Technology & Banking Report

Technology and Banking

By Swati Panwar MBA II Sem College of Engineering and Technology

Technology and Banking The Quintessence Nature of Banking harmonizes closely with Technology – Tasks Common to Both Bankin g

Information Storage Processing Transmission

Technolo gy

Innovative Risk Management Complex Credit Calculations

Global Operations

Pervasive Branch Network Mass Transaction & Items Processing

g n i k n a B

d n a

c e T

y g o l o n h

Benefits of Technology • Increased operational efficiency, profitability & productivity • Superior customer service • Multi-channel, real-time transaction processing • Better cross-selling ability • Improved management and accountability • Efficient NPA and risk management

Focus aspects of Commercial Banking now are: BANK’S BUSINESS

Electronic Banking

NI SI AR

Any Branch Banking CRM

ATMs MIS & Intranet POS

Terminals and Cash dispenser

Card

Corporate Network Risk Managem ent

Manage ment Document Managem ent Resource Managem ent

BANK’S BUSINESS

LOANS & MISC. SERVICES

Core Banking (CBS)

Financial Technology Infrastructure Data Center to host servers for:  CBS  ATM/Financial Switch  Internet Banking  DW/DM/CRM/MIS etc.  Back-office Application  E-mail Servers, Internet Server, Enterprise-wide Network & Networking Equipment Security Systems Systems at Branches/RO/ZO/CO Depts. Supporting Systems Disaster Recovery Site & Business Continuity

Technology – A Differentiator Technology is indeed a differentiator not only in terms of competitive advantage, but also in terms of administrative and back-end processes…. But…due to rapid technology deployment in Indian banking sector, the “haves” and “have-nots” gap is all set to narrow quickly.

How Long a Differentiator? • Then….can technology be enough of a differentiator? • Any new technology or technology-enabled process can act as a differentiator or a competitive edge for some level of time. • After that time, the technology still has to be adopted as a “necessity” and as a cost of doing business Thanks to shortening technology life cycles, it would be short sighted to assume that technology would be a long term differentiator…

For Long-Term Differentiation Elements of Technology as a Differentiator

Scalabilit y& Flexibilit y

Efficient utilisation, mgmt

Process enabling

Utility to custom er

Suppo rt Skills

Issues with Customers Not only employees, there are problems for customers too when a new technology arrives… • The major challenges – – – – – –

Comfort levels Security and trust issues Convenience factor Getting rid of myths Migration from existing to new systems – Changing the habits

POS Terminal and Cash Dispenser

POS Terminal Connected to Cash dispenser

ATM

Electron ic Banking

Branc h Branch 3 Bankin g

Branch 2

Branch 1

Head Office

Branch n

Branch 4

Branch 5 Branch 6

Technology Acquisition • Inappropriate technology purchases can be the root of all problems… • The Bank management has to: – Give thought to the utilization rate – Avoid “knee-jerk” reactions (“they have done it… I should also do it”) – Be impartial in technology decisions (“I like that technology…I want it”) – Understand where the solution will fit AND where it won’t! – Assess the strengths & weakness of solution – And seek answer to “are we ready for it?”

Differentiation is attained not achieved just through technology, it is gained in the way the technology is selected, implemented and utilised

•Goal definition •Integrating business & technology goals •Solution features •Vendor selection •Business process reengineering •Change management

Technology For Sustained Differentiati on

•Efficient utilisation •Customer utility •Technology Management •Support functions •Maintenance •Back-ups and Disaster Recovery •Scalability & flexibility •Learning & evolution

Regulation and Supervision – The Challenge Challenge of Technology:

New markets, products, services, delivery channels Opened up a market for “risks” – derivatives Challenge of financing tech firms & IT innovation all have implications for the stability of banks and of the economy

The Opportunity Regulators have new tools Focus of all recent financial sector reforms Emergence of non-intrusive, focused supervision With a view to prevent frauds and disturbances to financial stability

Technology and Banking Supervision THE RBI RESPONSE Offsite Supervision & Monitoring OSMOS COSMOS (Non banking Financial Companies / Development Financial Institutions) UBD Soft Credit Information Bureau (A joint venture between Housing Development Finance Corporation Ltd., State Bank of India, Trans Union International Inc. & Dun & Bradstreet Information Services India Pvt. Ltd.)

Currency Management and Technology – Opportunities Galore Currency Management - a formidable task in India given… 



the geographical size, the volume and value of notes and coins in circulation, preference for cash and currency handling practices ...but technology offers immense opportunities to improve performance

RBI’s The Clean Note Policy (1999) Establishment of 2 state of the art currency presses Technology driven anti counterfeit measures 48 fully automated Currency Verification & Processing Systems 21 Shredding and Briquetting Machines

RBI and Customer Service…(1) Dissemination of information The RBI website

Multiple Delivery Channels Coin & Note Dispensing Machines For the general public Interactive Voice Response System For banks and financial institutions Web server For government customers On the anvil…. A secured web server SFMS/email based communication with

RBI and Customer Service...(2) Improvements in payment and settlement systems MICR Clearing Enabling faster clearing of cheques Cheque Truncation & E-Cheques On the drawing board ECS/EFT Enabling T+2 settlement of our equities market National EFT Enabling T+0 settlement of all customer funds transfer transactions

The future will be not be more of the same…   … we need to be ready..

Thank You