Bank CIOs Should Keep An Eye On Competition

by Sohini Bagchi    Jan 08, 2014

Madhivanan Balakrishnan Global CEO and MD 3i Infotech Limited

Sluggish economic growth has posed several challenges to the banking sector in India. Despite this, IT spends in this sector are expected to go up as focus is on developing new uses cases to improve customer experience, managing risk, and optimizing operations. In an exclusive interview with CXOtoday, Madhivanan Balakrishnan, Global CEO and MD, 3i Infotech Limited shares his views on IT trends and challenges in the banking sector for the next one year.

What are the major shifts you are noticing in the banking sector in India?

The banking sector is India is undergoing rapid technological development on one hand, while on the other the retail business is taking a new dimension in banking. So the shifts that are taking place are both internal and external to be more agile and productive. On the technology front, banks are looking to adopt new models for growth and are strengthening in areas such as risk compliance, security and customer services with new and advanced technologies. Earlier, the public sector banks were wary of adopting technology. However they have also realized that in order to complete with the cutting-edge technology and innovative growth models of private and foreign banks, they should not compromise on the quality of service. Even though the IT spends will not be very significant in the next one year, banks will continue to invest in areas such as Internet and mobile banking. A section of the banking population has already embraced these platforms, even though the challenge is to increase the reach in rural and remote areas. It will take a while for these technologies to mature.

What should be the key focus for banking CIOs in the coming months?

In the present economy that continues to be sluggish, each sector is facing multiple challenges and the banking sector is no exception. Interest rates are expected to go up further given the inflationary constraints and the same would impact economic growth. In such a scenario overall IT spending may not be significant in the coming months. Despite this, IT spends in this sector are expected to go up as focus is on developing new uses cases to improve customer experience, managing risk, and optimizing operations Technology expenditure is hence primarily expected to go up on risk management solutions; especially in the KYC, BASEL norms measurement and Operational Risk control areas. Requirements for Fraud Management solution is expected to go up tremendously. To bring mobile banking to the mainstream is a challenge currently as it has not been adopted the way it should have been. Even though banks are working in this area, it will take a while to reach the growth momentum.CIOs should also look at their payment and settlement system to ensure transfer of funds on real time basis eliminating risks associated with transactions and settlement process. Another area where banks should look at reducing the investment costs in technology applications is by sharing of facilities. Banks are coming together to share ATM Networks.  Similarly, in the coming years, we expect to see banks coming together to share facilities in the area of payment and settlement, back office processing, data warehousing, etc. With the new bank licenses expected in early 2014, technology companies are expected to benefit from the same as the new banks would look at the latest technology available.

Do you think the role of the CIO changing in the banking sector?

The business of banking has undergone a major shift and likewise the role of the CIO. It is important that the CIO understands or else, he would not be able to drive the change. He is increasingly playing a customer centric role. Here the focus is on external customers as well as internal customers that include the employees of the bank. He needs to understand the next-generation technologies. Many CIOs in the banking sector are already bullish on emerging technologies such as mobile, cloud, analytics and to an extent social. As banks now prefer core banking solutions with multichannel options like ATM, mobile, Internet, and IVR to attract customers, we have to build our new products with a multi-channel architecture approach. For example, we offer cloud and mobility-driven technologies to our banking customers. Externally, the CIO needs to keep an eye on its competition and the technologies they are implementing.

How important is consolidation in the banking sector?

Consolidation is a natural process and it is a good thing to happen because the need of the hour is to have large-scale banks to match their international peers and consolidate their positions on the global platform. consolidation is possible in two ways. one is India needs a bigger banking sector with more big sized banks and more banks in general. Small banks that play specific roles and cater to niche markets are as important as having large-sized banks that stack up in the context of global scale. This will lead to more competition, but that’s healthy in any sector and is good for the customer.

What is 3i Infotech’s focus on the banking sector for the next one year?

 In the next 1-2 years, we are focusing on mid-sized banks with end to end core banking, universal lending and factoring solutions to handle large transaction volume. The company is also planning to bring a host of automated solutions for the non-bank financial companies (NBFCs) in the coming months. We are noticing a significant percentage of banks in the mid-sized category, are looking to replace their legacy solutions with more efficient and flexible core banking systems. At the same time, they need to justify their ROI by investing into solutions that are more reasonably priced that the Finnacle and other solutions available on the market that are more suitable for larger banks. We are looking at banks in Asia Pacific, Middle-East and African markets, to facilitate them with customer-centric product development and provide flexible customization capabilities. Last year, we have expanded our Kastle family of products to enable banks to efficiently manage their retail operations as well as specialized corporate banking products to manage risk, asset liability, payments and treasury.