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CHANGING TRENDS IN INDIAN BANKING

By

Miss. P. PIRAKATHEESWARI, Lecturer in Commerce,

Sri Sarada College for Women (Autonomous), Salem – 16.

Faced with mutually interdependent forces of competition, regulation, technology, and expectations of the customers, banks are set for a range of roles. The future mantra: intelligent integration.

Adjust, adapt, and change. That’s the message that technology has sent across to modern day banking. As technology ingrains itself in all aspects of a bank’s functioning, the challenge lies in exploiting the potential for profiting from investments made in technology (See Technological Ability). The transition of technology from a historical operational and back-office role to a strategic role complementing the business direction is more evident abroad-a fact exemplified by the top slots notched by foreign banks in the BT-KPMG Best Banks Survey. The new mindset is illustrated by innovations and speculative bets taken by banks, where investments in technology have focused on benefit-realisation. Banks that have adapted this mindset have realised benefits from:

• Customer management-focused investments where integrated informational views and transactional capabilities across products, services, and channels have enabled the banks to obtain a better picture of customer preferences, risk, and profitability.
• Investments aimed at managing risk and regulation issues with banks gaining the ability to identify, manage, and allocate risk exposures on across the enterprise to prioritise business decisions.
• Developing a portfolio of shared service alliances focused on providing integrated cross-channel access and new range of services.
• Implementing best-of-breed workflow around the core e-Enabled business systems to provide the right linkages to yield business benefits.

In India, investments in technologies by financial services organisations are increasing, and new initiatives emerging, albeit at a basic level (See The Impact Of IT). However, in the long run, it is evident that technology investments in transaction and process automation will cease to be a differentiator.

Tuning technology

Banks have traditionally performed the role of financial intermediaries. Apart from the old world game of transforming liabilities or deposits to assets or loans, traditional banking has now expanded to cover areas like logistic support for their customers for collection of receivables (e.g. Citi-Commerce One), tie-ups with other service providers to facilitate bill payments, and providing customised solutions to customer segments. The current trend is to try and be a part of all financial transactions in the market space, and increase the share of the customer wallet. As banks face the mutually interdependent forces of competition, regulation, technology, and customer expectations, a picturesque setting for the tremendous upheaval and opportunity emerges. This interdependency, in turn, is built upon mutually dependent technological trends.

• Increase processing power: With increasing power of processing, the cost of processing transactions has come down significantly. Radical advances that came about in computing power in the latter half of the 90s has egged on banks to centralise their processing operations, thus enabling multiple points of interaction with customers, paving way to advancements like any-branch banking.
• Increase in networking: Connectivity and not processing power is the current mantra.
• Increase in flexibility in defining business standards: Business standards are getting redefined in tune with the changing technology standards. While a number of such standards are in the process of being developed for the banking and financial services industry, an industry wide consensus is yet to emerge.
• Increase in modularity of software: Software is increasingly being built like ‘Lego’ blocks structure i.e., applications created by constructing and combining well-defined modules. The gluing together of various specialised applications is now easier because of this approach in design.

These four trends are impacting irreversibly the business of banking, mainly in product management, outsourcing, insourcing, analytics, and payment systems.

Product management

Financial Services: Then & Now

Old World

New World

Confined marketplace

Unlimited market space

Competition between banks

Competition from brands

Limited product line

Extensive product breadth

One-size-fits-all product

Customisation and innovation

Branch-focused

e-Enabled, multi-channel players

Focus on business growth

Focus on revenue growth as well as cost-reduction

Revenues through margin

Revenue generated through fees and value-added services

Existing products and services are changing way for value-added ones thanks to the one-upmanship game among competing banks, sparked off by soaring consumer-demands. For example, cash-management products may soon morph from its current form into products that use payment gateways and alternate settlement mechanisms-for quicker movement of money across manufacturers, suppliers, distributors, and customers.

Banks are increasingly finding that the most viable way of differentiating themselves will be to successfully manage customer relationships and enhance the overall customer experience. In future, the market space will see banks and non-banks striving to seek opportunities for profit, in wake of product commoditisation.

Outsourcing

The challenge of managing the diverse services in a networked environment has caused the banks to introspect on what should be considered as their core skills and primary roles. Many of them have already started outsourcing functions and processes like data entry of account opening forms and cash management data, and call centre functions.

Managing the complexity of the multiple technical components is becoming a challenge to most banks. If banks do invest in creating these skill sets, the value that can be unlocked by spinning off the technology unit is much greater than the advantage of keeping it in-house. This could be in two forms-the products developed like s1 (the Internet banking solution created by Security First National Bank) or the services company that produces applications themselves, like ICICI InfoTech and IDBI Intech.

