Newsletter, October 2009 - IDRBT

ISSN 0973-2527 Volume 12 No. 1
Fast Forward
Newsletter, October 2009
Exploring and Exploiting
technology
for Common Good
Institute for Development and Research in Banking Technology
( Established by Reserve Bank of India )

GREEN IDEAS : Dr. D. Subbarao, Governor,
Reserve Bank of India, and Visitor, IDRBT,
planting a sapling at the Institute on May 18, 2009
INTELLECTUAL CAPITAL : Dr. D. Subbarao
with members of the Institute's Governing Council and Staff

Fast Forward
October 2009
A CASE FOR IT GOVERNANCE IN BANKS
ANKING Technology in India is now
two decades old, counting from the
BR a n g a r a j a n C o m m i t t e e o n
Computerisation in Banks, 1989, which gave it a
push. By now, most of the Banks have attained
sufficient maturity in technology adoption,
upgradation and even absorption. A few banks
have even moved on to achieve some technology
innovation capabilities. There have also been huge
productivity gains.
The time is ripe for the banks to concentrate more
on making their IT implementation and usage
more efficient and effective. They need to explore
the ways and means of unlocking value from the
way IT is deployed, used, controlled and
integrated into the business of the bank. In short,
they have to get a firm grip over IT Governance -
concept, awareness and the extent and depth of
implementation.
What is IT Governance?
IT Governance, spearheaded by the IT
Governance Institute ( www.itgi.org), broadly
covers the following:
Alignment of IT Strategy with Business
Strategy
Making IT deliver Value to Banks
IT Risk Management
IT Resource Management and
IT Performance Measurement
Strategy Alignment
Strategy alignment is to ensure that IT is deployed
to help, maintain or improve business activity or
processes. For example, a one-year-old ATM
Network of a bank with only a daily average of 30
transactions per ATM (TPA) when compared
with its peer having over 300 TPA is a clear case of
the IT telling the Business to rise and meet the IT
vision and implementation.
The problem here may be that the bank in
question either installed more ATMs than its
customers needed or the ATMs were not installed
in convenient locations for their customers to fully
exploit or its customer profile is such that they are
not in favour of using ATMs or it may even be a
case of a sheer game of numbers wherein this
Bank wanted to score over its benchmark rival or
competitor by installing so many ATMs.
An indicator of better alignment would be
enrichment of the number and nature of delivery
channels with a higher proportion of products and
services moved to electronic, self-service and 24/7
platforms.
Value Delivery from IT
In simple terms Value Delivery means getting a
better Return on Technology Investment (ROTI).
This can be done through so many ways: reducing
the cost of operations, improving revenues,
launching new products and services that are IT
enabled, clearly specifying and monitoring the
deliverables from IT and so on.
For example in transactions done through ATMs
and Internet Banking, the bank is making the
customer do the complete transaction himself,
without any manual intervention from the bank.
To that extent, the transaction load on the
branches comes down. And this is a measurable
savings in costs of operation, that too with
improved customer satisfaction and complete
accountability and responsibility laid at the
customer’s door. Value Delivery from IT, as a
concept, is yet to take-off in India and hence the
level of awareness and commitment to this is very
low in most of the banks.
1

Fast Forward
October 2009
IT Risk Management
Having logged into Basel II already, banks are only too aware that pervasive IT constitutes 70% of their
Operational Risk. In other words, 7% of the additional capital they have to provide (with an alpha of 10%)
for operational risk will be to cover their IT risks. These IT risks can be more effectively managed with an
organizational mechanism, with board level commitment, which makes use of sound policies, for each and
every aspect of IT deployment, usage and control, backed up by international standards and best practices.
These policies get translated into procedures at the top management level and these procedures get split
into detailed practices (and guidelines) for the grass root functionaries to religiously follow.
A functional, supportive organisational structure is a sine qua non for the successful implementation of the
policies and satisfactory achievement of the objectives. Banks need to have an effective IT Risk
Management in place. In fact, it is time for the banks to take stock of the policies in place, the level of
commitment, understanding and implementation, and put in place the required organisational structures
to support and achieve the desired results.
IT Resource Management
IT Resources can be broadly classified into five major categories: Data, Applications, Technology,
Facilities and People. Acquiring, maintaining, using, leveraging, protecting and ultimately ensuring that all
these resources are put to effective and proper use to achieve the corporate business objectives will demand
enormous clarity, time, attention and commitment from bank managements and the involvement of the
rank and file.
Each of these resources should have clearly defined owners, mandated access and usage control matrices,
backup and recovery norms and accepted/acceptable standards of performance and reliability to make
them serve the purpose for which they exist. Banks have to gear themselves up in this regard for getting the
best out of their IT.
NEW DIRECTIONS : A High-powered committee under the Chairmanship of
Dr. C. Rangarajan reviews the Institute's activities to redefine the role of IDRBT
2

