Empowering Financial Inclusion: The role of technology in reaching underserved areas

Pinkesh Kotecha

Using advanced ICT solutions has emerged as one of the most effective ways for such institutions to increase their reach across tier II and tier III geographies, writes Pinkesh Kotecha, Chairman and MD, Ishan Technologies in an interaction with Srajan Agarwal of Elets News Network (ENN).

Could you explain the importance of technology in enabling banks to effectively target last mile customers, and how Ishan Technologies is helping financial institutions in this regard?

The last-mile refers to the final stage of delivering financial services to customers, particularly those in remote or underserved areas. In this context, it becomes clear that last-mile connectivity is especially important in a country like India where geographical diversity tends to isolate thousands of communities from the technological and financial hubs.

Banks and financial institutions have been harnessing various innovative technologies to bridge the gap between financially excluded communities for years. High-speed broadband, 4G networks, easily accessible mobile apps, etc. have all been instrumental in getting closer to this goal. Such technologies represent a business opportunity for banks as it gives them access to a large number of new customers while also promoting social welfare through financial inclusivity.

A number of last-mile customers are localised to tier III, tier IV, and semi-urban cities of India. Ishan Technologies has a pan-India reach in terms of internet connectivity and works with financial institutions to expand their footprint.

Could you elaborate on the benefits and advantages of expanding financial services to tier II and III geographies through the use of Information and Communications Technology (ICT)? How does Ishan Technologies support this expansion?

It goes without saying that in a country like India, where 43% of adults did not have bank accounts as of July 2022, according to downtoearth report, increasing financial inclusivity is of the essence. From a business opportunity point of view, this untapped corpus of customers is most relevant for banks and financial institutions as it represents millions of new customers to bolster their operations.

Using advanced ICT solutions has emerged as one of the most effective ways for such institutions to increase their reach across tier II and tier III geographies. By investing in ICT infrastructure or partnering with service integrators, banks are able to utilise technologies like cloud computing, high-speed retail broadband, and even 5G networks to connect as many diverse regions and clients as possible.

FIs with branches in non-central locations may need IT infrastructure but do not have the IT teams necessary to man the IT stack. Ishan Technologies enables with cloud-enabled network stacks which require minimal manual intervention and the desired uptime.

With the growing popularity of Network as a Service (NaaS), what is the scope and potential of this service model for financial institutions? How can NaaS benefit banks in terms of flexibility, scalability, and cost-efficiency?

At the top strategic tiers of banking, most financial institutions have very specific and well-reasoned goals that they wish to achieve. This may be in terms of increasing client retention, increasing penetration in a specific market, initiating international transaction capabilities for rural populations, etc. Banks often do not have a pre-established technical infrastructure to achieve these specific goals. Furthermore, banks may not be sure if a venture would even be successful, increasing the risk factor on the financials and reputation. Moreover, scalability might differ for different business units of the same institution. .

Under these circumstances, Network as a Service (NaaS) is a system that works particularly well, as it allows banks to experiment with new ventures and get a “feel” for how successful a strategic move may be without risking their own native systems or infrastructure. NaaS is also flexible enough to allow for one-time projects like a big international event or an annual system-wide review. For smaller FIs that may not have large, established infrastructure, NaaS can be a good alternative to bolster their reach. The biggest advantage is NaaS can be customised for each institution without having them to fit into a predesigned framework.

Within the operating lease model that much of NaaS follows, there is plenty of scope for FIs to invest in an infrastructure refresh at the end of a 3-5 year period. It must be noted that NMS (Network Monitoring System) and NAC (Network Access Control) software stacks are required for visibility and security. Hence service providers having these platforms are often preferred by client corporations.

Cloud-native technologies, such as Artificial Intelligence (AI) and Machine Learning (ML), have gained significant prominence in various industries. How can banks and financial service providers leverage these technologies to enhance their operations, customer experience, and overall efficiency? Are there any specific use cases or examples that you can share?

