Technology has helped reduce costs, which in turn help the bank manage even low balance accounts.
Bank of Baroda is using technology to reduce cost of managing accounts while focusing on improving customer service.
The third-largest public sector lender has laid out a digital roadmap that will remove the need to worry about small balances in bank accounts. The cost of managing these accounts will be offset by the efficiency of opening bank accounts, and the lender would focus on product delivery, according to CEO and Managing Director at Bank of Baroda PS Jayakumar.
He added, “We want to be able to anticipate what our customers want in a seamless manner. We have introduced tablets and now open almost 4 lakh accounts every month in 10-12 minutes (per account). This makes the balances in the account less relevant.”
Banks have been opening accounts as part of the government’s financial inclusion initiative, but have failed to garner enough deposits in most accounts, which makes it costly to operate.
Most banks including State Bank of India (SBI) and Bank of Baroda penalise customers for non-maintenance of minimum balances.
Earlier this year, SBI faced massive backlash for its high charges, so it reduced the penalty amount in March. Even as costs of managing these accounts have reduced with the help of artificial intelligence, blockchain and robotics, the penalties remain.
Bank of Baroda has now collaborated with two global technology players – IBM and Accenture – to lay out a roadmap to scale up its businesses.
At an event held in Mumbai to announce the tie-up on June 20, Jayakumar said, “In technology, now we are talking about leapfrogging rather than catching up. There is rapid change of technology going on and the enormous scope of it will help us.”
He pointed out that the bank was working on helping farmers purchase seeds and fertilizers via an application process where the bank will interact digitally with customers. “This will help [farmers] double farm income,” he said.
When asked whether technology will help the bank reduce manpower, Jayakumar says, "No."
"Technology has eliminated data entry process and these people are moved to help in sales and other support…About 15-20 percent of our manpower is in sales and customer servicing right now this could easily go up to 50 percent (with technology)," he said.
Meanwhile, Papia Sengupta, executive director at Bank of Baroda said, there will be more re-skilling of employees.Further, professor at IIT-Bombay Deepak Pathak, who is advising the bank on technology said, “In three years, the mindset of people will change. It will empower them. And as business grows, the number of people required will only increase…Since 1990s, a bank like SBI has only increased its employee base. So, the jobs will remain but the form will change.”