Financial Foresights Digital Banking - New horizons in a cash-light India - ficci
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Financial Foresights
April 2017
Digital Banking
New horizons in a cash-light India
Financial Foresights
Editorial Team
Jyoti Vij
Contents
jyoti.vij@ficci.com
1. PREFACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Anshuman Khanna 2. INDUSTRY INSIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
anshuman.khanna@ficci.com n Digital Banking - Transforming India ? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Bhaskar Som
Supriya Bagrawat Country Head
supriya.bagrawat@ficci.com India Ratings & Research Advisory Services
n Digital Banking & Technologies of Tomorrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Amit Kumar Tripathi Rajiv Anand
amit.tripathi@ficci.com Executive Director & Head – Retail Banking
Axis Bank
n Digital Banking - An Indian Perspective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Raghavendra Bhat M.
About FICCI General Manager
Karnataka Bank
FICCI is the voice of India's n Making Banking More Human . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
K P Sunny
business and industry.
General Manager, Digital Banking, Strategic Initiative & Optimization
Established in 1927, it is Federal Bank
India's oldest and largest n Digital Banking in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
apex business organization. Prasanna Lohar
Head Technology – Innovation & Architecture
FICCI is in the forefront in DCB Bank Limited
articulating the views and n ‘SMART Digital Banking Platforms’ for Enriched Customer Experience and
concerns of industry. It Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Murali Mahalingam
services its members from the Industry Director, Banking & FS
Indian private and public SAP
corporate sectors and n Digital Banking - New Horizons in a Cash-light India . . . . . . . . . . . . . . . . . . . . . . . . 28
AKS Namboodiri
multinational companies,
General Manager IT & IRMD
drawing its strength from Dhanlaxmi Bank Limited
diverse regional chambers of n Smart Apps & Bots – The New Face of Indian Banking . . . . . . . . . . . . . . . . . . . . . . . 31
commerce and industry Shantanu Sengupta
Managing Director & Head - Consumer Banking Group
across states, reaching out to DBS Bank India
over 2,50,0000 companies. n New Horizons in Less Cash India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Deepak Sharma
Chief Digital Officer
Kotak Mahindra Bank
Disclaimer n Digital Banking – The Holy Grail for the Banking Industry . . . . . . . . . . . . . . . . . . . 36
Sujatha Mohan
All rights reserved. The
Head, Digital & New Initiatives
content of this publication RBL Bank
may not be reproduced in
whole or in part without the
3. FICCI'S DATA CENTRE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
consent of the publisher. The
n Equity Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
publication does not verify
any claim or other n Mergers & Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
information in any n Debt Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
advertisement and is not n Loan Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
responsible for product claim n Project Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
& representation. n Investment Banking Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Articles in the publication
represent personal views of
the distinguished authors.
FICCI does not accept any
claim for any view mentioned
in the articles.
Financial Foresights 1Preface
F
inancial Foresights, the flagship quarterly publication of FICCI’s financial sector team, provides a platform
to industry, policy makers and other stakeholders to exchange ideas and views on important financial
sector developments in the country.
The current issue of the publication focuses on the topic: ‘Digital banking - New horizons in a cash-light India.’
and presents insightful write-ups contributed by industry leaders from the digital banking space.
As you go through the pages of this edition, you would see that all our authors agree that innovation is
increasingly becoming a part of the banking system in India. Yes, the speed with which different banks are
moving in this direction may vary, but there is agreement that there has to be a well thought out strategy to
deliver services to customers in a more efficient manner and at a time and place of customers choosing.
There are three trends that are shaping the future of the digital banking space in India. First, is the rapid growth of
the more nimble Fintech players that are working to deliver services in a manner never seen before. Banks will
have to work alongside such players to improve the customer facing side of their business as well as their own
internal processes. Second, the experience of customers in other industries be it e-commerce, healthcare,
education or transportation is improving at such a fast pace that they are now expecting similar delivery and
interface even in the banking industry. Third, and this perhaps is the most important, is the whole push
government is giving to digital economy in the country and which itself is inducing a change in consumer
behaviour and making customers ask for more convenience from their banks.
While on this subject, one must mention that the way India Stack has developed, we can see this is one of the most
transformative platforms created anywhere in the world for delivering services including financial services to
people in a very transparent manner. UPI, BHIM app or the Aadhar based payment systems which may not even
require one to have a phone for carrying out some of the banking transactions is a fascinating story to follow in
itself and the government deserves full credit for ushering in such great innovations in the Indian marketplace.
Our authors talk about this and other developments such as ‘wearable banking’, ‘predictive banking’ etc. – all of
which are destined to change the face of banking in coming times.
In this issue, our financial sector team has tried to highlight the prospects of Digital banking in India and we hope
that you will find it an interesting read. We are thankful to all our contributors for sharing their views, insights
and perspectives. It is through such a collaborative effort that FICCI facilitates pushing the knowledge frontier
for all stakeholders and bringing to light some of the key issues that merit debate and discussion. As always, we
look forward to your feedback.
With best wishes
Dr. A. Didar Singh
Secretary General
FICCI
Financial Foresights 2Industry Insights
Financial Foresights 3Industry Insights
Digital Banking -
Transforming India ?
