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IT Invasion In Banking Sector: Convergence Of Computing, Communication And Banking

by Aniruddha Paul, Chief Information Officer, Kotak Mahindra Bank November-2015

 

Kotak Mahindra Bank (BSE: 500247; NSE: KOTAKBANK) is the fourth largest Indian private sector bank by private market capitalization. With over 641 branches and more than 1,159 ATMs, Kotak Mahindra is spread across 363 locations in the country.

Indian banking industry, the backbone of Indian economy, is probably the second largest spender of IT. With the growth of high speed networks, coupled with the reduced price of computing power, there has been an explosion of technological breakthroughs that changed the banking industry from paper and branch banks to digitized and networked banking. Regardless of this revolution in the banking sector, the banks across the globe still struggle to manage data in banking and financial services. Financial institutions across the globe have the unique privilege of owning heaps of customer data, and yet, there are significant laggards in coming up with meaningful insights that can assist their customers in making the right decisions with their financial matters. What is more surprising is that financial institutions typically have a richer and historically longer data set compared to the newer internet companies in the form of customer master data and transaction data that constitutes what is generally referred as “internal big data” of such institutions.

The major reason behind the inability of banking companies to leverage this data was that technologies such as big data analytics and infrastructure technologies hadn’t evolved enough to be truly nimble, insightful and cost effective. Data warehouses used to cost a fortune, and data architectures were hard to modify and change. However, in the recent past, there has been several technical penetrations in terms of capabilities as well as costs. Financial Institutions have grappled challenges of legacy architecture and existing business models, and have therefore been slow in embracing data analytics as a game changer.

Technology for Accelerated Banking
Advancements in technology are allowing delivery of banking services more conveniently and effectively than ever before. Today as technology offers vast opportunities to scale; it allows banks to serve everyone standing in the queue, irrespective of the length of the queue and the variety of needs amongst those queuing up. The real challenge however is, extending the benefits of banking to those who cannot even afford to stand in the queue. Financial inclusion must have a model where the unbanked are not expected to come and queue up at a bank, but the banks must reach the customers instead. And that’s possible only through non-linear technologies like mobile banking and innovative banking models, especially in the areas of KYC (Know Your Customer) and payment transfers.

Most forward looking companies have already begun to recognize the pivotal role that IT can play– whether it’s in terms of ensuring smooth running of day-to-day operations (what I call the Run-The-Bank IT) or in terms of IT driven business transformation (i.e. Change-The-Bank IT). Digital banking is built around the twin foundations of ubiquity and actionable insight.
 
The first – ubiquity is all about delivering banking services in any form or manner that our customers want. Technology allows us to address the long tail of customer preference, so if our customers want us to serve them through face to face interaction, we have our branches; if through a call, we have call center; if through a browser, we have internet banking; if on their fingertips, we have mobile banking; if through social media we have Kotak Jiffy and Hashtag Banking.

The second– actionable insight is about making sense of the vast volumes of data that our customers entrust with us, whether in terms of our internal big data or in terms of external social data. Today’s technology allows us to crunch the data and arrive at insights, whether in real time, or in a more contemplative manner. Such insights guide our customers towards a control over their financial lives and towards making nuanced, responsible choices.

Optimizing Business Processes
The key challenge for IT leaders is to juggle between the duality of Run and Change, with its very different and often contradictory needs and levers. My personal commitment is towards ruthlessly optimizing Run costs through higher efficiencies, and freeing up mind spaces and budgets towards Change. IT Change budgets needn’t come only from business/finance leaders– as true business leaders CIOs and CTOs must be committed towards generating their own funds by optimizing Run costs in favor of Change. When organizations reach a tipping point in terms of complexity in their business processes, it’s time to invest in business technologies that provide a framework to define, run and supervise business processes. Such implementations also offer organizations the opportunity to clean up and redefine their business processes, by leveraging the best practices offered by quality ERP/CRM softwares. In other words, effective control over such solutions depends on organizational maturity and willingness to reinvent. Merely overlaying softwares on existing business processes may prove to be an expensive and sub optimal implementation. (As told to Deepshikha Singh)