Technology in Banking (2013)

8/10/2019 Technology in Banking (2013)

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Technology in BankingTowards Improving Business Performance and

Customer Engagement

Institute for Development and Research in Banking Technology(Established by Reserve Bank of India)


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Institute for Develop

in Banking Technolo

Banking Tech

Foreword

Technology today has become s

strong infrastructure to leverag

banks and conduct of banking

business and growth in volum

improvement in customer servi

expense ratio has stabilized t

expenditure to acquire IT infra

have also put up a robust mech

committees and alignment of fu

In the future banks will have to

driving business optimization. B

demographics, transactions and

data to deliver business impa

substantial focus on informatio

warehouses and analytical cap

addition banks will also need

effectively utilize the informatio

The second significant challeng

level of revenues or returns giv

it would mean, given the level

achievable levels. Banks will n

productivity measures [ like Re

(like cycle time, response time,

outcome, quality, satisfaction e

processes and technology to del

and retaining adequately skill

engineering their business pro

economic enterprises.

As in the previous years, this

visible business impact of the in

customer service and business o

B. SamDirector

IDRBT

ment & Research

y

nology Towards Improving Business Performance and C

ynonymous with banking and Indian banks hav

e its benefits. IT has made a visible difference i

operations. Banks have benefitted immensely

es, the journey has been beneficial for the

ce quality. While for larger banks the IT capita

o approximately 18%, smaller banks are inc

tructure, with approximately 54% capital expe

anism for governance and management of IT as

nctional and technical teams for IT implementat

focus on two major aspects delivering custo

anks today have built up significant database a

behavioral data. However the key is to derive i

ct. Information and technology will have to

n. Banks will need to have a significant level o

bility both in terms of people and tools to fa

to have a robust customer life cycle mana

n.

e is driving business optimization which broadl

n a particular level of resources. Specifically in

f IT resources have the revenues or returns ac

eed to define metrics for performance of IT

turn on Investment (RoI) and marginal RoI] to

utilization) and performance effectiveness mea

c). In achieving these objectives banks will have

liver superior customer service. Banks will have

ed manpower. Banks should also pay enou

cesses to move to the next level of growth

report captures the developments in banking

itiatives. In future we expect banks to take subs

ptimization.

amurthy

stomer Engagement | 2

put in place a fairly

in the functioning of

due to scaling up of

ustomers too, with

l expense to total IT

easing their capital

nditure. Most banks

sets with board level

ion.

mer satisfaction and

bout the customer

formation from this

be separated with

f integration of data

ce this challenge. In

gement program to

y deals with highest

erms of IT resources

ieved the maximum

assets starting with

efficiency measures

sures (like coverage,

to integrate people,

to focus on acquiring

gh attention to re-

nd effectiveness as

technology and the

antial steps towards

Ashvin ParekhPartner and National Leader

Global Financial Services

Ernst & Young Pvt. Ltd


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Contents

Executive Summary................................ ................................ ............................ 3

IDRBT Awards for Excellence in Banking Technology 2012-13............................ 4

1. Introduction............................................................................................. 5

2. IT for Financial Inclusion .......................................................................... 6

3. Mobile Banking...................................................................................... 10

4. Electronic Payments............................................................................... 15

5. Customer Management and Business Intelligence ................................. 19

6. IT for Business Optimization .................................................................. 23

7. Looking Ahead ....................................................................................... 24


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Institute f or Develop

in Banking Technolo

Banking Tech

Executive Summary

The IT capital expenditure of t

decline of 1% in FY12. Initiativ

business services as well as the

data center migration, inciden

virtualization of servers among

of banking in the coming years.

Banks have made significant pr

accounts increasing from appro

balance increasing from Rs. 4,4

frill accounts (accounts with at l

of no-frill accounts provided wit

with the outstanding balance in

FY13. Furthermore the BCs and

1.47 lacs in FY13, while SHGs lin

scale of progress augurs well for

Mobile banking is starting to g

average daily value of mobile fu

in FY13, a jump of 593%. Comfo

huge growth opportunity. Initia

and one time authentication

applications or apps have grow

customer base.

Electronic fund transfers have a

Rs. 102,137 crore in FY13. Furth

transfers were Rs. 4,537 crore,

debit card transactions related t

Given the time-span of IT adopt

for managing IT risk. While m

changing environment, Indian

mechanism to manage IT risks.

There is significant ground to b

optimization and business inno

front.

ment & Research

y

nology Towards Improving Business Performanceand C

he surveyed banks shows an improvement of

es taken by banks have been in multiple are

control functions and include upgradation of

t management command center, upgrade of

thers. These initiatives will have a significant im

gress on the financial inclusion front with a gro

ximately 69 million in FY12 to 98 million in FY

9 crore to Rs. 7,317 crore respectively. While t

least 4 transactions in last financial year) was o

h overdraft increased by 441% from 1.5 lacs in F

creasing by 225% from Rs. 2,256 crore in FY12

BC agent linked also shows a significant growth

ked shows a marginal growth of 9% increasing t

the financial inclusion agenda.

in traction with approximately 55 million custo

nd transfers increasing from Rs. 3.7 crores in FY

rt, convenience and anytime transfer facility ma

ives taken by banks on security front with two f

have also helped. Customers accessing mobi

n by 150% over the past year, though they are

lso grown at a steady pace increasing by 29%

ermore average daily value of debit, credit and i

Rs. 52 crore and Rs. 12,090 crore in FY13. Ho

o cash withdrawal at ATMs rather than mercha

ion most banks have put in place appropriate st

anaging IT risk is a journey and always evolv

banks have put in place an appropriate fra

covered by banks in use of IT for customer m

ation and the near future may see substantial


23% in FY13 after a

as both to augment

ore banking system,

ATM switches and

pact on the business

th of 41% in no-frill

13 with outstanding

he ratio of active no

ly 15%, the number

Y12 to 8 lacs in FY13

to Rs. 7,322 crore in

of 97% increasing to

23 lacs in FY13. The

mers registered and

2 to Rs. 25.58 crores

kes mobile banking a

actor authentication

ile banking through

only 7% of the total

ver the past year to

ternet banking fund

wever a majority of

t payments.

