Technology and Banking

By
Swati Panwar
MBA II Sem
College of Engineering and
Technology
 Technology and Banking

The Quintessence Nature of Banking harmonizes

closely with Technology –

Tasks Common
to Both

Information
Bankin Storage Technolo
g Processing gy
Transmission
 Innovative Risk
Management
Complex Credit
Calculations

g y
l o
Global Operations
no
c h
Te
nd
Pervasive Branch a
Network
ng
ki
a n
B
Mass Transaction
& Items Processing
 Benefits of Technology

• Increased operational efficiency,

profitability & productivity
• Superior customer service
• Multi-channel, real-time transaction
processing
• Better cross-selling ability
• Improved management and
accountability
• Efficient NPA and risk management
 Focus aspects of Commercial
Banking now are:
BANK’S BUSINESS

SERVICES
LOANS & MISC.
Core MIS & ATMs
Banking (CBS) Intranet POS
Terminals
and Cash
Electronic dispenser
Card
Banking
Corporate Manage
Network ment
Any Branch Document
Banking Managem
ent
Risk Resource
CRM Managem Managem
NI SI AR

ent ent
BANK’S BUSINESS
Financial Technology
Infrastructure
Data Center to host servers for:
 CBS
 ATM/Financial Switch
 Internet Banking
 DW/DM/CRM/MIS etc.
 Back-office Application
 E-mail Servers, Internet Server,

Enterprise-wide Network & Networking

Equipment
Security Systems
Systems at Branches/RO/ZO/CO Depts.
Supporting Systems
Disaster Recovery Site & Business
Continuity
Technology – A Differentiator

Technology is indeed a differentiator not

only in terms of competitive
advantage, but also in terms of
administrative and back-end
processes….
But…due to rapid technology
deployment in Indian banking sector,
the “haves” and “have-nots” gap is all
set to narrow quickly.
 How Long a Differentiator?
• Then….can technology be enough of a
differentiator?
• Any new technology or technology-enabled
process can act as a differentiator or a
competitive edge for some level of time.
• After that time, the technology still has to be
adopted as a “necessity” and as a cost of doing
business
Thanks to shortening technology life cycles, it
would be short sighted to assume that
technology would be a long term
differentiator…
 For Long-Term Differentiation

Elements of Technology as a
Differentiator

Scalabilit Utility
Efficient Suppo
y& Process to
utilisation, rt
Flexibilit enabling custom
mgmt Skills
y er
 Issues with Customers

Not only employees, there are

problems for customers too
when a new technology
arrives…
• The major challenges –
– Comfort levels
– Security and trust issues
– Convenience factor
– Getting rid of myths
– Migration from existing to new
systems
– Changing the habits
 POS Terminal and Cash Dispenser

POS
Terminal
Connected
to Cash
dispenser
 ATM
Electron
ic
Banking
Branc
h
Branch 2 Bankin
Branch 3

g
Branch 1
Head
Office Branch 4

Branch n Branch 5

Branch 6
 Technology Acquisition
• Inappropriate technology purchases can be
the root of all problems…
• The Bank management has to:
– Give thought to the utilization rate
– Avoid “knee-jerk” reactions (“they have done it…
I should also do it”)
– Be impartial in technology decisions (“I like that
technology…I want it”)
– Understand where the solution will fit AND where
it won’t!
– Assess the strengths & weakness of solution
– And seek answer to “are we ready for it?”
Differentiation is attained not
achieved just through technology, it
is gained in the way the technology is
selected, implemented and utilised
•Goal definition •Efficient
•Integrating utilisation
business & •Customer utility
technology Technology •Technology
goals For Management
•Solution Sustained •Support
features Differentiati functions
•Vendor on •Maintenance
selection •Back-ups and
•Business Disaster
process re- Recovery
engineering •Scalability &
•Change flexibility
management •Learning &
evolution
Regulation and Supervision –
The Challenge
Challenge of Technology:
New markets, products, services, delivery channels
Opened up a market for “risks” – derivatives
Challenge of financing tech firms & IT innovation
all have implications for the stability of banks and of the
economy
The Opportunity
Regulators have new tools
Focus of all recent financial sector reforms
Emergence of non-intrusive, focused supervision
With a view to prevent frauds and disturbances to
financial stability
Technology and Banking Supervision

THE RBI RESPONSE

Offsite Supervision & Monitoring

OSMOS
COSMOS (Non banking Financial Companies /
Development Financial Institutions)
UBD Soft
Credit Information Bureau (A joint venture
between Housing Development Finance
Corporation Ltd., State Bank of India, Trans
Union International Inc. & Dun & Bradstreet
Information Services India Pvt. Ltd.)
Currency Management and Technology
– Opportunities Galore
Currency Management - a formidable task in India
given…
 the geographical size, the volume and value of notes and coins in
circulation, preference for cash and currency handling practices
 ...but technology offers immense opportunities to improve
performance
RBI’s The Clean Note Policy (1999)
Establishment of 2 state of the art currency presses
Technology driven anti counterfeit measures
48 fully automated Currency Verification & Processing Systems
21 Shredding and Briquetting Machines
 RBI and Customer Service…(1)

Dissemination of information
The RBI website
Multiple Delivery Channels
Coin & Note Dispensing
Machines
For the general public
Interactive Voice Response
System
For banks and financial
institutions
Web server
For government customers
On the anvil….
A secured web server
SFMS/email based
communication with
 RBI and Customer Service...(2)

Improvements in payment and

settlement systems
MICR Clearing
Enabling faster clearing of
cheques
Cheque Truncation & E-Cheques
On the drawing board
ECS/EFT
Enabling T+2 settlement of
our equities market
National EFT
Enabling T+0 settlement of
all customer funds transfer
transactions
The future will be not
be more of the same…
 
… we need to be
ready..

Thank You