The banking industry in India has witnessed major transformation due to technological advancements. Indian banks can proudly claim that they are the fore-front in usage of technology in banking services, much ahead of most banks in developed countries and the level of innovation will grow even higher in future, says K. Ramachandran, Senior Advisor (Banking Technology), Indian Banks Association, in conversation with Harshal Yaswant Desai of Elets News Network (ENN).
How do you rate the current technology standards followed by Indian banks? Are we at par with international standards?
Banks in India, in the last decade, adopted the latest technologies and implemented core-banking solutions to serve the customers at the bank premises, converting a branch customer to a bank customer across all branches, enabling anywhere banking. Based on the strong Core Banking System (CBS) platform they built interfaces to alternate channels like ATMs, Internet Banking, Mobile banking, Mobile wallets, Physical POS terminals, Digital PoS, Micro ATMs, Aadhaar based payments etc.
The Reserve Bank of India (RBI) ushered in RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) and Cheque Truncation System (CTS ) to speed up the payment systems. The National Financial Switch (NFS) of National Payments Corporation of India (NPCI) connected all the ATMs and enabled inter-operability of ATM services across banks. Then, NPCI introduced Immediate Payment Service (IMPS), a real time payment system, best of its kind in the world, which could move funds from one bank account to another in real time.
Indian banks can proudly claim that they are at the forefront in usage of technology in banking services, much ahead of most banks in developed countries. They will continue to adopt new technologies to provide more banking services and delight the customers in the years to come.
Is demonetisation, to some extent, responsible for increasing digital initiatives?
The demonetisation announced by the Central Government on November 8, 2016 has given a boost to the adoption of digital banking and payments. Last six months have seen the growth of innovative products in digital applications like Unified Payment Interface (UPI), BHIM, BHARAT QR and BHIM Aadhaar. These applications are handling millions of transactions every day.
How does IBA help banks in staying ahead in terms of technology adoption?
The Indian Bank Association (IBA) has been helping the banks in keeping abreast of latest technologies through workshops, seminars and meetings with support from IT vendors. It assists in banks to arrive at common standards for hardware and software, where applicable, keeping the interests of banking industry and all other stake holders. BHARAT QR is the first collaborative exercise in the world bringing together the four major card network operators American Express, Master, Rupay , VISA and all the Indian banks , which involved setting up a Uniform Payment Interface (UPI), standard QR code for the scanned payments Application (digital POS), improving the convenience of the merchants and customers.
What role is Aadhaar playing in the banking sector? Kindly elaborate.
The introduction of Aadhaar card and Aadhaar authentication through UIDAI has been a game changer in the Indian banking Technology in the last one year. The E-KYC has made it easy for the customer and banks to open accounts, meeting the KYC requirements. The Aadhaar authentication has brought in a new payment system – AEPS and subsequently the BHIM Aadhaar – a digital POS system, which only requires a smart phone with a biometric device for the merchant and does not require even a phone from the customer. This increases the reach of digital payments to the masses.
While Aadhaar has enabled the Direct Benefit Tranfer system helping the government to save thousands of crores by plugging loopholes and eliminate subsidies in welfare schemes, the new notification under PMLA requiring all accounts to be linked with Aadhaar will further strengthen GOI in its drive against black money. The increased use of Aadhaar authentication will help the banks in improving operational risk management in the opening of accounts and transaction payments.
Tell us about your initiative named Digi-locker?
The projects like Digi-locker will help banks in verification of documents and assets. For example Date of birth, educational qualifications, driving license, Motor Vehicle ownership etc. can be verified from the source/issuers. The digitisation of land and other property records will improve the credit risk management.
Banks will use more of Analytics – descriptive, predictive, prescriptive, cognitive analytics and Big-Data for fraud monitoring, cross-selling, up-selling, credit scoring, focused marketing, customer surveys, feedback through social media etc.
What are your views on issues like Artificial Intelligence and blockchain?
Artificial Intelligence will be used for optimising software development, chatbots to respond to customer queries, pattern recognition for generating alerts, early warning signals for asset slippage, investment advisory and so on. Some banks have already introduced walking Robots at branches to receive and answer FAQs from customers. Block chain is another area banks are looking forward to. But the implementation of real projects seems to be delayed. Cyber Security is one challenge banks have to face on an ongoing basis.
Will online banking obsolete physical banks in future?
Physical bank branches will not disappear. Digital banking will work along with physical branches, as customers still perceive and trust the humans more than machines, for all counselling and advisory work in areas like housing loans, corporate loans, investments, foreign trade and forex transactions.