Scalable and Secure
The platform needs to provide a seamless onboarding experience for customers with E-KYC, Aadhar, UPI, BHIM integration etc. It needs to be able to scale based on the volumes we are envisaging for digital payments. Eg Paytm has already crossed 200 million customers and many others are envisaging this volume in the short term. Recently there has been an increase in cyber-attacks on banks in India. It is important to bring in cyber governance and leverage analytics, machine learning and deception techniques as also secure coding and testing practices for threat prevention and deduction and thereby reducing risks for banks.
Modern IT architecture
Modern IT architecture that has modern data warehouse combined with advanced analytics capabilities for data driven decision making. Newer technology innovations eg API based, AI (Robo advisories), Block chain technology, IOT Modern architecture that is based on “Modern Data warehouse” that combines structured and unstructured data (leveraging social media insights) to provide a single version of truth with comprehensive current and historical information. This rich data is the new oil that will help banks generate new revenue streams. The recent demonetization has left a large digital footprint and banks are in a unique position to mine this data using advanced analytics technologies for customer segmentation. Banks will thus be able to provide real-time contextualised offers based on customer profiling, drive cross- sell and up-sell, increase market share, and identify EWI (Early warning indicators) for identifying non-performing assets, which will help reduce risk.
- The digital banking platform needs to brings together both transactional business processes and analytical business intelligence. With this, the bank can turn data insights into actionable information, thus allowing the bank to be transparent and responsive based on facts and not guesses. With the platform in place, banks can start small, and as new issues come up they can incrementally add connected solutions to address new business challenges without negatively impacting operations. From this extensive foundation, a digital core, banks can set themselves up to address today’s issues while having the agility to handle future innovations. This enables banks to explore new business models such as banking as a service by extending the value chain through partners with retailers, manufacturers, digital communities and others, build market places for financial services and with integrated banking through low cost cloud platforms and mobile services
- Banks in India need to adopt new innovations eg APIs, Artificial Intelligence, Block chain, Augmented and Virtual reality, IOT. Banks are working on making their APIs available for integration with customers and payment regulators. For eg. Yes bank is offering the digitization of the B2B supply chain with the launch of API banking services.
API banking allows the bank’s banking systems to be seamlessly and securely integrated with corporate clients’ ERP systems. Banks are also leveraging Robo advisors for improving customer service, eg HDFC bank has launched- IRA (intelligent robotics assistant) at one of its branches to help with smoother customer service, marketing, employee assistance and process automation. We will be seeing many more banks using these advisors in future for customer service. Block chain technologies are evolving with use cases in vendor financing, trade finance, outward/ inward remittance, asset tracking, record management, e-KYC, etc. For example, YES BANK has implemented a multi-nodal Blockchain transaction to fully digitize vendor financing for Bajaj Electricals. ICICI bank has successfully executed transactions in international trade finance and remittance using blockchain technology in partnership with Emirates NBD, a leading banking group in the Middle East. IOT integrations of POS devices with Aadhar, finger print scanners etc is another important step to help move towards cash less transactions.
Agile platform that helps banks to innovate and launched new products to go to market faster. Eg SBI launches its SBI Buddy(wallet) with innovative wallet offerings in a short period in 13 languages to help promote digital and inclusive banking. Further value added services are offered along with wallet eg bill payments, movie tickets, rail and airline ticketing, food and dining, gifts etc all this linked to the digital mobile wallet there by promoting cash-less payments.
Re-imagine business models & process
Traditional banking models are no longer sustainable. Indian banks are revaluating the customer engagement strategies, networks and digital capabilities and data insights to find new real time ways of delivering the product and services. Indian banks are creating their market place with e-commerce players eg Flipkart, Amazon etc partnering to offer value added services eg smart buy from HDFC offers flights, hotels, travel, utility and integration with flipkart to provide customers a one-stop seamless experience. This re-imagined models will help banks to cross- sell and up-sell products and services to customers and increase wallet share and be more profitable.
Banks need to reimagine process eg robo-advisors offering advice to wealth management customers, interactive chat-bots offering advice in account management. These enriched processes will help improve customer satisfaction. Banks are collaborating with fintechs to enrich offerings in the areas of digital payments, digital lending and wealth management. This collaboration would help banking customers to get more innovative offerings.
Total Cost of Ownership
The new generation platform investment will help banks and financial institutions reduce TCO thereby justifying the returns on these investments. Hence, there is need to monetise the investments by quickly gaining customer wallet share through all the above mentioned digital innovations.
The goal for the future should be to first encourage digital payments at cash touchpoints (like Railways, Oil Marketing companies (LPG, Petrol & Diesel), Farming, Food, FMCG, etc.). Second, all businesses should be incentivized to pay employees and contractors in a digital manner.
Third, micro and small retail payments should be brought into the net via an exponential increase in merchant acceptance points that take payments via BHIM. These touch points should leverage the new generation SMART digital banking platforms to transition from cash to cash-light India to providing contextual, efficient and enriched customer experience focused on agility and convenience of the customer.
Murali Mahalingam, Industry Director, Banking & FS, SAP writes this piece for the April 2017 edition of our Financial Foresights.