BankING on tech: ING Vysya says IT finds the next big thing
Technology has become a way forward for almost all businesses with increasing dependency. In fact, most organisations today are driving profitability through streamlined operations and innovation, which come only by implementing the latest techniques.
Moneycontrol.com's Chikita Kukreja contacted ING Vysya Bank's chief financial officer Jayant Mehrotra to know how he was reading the technological intervention. And, here is what he had to say.
Q: Banking and financial services currently constitute about 40% of the revenue mix for IT companies In India. With increasing branch network of the banks, how is this likely to impact earnings?
A: Definitely branch expansion will result in higher spends on IT infrastructure and would constitute an opportunity for IT companies, who have the geographical spread to manage branch IT infrastructure through workplace support.
However, if you take branch network expansion as a surrogate of overall expanding banking ambitions, then there would be substantially more attractive gains in terms of application development and maintenance (e.g. CRM, lead management, workflow management).
Q: In spite of years of existence, internet banking has not really picked up and people still believe in traditional methods of transaction. Will we see a spurt in this segment and what is the strategy next?
A: India is a vast market with multiple consumer segments, one size will never fit all. Convenience, type of banking transaction and trust, determine the mode of banking. We will continue to see a segment of consumers, who prefer the human touch and visit the branch. In my opinion even for complex transactions, wealth management discussions or availing large loans, customers will prefer to meet the banker, feel comfortable and then take the next step.
On the other hand, given our demographics and mobile handset sales, I see explosive growth of banking on mobile and internet. These will be for the repetitive, low-ticket transactions. In fact, we too have made significant investments and seen growth in these areas. The strategy is to keep investing in our technology and make transactions instantaneous, simple and secure.
Q: Apart from ATM operations and on-location technology, how else do you utilise technology to expand in rural areas?
A: We have a significant presence in rural areas across southern India with physical branches. We follow the conventional branch model. The only difference is the branch timings�during harvesting season, the branch manager is up and about at 4am.
Banks are still testing how technology can help them deliver banking in rural areas in a cost-effective manner. We are currently working with business correspondents in locations where we do not have a physical branch. The correspondents service the end customer and data is exchanged with the core banking system to ensure all records are in sync. We are also testing the hand-held device, which is capable of working in a store-and-forward manner, given the realities of network infrastructure in the rural areas.
Q: What precautions have you taken to safeguard the massive data that you have?
A: The core competency of a bank is data confidentiality and we as a bank ensure we take utmost care in handling and safeguarding customer data. A significant portion of our IT investments are channelised for data protection like encryption of data, multiple level of data back-up, disaster recovery, access controls, cross fraud monitoring systems, so on and so forth.
Having said that, its very important to have a sustainable risk management framework and audit and assurance programmes for continued protection of data.
Q: So what security measures do you advice for the industry?
A: Data security is changing at a fast pace, so it will be difficult to give one mantra. I would definitely suggest banks to pay more attention to this, especially with the expected growth in remote banking channels. Some of the non-negotiable elements being continuous scanning of trends, new technologies, what other industries are doing and investing in people to drive these priorities. Finally, while technology provides a level of security, there should be equal focus on processes and people controls like security awareness, training and pre-employment screening.
Q: How do you ensure your business can leverage the latest technology to stay on top and competitive, ensure high RoI, but do it at viable costs and by leveraging financial models that reduce capital expenditure? How do you ensure IT is not a fixed cost on your balance sheet?
A: Look at IT only as a cost and measure its success though the RoI model. This will ensure you will become extinct in the future. In the current dynamic environment, where we see new mediums, technology and changing consumer preferences, it is important to test new technologies, business models and be nimble.
Yet as a CFO, concepts like RoI and capex versus opex are important and real. To balance the two, it is important to look at IT investments as two components. First is the basic, must-do, status quo�here I adopt the total cost of ownership and cost benefit analysis i.e what do we gain (or save) through this investment.
The second is allowing our teams to test new models and technologies through small pilots, thus we are constantly evaluating the next big thing.
Q: Are you already using or considering using technologies such as cloud computing, virtualization that can preserve capital, turning a large, upfront capital expenditure (CAPEX) into better manageable operational expenditure (OPEX)?
A: We are early adopters of this and have made significant investments in virtualization and enterprise integration architecture. The benefits have been significant and immediate, the gains are in terms of cost saves and time to market. These technologies are very relevant not just through a capex/opex prism, but in terms of the strategic benefits they bring to our bank.
Q: Would you consider managed services also part of a similar strategy? But being in BFSI, how do you handle regulatory issues wrt managed services?
A: We have been among the pioneers of IT outsourcing in the Indian BFSI segment, with complete outsourcing of our application and infrastructure development and maintenance, along with workplace support since 2002. Our outsourcing contracts have been vetted by the regulator and we are in compliance with the laws of the land and also with our overall ING group standards.
Q: How are you leveraging the UIDAI-Adhaar project by the government of India?
A: This I believe is a game changer for the Indian financial industry. Currently, we are participating in the project to service the under-banked segments via the hand-held devices and business correspondents. There are many benefits the UIDAI will offer the future depending on how our regulatory environment matures.