Technology in Banking (2013)
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Transcript of Technology in Banking (2013)
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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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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
stomer Engagement | 3
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 4
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 5
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 6
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
ment & Research
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nology Towards Improving Business Performanceand C
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
All Banks Large Bank
53Large
Banks
nts (mn)
1
15
49%
0%10%20%30%40%50%
All Ban
Small Banks
Active no-frill a
stomer Engagement | 7
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 8
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
nology Towards Improving Business Performanceand C
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.
stomer Engagement | 9
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
3Data based on the nominations su
ment & Research
y
nology Towards Improving Business Performanceand C
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
stomer Engagement | 10
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 11
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 12
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 13
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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 14
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
4Data based on the nominations su
5
RBI Payment System Vision Docu
ment & Research
y
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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)
stomer Engagement | 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
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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
nology Towards Improving Business Performanceand C
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.
stomer Engagement | 16
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
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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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 17
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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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
nology Towards Improving Business Performanceand C
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
All Banks Large Bank
stomer Engagement | 18
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
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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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 19
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
nology Towards Improving Business Performanceand C
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.
stomer Engagement | 20
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
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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
nology Towards Improving Business Performanceand C
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
stomer Engagement | 21
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.
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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
nology Towards Improving Business Performanceand C
?
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
stomer Engagement | 22
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.
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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
nology Towards Improving Business Performanceand C
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.
stomer Engagement | 23
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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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
nology Towards Improving Business Performanceand C
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,
stomer Engagement | 24
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