Digital Banking in India 05022016

“Digital Banking – A New Frontier in Indian Business”Presented at

CONVERGENCE -10th International Conference on ‘Digital Business: New Frontiers in Management’

Prof Chowdari Prasad

AndDr KS Srinivasa Rao05th February 2016

Digital Banking in India 2

Flow of Presentation• Introduction to Banking, Information Technology, Reforms• Committees of RBI for Technology in Banks & Various Developments • Digital Banking - Meaning• Review of Literature, 16 Articles in Research Journals & 13 Reports• Objectives of the Study & Research Methodology• RBI Guidelines, Payment Settlements : Vision 2015 and IDRBT• Digital Banking Products & Services offered by various outfits• Status of aggregate business of banks in India for 3 years 2012-2015• Cyber Risks, Financial Inclusion, PMJDY, Rupay, Payment Banks, m-Banking• ATMs, Big Data on Digital Banking from RBI website, Conclusion

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Introduction to Banking, Information Technology, Reforms

• Indian Banking System - Commercial, Developmental, etc • Organisational changes, Operations and Geographical Spread, Legal and

Technological interventions and Offering of various types of products • Functioning of banks can be divided into three phases viz., • (i) prior to 1969 - first nationalisation, • (ii) between 1969 to 1990 - growth period and • (iii) after 1991 - consolidation with the introduction of Economic Reforms through

Liberalisation, Privatisation and Globalisation (LPG)

• Use of computers for back-office reconciliation extended to front-office operations in due course leading to introduction of Online Banking

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1. Retail Banking

2. Wealth Management / Growth trend

3.Demand for Low Cost Banking Solutions

4.Branches vs. ATMs to increase5. Mobile

Banking and Internet penetration

6. CRM and Data warehousing

7.Generate more fee-based income

8. Importance of SME segment

9. Investment Banking and 10. Infrastruc-ture Financing

Indian Banking :

Opportunities & Challenges

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05/01/2023 Digital Banking 5

Focus aspects of Commercial Banking

Core Banking (CBS)

ATMs

Card Management

Any Branch Banking

DocumentManagement

RiskManagement

ResourceManagement

MIS & Intranet

CRM

Corporate Network

Electronic Banking

POS Terminals and Cash dispenser

BANK’S BUSINESS

BANK’S BUSINESS

RA

ISIN

G D

EPO

SIT

SL

OA

NS &

MISC

. SER

VIC

ES


Committees of RBI for Technology in Banks & Various Developments

• RBI formed 12 Working Groups and Expert Committees on Mechanisation / Computerisation in the Banking Industry (1982-2013) as given in Table-1.

• Major recommendations of these were on MICR Technology, Use of standardized cheque forms/encoders, settlement operations in the Clearing Houses, Computerisation of branches by increasing their connectivity, Issues relating to Payments System, Cheque Clearing for Securities Settlement, Electronic Funds Transfer (EFT) System, Electronic Banking, ‘Doing Banking by Using Technologies’ like - internet and networking, Cheque Truncation, etc., to increase efficiency, quick service, productivity and transparency.

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RBI Working Groups / Committees on ITS. No. Year Name of the Committee Chairperson

1 1982 Working Group to consider feasibility of introducing MICR / OCR Technology for processing of Cheques

Dr Y B Damle, Advisor, Management Services Dept., RBI

2 1984 Committee on Mechanization in the Banking Industry

Dr. C. Rangarajan, Deputy Governor, RBI

3 1987 Committee on Communication Network for Banks and SWIFT implementation

Sri. TNA Iyer, Executive Director, RBI

4 1988 Committee on Computerisation in Banks Dr C. Rangarajan, Deputy Governor, RBI

5 1994 Committee on Technology Issues relating to Payments Systems, Cheque Clearing and Securities system in the Banking industry

Sri. W S Saraf, Executive Director, RBI

6 1995 Committee on Proposing Electronic Funds Transfer and Electronic Payments

Smt. K S Shere, Principal Legal Adviser, RBI

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Digital Banking in India 85/2/2016

