We are open to fintech partnerships, says Kotak Mahindra Bank’s new CTO

Milind Nagnur, President and CTO, Kotak Mahindra Bank (Illustration by Suneesh K)

As chief technology officer of Kotak Mahindra Bank, Milind Nagnur stands apart from many of his peers. For one, Nagnur’s last stint was at Early Warning, a US-based fintech company that was owned by seven banks. In over 20 years, Nagnur has held leadership roles in Citi and Wells Fargo and combines the expertise of traditional large banks with the technology-first approach of fintech companies.

Nagnur speaks of an important shift – that of viewing the bank as a software engineering-focused organisation. In his maiden interview since taking over as the first CTO of Kotak Mahindra Bank on August 2, Nagnur tells Moneycontrol that when it comes to tech, it is equally important to master newer ways of working as it is to master new platforms. In his view, the new definition of trust in banking for customers is not about the safety of assets, but about how dependable a bank’s digital offerings are. Edited excerpts:

What are your top priorities in your new role?

The first one is to transform the bank to take a technology-first approach to solving customer problems. In other words, create new and productive experiences for customers that are powered by technology.

The second priority is to think in terms of solving customer problems versus thinking in terms of selling our products. Whether it is a bank or any other organisation, traditionally, there is a lot of inside-out thinking. Therefore, the second change would be transforming ourselves into thinking outside-in.

The third priority would be being true to ourselves in the new definition of trust. The traditional definition of trust in banking has been about whether my assets are going to be safe and sound. But today, that’s a given. The new definition of trust is whether my bank is available digitally and physically, with high performance and reliability and 100 percent availability, when I need it, where I need it, and in the channel and format that I need it in. If you talk to millennials and GenZ today, that is the new definition of trust.

What are the learnings that you can take from your past roles and apply here?

My fintech experience teaches me that you should think big, but you should start small and scale fast. That is a very different approach compared to spending months thinking about huge investments, and you're swinging for the fences and going all out with certain projects and proposals. Also, long-drawn implementations for several years.

Gone are the days when companies could afford to do that. So, you move towards an agile mindset today where, of course, you have to think big and be ambitious but you don’t at one shot make the swing for the fences investments. You start with a minimum viable product. You test and learn as you launch to market. That also changes the way in which you internally operate, that's where new ways of working come about. Typically, most of the people in technology traditionally would be used to project plans where development, testing, and third-party reviewing take months.

The new way of operating is essentially about – ‘I have a vision and I have defined it. But I'm going to start small with a minimum viable product. Every four to six weeks, I am going to launch some part of that. I'm going to test the market with probably at least two versions of what I want to go live with.’

In the process you are doing this incremental value-add where you are testing and learning, adjusting and discarding things that are not working out. Then you are amplifying and enhancing things that are giving amazing experiences to customers. It is very important for us to understand and master not only new and modern platforms like cloud, but also new and modern ways of working.

We have often heard that large banks are not agile when it comes to tech upgrades due to huge volumes. Does that constrain you?

One great example of agility is the 811 platform. That is a great example of working differently, co-locating the different product teams, software engineers, the UI and UX designers, everyone working on the feature set together. Then launching the product to the digital mobile channel in short sprints. These are the characteristics of the agile method of working. So, the goal here is to take bright spots like that in terms of new ways of working and apply them across the company with three objectives – one is to fortify and solidify the core so that the core is really strong. Further, modernise our platforms using avenues like cloud and therefore enabling modern experiences for our customers and team members.

 Are you in talks for any fintech partnerships?

The role of partnerships in the financial space is definitely very important. The future is about having a strong ecosystem that consists of customers, financial institutions like ours, the regulators and the fintechs. These four components of the ecosystem have to partner and collaborate very closely to enable the exponential growth that we all want India to have. So, that's a critical part of our strategy.

I cannot comment on specifics. Obviously, our highest priority is to stay within the regulatory framework. Within that regulatory framework, we are open and look forward to partnerships and collaborations, taking our customers and regulators in confidence at each step.

What are the bank’s plans when it comes to leveraging fintech partnerships for backend development?

The whole world is moving towards an event-based architecture. You can also call it APIs (application programming interface) or microservice-based architecture. What that really means is you are modernising your architecture in a way that partnerships and collaboration are possible in a safe and secure manner, provided that the interfaces are API-based and the deployments follow certain security standards. Also, provided that end-to-end customer journeys can be stitched together as a result of these APIs talking to each other.

It is very important that we design an event-based architecture and even core backing platforms must adhere to that. We should think about edge computing based on this event-based architecture to make instant experiences available to our customers, which is what everybody wants now. The customer’s expectation is that I want my service, whether it's banking or any other service, at my fingertips on my mobile phone when I want it and where I want it.

In order to enable that, our internal architecture across the ecosystem, including across other banks, fintechs, data service providers, credit bureaus, and payment providers should get on to event-based, edge computing, and API-based architecture. If we do these three things across the ecosystem, then I think we can see phenomenal exponential growth in terms of how digital services are made available to the customers.

There is a view that core banking systems are not exactly agile. What is the remedy?

The remedy is exactly what I just said, which is the blueprint for an event-based architecture. To further drill down a bit more technically into this topic, if traditional implementation of core banking was a monolithic database, where everybody is hitting the same database for every query, whether it's branch or real-time or digital, sooner or later you are going to get into some of those bottlenecks and performance issues. But by having an event-based architecture and an edge computing cache, what happens is you have real time synchronisation between the core database and between your events database and you offload a lot of real-time processing to your edge computing framework, which is powered and replicated through the core banking system.

Has Kotak Mahindra bank moved to an event-based architecture or is that something that will happen in the next few months or a year or so?

It's a journey. It's not a one-and-done. We have definitely made a great start in terms of having our own event-based architecture and we have seen some early benefits from that. But like I said, it's a journey that we have to continue across various platforms internally and externally.

What steps will the bank take to curb digital frauds?

We have a very advanced cybersecurity programme and this is a situation where technology is to be used to create technology. So, we are making significant advances in our cybersecurity programme with newer tools. That'll put us significantly ahead in terms of proactively monitoring, gauging and preventing some of these cyber issues.

How is the bank attracting top tech talent?

Our mission is to be a software engineering focused organisation and therefore, there is heavy emphasis on acquiring software engineering talent. The ratio of engineers to non-engineers becomes very important. That ratio will go up significantly and that is our goal.

In terms of how we are going to achieve that, all of our messaging, whether it's on LinkedIn or social media, whether it's when we visit campuses, or whether we talk to potential candidates or whether we have our talent reviews, we welcome and invite the best software engineers to join us.

The second impactful part of the holistic package is about the ability to do meaningful work with a purpose and impact so many people's lives positively. The third one is about a culture of collaboration and engagement. We are completely changing how things work. Instead of working in verticalised departments, we are working horizontally in cross-functional teams.

How will you ensure that the servers can handle the growing volumes and improve the approval rate for Unified Payments Interface (UPI) transactions?

We do very frequent capacity planning and positioning for the next several years at a time and not just the near term. We have made a great start and we are going to show exponential benefits in that regard in the days and weeks to come.

Your advice to Indian fintechs?

I would say keep innovating. Always keep in mind the fundamentals of financial services, which are safety and soundness and trust. Because people trust the financial services, industry and service providers. This space comes with a lot of responsibility and trust to our consumers, so keep innovating with that in mind.