Fast Forward
October 2009
IT Performance Measurement
This is one of the most difficult nuts to crack. This
becomes all the more difficult if there is no clarity
on what the IT Infrastructure is expected to deliver.
Ideally we should have two inputs – what the IT
Resource is expected to deliver and how it is
supposed to impact the business process or
objective. To start with, banks can look at the first
part which may be a little easier than the second.
The first part, for example, will be to measure and
monitor the cost per page for using a specific
printer with the help of specific warranties,
guarantees and service level agreements for
maintenance. What the bank does with all those
print-outs or whether there are controls on what is
allowed to be printed is another difficult part to be
considered to arrive at the business impact of this
printer (irrespective of whether it is an impact
printer or not!).
In short, IT Performance Measurement is all about
setting or arriving at Key Goal Indicators (KGIs)
and Key Performance Indicators (KPIs), prior to
performance and not after. KGIs refer to progress
in terms of what exactly is to be done and KPIs talk
about how well the task is to be done. For example
KGIs talk about milestones like number of
branches or regions covered, KPIs talk about
accuracy levels, satisfaction levels, organizational
learning that happens in the process of
implementation etc. While KGIs look at outputs,
KPIs look at outcomes.
The monitoring mechanism relies as much on
clearly observable and measurable indicators as the
frequency of collection and the accuracy of the data
elements involved. The level of the hierarchy at
which the overall performance gets reviewed
decides the level of effectiveness of the
performance measurement process as a whole.
There is an urgent need for adopting IT
Governance. The time is ripe for banks to take it up
seriously and for the boards to insist on top priority
being accorded to this vital issue of governance.
By
M.V. Sivakumaran,
Assistant Professor,
IDRBT
Achievements
Dr. V. Ravi, Assistant Professor, IDRBT, has received an H-index of 8, computed based on the
citations for his papers. His paper, "Optimization of Complex System Reliability by
Modified Great Deluge Algorithm", published in the Asia-Pacific Journal of Operational
Research, 21, 4, 2004, 487-497, is listed in the Top Accessed Articles by the Journal in 2008.
The paper titled "Software Cost Estimation using Wavelet Neural Networks", K. Vinay
Kumar, V. Ravi, Mahil Carr & N. R. Kiran, published in the Journal of Systems and
Software 81, 11, 2008, 1853-1867 was listed as the 10th Hottest paper during Oct-Dec
2008 in Top 25 Hottest articles published in the Journal.
3

INSIGHTS FROM THE TOP : Dr. D. Subbarao, Governor, Reserve Bank of India, and Visitor, IDRBT,
interacting with members of Governing Council at IDRBT
MAKING IT DELIVER : A MAJOR INITIATIVE ON IT GOVERNANCE FROM IDRBT
ITH the economic meltdown in the West and Governance, only can help banks in addressing this
the resultant slowdown across the world, alignment challenge, he added.
WCorporate Governance has assumed significance of an
Making IT Deliver
unprecedented magnitude. Now that pervasive use of
With a view to "Making IT Deliver" its full potential to
IT in enterprises across the world for internal and
the banking industry - all its players and stakeholders -
external communication, interaction, business
we have launched a major initiative on IT Governance.
processes and knowledge management has far outpaced
all our expectations, the enormous capacity for IT The efforts started in January 2009, where we instituted,
Governance to contribute efficiently and effectively to as part of our IDRBT Banking Technology Awards for
Corporate Governance needs no emphasis.
Excellence, a new award category for IT Governance
The Banking Scene
and Value Delivery. The feedback gathered from the
Banks in India have come a long way as far as usage of
Banks, gave us a better picture of the current status of
technology is concerned. Most banks have attained
conceptual awareness, reach, extent and depth of
sufficient maturity in technology adoption. Some of
implementation levels of IT Governance in Banks.
them have even gone on to use IT in innovative ways. This led us to plan for a pilot programme on IT
Now is the time to concentrate more on making IT Governance for Executives in the Top Management -
implementation and usage more efficient and effective. AGMs and above. This two-day programme was
For this, they will have to focus on the effective ways and successfully conducted on April 27 and 28, 2009. A
means of unlocking value from the way IT is deployed, good mix of 22 executives from Business and IT Wings
used, controlled and integrated into the business of the from different banks attended this programme.
Bank.
We also propose to mount a series of effective steps to
There is an urgent need for spreading the heightened impress upon all the stakeholders to take IT
sense of awareness needed for controlling and Governance seriously, as the only way forward for
exploiting IT to the maximum extent to derive the full growth with value and values, without any further loss of
benefit in terms of managed risks, reduced costs, time. As part of this initiative, we have also launched a
improved returns, effectiveness and efficiency.
research project to evolve an IT Governance
Framework for Banks, which seeks to draw upon the
Dr D. Subba Rao, Governor, Reserve Bank of India,
best practices across various standards and frameworks
and Visitor, IDRBT, in his address to the bankers, at
currently available, apart from factoring in the views and
the IDRBT Banking Technology Excellence Awards
practical possibilities from the bankers themselves.
function, held on May 18, 2009 highlighted that a major
challenge in IT implementation for banks is the For more details on IT Governance initiatives and Inalignment
- of Business, IT, HR and Organisational Company Programmes, please contact :
Structure - which is so critical to derive value. IT Shri M.V. Sivakumaran, Assistant Professor
Governance, an important component of Corporate (mvsivakumaran@idrbt.ac.in).
4