7 1999 Committee on INFINET Sri. Vasudevan RBI Expert

8 2001 Committee on Legal Aspects of Bank Frauds Dr.Mitra

9 2002 Working Group on Electronic Money Ms. ZarirCama RBI

10 2003 Working Group on Cheque Truncation and e-Cheques Dr.R B Barman, Executive Director, Reserve Bank

11 2011 Working Group on Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds

Shri G Gopalakrishna, RBI

12 2013 Committee on Comprehensive Financial Services for Small Businesses and Low Income Households (formation of Payment Banks)

Dr.NachiketMor, RBI Board Member

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DEVELOPMENTS IN BANKING & IT

• ALPMs• CLEARING HOUSE• CAR,CRR,SLR,PS,NPAs• CREDIT/DEBIT CARDS• NICNET,I-NET, RABMN• INFINET, RBINET• BANKNET, NDS, SFMS• MICR, ATMs, SWIFT• DEMAT, IT ACT-2000• INTERNET BANKING• ECS, EFT, SEFT, RTGS• CROSS SELLING

• ALM & RM, MIS• CRM, KYC, AML • Core Banking Solutions• KISAN /SME CARD• CREDIT INFO BUREAU• DISASTER MANAGEMENT• Cheque Truncation• CYBER CRIMES – HACKING,

PHISHING, PHARMING, TROJAN, SKIMMING, ETC• SMART CARDS• DIGITAL BANKING


Digital Banking - Meaning• Internet has brought in the biggest change in the way we have been

banking for centuries. • Digital banking is the present trend in banking using the internet and much

more, based on SMAC model, which puts customer first and cuts costs • SMAC stands for Social, Mobile, Analytics and Cloud. • SMAC makes banking business more agile and customer centric which

contributes to the building of the Digital Banking. • Other elements are ‘Data’ and “User-experience” that contribute to the

concept.

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Review of Literature, 16 Articles in Research Journals & 13 Reports

• 16 Articles between 1998 and 2016 on IT, Networking, ATMs, Credit Cards, Debit Cards, Internet Banking, Mobile Banking, ECS, RTGS, Mobile Wallet, Payment Banks, Cloud Technology, SERV-QUIL, etc

• 13 Reports on Digital Banking between 2012 and 2015 by Consulting / IT Companies like Infosys (2012), WIPRO, Efma (2013), McKinsey & Company (2013), India Brand Equity Foundation (2013), Deloitte Consulting (2014), PWC (2014), Happiest Minds Technologies (2014), Cognizant (2014), E&Y and IBA (2014), BCG and IAMAI (2015), DBS Group Research Equity (2015), McKinsey & Company (2015), and PWC- ASSOCHAM India-2015

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Objectives of the Study & Research MethodologyObjectives of the Study:1. To understand the importance of Digital Banking in Indian Banking System 2. To analyse the advantages in business through Digital Banking for the

Stakeholders including intermediaries (IBA, Payment banks)3. To understand the importance of SMAC as a competitive Strategy for Banks

(Wallet) 4. To create Awareness of Threats and Challenges of Digital Banking (Crimes)Research Methodology:Exploratory mainly as the concept is still at the evolving stage in India. Secondary Data was collected from various sources of Bank Websites, Newspaper Advertisements and Information through Press Releases. Objectives of Research were verified through the information available but not tested by any hypothesis.

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RBI Guidelines, Payment Settlements : Vision 2015 and IDRBT• Corporate Governance of Banks in India

• IT Governance is an integral part of the Corporate Governance• IT sustains and extends business strategies and objectives• Responsibility of the Board of Directors and Executive Management.• Every commercial bank branch is at some stage of technology adoption like Core Banking Solution (CBS), or

alternate delivery channels such as internet banking, mobile banking, phone banking and ATMs.

• Payment Settlements in India - Vision 2012-15• Vision Statement: To proactively encourage electronic payment systems for ushering in a less-cash

society in India and to ensure payment and settlement systems in the country are safe, efficient, interoperable, authorised, accessible, inclusive and compliant with international standards.

