Banking Central | Banks must get their technology game right

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Instances of banks reporting prolonged technical glitches refuse to go away despite repeated warnings from the Reserve Bank of India (RBI). These outages are not limited to the big ones such as HDFC Bank and State Bank of India (SBI). Customers across the board have been complaining of glitches on the internet and mobile banking platforms.

Often, it is the big banks that make the headlines but the problem is widespread. These frequent glitches do little to encourage users, especially those who are new to technology, to opt for digital banking channels at a time when there is a sustained push for them from the government as well as banks.

Customers typically use internet or mobile banking for transactions such as fund transfer or utility bills payment. For them, these recurring problems cause hardship and confusion.

The Reserve Bank of India’s regulatory action against HDFC Bank has forced the banking sector to sit up and take note.

Almost all banks, both in the public and private sector, have reviewed their technological capabilities and claimed to have resolved the issues.

Why can’t it be fixed?

But assurances count for little. Recent reports indicate that there has been no respite. Why is the problem persistent? Experts say while banks have been on a spree to launch new digital products, they have not invested adequately in strengthening and upgrading their technology platforms. The RBI has taken the technology lapses seriously.

It has not withdrawn the ban that prevents the HDFC Bank from launching new digital products even after seven months. This is despite the bank management's repeated assurances that the lender was working towards addressing the glitches.

An RBI-appointed third-party IT audit of the bank is over and the report has gone to the central bank for a review. The regulator, it appears, is convinced that until the bank resolves the issues that caused repeated outages over the last 18 months, the ban won’t be lifted.

The ban has put the biggest private sector bank on the back foot as HDFC Bank’s rivals have taken advantage of it.

Also read: RBI ban on new credit cards sale hit market share; will come back with a bang once embargo lifted: HDFC Bank

Upgrade the tech

Technology has helped to change the way customers approach banking services. But for the banking services to become more inclusive, banks need to make sure the alternative channels work seamlessly. Considering the significant growth in number and value of digital transactions over the last few years, banks have to invest in technology.

The advance in technology with the rise in digital payment apps has led to an increase in online transactions across the country.

Digital transactions have more than doubled in volume over the last five years—from Rs 1,393 lakh crore in 2016-17 to Rs 3,000 lakh crore in 2020-21, the Lok Sabha was told on July 28.

“Digital payment volumes have grown from 1,085 crore transactions in financial year (FY) 2016-17 to 5,554 crore transactions in the financial year 2020-21 at Compound Annual Growth Rate (CAGR) of 50.42 percent,” Minister of State for Communications Devusinh Chauhan told the House.

Banks often defend the technical glitches saying these are routine but that’s doesn’t cut it. As the banking regulator has been repeatedly saying, banks need to scale up investment in strengthening the technology before launching new products to ensure their platforms can handle volume without inconveniencing the customer.

(Banking Central is a weekly column that keeps a close watch and connects the dots about the sector's most important events for readers.)