ructures and policies

ing with respect to

ework and review

nagement, business

development on the


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IDRBT Awards for Exc

The process for the Ninth Editio

in March 2013 with a jury meeti

was chaired by Mr. K.V. Kamath,

Dr. R. B. Barman, Forme

Dr. K. Ramakrishnan, CE

Prof. G. Sivakumar, IIT

Dr. Santanu Paul, CEO,

The awards categories for the y

1. Use of Technology for Fi

2. Use of Technology in M

3. Electronic Payment Syst4. Customer Management

5. Use of IT for Business O

6. Managing IT Risk

7. IT Innovation

8. Best IT Team

9. Best IT enabled Coopera

Three new categories were intr

and Best IT Team. Additionally

cooperative bank was also introsubstantial nominations for Use

the category for this year.

Evaluation process

A total of 34 banks including 2

process with 171 nominations

nominations filed last year. Ba

Rs. 50,000 crore.

ment & Research

y


llence in Banking Technology 20

of IDRBT Awards for Excellence in Banking Tec

ng to discuss and finalize the award categories.

Chairman, ICICI Bank and comprised the followi

r Executive Director, RBI (Jury Member)

O, IBA (Jury Member)

umbai (Jury Member)

alentSprint and Distinguished Fellow, IDRBT

ar were as follows:

nancial Inclusion

bile Banking

ems & Business Intelligence Initiatives

timization

tive Bank (one award)

duced this year Use of IT for Business Optimi

to encourage the cooperative banks one awar

duced. During evaluations the jury felt that baof IT for Business Optimization category and h

large, 8 small and 3 cooperative banks partici

across different categories. This is a significan

ks were classified as large and small based o


12-13

nology was initiated

The jury for this year

ng:

zation, IT Innovation

for Best IT enabled

ks had not provided nce decided to drop

pated in the awards

t increase from 138

the deposit size of


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1. Introduction1

Banks today have become sy

governance, operations and con

vision and business objectives.

organization structures with alig

The total IT expenses of banks

banks the IT expenses grew by 3

Figure 1

Figure 2

Growth in overall IT spends sho

A look at the ratio of capex to

adoption while larger banks are

1

Based on a sample of 27 banks (1above and below Rs.50,000 crores

12,967

14,712

12,578

14,1

389 5

FY11 FY12

Total IT spe

All Banks Large Ban

6%5%

39%

0%

10%

20%

30%

40%All Banks

Small

Banks

Growth in Total IT

ment & Research

y


onymous with technology and have leverage

trol. Banks have put in place fairly robust IT Str

The larger banks (both private and public) ha

nment between technical and functional teams.

rew at 6% in FY13, less than half of 13% witnes

9% as compared to 42% in FY12.

s smaller banks increasingly spending on acqui

otal IT spend shows that smaller banks are still

spending more in maintenance of the IT infrastr

large and 8 small) categorized as large and small bas

15,659

59 14,890

4 770

FY13

d (Rs.cr)

ks Small Banks

Large

Banks

spend FY13


d IT in all areas of

tegy to support the

e also put in strong

ed in FY12, for small

ing IT infrastructure.

l in the process of IT

ucture.

ed on deposit base


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Figure 3

2. IT for Financial Incl

Leveraging technology is helpin

addition the governments sup

viability of the initiatives. The fi

with approximately 41% growth

growth in SHGs linked. There i

While a large part of the tech

banks have also invested sub

infrastructure.

Business growth

With the business models more

no-frill accounts opened. As on

opened, an addition of approxi

Figure 4

2Data based on the nominations su

0.20

0.10.54

-

0.20

0.40

0.60All Banks

Small Banks

Ratio of Capex to Tot

68.99 68.20

0.79

FY12

Total No-frill Accou

All Banks Large Bank

ment & Research

y


usion2

g build economies of scale and bringing down

port in terms of electronic transfer of benefi

ancial inclusion initiatives of banks have gather

in no-frill accounts opened, 97% growth in BC a

s also a substantial growth of 64% in no-frill

ology investments in FI is being done by the

stantially in expanding transaction handling

or less stabilized, banks have made tremendous

March 2013 approximately 97.53 million no-fril

ately 30 million accounts for the year.

Figure 5

bmitted by 19 large and 6 small banks for the catego

Large Banks

al IT spend (FY13)

97.53 96.44

1.09

FY13

nts (mn)

s Small Banks

4

37%

34%

36%

38%40%

42%All Ban

Small

Banks

Growth in No-fr


transaction costs. In

ts is also adding to

ed sufficient traction

nd BC agents and 9%

alance outstanding.

C service providers,

capability of the IT

progress in terms of

ll accounts had been

ry

1%

41%

s

Large

Banks

ill Accounts (FY13)


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While the larger banks adde

accounts. On average banks add

The balance outstanding has alRs. 7,317 crores in FY13, resultin

Figure 6

While the larger banks have gr

better control on the quality of

Figure 8

Business and operating model

The enrollment of BCs has gro

the linkage of SHGs grew at a s

SHGs credit linked. Other than

like mobile vans, kiosks and ultr

64%

35%

0%

20%

40%

60%

80%

All

Banks

Small

Banks

Growth in balanc

15.06

14.