In future, banks will need to focus on value-differentiating services by keeping in-house their competitive advantages while partnering with others who complement its services-making the argument for best-of-breed integration a necessity.

Insourcing

Insourcing is a model wherein banks perform operations that are originally done by their customers/other banks. Corporate clients may outsource activities like receivable management, accounting and risk management of corporate investments to banks. New product offerings will emerge as a combination of existing products and the new insourced activities Banks, with their established processing capacities, are ideal partners for insurance and other financial service firms in their pursuit of customer reach and service provision

Analytics

As they realise that product and related services by themselves cannot provide sustainable competitive advantage, banks are paying more attention to relationship with their customers and the way they manage risk, determine price, and allocate capital.

Going forward, banks will attempt to augment their behavioural and economic views of the customer, preferably captured at point of contact in addition to existing transactional and demographic data (in-house and external). Banks will require use of analytics to effectively manage their customer relationships, conduct detailed analysis that help more accurately model, and predict future customer behaviour and lay a quantified foundation for strategic decision-making.

On the other hand, banks often face the tricky task of asset allocation and pricing. In the last decade, investments in risk management and related systems have increased multifold, albeit made with a compliance objective towards identifying, measuring and funding risk. The future will see increasing investments in risk analytics as part of an integrated framework supporting asset pricing, performance measurement, and asset allocation models.

Payment systems

In recent years, alternate money transmission avenues, especially the development of electronic money schemes, have been gaining currency. While electronic money has the potential to take over from cash for making small-value payments, making such transactions are becoming easier and cheaper for both consumers and merchants. This raises policy issues for central banks in its role as the guardian of the payment network and implementer of the monetary policy. The emergence of peer-to-peer money transmission mechanisms poses a challenge to current role of banks as gatekeepers to traditional payment systems. Robust payment systems, therefore, are a key requirement in maintaining and promoting financial stability with technology playing both a facilitating and disruptive role in them.

The Future

Despite the radical new trends emerging, banks will continue to play their role as trust-enablers in all commercial activities. Their role as financial intermediaries and payment enablers will also continue, but they will be outsourcing all non-core activities to specialised service providers and insource opportunities where they have a saleable value proposition. The transfer of money will not generate profits-it will, however, be the basis of other services that banks will provide. The level of integration that banks achieve with their customers supply chain will determine profitability.

Conclusion

Armed with a technology backbone, banking will remain the best business model for managing liquidity, creating trust, and managing risk. The ability to make informed decisions based on business benefits, to become intelligent investors in technology, and seek sourcing options would be some tenets of successful organisations on the right side of this divide.

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Today diabetes affects more than 500 million people worldwide. Diagnosis and treatment of diabetes cost an estimated $174 billion in 2007 in the US alone. Its is expected that developing countries will bear the brunt of this epidemic in the 21st century, with 80% of all new cases of diabetes expected to appear in the developing countries by 2025.

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With the fourth quarter of 2009 upon us, we thought it was time to look back at technology trends that our clients have been “falling for.”  It’s clear that companies with a forward-thinking approach and solid grasp of technology trends have a distinct competitive advantage.  We’ve found that the following technology trends have positively shaped their business.  Haven’t checked them out yet?  Don’t worry, these same technologies can give your company the tools it needs to do business in this challenging economic environment.

Cloud computing or Software as a Service (SaaS)

To some, it seems like we’ve come full circle—from the world of mainframe computing to distributed PCs and now back to cloud computing where a third party hosts and supports your business software.  Some examples of cloud computing include the basics like hosted Exchange and antiSPAM email filtering or more sophisticated applications like ERP, CRM or HR management systems.  The benefits to you:

• Shift large-scale software expenses from a capital budget to an operating expense
• Better security
• Improved uptime
• Ubiquitous access across desktops, notebooks and mobile devices.

One IT Radix client who shifted to our hosted Exchange solution was able to improve its mobile workforce access to information, eliminate wasted time deleting junk email while at the same time add two new important features to their email usage—encryption and archiving.  Having email encryption and archiving allowed our client to bid on and win a large contract because they immediately had the required technologies in place, unlike their competitors.

Virtualization

The initial goal of virtualization is to reduce server sprawl while at the same time enable needed business functionality.  We’ve seen virtualization expand to the desktop as well—making it possible to run legacy applications, improve security and more.  One of our engineering clients invested a bit more upfront on server hardware, but was able to upgrade both their basic file server and their accounting system on a single server using virtualization.  This easily saved our client $5k or more on server hardware.  In addition, virtualization is a fantastic green IT solution, reducing electrical and HVAC requirements and upgrades, not to mention the ongoing savings on actual utility expenses.