WINNERS ALL : Dr. D. Subbarao, Governor, Reserve Bank of India
and Smt. Shyamala Gopinath, Chairperson, IDRBT with the winners of
IDRBT Banking Technology Awards, 2008
IDRBT
Banking Technology
Excellence Awards
2008
Dr. D. Subbarao, Governor, Reserve Bank of India,
and Visitor, IDRBT, presented the IDRBT Banking
Technology Excellence Awards for the year-ended
March 2008 on May 18, 2009.
Speaking on the occasion, the Governor focused on the
potential of IT in extending banking services to the
under-served rural and semi-urban areas. "The use of
Smart Card technology, mobile ATMs, coverage of
post offices under electronic payments networks in outof-reach
areas - all could play significant roles in
providing financial services to more people," he
stressed.
He also outlined the focal areas for IT implementation
in banks which includes enabling differentiation in
customer service; Facilitating customer relationship
management based on available information, which can
be stored and retrieved from data warehouses;
Improving asset-liability management for banks, which
has a direct bearing on the profits of banks; Enhancing
compliance with anti-money laundering regulations;
and Complying with Basel II norms.
Pointing out that in the years ahead, the ability of banks
to harness new technologies to meet the demands of
households and businesses will be tested, he exhorted
the banking sector to meet the challenges head on,
continue to find new and better ways to put technology
to their and their customers' best use, and thereby
efficiently manage the associated technology and
business challenges.
Shri B Sambamurthy, Director, IDRBT, in his
welcome address, recounted the interesting journey of
IT in Banking - starting as an IT monarchy yielding to
Business Monarchy later and moving on to the current
federal structure while connecting IT and Business. He
stressed on the need for framing common, open and
interoperable standards to bridge the digital divide and
to get the best out of core banking platforms, which have
become the engines of growth. Further, he advised
banks to look beyond core banking, which essentially is
a transaction management platform.
5

Fast Forward
October 2009
Banking Technology Excellence Awards 2008
An eminent jury consisting of Dr. R. B. Barman, Ex-
Executive Director, Reserve Bank of India; Prof. G.
Sivakumar, Professor, Indian Institute of Technology,
Bombay; Shri H. Krishnamurthy, Professor, Indian
Institute of Science; Dr. K. Ramakrishnan, Chief
Instituted by IDRBT in the year 2001, these awards aim to
infuse a spirit of healthy competition and accelerate the
process of technology implementation and innovation
among various banks in the country.
The Awards are also meant to act as catalysts by
recognizing and rewarding the efforts of banks aimed at
Banking and Financial Sector.
better use of technology, greater levels of technology Executive, Indian Banks Association; and Shri H. N.
absorption, and improved levels of customer service and Sinor, Chairman, 3i Infotech Limited; adjudged the banks
satisfaction through innovative use of technology. for arriving at the winners for the year.
The Awards are arrived at after a careful scrutiny and
evaluation of the inputs called for from all the banks in the
country on a wide range of parameters. Accordingly, these
awards are the best indicators of efficient and effective
technology implementation and innovation in the Indian
Both Public and Private Sector Banks submitted
information for each category of award. The jury took into
account the heterogeneities in the industry in terms of
size, presence and level of operations while comparing the
banks for each category of award.
The awards, meant to recognise and honour the best and innovative use of information technology to enhance the
levels of customer service and satisfaction, were presented by the Hon'ble Governor in the following categories:
Best Use of Technology for Financial Inclusion
Best Bank Award : Corporation Bank
Shri Jag Mohan Garg, Chairman & Managing Director,
receives the Award
Special Award : Punjab National Bank
Dr. K. C. Chakrabarty, Chairman & Managing Director,
receives the Award
6