0.53

-

5.00

10.00

15.00

20.00All Banks

Small

Banks

Active no-frill acco

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the bulk, smaller banks contributed appro

ed 1.15 million accounts each.

o increased significantly, growing from Rs. 4,4g in a growth rate of approximately 64%.

Figure 7

wn substantially, smaller banks have been gro

ccounts as evidenced by the percentage of acti

Figure 9

n significantly with approximately 1.5 lac BC/

lower pace of approximately 9% (on a larger b

these predominant models banks are also dep

small branches.

65%Large

Banks

O/S

4,459 4,364

95

0

2,000

4,000

6,000

8,000

FY12

Balance o/s in No-f


53Large

Banks

nts (mn)

1

15

49%

0%10%20%30%40%50%

All Ban

Small Banks

Active no-frill a


imately 0.3 million

9 crores in FY 12 to

wing steadily with a

e accounts.

BCAs enrolled, while

ase) with 2.3 million

loying other models

7,317 7,188

128

FY13

rill accounts (Rs.cr)

s Small Banks

5%

%

ks

Large Banks

ccounts (%)


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Figure 10

Figure 12

Direct Benefit Transfer (DB

DBT is expected to add to the vi

float and while multiple chall

expected to be smoothened ou

on January 1, 2013 and curr

scholarship and LPG subsidy.

147,67

440-

50,000

100,000

150,000All Banks

Small

Banks

BC's enrolled

2,310,

25,276

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000All Banks

Small

Banks

SHGs linke

ment & Research

y


Figure 11

Figure 13

)

ability of FI initiatives by providing the banks wi

nges remain in terms of operationalizing the

as the operations mature. The direct benefit tr

ntly covers schemes like National Child Lab

147,235

Large

Banks

46%

0%20%40%60%80%

100%All Ban

Small Banks

Growth in BCs

838

2,285,562

Large

Banks

5%

0%2%4%6%8%

10%All Ban

Small Banks

SHGs li


th a good amount of

scheme; these are

ansfer was launched

ur Project, Student

7%

98%

s

Large Banks

9%

9%

ks

Large Banks

ked


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Banks across the spectrum, bot

of funds to the beneficiaries. Th

National Automated Cle

Aadhaar Enabled Paym

Aadhaar Payment Bridg

Benefits under various governm

on Aadhaar number through NP

and respective amounts will b

developed in-house software to

the UIDAI database. Banks have

UIDAI infrastructure for bio-met

The initial kick-off of the LPG di

to undertake 2.28 million traReduction in leakage will ensur

Indian population. The next ste

and food subsidies. Of these, w

subsidies is likely to begin in the

will be the most difficult to impl

ment & Research

y


public and private, have implemented the DBT

e banks have integrated with NPCI to provide th

aring House (NACH)

nt System (AEPS)

System (APBS)

ent schemes are being credited to the beneficia

CI payment gateway. The list of beneficiaries wi

provided to the bank for disbursement of s

seed Aadhaar numbers and look-up the details

been appointed as Authentication User Agenci

ric authentication.

stribution has been fairly successful. The gover

nsactions impacting 1.25 million householdsthat the subsidy actually reaches the truly des

will be implementing the DBT scheme for payin

hile pilot programmes for kerosene are under

Union territories in FY14, but the payment of t

ement.


scheme for transfer

following services

ries accounts basing

th Aadhaar numbers

bsidies. Banks have

of the beneficiary in

s (AUA) and use the

ment has been able

across 18 districts. erving classes of the

g kerosene, fertilizer

ay, the DBT of food

e fertilizer subsidies


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3. Mobile Banking3

Despite this rise in m-banking

even for their existing custome

accounts and the vast mobile swhich consumers are not ado

channel for banking , limitation

services in varied languages in I

phones, which also limits the c

this may change in coming year

Mobile banking can be classified

Figure 14

In an environment which has a

one-size-fits-all solution does n

mobile banking applications lik

services to cater to various mo

high-end phones / tablet platfo

services like USSD to the low-e

capabilities.

There have been various devel

new strategic partnership mode

Payment System (IMPS), Nati

markets. M - Banking has lower

start-up costs and service price

bank accounts, deposit, withdr

facilities to its customers (nea

population) through mobile ban


ment & Research

y


transactions in India, banks are yet to fully ex

rs. The current penetration is low compared to

ubscriber base of more than 900 million. Somting mobile banking include the lack of adop

s of services on mobile banking, non-replicatio

ndia etc. Most mobile banking applications ar

stomer base, but with the introduction of USS

.

as follows:

paucity of advanced technology and mobile h

t work. Therefore, there is a need for banks to

custom applications, mobile browser, etc to

bile / tablet platforms like iOS, Android etc w

rms with good processing capabilities while at

nd segment having java based phones with lim

opments over the past year in the mobile ban

ls (like banks and telcos) and products / service

nal Unified USSD Platform (NUUP), etc) em

ed some of the key barriers to financial inclusio

s. Eko India Financial Services, as business cor

awal and remittance services, micro-insuranc

rly 80% of whom are migrants or the unba

king.

bmitted by 22 banks (15 large and 7 small) for the ca


loit this technology

the number of bank

e of the reasons for tion of mobile as a

n of mobile banking

designed for smart

-based applications,

andset capabilities a

ake investments on

ffer mobile banking

ich are available on

the same time offer

ited data processing

king space including

s (Inter Bank Mobile

rging in the Indian

in India by reducing

respondent provides

, and micro-finance

ked section of the

tegory


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Key developments and in

The apex bank and NPCI are ta

to reduce the burden on ATMs a

IMPS An emergin

An IMPS is a mobile

and operated by the

to bank accounts and

November 2010, prov

banks on a 24x7 basis.

who receives the fu

confirmation of debit

to make payment to

Internet, mobile Inte

person to person (P

Merchant Payments.