Mobility

It’s easy to forget that only a few years ago the typical office worker was bolted to a desk and connected to data by wires, cords and cables.  Over the last few years, wireless technology—including 3G cellular data networks and widespread Wi-Fi—has opened the door to an anytime, anywhere business model.  Several of our clients are using business-specific applications on devices such as an Apple iPhone to conduct business basically anywhere.  Some things to consider:

• Is your sales team positioned to collaborate, share leads and land the deal at any time and any where?
• How can your business processes be optimized and extended by mobile computing to give your SMB the dexterity to run circles around your larger, more inflexible competition?
• How is your firm positioned to work from anywhere, to minimize lease and utility expenses, and to obtain state and local tax benefits for reducing carbon emissions?

Technology is constantly changing.  These are just three of the technology trends that have helped our clients continue to grow and enhance their products and services and in some cases, “rake away” their competition.

Want the same benefits as our clients, just ask your IT support provider of choice.  They’ll make sure you “fall for” the right technology for you!

It all started with the remote control. A vast majority of home electronics today require the use of remote controls, devices which have grown increasingly advanced and powerful since their invention in the late ’70s. It’s nothing new that televisions, stereos and DVD players feature remotes as an essential component, but in the last five years, it’s gaming systems that have turned remote control into an art form.

The first official first-party wireless game controller was the WaveBird controller for the Nintendo Gamecube, released in 2002. The WaveBird’s advances have had a lasting impact; in the current generation of gaming systems (PlayStation 3, Xbox 360 and Wii, primarily) wireless controls are the industry standard.

Furniture design, in a lot of cases, has yet to catch up. Many TV stands and cabinets feature wooden or frosted glass doors. These can look lovely, but they interfere with the infrared transmission that wireless controls rely on. This goes double for the especially sensitive multi-LED sensors, like those on the Wii. Many consumers make the mistake of purchasing a good-looking cabinet with wooden doors, whether for its classic look or for appealing security features such as locks, but these people are then forced to leave the doors open all the time to use their DVD players or video game systems, or even to remove the doors entirely, leading to a piece of furniture which looks broken or incomplete. I’m sure you’ve seen such solutions; perhaps you’ve even done it before. Older furniture designers just didn’t plan for the future, did they?

There are other considerations too. Many current pieces of audio-visual furniture make use of transparent glass doors, which are a good solution to the remote problem, as they don’t block infrared transmissions. Glass is typically a feature of transitional and contemporary furniture; it is very popular for its neutrality, looking as subtle as a cottage window or as futuristic as a space shuttle windshield. Most furniture glass today is of the tempered safety glass variety, which is hard to scratch and even harder to break, making it a safe solution for a family living room.

However, the one thing glass doesn’t offer is concealment. Unless you’re an organizational genius, the typical gaming and electronics stand becomes a repository for wires and cables, and manuals and controllers. Fun, but not something you want to show off when Grandma comes over for tea, unless your grandma loves Halo 3 (and if she does… give her a hug, courtesy of Cymax).

An increasing number of entertainment center designs lack doors entirely. This solves the door problem, but again, the concealment problem arises — and this time with even less security. You won’t be able to hide away electronics, wires and equipment when you need to, such as a surprise visit from the little cousin who tried to eat your Reservoir Dogs DVD like an Oreo last time. You’ll have to keep your stand ship-shape all the time instead of shutting the door on an unsightly tangle of wires. What are you gonna do?

Don’t worry, you can have it both ways. Transparent glass, frosted glass, or wooden doors are all viable solutions thanks to infrared technology. If you’re going for a classic home style or desire furniture with opaque cabinet doors, infrared extender kits are a great choice. IR extension technology has been available since the ’80s, but is often overlooked as a home electronics solution since IR extenders are usually designed by third parties.

An IR extender generally consists of a small receiver set up on a shelf or tabletop, which catches the IR signals of your remote and sends them (via wire or radio wave, which bypasses walls and doors) to your electronics. This even works for sensitive controls which require immediate reaction time. The Wii, for instance, has an official infrared bar that can be placed anywhere. With an IR extender, virtually any style of living room furniture can be a great addition to a gamer’s living room.

It all adds up to a great set of options for your home electronics. Balancing good looks with functionality has always been furniture’s toughest call, but just because technology changes doesn’t mean your taste in furniture has to. If you’re after a perfect entertainment center or that special piece of game-friendly furniture, check out Audio-Video-Furniture.Com, a proud part of the Cymax online furniture distribution network. Who says you can’t have a Louis XV Rococo style furniture scheme and a game of Dead Rising going on a plasma TV amidst it all? Your needs are complicated, but at Cymax, the solutions can be simple.