• IDRBT, Hyderabad• It is a ‘Think-Tank’ for promotion of technological research and consultancy. IDRBT has outlined its

plans to launch a Digital Banking Framework in 2016 aimed at making Digital Banking versatile by incorporating new channels of payments.

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Digital Banking Products & Services offered by various outfits

S. No.

Type of Bank Name of the Bank Technological &Innovative Digital Banking Products and Services

1

Public Sector

State Bank of India(3.7 lakh touch points, 16,415 branches, 56,930 group ATMs including Multi-Function and Self-Service Kiosks and Cash Deposit Machines, 2.4 Lakh POS Terminals and 58,571 Customer Service Points)

In-touch, InCube (Start-up Branch), ExclusiF (Wealth Management), ATMs, Point of Sale Terminals, Core Banking, Internet Banking, State Bank Anywhere Smart Mobile Banking, Business Correspondents, Customer Service Points, Buddy (Anyone, Anytime, Anywhere), SBI Quick (Missed Call Banking), Foreign Travel Card, SBI Online Customer Acquisition Solution (OCAS) and SBI Self Service Kiosks (Bank @ Your Service 24x7), e-Smart SME (e-Commerce Loan), e-auctions and e-CRM

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2

Public Sector

SBBJ

Mobile ATMs, Green Channel Banking, SBBJ e-LOBBY, Internet and Mobile Banking, e-Trade, e-Tax Payment, e-Remittance, Quick Missed Call Banking

3

Public Sector

Panjab National Bank

NEFT, RTGS, Cash Deposit Kiosk, SMS Banking, IMPS, e-Statement, ECS, Fee Portal, Mobile Banking, Internet Banking, EMV Debit Cards, Talking ATMs, Doorstep Banking, Credit Cards

4

Public Sector

Bank of Baroda

Rapid Funds2India, Baroda Flash Remit (with UAE Exchange), Speed Remittance (with UAE/Lulu/Al Ansari Exchange), MTSS and Swift Remittance

5 Public Sector

UCO Bank UCO Tap & Pay (for College Students and Corporate) and UCO m-Passbook

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6 Public Sector Andhra Bank Digital Wallet, Speed Pay, etc 7

Public Sector

Union Bank of India

1. IMPS through branches for Retail and Corporate customers 2. Mobile Passbook ( M Passbook) 3. Missed Call facility for Mobile Banking & Account balance 4. SMS based value added services Blocking Debit Card Balance enquiry of various accounts Aadhar ID seeding Enable/Disable user id of internet banking ATM and Branch Locator

8 Old Private Sector Bank

Karnataka Bank

Core Banking, Internet Banking, Money Plant (ATMs), Quick Remit (for NRIs), Moneyclick, KBL ApnaApp and KBL m-PassBook

9 Old Private Sector Bank

Federal Bank

FedBook (mobile app), Co-branded VISA Credit Card (with SBI), Automated Chat Facility (Virtual Relationship Officer), e-Passbook App

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10 New Private Sector Bank

ICICI Bank Rail Ticket Booking on Website (IRCTC), etc

11 New Private Sector Bank

HDFC Bank Click2ProtectPlus and others

12 Foreign Bank Citi Bank e-Core Banking through ATMs

13 Foreign Bank Standard Chartered Bank

Standard Chartered Breeze-Mobile Banking

14 Regional Rural Banks (RRBs)

66 Grameen Banks sponsored by Commercial Banks

Online Transaction services from Regional Rural Banks, Internet Banking (non-transactional services view only) for weak Banks

15 Cooperative Bank

Saraswat Cooperative Bank Ltd.