Fast Forward
October 2009
Best Use of IT for Customer Service in Semi-Urban and Rural Areas
Among Large Banks : State Bank of India
Shri Chintagunta Ramnath, CGM (IT ),
receives the Award
IT Governance and Value Delivery
Among Small Banks : Karur Vysya Bank
Shri P.T. Kuppuswamy, MD & CEO, receives the Award
Best Bank Award : HDFC Bank
Shri Aditya Puri, Managing Director, receives the Award
Special Award : Kotak Mahindra Bank
Shri Sanjay Balsare, Executive Vice President, receives the Award
Initiatives in Mobile Payments
and Banking
Best Bank Award : ICICI Bank
Shri Mukesh Kumar Jain, Senior General Manager,
receives the Award
7

REGULATOR'S PERSPECTIVE : Shri. G. Padmanabhan, CGM-in-charge, DPSS, RBI,
delivering a lecture on Mobile Banking at IDRBT on August 11, 2009
EXECUTIVE DEVELOPMENT PROGRAMMES
ONSIDERING the changing nature of Risk for Compliance was conducted and the
threats and feedback from the earlier response was encouraging. A Programme on
Cprogrammes on Information Systems Mobile Banking was conducted in August 2009 with
Security, focussed programmes on Hardening of active participation from several banks.
Operating System was held in January and June
2009.
Besides conducting training programmes, a meeting
with IT Heads of Regional Offices of various banks
A programme on Business Continuity Management was conducted to understand and discuss their
was held in December 2008. This programme was training needs, and also the typical problems faced
based on the DRI International's Professional in implementation of IT.
Practices and Business Continuity Institute's Good
Practice Guidelines.
A meeting with General Manager (IT) & (HR) of a
few banks was also held in Bangalore in January
Given the national imperative for bringing 2009 to understand the Top Management
unbanked sections to the formal banking sector, expectations from our Executive Development
three programmes on Financial Inclusion were held Programmes. Aspects such as Green IT,
during December 2008 - July 2009.
Virtualization, Governance, Business-IT alignment
Further, for the first time, the Institute has
were discussed.
conducted two programmes on IT Governance, A Training Consultative Council has been formed
since huge investments in IT need to be with representation from banks (IT and HR), IT
administered in an efficient and effective manner. industry and Consultants. The purpose is to align
Governance, Risk and Compliance is the new the programmes offered at IDRBT in tune with the
mantra whatever the industry; to sensitize the Chief requirements of the banking sector.
Compliance Officers of Banks, a one day
Programme on Data Protection Imperatives was In all 20 programmes have been conducted from
conducted on July 07, 2009 in collaboration with December 2008 to August 2009 and attended by
Data Security Council of India.
547 participants.
Operational Risk is a huge area where there is lot of
scope for improvement. For the first time, a 2-day
Programme on Basel II - Managing Operational
The Institute's constant endeavour has been to
provide programmes that are relevant to banks, with
quality content.
8

