeping a retail bank competitive and equally significant is the availability of digital services and the ability to be responsive, in order for customers too get the best service possible. Retail banks must be prepared for further change, making scalability critical to a well-performing network. Last but not least, good security – both cyber and physical – is essential for compliance, social responsibility and to keep reputation intact.
People in rural areas still have to travel miles to access a banking interface. The number of branches serving rural areas has witnessed. Although India is a vast country, it has only 2.3 lakh ATMs and 14 lakh point-of-sale (POS) terminals, which is almost half the number of such facilities in developing countries and one-fourth that in developed countries. Though digital channels like apps, websites, SMS/text, ATM, video teller machines (VTMs) and e-kiosks are narrowing the gap between banks and customers, rural Indians are more comfortable with physical channels.
How much proper IT infrastructure does start-ups in the finance sector has? Are we facing a special challenge as many are using those applications for transactions?
The infrastructure layer, we see a transformation happening in fin tech similar to what happened in the broader enterprise software market in past days. That marked the beginning of a decades-long innovation cycle in software that continues today, with cloud and modern software architecture replacing the initial wave of on-premise software. Financial services have yet to have material innovation in purpose-built software that caters to this industry. We believe we are within the early stages of an entire infrastructure layer that is being built. This formed our initial thesis for our investment in Plaid, which is building a technology platform and integration layer. The infrastructure layer is no longer commoditized, instead, it is now enabling core product functionalities and driving superior user experience. Other examples where we have applied this thesis across the fintech stack, There are challenges in accommodating Fintech Infra which is not in India rather regional level Fintech is leveraging more business within the regional level.
You would have experimented with almost all new age technologies. What type of technologies or solutions that impress the one who heads the head of a financial company?
Technology is a dynamic segment of the financial services sector that is gaining significant momentum and disrupting the traditional financial services value chain. New Fintech companies and market activity are reconstituting the competitive landscape, blurring the identity of a player in the financial services sector.
FinTech is an exciting area with a lot going on, Below are a few technology which we track actively and believe are the key areas to look at for the next wave of innovations ,Integrated Digital banking ,SD-WAN , leveraging multi-cloud with orchestration layer and better security ,Robo Advisory ,Cyber and financial Crime ,Omni-Channel and customer experience ,Augmented and virtual reality ,Digital payments, Machine Learning and AI ,Robotic Process Automation ,Blockchain , Drones and more.
With ever-changing customer behavior and technology lead disruptions, what is the future of Banking and Financial Services in India according to you?
BFSI in India is at the crossroads now. They need to adopt a holistic approach to digitization. It is not just a customer relation tool, neither is it just something that speeds up a banking process. It is changing the entire concept of banking. Product innovation and development according to the needs of individual customers is the current buzzword. Banking will be an important aspect of economic growth. The future of banking technology is e-banking or digital banking.
MachineLearning, Data science can be used to predict the needs of customers and provide them with customized products that suit their needs.
With AI there will be changes to banking processes. We can expect to see smarter operations as backend processes are streamlined.
Personalized Services with Digital banking will help customize the screens for customers based on their usage history. It will also allow for automatically filling in certain information required on online forms. This will ensure a much better user experience
Security – While passwords and OTPs are already in use, we can look forward to advanced biometric authentication, voice recognition and face recognition in the near future. ATMs will become contactless, and the mobile phone would be used to operate it.
Blockchain Technology: More and more banks will adopt blockchain technology which means that the account details of a customer will be maintained in real-time across banks while eliminating the risk of hacking by criminals.
UPI (Unified Payments Interface): In India, this payment system is considered the future of retail banking. It is one of the fastest and most secure payment gateways that is developed by National Payments Corporation of India and regulated by the Reserve Bank of India. There are approximately 39 apps and more than 50 banks supporting the transaction system that works all time unlike traditional banking.
Cloud technology: Cloud computing will improve and organize banking and financial activities. Use of cloud-based technology means improved flexibility and scalability, increased efficiency, easier integration of newer technologies and applications, faster services and solutions, and improved data security. In addition, the banks will not have to invest in expensive hardware and software as updating the information is easier on cloud-based models.
Wearables: With smartwatch technology, the banking and financial services technology is aiming to create wearables for retail banking customers and provide more control and easy access to the data. Wearables have changed the way we perform daily activities. Therefore, this technology is anticipated to be the future retail banking trend by providing major banking services with just a click on a user-friendly interface on their wearable device.
In the decision cycle of banking vertical, IT heads, what would be the role of the channel partner? Do you take their opinion or prefer them to deploy your solutions.
They will a huge role in decision Making, all enterprise and BFSI segment IT department will not have all expert for emerging technology hence they must be taking Channel Partner opinion.
What is the key advises you would like to provide for channel partners aspiring to win big accounts in the BFSI/NBFC space?
BFSI can meet changing customer expectations, but it won’t be easy. Partnering with the best Fintech firms will be a tremendous help. BFSI want companies that will share their business goals and understand their vision. it is all very well to say Fintech firms should be strong partners to their banking clients. Fintech firms are usually built on entrepreneurship and good technology. But they are less often built on true banking expertise and industry experience. Fintech firms need industry professionals. Or else they need partnerships with industry consultants, to help them fill in the gaps.
Lastly, many reports suggest that security is the key concern of the banks. What type of security is in demand for BFSI and NBFC sectors?
The cybersecurity market by solution is segmented into Identity and Access Management (IAM), risk and compliance management, encryption, Data Loss Prevention (DLP), Unified Threat Management (UTM), firewall, antivirus/antimalware, Intrusion Detection System (IDS)/Intrusion Prevention System (IPS), security and vulnerability management, disaster recovery, Distributed Denial of Service (DDoS) mitigation, web filtering, and others (application whitelisting and patch management). The IAM solutions segment is expected to dominate the market during the forecast period and estimated to have the largest market size in 2020 considering the use of a multi-cloud environment. Encryption solutions play a key role in changing the cybersecurity marketspace and enable enterprises to hide their critical data from unauthorized bad actors.