WELCOME TO A PRESENTATION ON Business Opportunities in

implementing Cheque Truncation

WELCOME TO A PRESENTATION ON Business Opportunities in

implementing Cheque Truncation

Atul Kumar

Chief Manager, Syndicate Bank

Corporate Office, Bangalore

BFSI has always been the most significant contributor to the

country’s domestic IT consumption.

At Rs 10,453 crore, the financial sector again proved to be the most lucrative vertical accounting for nearly a quarter of the domestic industry.

At Rs 10,453 crore, the financial sector again proved to be the most lucrative vertical accounting for nearly a quarter of the domestic industry.

BFSI– IT Still Banked on BFSI

2002-3 2003-4 2004-5

3,500 Cr

7,231 Cr

10,453 Cr

Spending

DQ Top 20: 2005

More than 50% of the Top 20 IT Mega spenders were from

BFSI Segment

More than 50% of the Top 20 IT Mega spenders were from

BFSI Segment

Source: DQ-IDC India Survey:

Mega spenders 2005

World leading banks

adjust their portfolio by

emphasizing more on

payment- related

revenues.

Increasing role of payment business as banks’ source of revenue

Interest

Revenues

Payment

Revenues

Federal Reserve:

More than 40% of revenue of

the US’s largest banks derives

from payment business.

Global Trend

Source : Fed New York , The Global Payments System: A Central Banker’s Perspective

Increasing role of payment business as banks’ source of revenue (cont.)

Boston Consulting Group:

Payment revenues are up to 40 % of total bank revenues:

Payment revenue : Total Revenue

US 40 %

UK 32 %

Australia 24%Source : Boston Consulting Group, The Global Payments 2005

Increasing role of payment business as banks’ source of revenue (cont.)

Global Trend

Cheque Truncation:

Benefits

• Shortening cheque clearing cycle

- Nationwide cheque clearing period will be drastically reduced.

• Saving costs of cheque management, such as - Transportation cost of physical cheque

- Cheque processing costs incurred on both RBI (ECS) and banks.

- Cost of storing physical cheques (According to existing norms,banks

have to keep physical cheques for 8 yr.)

• Reducing risk of losing physical cheques during transportation

Cheque Truncation – Business Opportunities..

• Use already created infrastructure in a core banking scenario. Since it shares the network across applications like core banking, RTGS etc, , the cost burden for each application will get reduced which in turn ensures optimum utilization of Infrastructure.

• Opportunity for outsourcing: There can be a tie up with smaller banks for capturing the images of their outward instruments at a cost based on the volume of transactions. This will enable the banks to reduce their costs to a large extent.

Cheque Truncation – Business Opportunities –

• Electronic images of the instruments can be given to the customer along with the statement of account to enhance the satisfaction levels of the customer (may be at a cost for those who are willing to pay).

• It facilitates speedy and accurate customer service resulting in customer delight.

Cheque Truncation – Business Opportunities –

• By leveraging on current imaging technology, public key infrastructure and network infrastructure, the CTS provides for far greater efficiency and fewer errors. The use of images increases operational efficiency substantially and eases the storage and retrieval process.

• The traditional methodology of issuing a cheque and taking advantage of the delay before it ’s debited – effectively goes away thus putting an end to kite flying.

Cheque Truncation – Business Opportunities –

• In case of large corporate clients who present more number of cheques in clearing, Bank can think of installing a scanner at customer location along with the remote connectivity and get the captured images which can be processed by the system. This will save time for the customer and for the Bank.

• With CTS, the myth of fixed time clearing cycles can eventually go paving way for multiple (ANYTIME ONLINE CLEARING) clearing cycles.

Payment revenues - Synergy from M&A will make payment unit to be

strategic assets generating more revenue

Transaction costs - Sharing back office costs to reduce operating costs.

Efficiency - Economies of scale

Benefits:

Thus, Cheque truncation is a business enabler. It leads to higher efficiencies and

better managed operations.

Thus, Cheque truncation is a business enabler. It leads to higher efficiencies and

better managed operations.

Issues:Key Communications Trends

• Gilder’s Law: Bandwidth– Bandwidth available doubles every 6-9 months– “The Death of Distance”

– Cost of bandwidth still high in India– Bubble Bandwidth still not available

CRITICAL SUCCESS FACTORS

•BUSINESS PROCESS REENGINEERING

•TOP MANAGEMENT COMMITMENT & SUPPORT

•SUCCESSFUL MANAGEMENT OF CHANGE

•BEST-OF-THE-BREED SOLUTIONS

•TRAINING AT ALL LEVELS

AGENDA 1:Industry Payment

Body

AGENDA 3:Payment

Legislation

AGENDA 2:NationalPayment

Data

AGENDA 4:Infrastructure

andStandards

A Road Map forIndian Payment Systems

AGENDA 5:CrossBorder

Connection

Implementation Plan

Key Drivers: Strategic Objectives, International Best Practices

Payment Hub

RECOMMENDATIONS

“Banks that focus on products instead of relationships will lose business to non-traditional financial companies that give priority to managing customer relationships”

Peppers & Rogers Group Study

Banks are loosing Business ?

akumar@syndicatebank.net

THANK YOU