Bhaskar Som
Country Head
India Ratings & Research Advisory Services
T
he buzzword in India today lot of action from various fintech Interface - which allows for swift
is creating a cashless future. players to leverage on GoI's digital payment across banks - and finally,
Buoyed by the successful push. a consent architecture system,
acceptance of demonetization, the where information is made freely
The traditional banking industry is
Government of India (GoI) is now available to anyone else for use.
thus facing the impact of digital
pushing digital transactions. The India thus today stands at the cusp
technology. To remain
GoI has set a target of 25 billion of a banking revolution through
contemporary and relevant, several
digital transactions in the next rapid penetration of digital
commercial banks have already
financial year (FY18) through banking.
started aggressively innovating
multiple facilities, including
digital products and services for However, if one looks at the total
platforms such as Aadhar Pay,
customers. Meanwhile, India today payment transactions done in the
Unified Payment Interface (UPI),
offers a unique architecture for months post demonetization, it is
Immediate Payment Service (IMPS)
digital banking which is not apparent that the big digital push
and debit cards. GoI has also
available in the US or China. This has not happened. RBI has started
launched a mobile application
architecture includes an existing reporting payment transaction
(Bharat Interface for Money -
eKYC (know your client) system statistics for all modes of payments
BHIM) for facilitating e-payments
and the Aadhaar authentication since November'16 - the volume
through bank accounts. The
framework, a signature and and value of various types of
payments industry is thus seeing a
digilocker, the Unified Payments transactions are shown in Exhibit 1.
Exhibit 1
Monthly Transaction Volumes Monthly Transaction Values
RTGS NEFT CTS RTGS NEFT CTS
IMPS NACH UPI IMPS NACH UPI
USSD Cards PPI USSD Cards PPI
mn units Mobile Banking
INR bn Mobile Banking
1,200
120,000
1,000
100,000
800 80,000
600 60,000
400 40,000
200 20,000
0 0
Nov 16 Dec 16 Jan 17 Feb 17 Nov 16 Dec 16 Jan 17 Feb 17
Source: RBI, IRR Advisory Source: RBI, IRR Advisory
RTGS - Real time gross settlement
NEFT - National electronic funds transfer
CTS - Cheque truncation system
NACH - National automated clearing house
USSD - Unstructured Supplementary Service Data
POS - Point of sale
PPI - Prepaid payment instrument
Financial Foresights 5Industry Insights
It is interesting to note that a total December'16 to February'17, while drop to 6.9% in the next 3 months.
of 744mn transactions (including value-wise the drop has been ~11% Value-wise, mobile banking
cheque payments) were done in during the corresponding period. continued to account for 1.2~1.3%
India in Nov'16, which increased to Further, to reach 25 billion of total transactions.
1,028mn in Dec'16, only to drop transactions, the number of
The key issue is that the technology
subsequently to reach 820mn in transactions needs to increase 2.5
interfaces and other advances are
Feb'17. Of course, the data is times from current levels in the next
merely enablers and not drivers for
representative since the information one year.
shift to digital payment. India
on mobile banking payments have
Experts feel that increased continues to be primarily a cash
been aggregated for only 5 banks.
smartphones penetration in India economy, suffers from
From the exhibit, it is apparent that
will drive digital banking in India. intermittency in a digital
NEFT, CTS, NACH and cards
The smartphone user base in India infrastructure, and there is
account for the bulk of the
crossed 300mn in 2016 and is reluctance from a large section of
transactions by volume (~76%),
expected to reach 500mn over the the population to embrace digital
while RTGS, NEFT and CTS
next 5 years. Thus, digital banking payments. Even spending through
account for ~89% of the
has the potential to ride on cards has not seen increased
transactions by value. Based on the
smartphone user base and grow traction although they have been
above data, it is apparent that banks
exponentially over the next few around for over two decades. IRR
continue to dominate digital
years. In November, mobile Advisory has analyzed the usage
transactions in India. Volume-wise,
banking accounted for 9.7% of total patterns for debit and credit cards
digital transaction has seen over
transactions by volume, only to post-Janaury'16. The same is
20% reduction between
presented in Exhibit 2.
Exhibit 2
Credit and Debit Card Usage Patterns
mn INR bn
900 3,000
800
2,500
700
600 2,000
500
1,500
400
300 1,000
200
500
100
0 0
Jan'16 Feb'16 Mar'16 Apr'16 May'16 Jun'16 Jul'16 Aug'16 Sep'16 Oct'16 Nov'16 Dec'16 Jan'17 Feb'17
Value. of Transac ons - Debit Card (ATM) (INR bn) - RHS Value of Transactions - Debit + Credit Card (POS) (INR bn) - RHS
No. of Transac ons - Debit Card (ATM) (in mn) - LHS No. of Transactions - Debit + Credit Card (POS) (in mn) - LHS
Source: RBI, IRR Advisory
As on February 2017, India had withdrawals. The usage of cards for average individual uses his credit
840mn debit cards and 29mn credit POS transactions increased sharply or debit card 2.5 times a month, the
cards. From Exhibit 2, it is apparent immediately post demonetization, percentage usage of debit and
that Indians use primarily debit but has then seen downward credit cards for POS transactions
cards, and that too for ATM correction. Assuming that an was ~10% of total cards in FY'16 till
Financial Foresights 6Industry Insights
demonetization. If one assumes that People need to be incentivized so monitoring your every move in the
people using debit or credit cards that they find an economic merit in near future!
increased their usage in the period moving to digital payments. For
Finally, there is no doubt that
post-demonetization - say from an example, GoI may consider
digital banking has brought in
average of 2.5 times a month to 3.5 providing a percentage cashback of
amazing customer experience.
times in November and 5 times in value or a reduction in excise duty
However, increased levels of cyber
December - then there is only a to buyers who buy over digital
threats have the potential for
marginal increase of ~1% in card gateways. The financial incentive
causing significant disruptions in
population usage for POS sales post has to be lucrative enough for
their services apart from risks
demonetization. people not to pay in cash, while
related to sensitive customer
providing GoI detailed information
Hence, while India may be information and internet frauds. It
on a person's spending to provide
prepared to transform into a digital is therefore important to see how
opportunity to bring under the tax
economy and may have set up information technology systems
purview and increase net revenues
enablers in place, the drivers which and data security risks are
for the GoI. However, to ensure the
can convert people into embracing monitored and managed.