BANKING FOR MASSES : Smt. Usha Thorat, Shri. B. Sambamurthy, Dr. K. Ramakrishnan
and Dr. K. Unnikrishnan, at the workshop on Open Standards for Financial Inclusion held on Feb. 5-6, 2009
OPEN STANDARDS FOR FINANCIAL INCLUSION
MANY banks have started implementing Financial Inclusion on February 05 - 06, 2009.
financial inclusion schemes using
information and communication Consequent to the deliberations, a "Technical
solutions. Broadly, two technologies have been Committee on Open Standards for Financial
explored; while one is smart card based, the other Inclusion" has been constituted comprising of
rides on mobile telephony.
bankers, technical experts from academia and
government. This committee has been working for
However, almost all banks, barring a couple have not over five months and the draft open standards for
been able to roll out the pilots. This is largely Smart Card based Solutions for Financial Inclusion
attributed to lack of common standards which makes has been released for public review at www.idrbt.ac.in.
large-scale procurement and implementation Subsequent to the review, the final standards will be
difficult, and even renders intra-bank operability released.
difficult. Interface with CBS platform would also pose
problems.
A migration path for adoption of these standards for
banks and certification for adherence to the standards
Common standards would facilitate pan India
are also envisaged. The smart card based solution
deployment by banks; bring in scale benefits in
standards relate to the following areas - card
procurement and deployment; help in accelerating
numbering scheme, smart card hardware, smart card
ICT deployment and avoid vendor lock in for all
operating system, smart card architecture, bank
technology components; and enhance customer
terminal functionality and security framework (key
convenience by providing inter-bank access.
management system).
In order to address these issues, the Institute along
with the Indian Banks' Association teamed up with a
few select banks like State Bank of India, Punjab
National Bank, Union Bank of India, Corporation
Bank, South Malabar Grameena Bank, UCO Bank,
NABARD and institutions like Indian Institute of
Technology, Kanpur and National Informatics
Centre to organise a workshop on Open Standards for
9
These standards are likely to facilitate a quick and
efficient rollout of the financial inclusion schemes,
provide convenience to customers by making bank
terminals interoperable and ensure vendor
independence for banks. The proposed UIDN
number/standards would compliment these smart
card standards particularly by way of KYC
compliance.

Fast Forward
October 2009
TECHNOLOGY SERVICES
Structured Financial Messaging System
INETY four banks are participating in the
Structured Financial Messaging System
N(SFMS) as at the close of July 2009.
Participation of banks in National Electronic Funds
Transfer (NEFT) has also tremendously increased with
the number of branches increasing to 57000+ in 94
banks. With the increase in number of participants, the
utilisation of NEFT in terms of number of transactions
and volume handled have also increased.
The infrastructure for providing a cost-effective
solution to the small and mid-sized banks enabling
them to participate in SFMS and NEFT has been
operationalised and 34 banks have already joined the
Common Gateway
IFSC Directory
The IFSC Directory has been hosted by IDRBT as a
part of the technology infrastructure initiative being
created for the banking and financial sector. 107 banks
have furnished their details and 55779 branches have
been listed.
Common Gateway for Small Banks
The infrastructure for providing a cost-effective
solution to the small and mid-sized banks enabling
them to participate in SFMS and NEFT has been
operationalised and currently 34 banks participate
under Common Gateway.
given to local railways, who could prepare their
payment schedules in SFMS format and same was
uploaded in SFMS at RBI, Hyderabad and RBI New
Delhi. The payment has been linked through Transfer
Responding Advice of IAS, generated in SFMS.
SFMS/NEFT to Royal Monetary Authority
of Bhutan
With a view to provide technical support to the Royal
Monetary Authority of Bhutan (RMAB) in
operationalising Electronic Retails Payments services
in Bhutan, RBI sent a Project Team to Bhutan to study
their system and to provide software/product being
used in India with suitable customisation for use in
Bhutan. A representative from IDRBT too was part of
the team.
RMAB have evinced interest in SFMS/NEFT for their
individual electronic fund transfer and NFS for
providing inter-operability to their ATMs being
operated by their commercial banks.
SFMS/NEFT for Railways
IDRBT's efforts to popularise SFMS is bearing fruits. A
pilot has been completed to link the Railways payments
through SFMS/NEFT at RBI Hyderabad with the able
support from RBI Central Office and RBI, Hyderabad.
The RBI is in dialogue with the railways concerned in
the respective regional offices of RBI and soon all
payments flowing from Railways to the regional offices
of RBI would be channelised through SFMS/NEFT.
In this regard, a utility developed by IDRBT has been
24 x 7 SERVICE : A team of
IDRBTians providing round-the-clock
service to the Banking and
Financial Sector
10