NUUP

National Unified USS

India (NPCI) and offe

services to every co

2012. The service wo

single number across

handset make or regi

A common platform f

strategic move by N

service while NPCI ma

One of the main feat

handset make, cost,

not require a GPRS co

is live with 23 banks a

The maximum limit ofbanks may prescribe a

Benefits of NUUP to t

Works on basic v

required

The customer nee

Question and ans

ment & Research

y


itiatives taken in mobile banking

ing initiatives to develop solutions across the

nd other channels. Following are some initiative

, convenient remittance system

ased remittance system which is inter-bank in

ational Payment Corporation of India (NPCI). I

transfer of funds through mobile phones. The

ides real time transfer of funds between the c

. In other words, funds can be transferred any ti

nds instantaneously, and both the sender a

and credit respectively. IMPS enables mobile ba

erchants and enterprises, through various acc

rnet, IVR, SMS, USSD.IMPS products includes

P), IMPS Funds Transfer through Account N

Platform (NUUP), launched by National Pay

red on a short code *99#, is a service which

mon man in this country. The service was lau

uld allow every banking customer to access ba

all banks irrespective of the telecom servi

n.

or all banks instead of each bank having to de

CI to help banks and let them focus on custo

nages the technology behind the platform

res of the service is that it works on all GSM p

perating system or even the telecom service p

nnection and works on basic voice connectivity.

nd two telcos viz. BSNL and MTNL.

fund transfer per customer on NUUP is Rs.5000lower limit as per their individual policy.

e customers:

oice connectivity unlike an application, GPR

d not download any application on the phone

er driven interaction easy to understand


obile banking space

s taken:-

nature and is owned

MPS facilitate access

system, launched in

stomers of different

e to the beneficiary

d receiver get the

nking users a facility

ess channels such as

IMPS fund transfer

umber / IFSC, IMPS

ents Corporation of

would take banking

nched in November

king services with a

ice provider, mobile

elop a platform is a

mers to enable this

ones irrespective of

rovider. Also, it does

Currently the service

/- per day. However,

S connectivity is not


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Benefits of NUUP to t

*99# service can

Access to all telec

Easier adoption o

technology

Easier to promote

M-KCC- Mobile bas

The smart card linke

KCC, was launched i

technology for user fri

A mobile linked Kisa

October 2, 2011 in Vilthe Pallavan Grama B

The m-KCC using mob

inputs in cash-less m

farmers and vendors r

transaction is perfor

interactive voice reco

by initiating transacti

NABARD is encouragi

based KCCs to farmer

The mobile user base

smaller banks almost

Figure 15

The average daily volume and v

growing customer confidence. T

39.10 36.30

2.80

FY12

Mobile Banking

All Banks Large Ban

ment & Research

y


e Bank:

e used at BC POS terminals to serve the rural po

om service providers through a single integratio

f mobile banking due to simpler process of u

a single code *99# for banking services across a

d Kisan Credit Card

, mobile based and Aadhaar enabled KCC, po

in July 2012 and is seen as an example of h

iendly applications for Financial Inclusion of far

Credit Card (m-KCC) was launched by NABAR

lupuram district of Tamil Nadu for farmers havink (an RRB sponsored by the Indian Bank).

ile technology enables farmers to carry out pur

anner. All transactions are carried out throug

egistered with the bank and the technical servic

ed through a combination of a secured SIM car

ding/SMS system. This enables the farmers to b

ns through a mobile phone enabled system link

ng banks, particularly RRBs, to use this pilot f

.

has grown at a fast clip, increasing by 41% ov

doubled their customer base.

Figure 16

alue of mobile funds transfers have grown very

he average daily volume grew by 125% and the

54.9849.65

5.33

FY13

se base (mn)

ks Small Banks

91%

0%

50%

100%

A

Ba

Small

Banks

Growt


pulace

with NPCI

sing the service and

ll banks

ularly known as m-

arnessing the latest

ers.

on a pilot basis on

g KCC accounts with

chase of agricultural

h mobile phones of

e provider (TSP). The

d and a PIN using an

uy agriculture inputs

d to the banks CBS.

or extending mobile

r last year; specially

sharply as a result of

value grew by 593%

41%

37%

ll

ks

Large

Banks

in user base


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in FY13. While in absolute ter

substantial in the near future.

Figure 17

Figure 19

The Indian market for mobile

possibly unique business model4G services, a host of value add

Mobile banking is t

and ability to reach

model to mature.

In US and Europe,

market. NFC opera

interact with a poin

This provides ampl

through a mobile h

68,167 67,947

220

FY12

Avg daily no. of mobile

All Banks Large Ban

3.69 3.64

0.05

FY12

Avg daily value of mobile fun

All Banks Large Ban

ment & Research

y


s the average daily value may be small it is

Figure 18

Figure 20

payments and transfers is set to witness sev

s and consumer propositions. Furthermore, witd products and services could be launched

e sustainable model for the future because of i

out to customers in remote areas. Its likely to t

phones with NFC (near field communication

tes through a chip embedded in a phone en

t of sale terminal (with this, phone can act as

e opportunities to make transactions simple

ndset, something which might gradually evolve

154,043 152,929

1,114

FY13

fund transfers

ks Small Banks

406%

0%100%200%300%400%500%

All Ba

Small

Banks

Growth in no. of f

25.58 25.42

0.16

FY13

d transfers (Rs. cr)

ks Small Banks

246%

0%100%200%300%

400%500%600%

All Ba

Small

Banks

Gr


xpected to become

eral interesting and

h the introduction of

its cost effectiveness

ake 5-6 years for the

) have entered the

bling the phone to

virtual credit card).