same, all bank accounts, credit and
digital banking are missing. In a Regulations on digitalization in
debit cards, and other digital
country where 3% of the population India are at a nascent stage and
payment avenues available for an
files income tax returns and only their evolution would also be
individual should be linked to his
1% people actually pay income tax, important in charting the way
Adhaar and PAN card. This, of
there will be a lot of resistance to forward for disruptive innovations
course, brings in the scary
actually shift to a cashless India. in the Indian banking space. n
possibility that the State can be
Bhaskar Som Country Head, India Ratings & Research Advisory Services (PGDM - IIM, Calcutta, B.Tech (Mechanical) - IIT, Madras,
FRM), a Fitch group company, has over twenty years of cross-sector experience in strategy formulation, quantitative analytics
and risk management. Bhaskar is a member of IMC Chamber of Commerce's International Business Committee and was a
member of the Expert Panel Group set up by Ministry of Finance for boosting infrastructure financing in India. Bhaskar has been
a speaker at various forums on competitiveness, policy insights, innovative funding alternatives and banking trends.
Financial Foresights 7Industry Insights
Digital Banking & Technologies
of Tomorrow
Rajiv Anand
Executive Director & Head – Retail Banking
Axis Bank
I
nnovation is among the most financial activity - from banking to Not many would have believed us!
powerful forces that continue payments to wealth management But mobile banking is a reality
to shape human society. The and more - is being re-imagined by today with more than 100 million
advances in the material standard some tech savvy banking incum- transactions a month. By the year
of living enjoyed by most (though bents as well as by startups. 2030 most of today's technology
not all) human beings are largely Meanwhile, the old guard is trying will be redundant and will be
due to innovation. One of the to solve a puzzle presented by the replaced by other more evolved
principal arguments for free-market digital revolution: How can they modes.
capitalism is that it is the economic benefit from the rise of digital, and
Mobile phones especially smart
system that encourages innovation how can they stay relevant?
phones have created more opportu-
most, because it allows innovators
Banking today has nities to the common man than any
to capture a significant part of the
other technology in the recent past.
remunerations of their work. become Easy & On-The- Today mobile banking and mobile
Financial services industry is no Go wallets are the two fastest growing
different. The accelerating rate of segments in the payments industry.
Gone are the days when banking
technological change, combined Evolution of mobile banking on the
was a chore, a frustrating activity
with shifting customer preferences back of mobile phone revolution in
which in many cases needed you to
and an evolving regulatory India has helped clients make faster
take a day-off to accomplish the
landscape, have dramatic implica- and secure banking transaction on
task. Technology (Internet and
tions for the ways in which the move. For banks mobile
Mobile phone) has virtually
financial services are designed, banking is the most cost efficient
enabled banks to be where the
delivered and disbursed today. mode of offering banking services.
customer is; enabling her to connect
It is a win-win situation for both
Technology is overturning to the bank at a time and place
banks and clients.
workflows and processes in the convenient to her. Today we are
financial services industry. Tasks closer to year 2030 than to year
Future is Increasingly
once handled with paper money, 2000. Imagine if we told you in year
bulky computers, and human 2000 that you would be able to bank
Digital
interaction are now being com- from your phone 24X7 and Digital business is an overarching
pleted seamlessly entirely on digital accomplish most of your banking trend covering how the blurring of
interfaces. Almost every type of transaction in less than a minute? the physical and virtual worlds is
Financial Foresights 8Industry Insights
transforming business designs, Some of the traditional players in payments to different merchants
industries, markets and organiza- banking have been very agile in without the hassle of typing one's
tions. Major business and technol- experimenting with new age card details, or net-banking
ogy advancements, such as the technologies such as Artificial password. UPI is built on top of the
Internet of Things, 3D printing, and Intelligence and Block-chain. Banks IMPS, which we have used to
machine learning combine to and non-banks are innovating and instantly transfer money between
disrupt existing business models Indian ecosystem as a whole is accounts with different banks. All
and create an opportunity for gearing up for digital. money transfers with UPI are
entirely new ones. Digital technolo- secured with the two factor
gies build on each other with wave Technologies of Future authentications as mandated by RBI
after wave of innovation. - the first factor being your phone
Two very important developments
and the Mobile PIN as the second.
Customer expectations for banking have the potential to herald a new
UPI is likely to benefit overall
services (both offline and online) age of digital payments - the
payments ecosystem as the
are being reset by the experiences rapidly growing smartphone
payments service can be provided
being provided by retailers and penetration and the proliferation of
by banks to the merchant with an
online providers, elsewhere. bank accounts. India has over a
entry level smartphone and there is
Thanks to companies like Google, billion mobile connections with
no need to install POS machine at
Amazon, Apple, Uber and our very around 240 million smartphone
the place of business.
own e-commerce firms; customers users and is expected to grow to 520
now expect every organization to million by 2020 as per a report on Blockchain is another such new
deliver products and services Digital Payments by BCG and technology that combines a number
swiftly, with a seamless user Google. The National Optical Fiber of mathematical, cryptographic and
experience. New digital attackers Network initiative under Digital economic principles in order to
are definitely changing the rules India will connect 250,000 gram maintain a database between
and disrupting traditional value panchayats across rural India and multiple participants (lenders &
chains in many industries. The increase adoption of data services. borrowers) without the need for
same could happen to financial The Pradhan Mantri Jan Dhan any third party intermediary or
services industry as well. Fintech Yojana (PMJDY), through 282 reconciliation. In simple terms, it is
startups are already accelerating million accounts and 220 million a secure and distributed led-
innovation in financial markets by cards (as on 29 Mar'17), has ger/database, hardened against
leveraging technology. But it will provided the infrastructure for tampering, against which anyone
also be naïve to believe that universal access to banking. can verify the validity of transac-
technological advancement in tions. A block is the 'current' part
The issuing infrastructure is largely
banking will only be done by of a blockchain which records some
in place and with the launch of
Fintech firms. Over the next couple or all of the recent transactions, and
Unified Payment Interface (UPI)
of years you will notice that a lot of once completed goes into the
will provide a significant fillip in
financial innovation will be spear blockchain as permanent database.
