Banking in a transforming

economy
IDRBT Foundation Day
November 6, 2012
2
genda
Tec!no"ogy # disru$tive c!ange in banking
transforming India
T!e future of Indian banking
3
genda
Tec!no"ogy # disru$tive c!ange in banking
transforming India
T!e future of Indian banking
4
Im$rove
o$erationa"
efficiency
%inimise
costs
&nab"e
!ig!'s$eed
$rocessing
""o( data
ca$ture and
data mining
Banking sector ear"y ado$ters of tec!no"ogy
Im$rove customer e)$erience (it! en!anced interna"
efficiency
Disru$tion in banking
5
Deve"o$ments $ost t!e year 2000

dvent of retai" banking

*ro(ing $resence of foreign banks

&mergence of a universa" banking mode"

Banks and non banks com$eting to serve simi"ar

customer needs

Tec!no"ogy driven innovation in $roducts and

access to services

Focus s!ifting to inc"usive banking

6
Tec!no"ogy im$act on banking $ost 2000
Infrastructur
e

RT*+ ,200-.
1

N&FT ,200/.
2

Interbank %obi"e 0ayments +ystem

,2010.

T% insta""ed base of over 100,000

,over 212 com$ounded gro(t! from
2006 to 2012.

03+ termina"s over 100,000

1. Real time gross settlement system
2. National electronic funds transfer
7
I4I4I Bank
Internet
T%s
Branc!es
4a"" centre
+!are of
transactions in
2012
5/2
-12
122
22
T!e disru$tive $o(er of tec!no"ogy
%obi"e 22
03+ 12
+!are of
transactions in
2001
22
52
6-2
12
'
'
8
Tec!no"ogy is in a continuing state of f"u)

7ig!er ca$acity and $rocessing ca$abi"ity

+oft(are to run t!e devices

bi"ity to connect t!roug! broadband and (ire"ess

%obi"ity, ne( $"atforms and t!e ecosystems in

!and!e"d devices
From mainframe to
minicom$uter to
deskto$ 04
And now, mainframe in
a pocket

Ne( $"atforms suc! as for $ayments are no(

c!a""enging t!e traditiona" bank c!anne"s
9
T!e ne)t (ave8 being connected

292/ bn ,522. of (or"d $o$u"ation is on"ine today,

and 1910 bn users are on 5*

%obi"e internet is ram$ing u$ dramatica""y

/1 mn 5* users in 4!ina, y'o'y gro(t! of 11/2

56 mn 5* users in India, y'o'y gro(t! of :-02

%obi"e internet no( makes u$ /02 of internet

traffic in India

3ut of 19:0 bn mobi"e users in 4!ina and India

3ne bi""ion (i"" go on"ine in t(o years

+ource8 ;04B
10
4onnectivity in India 99

100 mn internet users, :00 mn mobi"e subscribers

Broadband connectivity a cata"yst

4onsumers are becoming $art of t!e c"oud

seam"ess"y (it!out conscious"y rea"ising it

Device costs (i"" continue to dro$

%ore and more ca$abi"ities (ou"d be avai"ab"e at

"o(er costs
.. would have a significant impact on banking
T!ird "argest
internet user base
T!ird "argest
internet user base
+econd "argest
mobi"e subscriber
base
+econd "argest
mobi"e subscriber
base
11
genda
Tec!no"ogy # disru$tive c!ange in banking
transforming India
T!e future of Indian banking
12
India<s current $ositioning
4!ina
,=+D.
2005 200/ 2010 2012 ,&.
*D0 ,bn. 1,6-1 2,2/1 /,650 1,662
0er ca$ita *D0 1,210 1,126 5,15: /,:66
0o$u"ation ,bn. 1926 1951 195- 195/
,&. ' estimate
Note8 *D0 is on nomina" basis
+ource8I%F
India
,=+D.
2005 200/ 2010 2012 ,&.
*D0 ,bn. /60 :0: 1,/6: 1,116
0er ca$ita *D0 /-6 126 1,5-2 1,-//
0o$u"ation ,bn. 1901 1911 1916 1922

India in 2010 (as at t!e >uncture (!ere 4!ina (as in 2005

India in 2010 (as at t!e >uncture (!ere 4!ina (as in 2005

13
5/
--
-/
6-
6:
11/
111
1-6
1/1
111
11-
2-6
7yderabad
4!ennai
=kraine
Banga"ore
4?ec!
;o"kata
0ortuga"
De"!i
T!ai"and
Denmark
%umbai
Be"gium
Ra$id urbanisation
+ource8 %ckinsey
GDP USD bn
Indias metros in !"#" will
be as large as some
countries were in !""$
India<s "arge metros in 20508 by *D0
ssuming an annua" *D0 gro(t! of :902 bet(een
2006'201: and 1902 bet(een 201:'2050
14