for the customers

in the Indian market

126%

125%

nks

Large

Banks

und transfers

593%

598%

nks

Large

Banks

wth


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Banks are likely to a

This will further red

A mobile applicatio

is likely to emerge i

Mobile enabled cre

card market mature

It will, however, be crucial for b

to adapt to potential evolutions

The mobile payments ecosyste

and customers is currently low

deep look into the mobile usa

services on a technology with r

generate awareness about mobi

Mobile application based banki

Mobile financial inclusion can s

financial transactions at the b

residents can vastly benefit fr

electronic channels and banks

through mobiles is likely to em

multiple stakeholders offering p

ment & Research

y


pprove and give loans via mobile banking withi

uce the need to go to a branch.

that provides a suite of customizable banking

the coming years.

dit card applications are likely to evolve grad

s in India.

nks to ensure that their mobile payment syste

in mobile operating technology.

is still at a nascent stage and hence, acceptan

but is bound to increase over a period of time.

e patterns among their target customers and

aches out to the majority of their customers. T

ile banking so that more and more people use it

ng is poised to be the next major step in the e

rve as a major catalyst for financial inclusion i

ttom of the pyramid. Government welfare pa

om mobile money. With welfare payments b

trying to achieve financial inclusion, mobile

erge as the major channel for banking and mig

roducts and services that cater primarily to unba


the next five years.

services to the users

ally once the credit

s are robust enough

e among merchants

Banks need to take

enable their mobile

ere is also a need to

for their benefit.

volution of banking.

India and can drive

y-outs to unbanked

ing routed through

money or banking

ht see emergence of

nked segments.


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4. Electronic Payment

The Indian payment system, wh

from paper to electronic. The

upward trend. The electronic

(RTGS), Electronic clearing servi

(EFTs) / National Electronic Fu

payments market in the worl

volumes have been growing by

Payments Corporation of In

development of regulations for

payments, the RuPay domestic

currently being rolled out).

Although non-cash payments

gradually pick up as the awa

biometric authentication, etc.)

B2B sphere and the use of cash i

Key Trends/Opportunitie

C2G (Consumer to Gov

focus area for the reg

efficiencies in payment

alone constitute more t

it may translate to 4.13 One of the recent initia

bank entities to launch

across the country. T

customer grievance red

rural and semi urban ar

The e-commerce and m

promote electronic pa

solution for RuPay car

reservations, booking, ti

With financial inclusio

sustained pace, the nu

the banking channel as

the middle of the pyram

Unstructured suppleme

through IMPS across m

untapped segment and


5

RBI Payment System Vision Docu

ment & Research

y


s4

ich is primarily cash dominant, is now at a fast

share of electronic payments in non-cash pay

payment system primarily comprises Real Ti

ices (ECS), credit and debit payments and elec

nds Transfer (NEFT). India is currently the 1

, but has the potential to grow significantly.

more than 10% a year as Reserve Bank of Indi

ia (NPCI) continue to drive infrastructure

cost effective and efficient electronic payment

cards scheme, and a biometric authentication

rowth in India is behind that in the other B

reness and popularity of the payment innov

pread. Thus far, however, the long-time relian

in commerce has kept cheque and cash usage hi

s for Electronic payments

ernment) & G2C (Government to Consumer) P

lator and government alike, both to drive in

processing and collections. It is estimated that g

an Rs. 2.93 trillion and if these payments are ef

billion5

electronic transactions in a year tives taken by the regulators has been the dec

the White Label ATMs (WLAs), thereby increasi

he sponsor bank will be responsible for cas

ressal. WLA is set to boost electronic payments

as.

-commerce platforms are poised for a big strid

ments for mass audiences, NPCI has launch

dholders to make online payments for vario

cketing, shopping, utility bill payments etc. in a

gaining pace and the number of bank acco

ber of transactions is likely to increase further

ell as the payment and settlement infrastructu

id presents a large untapped market.

ntary services data (USSD) that is being attemp

bile network operators (MNOs) by NPCI will he

boost electronic payments.

bmitted by 23 banks (15 large and 8 small) for the ca

ent (2012-15)


r pace transforming

ents has shown an

e Gross Settlement

ronic fund transfers

th largest non-cash

Electronic payment

a (RBI) and National

improvements and

instruments (e.g. m-

card system that is

RIC nations, it may

tions (m-payments,

e on cheques in the

gh.

ayments remain the

lusion and increase

overnment subsidies

fected electronically,

ision to permit non-

ng ATM penetration

h management and

with penetration in

in coming years. To

d RuPay PaySecure

us services such as

ecured manner.

unts increasing at a

s citizens start using

re. This bottom and

ted for fund transfer

lp in penetrating the

tegory


17/25


in Banking Technolo

Banking Tech

The concept of a pay

payment systems into

necessitate putting in a

interfaces for various p

would result in facilitati

current system of indiv

instructions into various

The concept of linking

channel is emerging. M

such services. The ser

airtime and buy cinem

services are accessed

Interactive Voice Respo

Initiatives taken by NPCI to

To promote electronic paymen

systems has launched multiple

Inter Bank Mobile Pay

IMPS, an instant 24X7

electronic fund transfe

mobile instruments as

fund transfers in a sec

provided by NPCI throu

providing IMPS servicestransfers, attempted ac

mobile banking to cust

the bank account and A

National Automated Cl

National Automated Cle

service enabling pan-In

been operationalized t

electronically manage D

system.