the proliferation of low cost
headed by incumbent banks - either Blockchain represents the next
acquisition infrastructure by
independently or in partnership evolutionary jump in business
allowing smartphones to substitute
with new fintech firms. You will process optimisation technology.
costlier PoS devices. UPI will be a
increasingly see a trend where
game changer in way that it is a With the advance of Smartwatch,
incumbents will be as good as
unique interface which works 24x7 banking is already slated to
fintech firms at innovation. Today a
across the banking system and is experience shift from your pockets
lot of banks are partnering with
instant, safe, secure, cost effective to your wrists. Wearable banking
fintech firms for mutual benefits.
and convenient to use. UPI allows will help banks roll out contextual
Financial Foresights 9Industry Insights
notifications to its clients, which important technology that com- massive change in the network
means that actionable promotional bines natural language queries, effect of financial inclusion is that
content can be delivered at just the predictive analytics, and self- millions of people who previously
right time. The future lies in evolving cyber security systems. had zero access to digital services
ultimate personalized, contextual Artificial Intelligence is the future & are now on the network and are
engagement. However, smart has already started to be part of our connected for good.
watches are not the ultimate everyday lives. Machine learning is
It is also very encouraging that we
frontier of wearable technology. As an approach to achieve artificial
have a central bank that is equally
the technology extends beyond intelligence & machine is "trained"
enthusiastic about promoting
Smart Watches to include Smart- using large amount of data &
innovations and technology. The
eyewear, gesture-controlled devices algorithms that give it ability to
Reserve Bank in its continued
and other connected products in the learn how to perform the task.
efforts towards building robust and
larger IoT (Internet of Things); we Another emerging technological
secure payment and settlement
envisage an exciting world of advancement is cloud computing-
systems for achieving a less-cash
'Predictive Banking' to emerge. All the practice of using a network of
society published Vision 2018
the data you generate across your remote servers hosted on the
which highlights the need for
daily life can be captured (with internet to store, manage, and
making regulations more respon-
your due permission of course), process data, rather than a local
sive to technological developments
connected and analysed - from server or a personal computer. The
and innovations in the payments
sensors embedded in everything big benefits of the cloud are cut
space. India now has the best
from your wearables to your costs, improve flexibility &
digital infrastructure for financial
cooking utensils to your car. The scalability, increase efficiency, serve
universalization and the fact that
area is unbound for exploration and client faster.
we have the Jan-Dhan, Aadhaar
as we explore further a billion
Conclusion and Mobile (JAM) layer, we have
possibilities can emerge. You can
an indigenous Indian stack that is
expect your bank to create products
The combination of higher spend- propelling us from being data poor
that shall connect with you on a
ing power and a freer adaption of nation to a data rich nation. Add to
deeper level but in a non-intrusive
technological adoption mean that this the data available through GST
manner. Banks and financial
banks and other financial institu- Network, under which companies
institutions will be a part of an
tions have an entire market of will upload nearly three billion
invisible layer around your daily
willing and able customers to offer invoices every month and govern-
activities. For example, by linking
better financial products/services ment will effectively have real-time
to your fitness band, we would like
at lower costs. The fact that economic data 24X7.
to encourage your fitness goals by
unbanked population in India
rewarding you on your achieve- Digital adoption and moving away
halved from 577 million to 233
ments. We can track your health from cash would not be without
million speaks volume about the
data (pulse rate, sleeping habits, complications. Some objections can
advancement of financial inclusion
daily physical exercise, calorie be easily addressed, such as a claim
efforts. Technology is the biggest
intake, etc.) and create customized expressed by a fifth of a sample of
enabler and equalizer today. As we
insurance plans for you at lowest respondents, who said in a recent
connect one-on-one in real time, it
possible annual premiums by survey that they like the feel of
has created massive new flows of
partnering with various health carrying cash. But other problems
trade for markets that were
providers. will be harder to ignore. The most
underserved or overlooked. Cell
intractable is the risk that parts of
Artificial Intelligence (AI) & phone subscription in India has
society will be left out of the
Machine Learning is another crossed one billion. So the first
Financial Foresights 10Industry Insights
financial system, in a world where mobile banking. When calling the efficiency and transparency are key
smartphones and plastic become call-centre, the customer may get elements. As self-directed solutions
the only ways to pay. In a near- help with online banking. Today, emerge among competitors, the
cashless world vulnerable groups, far too many banks create silos for ability to differentiate will be a
such as the poor, the elderly and each channel - including separate challenge. In addition to social
migrants, could become further reporting lines and separate sales changes, the driving force behind
marginalised, and those who are goals. This has to quickly change innovation in financial services can
especially cash-dependent for because in the customer's mind, all largely be attributed to technologi-
income, such as street vendors, channels merge together to form cal advances outside the financial
small traders, charities and the the aggregate customer experience. services sector that will bring new
homeless, would fear to see a drop When customers are given choices opportunities to understand and
in their incomes. on how to do business, and those manage the risk (e.g. telematics,
choices are relevant and the wearables, connected homes,
Today banking is a complex
experience is consistent, they are industrial sensors, medical
business delivered through
much more satisfied. advances, etc.). While it will be
multiple channels. The challenge is
fairly easy to replicate technology,
to offer consistent omni-channel Finally it is customer preference
the critical aspect will be building a
experience. Each channel should which will drive business models.