Fast Forward
October 2009
Other SFMS Initiatives
• A feature to further enhance the functionality of
SFMS is being slated to be rolled out in October
2009
• The branches under SFMS/NEFT would be
increased further bringing the number to match the
RTGS participating branches.
• More banks would be brought under SFMS
before the end of the quarter taking the total
number of banks to 100.
• A positive confirmation facility for NEFT
remittance is being introduced. The roll-out of
positive confirmation for credits is also on the anvil.
National Financial Switch
The Institute's National Financial Switch (NFS) Consequent to the decision of Reserve Bank of
continues to facilitate inter-connectivity between India to make withdrawal transactions free from
the Banks' switches, thereby enabling the any ATM in India from April 01, 2009, the
customers of member banks to use all ATMs of the transaction volume of NFS increased
network. The NFS Network presently connects tremendously. As compared to an average volume
42,362 ATMs of 37 banks, which is the largest of 1,85,080 transactions in April 2008, the average
number of ATMs under a single network in the transactions handled in April 2009 stood at
country.
9,75,580 transactions. As of July 31, 2009, the
- number of transactions per day stood at 16,27,907.
In order to handle the increasing number of
transactions, the Institute has upgraded the NFS
infrastructure and the NFS has successfully
handled multifold increase in transaction volumes.
In fact, the new system is capable of processing
over two billion transactions.
ANY BANK ATM::
Shri. L. Giridhar managing the NFS
Further, the NFS Standing Committee was
reconstituted in August 2008 and it now consists of
RBI, IDRBT and CCIL as permanent members
and nine members from NFS member banks in
the order of their ATM numbers. A meeting of the
Standing Committee was held on July 06, 2009.
Further, the Institute has also set up an NFS User
Group to deliberate various issues related with the
procedures, fee, etc.
11

Fast Forward
October 2009
Customer Relationship Management
The CRM processes should fully support the basic
customer lifecycle steps, viz., (i) Attracting present and
new customers (ii) Acquiring new customers (iii)
Serving the extant customers (iv) and finally, retaining
the customers.
Selection of right CRM Technology is critical to the
success of any CRM initiative. Most CRM packages
provide excellent sales force automation, but they are
not equally good at integration with computer/web
telephony. According to Gartner's magic quadrant for
CRM, Customer Service Contact Centers in 2008,
Oracle (Siebel Systems) is the market leader with
other players lagging way behind.
USTOMER Relationship Management
(CRM) is a new buzzword in marketing,
Cthanks to the advent and proliferation of
'customer-centric' philosophy that replaced the age-
old 'product-centric' philosophy. This paradigmatic
shift dramatically changed the way business is
conducted across all services industries, viz., banks,
retail, insurance, telecom, etc.
In 1980s, a concept called Customer Information
System (CIS) was introduced. The initial applications
had limited functionality and they were designed to
support a specific set of employees. Later, it changed
into contact management, sales force automation, call
center and customer contact center.
CRM methodology enables an organisation to
understand the customers' needs and behaviour in a
better way by introducing reliable processes and
procedures for interacting with customers and
developing stronger relationships with them. It
provides the whole information about customer,
which yields insight into behaviour of customers and
value of retaining those customers.
The following benefits normally accrue from a CRM
initiative:
A mix of different software to link the
databases, data warehousing software,
contact management software, and a CRM
package will go a long way in helping to
upgrade the small companies
Develop better communication channels
Collect customer related data
Create detailed profiles of individual
customers by resorting to analytics.
Increased customer satisfaction and
enhanced customer loyalty
Access to customer account history, order
information, and customer information at all
touch points
Identify new selling opportunities
Increased market share and profit margin
Increased revenues
More effective reach and marketing
Improved customer service and support
Improved response time to customer requests
for information
Improved ability to meet customer
requirements
Improved quality communication and
networking
12

Fast Forward
October 2009
Reduced costs of buying and using product The purpose of contact management tools is to :
and services
aim to reduce costs by improved process
Better stand against global competition
efficiency and use of media-based
communication channels
Types of CRM
Customer Relationship Management is of three to provide customers with a consistent
types:
interface across all communication
(i) Operational CRM
channels
(ii) Analytical CRM and
(iii) Collaborative CRM
Operational CRM
It enables effective interaction with customers and
gathers data about customers at various touch
points. Increasingly, organisations are accumulating
comprehensive data about their customers such as:
Personal details including age, gender,
marital status, income band
Account details including type of account,
tenure, payment plan
Behaviour including spending and service
usage, rewards usage
Preferences including lifestyle, hobbies,
buying preferences
Credit status including from credit
monitoring agencies
Demographics including from census,
market research agencies, etc.
Various types of tools are used for this purpose such
as:
Contact management tools
Channel management tools and
Content management tools
c o l l e c t i n f o r m a t i o n l i k e t o p i c s
discussed, customer requirements, soft
customer d a t a l i k e h o b b i e s ,
preferences, interests, details about
children and other minor stuffs. Thus,
demographic and psycho-graphic data of
customers will be collected.
On the other hand, channel management tools :
aim to understand how customer
interacts with the company
aim to deliver products and services
across multiple channels in an effective,
efficient and consistent manner.
Finally, content management tools :
help the company manage what is visible to
the customers, i.e., what the customers are
able to see when they interact with the
company
help the chiefs of business units to find out
whether the customers are satisfied with the
company or not.
We can perform the following analysis with this
data using Analytical CRM:
Segment customers by business value
Model new customer characteristics
13