Aadhaar Enabled Paym

Aadhaar Enabled Pay

interoperable financial

Correspondent of any

member banks which a

deposit and Aadhaar to

ment & Research

y


ment hub which is evolving will allow cons

one centrally managed mid-office payment

streamlined IT architecture which would elim

ayment products. Such a payment hub with t

ng faster and smoother electronic payment tran

idual interfaces being responsible for inputting

systems.

cards on mobile and transacting, by using

any banks are partnering with mobile payment

ice enables payment card holders to pay bill

a tickets from their mobile phone, anywhere

either through a menu-based USSD mobile

se (IVR) in multiple languages.

boost e - payments

t, NPCI which functions as a hub in all elect

roducts and services

ent System (IMPS)

mobile payment system launched in 2010 by

service through mobile phones. IMPS facilitat

channel for accessing their bank accounts an

red manner with immediate confirmation fea

gh its existing NFS switch. At present there are

. For IMPS, unstructured supplementary serviceoss mobile network operators (MNOs) by NPCI,

mers. IMPS is being extended to accept merch

dhaar number.

aring House

aring House (NACH) operated by NPCI is similar

dia processing of bulk payments and receipts.

owards the end of December 2012. It also

ebit mandates and holds great promise for sub

ents System

ents System (AEPS) is a bank led model

inclusion transactions at PoS (MicroATM) th

bank using the Aadhaar authentication. At p

e in production. AEPS allows balance inquiry, c

Aadhaar funds transfer.


lidation of multiple

system. This would

inate point to point

he latest technology

sfers compare to the

electronic payment

obile as a payment

s companies to offer

ls, recharge prepaid

and anytime. These

technology, or an

onic retail payment

PCI, is an interbank

es customers to use

carry out interbank

tures. This facility is

58 banks which are

s data (USSD)-based will help in enabling

ant payments, using

to the ECS payment

The system has just

has the capacity to

stituting the cheque

hich allows online

rough the Business

resent there are 18

sh withdrawal, cash


18/25


in Banking Technolo

Banking Tech

Aadhaar Payment Bridg

Direct Benefit Transfer

people living below po

centralised electronic b

sponsor or accredited bdisbursing entitlements

platform.

Creation of 24 X 7 Remi

NPCI plans to set-up a

customers through ret

transferring payments

India Money Line (IM

Customers will be abl

Mobile, Point of Sale (P

The average daily value of the

more importantly the ratio of el

couple of years.

Figure 21

The average daily value of pay

14% respectively, while Intern

proportion of the debit card

payments.

78,99710

72,309

6,689

FY12

Avg daily value of paper based

(Rs.cr)

All Banks Large Banks

ment & Research

y


e

program of Government aims to transfer sub

verty line. Thus for all government disbursals;

nefit transfer system to undertake direct mand

ank attached to various government departmenusing Aadhaar numbers. There are 85 partic

ttance system

24 X 7 real time remittance system which w

il and alternate facilities round the clock for

both inside and outside India. This new syste

) System and would replace the current NEF

to use this new system to make remittanc

S), ATM etc

electronic fund transfers by 30% to reach Rs.

ectronic to total fund transfers have remained

Figure 22

ents through debit and credit cards showed a

et banking payments grew by 59% for FY1

transactions consisted of cash withdrawals ra

,13794,417

7,721

FY13

fund transfers

Small Banks

112,066100,314

11,752

FY12

Avg daily value of elec

(Rs.

All Banks Large Ba


idies directly to the

NPCI has created a

ates from respective

ts for the purpose of ipant banks on this

ould be available to

aking payments or

m will be known as

T payment in India.

s through Internet,

144,720 in FY13 but

tatic at 59% for past

growth of 23% and

. However a large

ther than merchant

144,720131,666

18,127

FY13

ronic fund transfers

r)

nks Small Banks


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in Banking Technolo

Banking Tech

Figure 23

The electronic payment sector i

to develop a scalable model

correspondents) space. Comp

convenience and regulatory ini

and channels over a period of ti

regulatory bodies and migrate c

should review their existing inf

system or payment hub that co

banking solution.

A combination of positive regu

entrepreneurial activity in the

offering innovative cashless pa

support them. The growth pot

multiple stakeholders to come

quicker migration from cash to

0.59

0.

0.70

-

0.200.40

0.60

0.80All Banks

Small

Banks

Ratio of electronic to total fun

ment & Research

y


Figure 24

witnessing telecom players entering into strate

in mobile wallet and financial inclusion (by

tition, technology, increased customer dema

tiatives have resulted in introduction of sever

me. It is crucial that banks take advantage of th

ustomers from paper-based payments to electro

rastructure and migrate to an enterprise-wide

ld integrate all payment instruments while inte

latory intent and growing market demand is l

country's electronic payments sector. A num

yment methods are coming up as investors s

ntial is huge as India is a cash-based economy.

together and create robust architectural fra

lectronic payments.