culture of innovation and the ability
promote other channels and should Customers with new expectations
to leverage insights to build
be seamlessly integrated. For and the need to build trusted
solutions that will determine who
example, when interacting with a relationships are forcing incum-
will be able to maximize the
branch employee, the customer bents seek value propositions
opportunities and emerge as a
may be assisted in how to use where experience, transaction
winner. n
Rajiv Anand, Executive Director & Head – Retail Banking, Axis Bank-An executive director with Axis Bank, Rajiv Anand heads the retail
banking business for Axis Bank. He has led the digital transformation journey making Axis Bank a widely recognized leader in technological
innovation which can be testified through its pioneering launches on social payments, integrated wallets as well as a best-in-class banking app
that incorporates features like augmented reality and locker booking.
Over a career spanning more than 25 years, Rajiv has focused on various facets of the financial services industry having held key management
positions at leading global financial institutions. He is widely recognized for his strengths in capital markets and successfully building new
businesses to scale.
Rajiv joined the Bank in 2013 from its asset management arm, Axis Asset Management Co. Ltd., where he was the Managing Director &
CEO.
Financial Foresights 11Industry Insights
Digital Banking - An Indian
Perspective
Raghavendra Bhat M.
General Manager
Karnataka Bank
Digital Evolution connectivity with high speed importance. Digital banking
bandwidth to every nook and provides mission critical solutions
Digital Banking may be viewed as corner of the country. This has to bankers for their short term and
adoption of various existing and exposed the full potential of the long term business and
emerging technologies by the hitherto untapped market in India. technological requirements. Today,
banks, in concert with associated Latest technology and service aspects such as enhanced customer
changes in internal operations as offerings in the new age Digital satisfaction and value through
well as external relationships for Payments space by the Banks, such unified customer experiences, faster
providing superior customer as Unified Payments Infrastructure output, infinite banking volumes,
services and experiences effectively (UPI) including BHIM (Bharat financial inclusion, operational
and efficiently. Interface for Money) which is a efficiencies, scale of economy etc.
Mobile App developed by National are being sought after, by
Today we find ourselves in a digital Payments Corporation of India leveraging digital banking and
wonderland, where the milkman (NPCI), Bharat Bill Payment System mobile technologies. Becoming a
accepts wallet payment without a (BPSS), mobile money, e-wallets, digital bank can improve efficiency
fuss, a man buys a geometry set payment aggregation etc. have and provide a better customer
worth about Rs 100 for his daughter created a revolution by themselves. experience.
using a credit card and the
vegetable vendor uses QR code Currently there are several Digital Banking – a boon
based “Scan & Pay” utility. technologies, infrastructure and
processes available to enable banks or bane
The new innovative digital to become super-efficient and
technologies and futuristic thought Going by the deep penetration
dependable banks. Adaptation and
processes have given birth to whole within a relatively lesser
implementation of highly capital
new businesses and social turnaround time, state-of-the-art
intensive global technologies,
dimensions. Projects such as Make digital payment systems are now
infrastructure and processes are
in India and Digital India are now poised to take quantum leaps in
decisive in order to remain ahead of
the buzzwords to a bright and this new era that is largely driven
the curve. Transition and Inter-
sustainable industrial and financial by the ubiquitous Internet. These
operability related issues viz. from
progress of our nation. As part of disruptive dynamics and revenue
traditional banking to state of the
its impetus for DIGITAL models are literally the new game
art digital banking such as data
TRANSFORMATION in India, changers - causing tangible and
integrity, authentication (including
Government also encourages tactical shifts across major verticals.
third party authentication) and
technology adoption / up- E-commerce and M-commerce
trust factors in a digital banking
gradation while providing success is largely attributed to the
environment are gaining
phenomenal growth of various
Financial Foresights 12Industry Insights
digital payment technologies such Customers’ Standpoint competitors with regard to design
as card payments, electronic fund and ergonomics will decide the
transfers, payment gateways, e- Banks are now increasingly winner. In the coming days design
Payments, smart cards, mobile worrying about their very bastions will be a much bigger differentiator,
money wallets etc. Pivotal to being co-shared by a string of new with simplicity being the
embracing such new age payment age players. And the end-customer overarching goal. Elements
systems are the people, is the single largest beneficiary - allowing consumers to personalize
technologies, and processes that with a bouquet of services and their digital banking experience,
have together created vast, robust service providers to choose from such as contextual cross-selling, the
and dependable networks and and along with hugely competitive ability to set up personalized digital
seamless systems that guarantee pricing models. Banks will have to alerts and even the ability for the
humongous transactional volumes increase their operational efficiency customer to design their own
at breakneck speed, with and improve the customer digital banking app (font sizes,
dependable security and counter- experience by meeting the accessibility of certain functions,
checks built around them. customers’ expectations swiftly in etc.) will gain prominence.
order to keep their position in core
All these and rest are taking India markets. It is the ability to leverage customer
to the threshold of the big league insight for improved information
and to make the country battle- The level of automation and access. All new functionalities need
ready to compete with the most digitalization of the account to be part of the same digital
influential industrial and financial opening and on-boarding process banking application. Instead of
powers of global businesses. With has become very crucial. The most having every piece of functionality,
digital banking and mobility, the important aspect is to improve the bank can dream up crammed into
need is no longer to "leap-frog" but ability for consumers to open any one big-honking mobile banking
to "deep-dive" into the future. new account using digital channels app. In the future, digital banking
Going digital and mobile for a Bank and to efficiently onboard the new applications will be judged based
is no longer an option, it's a simple customer digitally. In this area, on the fewer number of
bare necessity - to collaborate and traditional banks still differ touches/clicks needed to get from
flourish. Today's challenging digital strikingly from the new market one screen to another. Banks are
payments ecosystem has become a players who offer a convenient end- forced set a goal to improve the
burgeoning marketplace. to-end online process. individual customer experience.