Banks and financial institutions have found various innovative uses for AI and ML which primarily increase the bank’s efficiency and lead to a smoother customer experience.

Fraud Detection: As AIs are capable of analysing the vast amounts of data that pour into a bank’s systems, they can be trained to detect anomalous banking activity and flag them as suspicious. This substantially reduces the amount of data that auditors have to sift through and thus increases efficiency.

Risk assessment: AI have been implemented in the loan approval processes of a number of NBFCs, whereby the AI analyses metrics like past banking behaviour and asset valuations to give an unbiased risk assessment for a certain loan application. This quantifies the risk of each application for the bank, making it easy to allocate human resources only to the cases which require in-depth analysis.

Automation- Internally, banks have dozens of processes and record-keeping steps that must be followed for legal and security purposes. While these once had to be done by executives, taking up a lot of valuable time, such processes can now be automated with AI integration.

Video Analytics for Security: Banks can now leverage AI, ML, and CV (computer vision) for security purposes. These technologies utilise machine learning to analyse video footage, enabling real-time surveillance, intrusion detection, facial recognition, etc. as well as generating real-time alerts.

Considering the rapid growth and transformation of the financial sector, what are the key challenges that banks and financial institutions face when adopting and implementing new technologies? How does Ishan Technologies address these challenges and ensure a smooth transition for its clients?

BFSI has been an early adopter of ICT infra. When adopting and implementing new technologies, banks and financial institutions face several key challenges:

Integration with legacy systems- Banks and FIs (Financial Institutions) are large and complex organisations by nature and necessity. With each regional branch and account having to be seamlessly connected across the country in order to enable even basic banking functions Add to that the myriad extra features like apps, ATMs, and UPI to the mix, and you have a vast network of technologies from very different time periods. If not integrated properly, these systems can become incompatible with each other at some point. Causing considerable damage in terms of time and sunk-cost.

Data Security and Privacy: Banks are one of the most data-dense institutions that the public interacts with. Everything from the names of our dependents to our own fingerprints are stored and connected to an account in order to provide all the convenient services we enjoy. Naturally, this makes banking databases prime targets for hackers with malicious intent. In fact, the Government informed parliament that Indian banks reported 248 successful data breaches by cybercriminals between June 2018 and March 2022. SIs(Service Integrators) and ICT services have a responsibility to design networks and systems that are secure and keep them up to date.

Choice of Technologies – Competition in the banking and financial sectors is stiff. And huge emphasis is being placed in banking circles on client retention. As the top banks implement more and more advanced technologies to provide seamless handling of funds with banking apps and interactive ATMs, everyone else in the market feels pressure to do the same. However, for many banks, implementing such advanced tech solutions is both unnecessary and counter-productive. For a regional bank serving tier III regions of India, having an app is far less important than having rock solid networks and connectivity that works in spite of geographical distances. Counseling banks on such matters and suggesting proactive methods to strengthen their position often comes under the ambit of SIs and ICT organisations.

Ishan Technologies has helped BFSI clients understand the application stack and audit the existing network topology for fitment or upgrades. Ishan also has the capability to provide disaster recovery sites and analyse the HCI (human-computer interaction) in the context of applications that are used in a virtualised manner in order to ensure compute consolidation.

As the Chairman and Managing Director of Ishan Technologies, what is your vision for the future of banking and financial services in terms of technological advancements and innovation? How do you foresee the industry evolving, and what role does Ishan Technologies aim to play in this transformation?

The Indian banking system has emerged as one of the forefront industries in embracing digital technologies. Given its extensive coverage across diverse geographical areas and customer segments, the sector has achieved commendable progress. Over the coming years, I predict that the industry will undergo a transformation toward a landscape driven by digital advancements. With technologies like artificial intelligence (AI), machine learning (ML), blockchain, and cloud computing assuming crucial roles. These advancements will empower banks and financial institutions to automate various operations, make many decisions based on data, and provide more bespoke services to their customers.

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