58Large

Banks

d transfers

4,573

52

4,410

52162 0

Debit Credit

Avg daily value of pay



gic tie up with banks

acting as business

nd for comfort and

l payment products

platform offered by

nic payments. Banks

payment processing

rfacing with the core

eading to a burst of

er of new ventures

tep up to fund and

. There is a need for

ework that enables

12,09011,983

106

Internet

ments (Rs.cr)

Small Banks


20/25


in Banking Technolo

Banking Tech

5. Customer Manage

- from CRM to Custo

The past 2 decades has seen

however, most of these monoli

driven thus doomed to sub

moved on and embraced the n

Thus the power shifted from

consolidated their product/bran

various industries (including ba

mature market driven organiza

zero Customer Experience wa

Having understood the above

Experience initiatives howev

out thinking of how do I fix my

value to the customer. Thus the

the holy grail of marketing by

the 3600

view helps track cust

driven eco system it is merely

decisions and conversations wit

Customer experience thus is ai

and therefore necessarily invol

and dislikes as a starting point b

next few sections will help us u

best it can be attempted within

Customer Experience Compone

1. Understanding Customer N

Insight driven actions

The Customer Experience jou

Structured Data Sources: In the

research reports, CRM & IVR d

customer behaviour and brand

way of newer products an

improvements. However, today

analyse unstructured Big dat

fore etc. This unstructured data

Voice of the customer.

ment & Research

y


ent and Business Intelligence

er Experience Engineering

global financial institutions invest heavily in la

thic CRM projects were characterized by insid

ptimal ROI. In parallel customers have with

wer age technologies like web, mobility and of

he bank to customers who now collaborat

d choice even before stepping into the branch.

nking) led to an increasingly demanding custo

tions which were aware that with brand differ

now the new brand / differentiator.

eality most banks are today attempting to de

er most of them are incorrectly starting the jo

processes, people skills or technology initiatives

concept of single customer view which was ear

ost banks while valuable, is just data rather tha

mer interactions across different departments

a prerequisite since the customer is now carr

out involving the bank

med at Customer Engagement rather than Cus

es right brain thinking around customer emo

efore we get into left brain areas like processes

nderstand better the components of Customer

the Bank.

nts

eeds

rney starts with identifying customer needs.

past bank marketers used multiple tools like pri

ta, NPS and customer satisfaction surveys etc.

preferences. This was then converted into acti

d solution offerings, communication strat

there are tools and technologies which make

be it blogs, reviews, customer comments in

if carefully listened to will provide insights to


rge CRM projects

out thinking and IT

increasing rapidity

course social media.

d, commented and

yper competition in

er on one side and

entiation tending to

ine their Customer

urney with an inside

to deliver maximum

lier considered to be

n insight. Thus while

in todays customer

ing out his business

tomer Management

ions, thoughts, likes

and technology. The

Experience and how

. Structured & Un-

imary and secondary

to gain insights into

nable knowledge by

gies, and process

it possible for us to

various social media

a bank on the actual


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Analytics & Segmentation

Considering the vast quantum o

analytics investments that the b

a. our current customer b

b. our aspirational custo

c. customers to harvest th

Customer / Business Intelligenc

various demographic and psych

segments is becoming increasi

multiply. In a recent EY global s

to co-creator) involving ~25000

The chameleon customer: a cmarket segmentation. This co

demands the human touch, i

individual is hard to read and

Also always keep in mind how y

to the customer and the custo

power over their peers who

a better strategy to identify th

them go.

2. Aligning the Channels of Co

Having identified key segments

now becomes imperative that

particular segment. This analysi

- Pre purchase (marketin

- During purchase (sales)

- Post the purchase (servi

Delivering a consistent multi-ch

consistency in pricing, quality

organizations develop their on

experience. The bank branch w

product and process complexity

and opportunity to delight eq

from branch to web or call cen

same time not providing these c

ment & Research

y


f data that is today available within the banks d

ank may have made it is relatively easy to identi

se (profitable, loyal, new etc.) that we would lik

er segments that we wish to target and grow

at may be low value or low margin

tools today enable the bank to identify the 3 s

ographic parameters - however slotting today

ngly difficult as the lines are blurred and co

udy on consumer behaviour (This time its pers

customers across 34 countries the number one i

onstantly changing persona, who defies the consumer has conflicting preferences and facet

sists on individualized service but communi

even harder to please

ou deal with the 3rd

segment remember the p

ers with whom you may have parted ways w

ay actually belong to the retain and grow seg

experience that you wish to provide them ra

mmunication and Distribution

that the bank would like to target for each of it

e identify the role and relative importance of

would need to be done for all 3 stages of the c

)

ce)

nnel experience across all channels is essential.

and branding across the network, whether v

line capability, they must be wary of neglect

ill remain core to consumers preferred contact

. At no point should the bank trade-off betwee

uation. In fact forcing customers to lower cost c

ter will become a huge negative in the custom

hannels will also be an equally big negative.


atabase and also the

y what constitutes

e to retain

egments above basis

customer into neat

munication options

nal: from consumer

nsight was

nfines of traditional s: shops online but

ates in packs. This

wer now has shifted

ith today have huge

ent. Thus it may be

her than just letting

s product offerings it

each channel to that

stomer lifecycle

Consumers demand

irtual or branch. As

ing the face-to-face

point depending on

n the cost to serve

hannels for example

r experience. At the


22/25


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Banking Tech

An important insight to keep in

for deals - in the brick and mo

negative and not something yo

considered to be cool a

competitive and getting a bette

These are important trends tha

through the lens of the Custom

3. Mapping the Customer Life

Mapping the customer lifecycle

the bank needs to start conside

lifecycle:

Figure 25

4. Mapping the Customer Jou

As discussed above for each sta

The following example illustrate

i. Event

- The customer is travelli

he has lost his card

ii. Customer Mind Set / Fe

- Extremely vulnerable &

- Rushed has a flight to

- Confused how do I set

ment & Research

y


mind is the customers view of himself when h

rtar world shopping around and looking for de

wanted the world to know however the sam

recent study found that 60% of customers f

price/deal than their peers makes them feel lik

we need to keep in mind as we look to assess

r

cycle

is the next step in our CE framework. The figu

ring the role of various channels & touch points

Things to remem

- Customer beha

drive the lifecy

- Customer jou

defined

at each stage

- Different segm

different journ

- Identify in each

moment of tr

to

address

ney

e in the customer journey the bank needs to ad

s the key areas:-

g internationally and as he is checking out of t

elings

worried not sure where his card is? Is it being

catch

tle my hotel bill quickly, inform the bank as rega


goes online to look

als was considered a

e behaviour online is

lt that shopping is

winners.

ur channel maturity

re below shows how

at each stage of the

er are:

viour and needs will

le

neys need to be

nts could have

ys

journey the Key

uth which we need

dress 5 key areas.

e hotel realizes that

isused?

rds lost card etc.