Banks have already started The ability to offer basic as well as The level of enhanced security
evaluating the reduction in number value-added content and available to protect identity and
and size of branches (both the functionalities through digital funds access is equally imperative.
number of units and the size of channels is another important Identity protection and account
existing facilities). In addition, the aspect. Value-added content and security will continue to be the
functionalities, in contrast, will focus area as hacking incidents
investment in digital technology to
contribute strongly towards a become more sophisticated and
replace more expensive human
positive customer experience. widespread. Banks have to
interactions is also being Value-added functionalities include implement biometric security,
considered. This includes, but not digital document safekeeping, including fingerprint technology,
limited to, tablets for universal access to financial news, digital facial recognition or voice
bankers, automated teller machines investing, personalized digital recognition etc as part of person
and digital kiosks to facilitate alerts, digital savings tools, online identification.
account opening and customer chat, social media banking, e-
inquiries. To be successful in a lobbies etc., among others. Challenges of
digital environment, banks focus on
Simplicity of design, availability of Digitalisation
improving their digital maturity contextual offers and ability to
across various dimensions of Secure banking based on
personalize the experience are
customer service. technology and its ramifications
definitely some of the key success
factors. The differentiation between including cyber-crimes in today’s
Financial Foresights 13Industry Insights
digital banking landscape has to be expect no less from traditional Status post-
reviewed continuously. The dark banks. Also the need to reduce costs demonetisation
side of being digital i.e. cyber and increase efficiency is assuming
security risks are to be taken care more significance than ever. In this Recent demonetisation exercise of
and risk mitigation measures need regard, improving a bank’s digital higher denomination notes by the
to be strengthened. Advanced fraud maturity ensures higher efficiency government has really accelerated
in its processes such as credit the transformation of digital
detection mechanisms and the
banking in India. Growth in the
possibility to leverage personalized offering, improved interaction and
number of digital transactions has
security preferences and alerts will customer experience.
been exponential since November
have to become more widespread. 2016. Backed by Government
Renewed skills development of
For any security enhancement to be thrust, people of India finally seem
workforce and investments into
accepted and efficient will require to have accepted/embraced digital
training and manpower
that the user experience is not economy. Demand for cash is
development is the need of the
impacted. Banks should consider diminishing slowly. New payment
hour. Customer segmentation is
investigating and implementing initiatives such as Aadhaar-linked
another aspect which will not only cashless payment solution which
additional layers of security that
facilitate ease of interaction, but enables a merchant to facilitate
will reduce the potential for device
also enable targeted product Aadhaar based payment for
and account level fraud. While
placement, thus increasing the cashless purchases by customers
ready to manage breaches, the goal
likelihood of further acceptance. called ‘Aadhaar Pay’ and ‘Bharat
should be to reduce the potential QR’, an integrated payment system
for losses and customer impact. All the while, it is important to be using the customers’ mobile phone
conversant with the regulatory, to pay through debit or credit card
Use of advanced data analytics will
security, technology and business by scanning a code at the
help in combating several issues
challenges that await both - merchant’s place etc., have come to
mentioned above. Adoption of stay. However with all these
traditional banks as well as the
technology and convincing the revolutionary new technologies,
latest entrants such as payment
customers to opt for self-service improvement in operational
banks. Taking digital banking to the
modes of banking is the biggest efficiencies in order to ultimately
unbanked is another task, a social
challenge. In addition, consumers increase bottom lines and
obligation. Achieving financial
are becoming impatient with banks shareholder value will remain a
inclusion targets by innovative use challenge for all banks. Role of
who offer irrelevant
of digital banking thereby analytics and innovative revenue
products/solutions without proper
promoting rural banking in a more models need to be further fine-
study of customer understanding.
comprehensive manner cannot be tuned. To reap maximum
While new generation banks are
forgotten. advantage in an increasingly digital
performing better and better with
society, it is imperative that banks
contextual offers that are based on must demonstrate superior
collected insights, consumers performance in all spheres of
customer service. n
Raghavendra Bhat M. B Com, CAIIB, General Manager, Karnataka Bank, Head Office, Mangalore-Raghavendra Bhat M. joined Karnataka
Bank in the year 1981. In his illustrious career of 36 years with Karnataka Bank, he has worked as head of several branches and also headed
Delhi and Bangalore regions. He has vast administrative exposure as an executive, having worked in the Credit Department, as head of
Information Technology Department at Head Office and also as head of Data Centre of the Bank. Currently he is the General Manager in
charge of IT & MIS Departments, Risk Based Supervision Cell, Risk Management Department, IT Bus Cell, Head Office.
Financial Foresights 14Industry Insights
Making Banking More Human
K P Sunny
General Manager,
Digital Banking, Strategic Initiative & Optimization
Federal Bank
Who wants Digital come from science fiction a few centers.
years ago but not anymore. These
Banking? But at the same time, when it comes
are real life headlines from
to what we mean by ‘Digital
I am fond of reading and normally prominent media. All around there
Banking’, there seems to be a little
carry a book when I travel. For that is a transformation happening
bit of misperception. Many
matter all at home are avid readers. whether we are prepared for it or
industry insiders and their clients
The difference is that, youngsters not.
use the word digital banking in a
travel with hundreds of books in
Of course, banking cannot stay much narrower sense. Many limit it
their kindle. With devices of the
behind. Customers who have to cash-less or paper-less
size of mobile phone, they carry
travelled in an Uber cab or did an transactions. This is not so. World
thousands of songs and many
Amazon purchase expect similar over, ‘Digital Banking’ per se has a
hours of video.
experience at their bank counters. wider meaning, though digital
Things have changed. Virtual We cannot blame them. If we are to transactions form a subset of it.