Fast Forward
October 2009
Assess affinity to a product, service or
message
Learn how frequently to contact each
customer
Market basket analysis (cross-sell/up-sell)
Multiple campaign response models
Customer growth and profitability growth
models
Churn models
Customer lifetime value
Credit risk scoring
Analytical CRM
The data collected in operational management is
analyzed to segment customers using various old
and sophisticated data mining analytics. Analytical
CRM is composed of the following components
(i) Pattern discovery (ii) Product and customer
analysis (iii) Multitude (iv) Sorting and customer
fractionation and (v) Customer value evaluation.
Thus, in a broad sense, data warehousing, online
analytical processing, data mining and marketing
constitute a CRM solution
loyalty. It allows a company to synchronize and
manage efficient, productive interaction with
customers, prospects, partners and internal
associates across all communication channels.
The customers' viewpoint is taken care of at every
transaction level thus enabling better service to the
customer. Collaborative CRM also reduces web
service costs by enabling web collaboration.
Implementation of CRM
To implement CRM, following factors need to be
accorded due consideration:
Interaction between customers and
company should be made easy, which in
turn enhances quick response to
customers' request and suggestions
Information about company like content
of customisation, advantages of the
company, benefits doled out to the
customers should be given easy access.
This establishes profitable relationships
with the customers based on mutual trust
and respect.
A b u n d a n t s u p p l y o f c u s t o m e r
information, which is integrated from
different channels
Analytical solutions provided for most companies
are an integrated view of customer across all
channels and applications such as campaign
performance analysis, customer profitability
analysis, cross selling and up-selling
Customers' data should be updated along
with passage of time.
Having cordial relationship with other
companies targeting the same customer
Collaborative CRM
segment. Thus, giving relevant solution to
customers' need and increasing
Collaborative CRM proposes the collaboration of acknowledgement to customers
results obtained from various departments of
enterprise like sales, technical support and Customers' data must be segmented for
marketing and shares the information collected customization thereby tailoring the
about customers. The objective is to improve the
quality of customer service and increase customer
company's product and services
accordingly
14

Fast Forward
October 2009
Even though virtually any services company must
adopt CRM, it becomes mandatory for some
companies. Companies dealing with banking,
finance, retail, insurance, airlines and hotels,
telecommunications and healthcare benefit a lot
from installing CRM software (Grigonis, 2000).
The need for CRM installation increases with the
number of channels to access customers and the
number of touch points with customers.
On High failure rate of CRM Projects
A Butler Group study reported that 70 percent of
CRM implementations fail. A Gartner study
reported that approximately 55 percent of all
CRM projects failed to meet customers'
expectations. Many people believe that these
"failures" are the result of the tools themselves,
which is usually not true. Another problem is that
many of the reports define success based on the
management's impressions and not on the
evidence of return on investment (RoI).
A new study, jointly conducted by Crmguru.com,
Mangen Research Associates and Caribou Lake
Customer-1, differs significantly by taking a closer
look at CRM implementations as well as the
factors that influence RoI. They reported that
only 35 percent of CRM implementations, when
considered over their entire life, can be
considered failures. That's less than half the
failure rate noted in some analyst reports.
In contrast, 45 percent of CRM implementations
are producing a payback. Most CRM failures are
the result of poor implementations rather than a
problem with the technology or the underlying
concepts of CRM. There are four key
implementation related factors that determine the
success of CRM projects:
Adopting a customer-centric strategy :
This is the most important factor.
Customers of today behave differently
from those of just a few years ago. They
realise the fact that they have a choice
and they can demand more from sellers for the
money they spend.
SETTING THE TONE : Shri. B. Sambamurthy, Director, IDRBT, inaugurating the
Programme on Beyond Core Banking held from April 15 - 17, 2009 at IDRBT
15

