Technology in Banking-Insight and Foresight for BTA_2011 ... - IDRBT

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Technology in Banking – Insight & Foresight 32 3.3.12. Rise of Prepaid Instruments Banks have seen the opportunity served by prepaid in addressing the gap left between the debit and credit customer base. Over 14 non-banking corporate entities have been granted permissions to issue prepaid cards in card-based, paper-based and other electronic formats, including virtual/mobile wallets to date. One of India’s leading mobile operators has been granted permission with several others in the fray. 3.3.13. New Credit Bureaus With two new credit bureaus being set up, in addition to the existing CIBIL, the quality and depth of the credit history and analysis is expected to grow multifold in the coming years, resulting in the enhanced quality of credit scoring and recoveries. The remarkable transformation has been the increased consumer awareness of the importance and impact of their credit histories. 3.3.14. IMPS: Mobile-based Payment System NPCI has introduced the Interbank Mobile Payment Service (IMPS) enabling seamless mobile-based transfers between bank account holders. The cornerstone of interoperability has been established with this measure. The innovation spree continues with a wide array of breakthrough business models, consumer propositions and technology solutions being implemented, driving the adoption of electronic payments. 3.3.15. Future Trends Changing customer preferences, mobile and internet penetration, rising cards, growth in disposable income and spend, as well as new technology initiatives have bolstered the payments landscape in India. It is evident that electronic payments will become increasingly popular as a delivery mechanism. However, there will always be customer segments, which will prefer to transact through a cheque or go to a branch to withdraw money. As such, banks will need to decide on the product strategy and create a mapping of their payment portfolio with their customer segments. Banks will need to increase their efforts in migrating customers from paper-based payments to electronic payments if they want to reap their benefits of cost advantages. However, this will require a fundamental change in consumer behavior, which can happen only if the banks and the regulator offer a secure, robust and efficient network, in addition to incentives in terms of convenience and benefits to customers. Business leaders of tomorrow would need to build on technologies foundations to deliver electronic payment systems. A robust architectural framework should be built by all banks to enable flexibility in gaining market share and increasing profitability from a more demanding customer base. Further, the technology framework needs to be developed, ensuring security to protect the reputation and support effective risk management. A framework that will reduce costs, bring about superior KYC/AML checks, help banks gauge customer behavior better and give an overall perspective on the profitability of their payments business would be most befitting. To achieve this, the increased acceptance of electronic payments by consumers across India is important. RBI has already extended Institute for Development & Research in Banking Technology
Technology in Banking – Insight & Foresight 33 a supporting hand to banks through the formation of the NPCI, for it will bring in a new focus on retail payments, which should also see the electronification that has been brought about by the introduction of RTGS in systemically important payment systems. 3.4. CRM Initiatives The Indian banking industry has undergone a sea change in the past few years. With the rapid growth in the services industry across the economy, customers have been exposed to higher standards of service and customer orientation. Profitable customers have started demanding the same level of service and customer differentiation from their banks. Banks have therefore largely started dismantling the commoditized services of the past and are focusing their efforts on creating value for customers. The only mantra of success for any bank is to build lasting customer relationships. As measuring and valuing customer relationships has taken centre stage, CRM has become a comprehensive approach that aligns business strategy, corporate culture and structure, as well as supports information technology. It is clear that although CRM has been in India for a long time now, but its penetration, especially in the financial services market, has been rather uninspiring. It has tended to largely focus on things at an operational level, essentially "middle-office" offers such as branch automation, fraud detection, straight-through-processing and other internally-focused efficiency plays as opposed to more beneficial “front-office” plays. New-age banks have taken a clear lead in the front-office play. But the survey also reveals that old-age banks are playing catch-up in this area. Being a low-cost player and having great operational efficiencies is now a mandatory requirement for banks and can no longer be looked at as differentiators. The true differentiation will arise from the customer value garnered by each bank. The long-term valuation of a bank will therefore be gauged by its customer loyalty. Customer loyalty should be gauged by the penetration of products per customer. This higher penetration is possible only when banks have a robust CRM system running across the entire organization seamlessly across channels providing customers with the right product at the right time through the right channel. The survey highlighted all the initiatives that banks are taking in this space and their individual level of preparedness for customer wars ahead. The survey also threw up some interesting, but widely held beliefs: There is a large standard deviation among banks in their CRM capabilities. All new-age banks do not have the same level of CRM maturity. In fact, there are some public sector banks, which will soon leapfrog over some private sector banks in the CRM race, provided public sector banks implement all their plans. The other trend at the leading banks witnessed is the focus on customer education and grievance redressal and a seamless integration of all channels. Meanwhile, banks have launched a host of new channels for customers. These channels have brought ease to customers at one level, but have also increased the challenge of providing a common experience to customers. Banks have all rolled out these channels, but are still struggling with migrating customers on to these alternate channels. A few banks have used their CRM capabilities well in this space to reveal a higher degree of channel usage by their customers. Institute for Development & Research in Banking Technology
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