Private Assistants like ‘OK Google’, borrow from Mr. Nandan Nilekani,
What exactly is Digital Banking?
‘Siri’ and ‘Alexa’ are literally there’s demand for ‘a WhatsApp
Christel Quek, who was with
waiting to execute your commands. moment in banking’. Digital
Twitter answered the question like
One does not venture to drive out banking has become the latest buzz
this, “It’s really about behavior and
without GPS these days and word.
not technology or channels, that
driverless cars are round the bend.
What is Digital Banking? influences strategy, content, and
Whether it is sports or shopping,
drives advocacy. It’s not about
booking a ticket or buying a pizza With demonetization and the being mobile first or digital first,
digital transformation has taken subsequent thrust from the but being people first.” Technology
over. government for cash less is only a means and not the end.
“South Korea plans to put transactions, the share of digital Customer experience is the key.
driverless cars on the road by 2020, and online transactions have been
This is obvious from the trend seen
IOT insurance market will be worth steadily gaining momentum. The
in other industries. All the
42.76 billion USD by 2022, Chinese relaxations given in MDM and the
innovations are moving towards
factory replaces 90% of humans new tax regulations; all help in
providing better and superior
with robots production soars, bringing in more customers for
customer experience.
Amazon conducts first commercial digital.
drone delivery and Precision Share of digital transactions will get Bank–Startup partnership
agriculture could start a green further boost, when the internet
revolution in India. ” These Which are the technologies that
become faster, cheaper and reliable,
statements would seem to have lend a hand to Indian banking to
especially in rural and semi-urban
bring the Uber or Amazon
Financial Foresights 15Industry Insights
experience to their customers? One the end consumer seems to be them to decide is short. Innovation
can pick and choose from a long welcoming it with open hands. is gaining momentum with the
list. But big data analytics can Fintech disruption is an accepted help of catalysts like India Stack. In
occupy the prime position. truth today as evidenced by the fact the meanwhile tech-savvy
that many banks are coming customers are enjoying the
Already fintech companies are
forward for engaging with startups. convenience which they never have
offering online instant checkout
With a variety of startups trying out enjoyed before.
loans based on minimal or nil
all permutations and combinations
documentation. Analytics help Cyber Security – a matter
with India Stack, we can be rest
them to do credit scoring centered
on non-traditional sources of data
assured that India is about to usher of concern
a new era of digital banking and
which were hitherto not available However all is not rosy as far as
better customer experience.
or not being considered. digital banking is concerned. While
What is all the more interesting is to API Economy government is trying to ensure
note that banks are coming out of financial inclusion and the banks
The digital branches like SBI In are enticing customers to go digital
their shell to partner with fintech
Touch are only a beginning. If we to cut cost, the less tech savvy
startups to offer innovative
go by the trends, what Bill Gates customers may find it difficult to
solutions. HDFC Bank partnered
said in 1994 is coming of age. switch over in a fast mode. There is
with a startup to bring forth Chillr,
‘Banking is necessary, banks are also the risk of fraud, as the
a payment app using IMPS. Federal
not; how banks can survive in the reluctant customers may not be
Bank is offering a mobile based
digital age’. The demand for APIs aware of the precautions they
account opening using Aadhaar as
from fintech startups is on the rise should take to ensure secure
KYC document. Yes Bank and
and banks have begun to realize the transactions. They can easily fall
Flipkart came up with Phonepe a
potential of an API economy. A prey to all types of cyber frauds like
payment app based on UPI. More
number of startups are already vishing, phishing etc.
are on the anvil.
working on the online lending
products. Not only fresh graduates Another threat is that the new
Role of India Stack startups with less domain expertise
out of college, but even veterans
For the first time the local with decades of industry expertise may not fully appreciate the
innovation is not following the are taking the startup route to implications of security of online
footsteps of the Silicon Valley. The innovate in the fintech arena. transactions and extent of fraud
journey India started in 2010 to that can happen. The recent UPI
The ultimate model can be one fraud is an example in case. Indian
provide a unique identity to its
where banks may play a backend Computer Emergency Response
billion citizens has in a way helped
role providing a sturdy and robust Team (ICERT) has already alerted
to author a revolution in the fintech
platform of banking while startups banks and associated entities about
domain. It paved the way for India
can be handling the user experience the enhanced threat as India
Stack, a set of APIs which
at the front end for an opex fee. At embraces digital banking on a
empowers even startups to develop
least on the retail banking front, higher scale.
fintech applications with ease and
banking-as-a-platform may not
par take in India’s digital Digital Banking throws up many
raise many eyebrows. The question
transformation. India stack now opportunities. With the new
that is yet to be settled is about
include Aadhaar for eKYC, eSign directive of RBI of using OTP for
branding and marketing – will the
for paperless execution of eKYC with Aadhaar, one can open
final product be cobranded or not?
agreements, UPI for seamless an account literally sitting at home
online payments and eLocker for Dilemma of Traditional or abroad. At the same time cyber
electronically storing and sharing security should be of prime
documents.
Banks
concern.