Fast Forward
October 2009
Line staff should be engaged in CRM project: You
can't force sales people and service agents to use
CRM tools. Companies that properly educate
relevant staff members about the business benefits
of CRM and train them to use it properly are more
likely to achieve success. Figure out how the CRM
system will make life easier for line staff so they can
see how they will derive direct benefits from the
tools.
Companies must also be willing to change their
organizations to take advantage of CRM: For
example, organizations that traditionally place all
pricing authority in a central organization may not
realize all the benefits of CRM technology unless
they are willing to let sales people directly
negotiate pricing with customers, and thereby
close sales more quickly.
Setting measurable goals for the CRM project is
paramount: It's difficult to monitor progress of a
CRM project and its actual payback without first
establishing metrics and evaluating performance.
To establish metrics, most companies need to
make a substantial investment in customer
research
Moreover, one should not expect short-term
financial goals and a quick RoI from CRM
projects. Most of the financial benefits of CRM
accrue from projects that prevent customers from
churning out and encouraging them to spend
more with the company. These benefits will
become tangible after at least a year or two.
Companies that don't aim for long-term
advantages of CRM should probably avoid taking
up CRM projects altogether (CRMguru.com).
Finally, one must realize and appreciate the fact
that a CRM project is essentially a business
initiative and not a routine IT project. This is
despite the fact that implementing a CRM project
does require a heavy dose of IT infrastructure.
The reasons for this assertion is that a CRM
initiative is conceived and started to further the
business goals of a company, viz. increasing
customer base, retaining old and profitable
customers and ramp up the revenues and profits
of the company in the process.
By
V. Ravi,
Assistant Professor,
IDRBT
( In the next issue: CRM in Banking )
Certifying Authority Services
The IDRBT Certifying Authority has issued over
1,20,000 Digital Certificates. Banks and Financial
Institutions are using certificates issued by
IDRBT CA for RTGS, CFMS, Corporate e-mail,
SFMS, CTS, Internet Banking Web Server,
OLTAS and CCIL settlement applications.
Further, there are 133 Registration Authority
Offices covering Public Sector Banks, Private
Sector Banks and Financial Institutions. These
also include 16 Registration Authority Offices
created for State Bank of India.
Forty Five RA offices for all Regional Offices and
Central Office Departments of Reserve Bank of
India are also in operation. IDRBT is also acting
as Registration Authority Office for banks and
financial institutions that do not have an RA set
up.
16

FORTHCOMING PROGRAMMES
DURATION
PROGRAMME
COORDINATOR
07-08 October 2009 Data Centre Management U. Kalpagam
12-16 October 2009 Data Mining for Bankers V. Ravi
12-14 October 2009 IT Governance for Executives M.V. Sivakumaran
19 - 20 October 2009 Technologies for Financial Mahil Carr
Inclusion @ IIBM, Guwahati
26-28 October 2009 Technology Tools for Trainers U. Kalpagam
29-30 October 2009 National Electronic Funds Transfer R. Mani
05 - 06 November 2009 Mobile Banking Mahil Carr
16 - 18 November 2009 Web Services V. Radha
23 - 25 November 2009 Wireless Technologies and Mobile Payments V. N. Sastry
26 - 27 November 2009 Payment Card Industry -
Data Security Standards
U. Kalpagam
& Mahil Carr
30 Nov - December 01 2009 National Electronic Funds Transfer R. Mani
02 - 04 December 2009 Business Continuity Management
U. Kalpagam
11 December 2009 Green Computing Mahil Carr
14 - 18 December 2009 Information Systems Audit
M.V. Sivakumaran
21-23 December 2009 Hardening of Operating Systems U. Kalpagam
29-30 December 2009 National Electronic Funds Transfer R. Mani
04 - 06 January 2010 XML Technologies and XBRL V. Radha
11 - 12 January 2010 Technologies for Financial Inclusion M V N K Prasad
02 - 03 February 2010 Quantitative Techniques in Finance V N. Sastry
08 - 09 February 2010 Secure Coding Practices U. Kalpagam
15 - 16 February 2010 Mobile Payments M V N K Prasad
01 - 03 March 2010 Ethical Hacking U. Kalpagam.
15 - 17 March 2010 New Trends in Internet U. Kalpagam.
22 - 26 March 2010 Information Systems Audit M.V. Sivakumaran
For details :
Programme Office, IDRBT,
Castle Hills, Road No. 1, Masab Tank, HYD-500 057.
Ph : 040 - 23534981, Extn. 2121, Fax : 040 - 23538080
e-mail : program@idrbt.ac.in, Website : www.idrbt.ac.in

Institute for Development and Research in Banking Technology
Castle Hills, Road No. 1, Masab Tank, Hyderabad - 500 057,
EPABX : +91-040-23534981, Fax : +91-040-23535157.
e-mail : publisher@idrbt.ac.in, http://www.idrbt.ac.in