23/25


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Banking Tech

iii. Is this a moment of trut

- Yes

iv. Is there an opportunity

- Depending on the respdefining moment for th

v. Defined Customer Expe

- How do we delight the c

5. Aligning the organization

Once the bank has defined tha

aligns the complete organizatio

Process

to validate that

to provide alter

to provide telep

People

Senior resource

Authority and r

Specially traine

Technology

Immediate acce

Dedicated call c

To succeed in CRM, Bus

customer oriented data

bank like data miners,

managers. In fact, inves

related to Data Wareho

Considering the importance and

service oriented organizations t

the organization reporting dir

Experience officer in most org

deliver a unified experience to t

leaders in the sector and be abl

ment & Research

y


?

to delight/ dismay the customer?

nse (process, people and technology) of the bcustomer in his relationship

ience by the bank

ustomer when he is faced with the above situati

t a particular event is a Moment of Truth it ne

into providing a superlative experience to the c

there is no fraud involved.

ate card at new location

honic approval till new card arrives

s to deal with customer when faced with above i

sponsibility for taking decisions depending on c

to put the customer at ease

ss to a person as compared to IVR etc.

enter and IVR integration

iness Intelligence initiatives and for relevant an

, banks must focus on building the necessary

ata architects, data stewards, data quality man

tments in human resources shall precede inves

using and Data Mining, to make them really effe

direct correlation that CE has to creating custo

oday have created a new role Customer Exper

ctly to the CEO. The greatest challenge fac

anizations is to embed CE culture within the

he customer. Banks which master this art will ev

to deliver superlative value to their stakeholde


ank this is actually a

on?

ds to ensure that it

ustomer across:-

ssue

stomer needs

d timely analytics on

skill sets within the

agers, segmentation

ments in technology

ctive and fruitful.

mer advocates many

ience Officer within

d by the Customer

organization and to

entually become the

s.


24/25


in Banking Technolo

Banking Tech

6. IT for business opti

Optimization typically seeks to

function. It seeks to find an

performance under the given

answer the question whether t

Rs. 18-20,000 crore worth of IT

While it is difficult to measure

tracking performance metrics. T

such as Return on Investmen

response time, utilization) an

quality, satisfaction etc). In achi

and technology to deliver superi

While most of the initiatives f

process simplification, the imp

framework will need to be d

measures defined first leading t

ment & Research

y


mization

ssign values to a set of variables that leads to

alternative with the most cost effective or

onstraints. IT assets and resources in the nea

ey are delivering optimal level of performance,

apital expenditure over the last 12-13 years.

the direct impact, banks will have to think of

he metrics will have to start with measuring pro

(RoI) and marginal RoI to efficiency measu

d performance effectiveness measures (like

eving these objectives banks will have to integra

or customer service.

or this category were related to aspects like

act measurement and improvement criteria a

efined in a top down approach with perfor

efficiency and productivity metrics.


n optimal value of a

highest achievable

future will have to

given the estimated

ays of defining and

ductivity of IT assets

es (like cycle time,

coverage, outcome,

te people, processes

workflow tools and

re not defined. The

ance effectiveness


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Banking Tech

7. Looking ahead

IT today has become integral t

other. However as with other r

in IT infrastructure business lea

used optimally. The overall an

growth or profitability or any ot

Technology should be custome

focus on customer retention an

banking customers going back

challenge. This is due to the in

interaction through multiple cha

With increased use technology

their toes with real time alert

detection and damage control. I

improvement including trainin

simplify process flows for increa

The future IT vision and strate

need to be aligned to the stra

desired value.

IDRBT Team

Mr. M.V. Sivakumaran, Faculty

Dr. G.R. Gangadharan, Faculty

Mr. G. Raghuraj, General Manag

Mr. Patrick Kishore, COO, SBU.

EY Team

Ms. Hema Jagtiani, Senior ManaPerformance Improvement, Fin

Mr. Kamal Tirkey, Assistant Man

Markets, Financial Services


the business of banking; it is difficult to envis

sources it has costs attached to it and with su

ers will have to seek answers to whether the i

marginal value that IT delivers in terms of b

er parameter, will become increasingly importa

r centric to derive optimal benefits and banks

d increasing share of wallet rather than only ac

to their primary bank for any other new rel

sufficiency of CRM and BI solutions. Data inte

nnels is still not available to front end branch p

lso comes increased risk of security breaches.

systems and governance policies to manage

n addition banks will also need to focus on ope

, workflow automations and business proce

sed return from technology.

y of banks will have to balance value delivere

tegic objectives of the firm and be accountab

er

ger, ncial Service

ager,


ion one without the

stantial investments

frastructure is being

siness impact, be it

nt.

will have to equally

uisition. For most of

ationship is a major

gration of customer

rsonnel.

anks will have to on

he threats for early

ational performance

s re-engineering to

d to the firm. It will

le for the delivering

Documents

Technology in Banking (2013)