India Stack is going to be a game So, traditional (in mindset) banks
changer as far as India is concerned. are in a fix now. They are not sure Digital Inclusion
Banking, known for its age-old whether to stick to the old menu or
For the rural India, this is a cultural
methods, is ripe for a change and go out and paint the town red. But
change, if not shock. There has to be
they know that the time left for
Financial Foresights 16Industry Insights
earnest efforts to help them to Robotics will help banks to cut cost Making Banking more
adopt digital banking. There is no of operation. Yet another
Human
doubt that they will acquire the technology being employed for
skill, the way they pushed India to customer service is chat bots and All these point to some exciting
the second or third slot for global virtual agents. A virtual agent can times for banking in India and
mobile usage. It is that they need give L1 support at a much lower elsewhere. As Yann Ranchere,
some time and guidance. The cost. Supported by Natural Director at Anthemis and Finance
technology adoption rate in the Language Processing and Artificial 2.0 blogger, put it, “It’s making
rural & semi-urban demography Intelligence capabilities, which are banking more human.” And that
seems to be a tad faster than in the now available on cloud platforms, definitely is going to make the
urban market. Though we have most of the time the customer may ordinary banking customer a lot
moved to advanced marketing not even notice that he is chatting happier and satisfied.
techniques, “word of mouth with a chat bot. Machine learning
With digital banking on the rise, it
advertising” still proves to be and analytics comes handy to the
is paving way to a whole new level
effective in the Indian market. banks in the area of fraud
of “Personal Relationship Banking”.
Importantly, in the age of monitoring and cross selling.
Till date, digital transformation was
deteriorating customer loyalty, the Chatbots in banking could help us
blamed for keeping customers
rural & semi-urban customers seem assign a banker to every customer.
away from our bank counters and
to be more loyal, once they are All of a sudden, customers have
thus missing the personal connect.
convinced about the product. started feeling more connected with
With the advent of social media
banks & they will eventually start
With the Central Government keen banking, banks/ fintech companies
to feel like a king. Customers will
on propagating digital banking, for are ensuring their presence
feel more in control of their
the declared goal of bringing down alongside customers always, which
financial relationships.
corruption, the share of digital allows us to learn & understand
transaction will only go up. This Technology in search of customers better. Be rest assured
will make the role of banks easier in that your bank will be there to offer
ensuring a better customer
Business Case you a loan when you are in dire
experience through digital banking. Internet of Things, Augmented need of it.
Reality, Virtual Reality, Real-time Passing of government subsidies
Digital Operations Translations and Voice-to-Text directly into accounts of citizens
While these changes are happening capabilities are some of the and automating a lot of manual
at the customer facing part of the technologies standing in queue and works are helping us to be a more
banks, similar transformations are waiting for appropriate business transparent society. Transacting
happening inside counters also. cases. A few banks have started digitally will only instill more
Indian banks have started relying experimenting with block-chain but confidence amongst public and it
on robotics to get things done at again, many are not sure about the brings back the mantle to the
their operations departments. use cases. customer, making the case more
customer- centric. n
K P Sunny, General Manager Digital Banking, Strategic Initiative & Optimization, Federal Bank
K P Sunny has 35+ years of experience in commercial banking in the areas of branch banking, treasury operations, corporate planning,
banking operations and banking technology.
He has a commerce background and is a certified associate of Indian Institute of Bankers. He is qualified in Business Finance, Application
Programming, Web Applications and Machine Learning.
He was a member of the RBI Committee responsible for UAT of the Negotiated Dealing System (NDS) and has also helped in the formulation
of its Business Rules. He was also part of the NPCI steering committee for Unified Payment Interface and was the member of the management
committee of Indian Banks' CIO Forum. He was the CIO of the Bank before he was appointed as the General Manager in charge of Digital
Banking and Strategic Initiatives. He also heads Bank's Launchpad initiative for mentoring startups.
He is much interested in innovation, lateral thinking and machine learning. He is an avid reader and enjoys books from authors like Malcom
Gladwell and Edward De Bono
Financial Foresights 17Industry Insights
Digital Banking in India
Prasanna Lohar
Head Technology – Innovation & Architecture
DCB Bank Limited
W
e understand rise like never before. The new Aadhaar enabled use cases , wallet
significance of Digital innovative leadership and futuristic disruptions & RBI initiatives along
& how clearly it's thought processes have given birth with NPCI e.g. UPI, BBPS, AEPS,
disruptive & game changing for to whole new business and social India QR are now the keywords to
banks & its customers. under dimensions. Ambitious projects a bright and sustainable financial
Digital India programme we are such as Digital India, execution of progress of our nation.
experiencing a New India on the payments bank, Make in India,
Public Universal e- Electronic
Early IT for Jobs eKranti
Internet Access to Governance Manufacturing
Broad Band Information Electronic Electronic
Access Harvest Phones & thru Target
Highway for everyone Automation Delivery of
programme programmes Mobile Technology Net Zero
of Jobs Services
Connectivity Import
The Reserve Bank of India's to electronic payments and ensure payments, electronic fund
"Payment and Settlement Systems that the payment systems in India transfers, payment gateways,
in India: Vision-2018" aims at are safe, secure, authorised, e-payments, smart cards, mobile
building best of class payment and efficient and accessible. money wallets etc. Pivotal to
settlement systems for a 'less-cash' embracing such new age
Digital banking provides mission
India. The broad contours of payment systems are the people,
critical solutions to bankers for
Vision-2018 revolve around 5 Cs - technologies, and processes that
their short term and long term
coverage, convenience, confidence, have together created vast,
business and technological
convergence and cost. To achieve robust and dependable networks
requirements. Following are three
these, focus on four strategic and seamless systems that
driving factors in India.
initiatives such as responsive guarantee herculean
regulation, robust infrastructure, 1. Adoption: Post demonetisation transactional volumes at
effective supervision and customer e-commerce & m-commerce breakneck speed, and with
centricity is important. success is largely attributed to dependable security and
the phenomenal growth of counter-checks built around
RBI has periodically put forth its
various digital payment them.
vision for payment & settlement
technologies such as card
systems so that the banks migrate 2. Agility: Today, aspects such as
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