3ver 100 mn $eo$"e across 600,000 vi""ages

Rura" gro(t! su$$orted by8

4!anging c!aracteristic of rura" economy (it! reduced

de$endency on agricu"ture

Rising (ea"t! creation (it! estimate of -0 mn midd"e #

!ig! income !ouse!o"ds by 2010
Resurgent rura" India

519 :
5:9 5 /19 -
2-9 1
2/9 :
209 0
519 / -29 -
2:9 6
0
20
-0
60
:0
100
1666'00 200-'0/ 200:'06
Services
Industry
Agriculture
+!are in rura" ND0 ,2.
gricu"ture Industry +ervices
15
@ooking a!ead8 im$act of $er ca$ita
*D0 gro(t!
0er ca$ita
*D0 A =+B /00
0er ca$ita
*D0 at =+B
/00 '1,/00
0er ca$ita
*D0 at =+B
1,/00 '2,/00
Demand for better
"iving
environment
@imited
as$irations

@o( affordabi"ity

Increased
affordabi"ity

s$irations of a
better "ifesty"e
0er ca$ita
*D0 at =+B
2,/00'-,000
cce"erating
consum$tion
cyc"e
&ar"y 2000
2002'2011
2012'2011
201:'2021
16
genda
Tec!no"ogy # disru$tive c!ange in banking
transforming India
T!e future of Indian banking
17
Tec!no"ogy for t!e masses
3n"y 102 !ave "ife insurance
A 12 !ave genera" insurance
3n"y 22 !ave a credit card
/62 of India<s !ouse!o"ds avai" of banking services
3n"y 152 !ave an T% C Debit card
T!e c!a""enge is in banking 100 mi""ion $eo$"e in
600,000 vi""ages in c"ose to 600 districts
18
4!anne" innovation
Driving sca"e and $rofitabi"ity

3$ening and o$erating savings accounts

&asy ;D4
+mart cards
03+ mac!ines
@o( cost T%s
%obi"e $!ones
@o( cost branc!

=sed by branc!"ess banking c!anne"s

Resource efficient branc!es

To bridge distance and ease transactions

For a"" banking o$erations

+teadi"y gaining traction

19
+mart cards !ave sim$"ified data ca$ture
Biometric Transaction 4ard

Biometric smart card for secure va"idation

3vercome distance by setting u$ service

$oints c"ose to customers

%ost effective for t!e $oor and uneducated

20
Branc! in a bo)

03+ based so"ution offering

banking transactions "ike ba"ance
enEuiry, cas! (it!dra(a", de$osit

4!eEue $ayment ,(it! ca$abi"ity to

dis$"ay signatures for verification.

RT*+
1
F N&FT
2

4an su$$ort transactions "ike $ass

book $rinting, o$ening of fi)ed
de$osits and bi"" $ayment

@o( band(idt!

*0R+ connectivity
1. Real time gross settlement system
2. National electronic funds transfer
21
=niEue identity number
0re"iminary ;D4 and (ider acce$tance

Instant identity verification

Basis for ;no( Dour 4ustomer

Bui"d credit !istory

Im$rove service de"ivery to t!e $oor

4ustomer management to avoid issues of over'

"everaging
22
Financia" services for a""

Direct $ayment of benefits suc!

as NR&*, +ocia" +ecurity
0ension sc!emes
+ubsidy
transfer
0ayment
ecosystem
4redit

4as!"ess $ayments t!roug!

mobi"e (a""ets

ccount !istory from e"ectronic

transactions for data driven
"ending
23
4ustomer engagement
%ustomer ac&uisition and on'boarding
Branc!es
T%s
3n"ine
c!anne"s

0roducts t!at address needs of

diverse customer segments

+trong distribution backing

$roducts

Deve"o$ment of ne( c!anne"s by

"everaging tec!no"ogy

4onsistency in e)$erience across

c!anne"s
24
4ustomer engagement
Servicing customers through the life c(cle
na"ytics

4onsistency of customer e)$erience

across c!anne"s of distribution

na"ytics to understand and

address customer needs across
diverse segments

Deve"o$ment of banking !istory for

underbanked and unbanked
customers for cost effective credit
25
In summary

Tec!no"ogy !as transformed banking g"oba""y and

in India

Tec!no"ogy ado$tion by Indian consumers is

$roceeding at dramatic $ace

India itse"f !as transformed and (i"" transform even

more in t!e years a!ead

Tec!no"ogica" innovation in India (i"" "ead t!e (ay

for innovation in banking

Banks (i"" use tec!no"ogy to attract and serve

customers across t!e $yramid
26
T!ank you