Banking and financial services have increasingly been using information technology to improve efficiency, cut costs and mitigate risks. But now they are using it to go a few steps further.

“Having successfully implemented the core systems, banks in India are now focused on differentiating themselves by delivering superior customer experience across all touch points,” Mr Shanker Ramamurthy, General Manager of Global Banking & Financial Markets at IBM Corporation, tells Business Line .

Future growth for banks in emerging markets such as India is likely to hinge on financial inclusion of the unbanked. As in the case of FMCG firms and telecom service providers, the hinterland is what is offering growth prospects amid a perceptible saturation in urban markets. Do you see technology applications having a major role in taking banking to the masses?

Technology and business model transformation are the two most powerful tools for taking banking to the masses. Traditional banking technology and business models were developed around the characteristics of urban areas: high density of clients, relative proximity to cash distribution centres, availability of infrastructure from a telecommunications perspective.

Not surprisingly, the economics of these models are not appropriate for serving clients in rural areas.

Technology, however, has enabled new ways to interact with rural clients at significantly lower cost levels…it is important to note that technology by itself is not sufficient to reach these new client segments; a consistent business model transformation is also required to capture this growth in the banking industry.

What are the key drivers of business transformation across the financial markets?

There are three main trends driving business transformation in the financial markets space worldwide.

First, clients and regulators alike are pushing for more transparency in the marketplace, which is driving the demand for new regulation.

Second, the 2008 financial crisis revealed that banks need to become more sophisticated in understanding and managing risk effectively.

Today, many of the basic assumptions and models are being re-thought and will continue to be re-examined. Third, banks and financial services companies have to figure out how to rebuild trust between financial institutions and their clients.

The industry is going to be grappling with these themes for several years and the industry ecosystem is going to look quite different as the themes play out over the next several years. IBM is said to be doing some interesting work with the Bank of China, London. Could you elaborate on it? Besides measurable deliverables such as reduced paper consumption, does technology intervention involve streamlining the bank's business strategy or improving the service levels for its customers?

The Bank of China in London was manually processing over 3,000 paper messages a day which posed avoidable operational risks, and was costly in terms of manpower and paper consumption.

The bank came to IBM for help to move to a digitised model that would help the company slash messaging-related paper use from about £50 a day to about £2.5, or about £18,000 annually. With new electronic systems in place, BoC employees now have access to messages through an online search capability, allowing them to monitor transactions as they are sent and received by the bank.

This new system dramatically helps the bank boost the core efficiency of its settlement reporting process.

What are the ‘Smarter Banking' initiatives that have been launched from IBM's array of products?

Smarter Banking is an IBM initiative to help banks adopt solutions to transform the efficiency of their enterprises, cut costs and mitigate risk.

A smarter bank anticipates client needs and delivers innovative products faster and more consistently than the competition.

It has full visibility, in real-time, of its risk position and responds quickly and nimbly to changes in market conditions.

In the insurance space, IBM has helped a major insurance provider in Japan, Dai-ichi Life, transform its claims processing system to boost customer service and shorten the claims lifecycle. Working on a first-of-a-kind project, IBM researchers developed a new software technology that used semantic analysis to give Dai-ichi Life a clear view of what was going on inside its claims processes.

The industry is going to be grappling with these themes for several years and the industry ecosystem is going to look quite different as the themes play out over the next several years.

In India, are there any specific instances of working with a banking sector client? Also, are there any specific IT interventions that you think are relevant in the context of the Indian banking sector?

IBM is a key partner to the leading banks offering a broad range of solutions and services that are relevant for their current and future business needs.

The Indian banks use IBM technology to run core transaction systems, integrate applications and payment systems, and ensure business continuity by managing their IT infrastructure and information security.

Having successfully implemented the core systems, banks in India are now focused on differentiating themselves by delivering superior customer experience across all touch points.

New technology

In this area, IBM is leveraging its data warehousing and business analytics technology to help banks understand their customers better, customise marketing campaigns, reduce fraud and manage enterprise risk.

Indian banks are also preparing themselves to compete with the best in the business both in India and globally and we have helped through benchmarking their IT capability and suggesting a roadmap for the future. IBM's IBV research also shows that Indian banks, as well as other banks in the growth markets, are seeing encouraging growth rates of 20-30 per cent.

Moving ahead, we will also see greater use of mobile technology being leveraged for financial inclusion and payments.

Related Topics