Bank Of Qualms

Life is

not about technology, it is about applying it. CIOs should be able to enforce

this in their organizations to qualify as 'change agents.' Morover, in a

cut-throat competitive segment such as BFSI this is more crucial.

Most workers in many

new economy companies such as banks and insurance have an average age of 30.

They are all technology-savvy. They have to cater and deliver to a 24x7 world.

That is also what the business expects-IT must deliver on the utility value.

Vendors, along with the CIOs, must understand this fundamental expectation.

Experts spoke to Dataquest.

There are issues, which

are common to most Indian banks and insurance companies. From an IT perspective,

there are also divides that layer the three major segments-public, private,

and multinational banks. The focus of public sector banks today seems to be

core-banking implementation. While some private banks have a mature strategy, a

few are building best of breed systems to compete with foreign banks. The

multinationals, with its entire robust infrastructure, are braced with

challenges too. How do they adapt global platforms for use in India?

Let's think for the

government sector CIO first, whose magnitude of concerns far outweigh the other

two. If one is talking of core banking implementation, about networking all his

branches, he has to realize that his organization will probably have 40%

branches in rural and semi-urban places where there is no electricity, forget

lease lines. And core banking would mean a centralized server connected to all

branches through a lease line.

A second issue is

delivery channels like ATMs. The government wants people to use Internet

banking. This requires a lot of learning. Most public sector banks, unlike the

private ones, also have an aging workforce. And to make them understand

complicated software is difficult. Software today is mainly written for people

who know English. But in rural areas, employees might not understand the

language. So till such time multilingual software is made available, 100% core

banking looks a dim prospect.

In such places, another

challenge for CIOs is in terms of lowering the total cost of ownership of ATMs.

The hit rates in cities for ATMs are very good. A bank normally requires a hit

rate of 200 for the machine to be viable. But in villages, the hits may not be

even 20. The RoI is therefore negligible. How does a CIO justify buying ATMs in

large numbers and maintaining them? The cost of one ATM today is not less than

Rs10 lakh. CIOs say that besides the cost matrix, they need ATMs that one, can

also take soiled notes and two, and can use biometric finger print access rather

than cards. A rural person may not be comfortable with a card or may not even

remember a pin number.

A bank normally requires a hit rate of 200 for the machine to be viable. But in villages, the hits may not be even 20. The RoI is therefore negligible. The cost of one ATM today is not less than Rs10 lakh. CIOs say that besides the cost matrix, they need ATMs that one, can also take soiled notes and two, and can use biometric finger print access rather than cards

Now, RBI has come out

with a regulation that banks should have no frill accounts. Meaning, you don't

give credit or debit cards and open an account for just Rs five - mainly

brought about to take care of poor farmers. The issue is that the cost of

account maintenance in a core banking solution is high. If you don't have at

least Rs 500 in the account, it is a loss-making proposition for the bank. How

does the CIO then keep the cost of operations low for such people in such areas? 

Next, if the bank gets

into data warehousing and business intelligence towards Basel II compliance

based on RBI guidelines again, 60% to 80 % of its business can be covered in

core banking at the most; 20 to 40%, depending upon the bank, will remain

outside it. How does the CIO accumulate the data in a centralized pool and

effectively utilize it? These are difficult questions to which there are few

answers.

The concerns for

private players without substantial reach in rural areas, are less grievous, but

none the less, noteworthy. Desiring for best of breed solutions to compete

globally may mean hiring top talent for maintenance work. And it is common

knowledge that the labor market for IT resources is quite hot-retention of

talent has therefore become a major challenge due to the entry of

multinationals. Banks and insurance firms are increasingly looking at

outsourcing as an option.

Most CIOs also predict

this trend to continue into 2006, also because outsourcing is becoming a

specialized game. In the IT development world most Indian IT organizations got

ISO 9000 certified very quickly followed by SCI CMM level III, IV and V. So much

so, that most of the SCI CMM level V companies are now in India. Global

standards got raised and everybody now wants process efficiency and quality.

With the growth of infrastructure management as a service area, outsourcing

vendors have gone in for specialized certifications like BS 15000, making them

ITIL compliant. In other words, making sure they now have efficient and

consistent project delivery frameworks.

Private sector and

multinational banks have also seen a future in wireless broadband, which they

believe will happen shortly at an affordable price. CIOs are imagining a

workforce with portable devices in the field that can access every application

they would normally do from the desktop in the office.

Better Storage (IP SANs

for some) and networking will be the other attention areas. Major technology

investments this year though, will go towards meeting the regulatory

requirements mandated by the RBI, which includes anti-money laundering software

and cheque truncation systems. A third spending area will be interfaces to RTGS

(real time gross settlement system) anda NEFT (national electronic funds

transfer platform) for rolling low value settlements between banks. A classic

case of how IT will take the lead in driving business!

Goutam Das  



goutamd@cybermedia.co.in