Centralized Banking Solutions Key To Survival
A centralized banking solution today has become a matter of survival and not a choice, a fancy, a luxury, or a fad, says Deepak Ghaisas.
In an exclusive with CXOtoday, Deepak Ghaisas, CEO (India operations) and CFO, i-flex solutions, explained, Statistically speaking, approximately 60-65 % of banking transactions in Maharashtra take place through the 650 odd co-operative banks in the state. Each co-operative bank easily averages 20 odd branches, which translates into 13,000 branches mapped all across the state. A mind-boggling amount of float is available here. These co-operative banks see a flood of activity in the crushing season, and according to my calculations, if these 13,000 branches were somehow interfaced to connect to a Core Banking Solution (CBS) even in a dial-in mode, they can recover their entire investment within just an 18 month timeframe — even if they use the solution only to manage their treasury.
According to Ghaisas, banks that have steered clear of investing in technology should look at the entire process of automation as a five-step roadmap. CIOs should basically adhere to the following blueprint:
 Move towards centralization of infrastructure
 Build a customer centric model rather than a GL-centered approach
 Design an MIS with customer and regional profitability in mind
 Eye business enablers like CRM, data warehousing, etc.
 Drive maximum channel usage with a 24×7 anywhere anytime banking model
Today private players like HDFC Bank have a definite edge in the industry because of the absence of legacy baggage, and the fact that they flagged off their banking services keeping a very strong focus on adopting technology as a key differentiator, added Ghaisas.
Why shouldn’t technology be a business driver for the Indian banking industry? questioned Ghaisas. Globally, banks have registered 8-10% revenues with technology. Today private players in the market spend 5-6% of their budget on technology only because they can see the tremendous benefits linked with it.
Earlier, banks bagged customers merely on the basis of their geographical presence. Customers basically opted for banks within their residential area, as it was a matter of convenience. This deciding factor has changed drastically with the introduction of anywhere, anytime banking services. PSUs have basically adopted a branch automation principle. They should realize the importance of providing anywhere, anytime services. The benefits accrued cannot be ignored — service levels increase dramatically. Moreover, with a centralized solution in place, banks are able to assess risks more comprehensively, explained Ghaisas.
Detailing i-flex’s own initiative, Ghaisas explained, It’s been two years since we invested in Pune-based e-biz online to bring core technology to rural urban and district co-operative banks. Our CBS, Flexcube, sits as a virtual consolidator at the host level in this offering. We also have an ASP pay per transaction model called Flextel, to enable technology adoption amongst mid-tier banks. If the ASP model has worked wonders in the US, there’s no reason to doubt its success in India. A mindset change is definitely required, as CIOs are expected to dramatically sideline all fears associated with using an ASP model — like privacy concerns, MIS report transparency doubts, etc. Banks can straightway cut 80% in acquisition costs with an ASP model.
In the post-budget scenario, rural banking is back in the limelight. Ghaisas believes that consolidation will be the key driver. In a poor country like India, there is no reason for justifying the presence of individual ATMs for each and every bank. ATM consolidation is the key, and banks should work towards the establishment of common payment gateways. Since ATMs cost an average of Rs 20 lakh each, there is an immense saving in terms of both hardware and bandwidth.
Deeper issues plague the banking industry today. Today, private banks are the only players in the industry who designate a CIO profile to head their technology initiatives. The issues plaguing the adoption of technology in public sector banks are completely different. The CIO designation is virtually non-existent, as most PSU’s follow the thumb rule of structuring their IT departments with tiered designations like GM, DGM, etc, lamented Ghaisas.
Giving his opinion on the Global Trust Bank fiasco, Ghaisas said, I think the manner in which RBI managed the entire event was extremely mature and commendable. The retail level panic that followed was in many ways predictable.
i-flex is also looking to dive into providing certifications like BS 7799. Banks will only evolve if there is a consistent growth of soft infrastructure — an amalgamation of training and awareness, which is still struggling to keep pace with the speed of technology evolution, he concluded.
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