ATMs, NFS Network, E-payments-VISA Bill Payment, Go-Recharge, RTGS, NEFT, Missed Call Service, GOMO-Mobile Banking, Online Trading

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16 Wallet Banking (2004)

Oxigen

Instant Money Transfers anytime anywhere using IMPS, recharge your Phone or book a Movie ticket

17

Wallet Banking(2009)

MobiKwik

Mobile Recharge, DTH Recharge, Utility Bills, Online Shopping

18

Wallet Banking (2015)

Paytm

Online Mobile Recharging, Online Bill Payments, Online Bus Travel, Credit and Debit Card Payments, Net Banking, BCCI Payments, Mobile Wallet, etc

19 Payment Bank (2015)

FINO Pay Tech

Deposits, Cash Management, Manpower and Technology (partnering with ICICI Bank), Recharges for Mobiles, Utility Bill Payments, Ticket Booking, Insurance Distribution, and Assisted Online Shopping

20 Payment Bank (2015)

Tech Mahindra – Mobo Money

A first of its kind “Tap N Pay”, Contactless Digital Payment Solution (Near Field Communication)

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Status of ASCBs in Deposits for 2012-2015

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2013 2014 20150

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Deposits (Rs. Crores)

Public Sector Banks Private Sector Banks Foreign BanksTotal


Status of ASCBs in Advances for 2012-2015

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2013 2014 20150

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Advances (Rs. Crores)



Status of ASCBs in Investments for 2012-2015

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2013 2014 20150

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

Investments (Rs. Crores)



Status of ASCBs in Total Assets for 2012-2015

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2013 2014 20150

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Total Assets (Rs. Crores)



Status of ASCBs in Net NPAs for 2012-2015

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2013 2014 20150

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Net NPA (Rs. Crores)



Status of ASCBs in Net Profit for 2012-2015

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2013 2014 20150

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Net Profit (Rs. Crores)



Status of ASCBs in Total Income for 2012-2015

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2013 2014 20150

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Total Income (Rs. Crores)



Status of ASCBs in Total Expenditure for 2012-2015

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2013 2014 20150

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Total Expenditure (Rs. Crores)



Cyber Risks, Financial Inclusion, PMJDY

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Human risk is a big problem for Indian financial institutions. Banks need to start proactively educating their employees and customers to prevent cyber threats. Improving awareness of the different threats that currently exist, including e-mail fraud, Phishing, Vishing, Smishing, Skimming, Hacking, and Trojan.

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society

Pradhan Mantri Jan-Dhan Yojana (Prime Minister's People Money Scheme) is National Mission for Financial Inclusion to ensure access to financial services, namely Banking Savings & Deposit Accounts, Remittance, Credit, Insurance, and Pension in an affordable manner

http://www.bankinfosecurity.asia/awareness-training-c-27


Rupay, Payment Banks and m-Banking

• RuPay is an Indian domestic card scheme conceived and launched by NPCI. • It was created to fulfil the RBI’s desire to have a domestic, open loop, and

multilateral system of payments in India. • RuPay facilitates electronic payment at all Indian banks and financial institutions

and competes with MasterCard and Visa in India.• The term “Payment Banks” is new in Indian context. In Sep 2013, a “Committee

on Comprehensive Financial Services for Small Businesses and Low Income Households”, headed by Nachiket Mor, was formed by RBI. • By January 2014, the Nachiket Mor committee submitted its final report and one

of its recommendations was the formation of a new category of banks called payments banks.Out of 41 applicants in the race, on 19 August 2015, RBI gave "in-principle" licences to eleven entities to launch payments banks

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11 Payment Banks licensed by RBI in 20151 Aditya Birla Nuvo2 Airtel M Commerce Services3 Cholamandalam Distribution Services4 Department of Posts5 FINO PayTech6 National Securities Depository7 Reliance Industries8 DilipShanghvi, (founder of Sun Pharmaceuticals)9 Vijay Shekhar Sharma, (CEO of Paytm)10 Tech Mahindra11 Vodafone M-Pesa

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Big Data on Digital Banking from RBI website, Conclusion

• RBI Website has Payment Settlements data (Volume in Mns and Value in Bns) for 12 years between 2004-2005 and 2015-2016* (*Partial) on parameters like:

• RTGS, CCIL Operated Systems,

• Paper Clearing, Retail Electronic Clearing, Cards,

• Prepaid Payment Instruments (PPI) and Mobile Banking (from 2011)

• Grand Total of these seven have recorded a steep growth

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10 Varieties of ATMs in India1. On-site ATMs2. Off-site ATMs3. Solar based ATMs4. Bio-metric ATMs (for

illiterate customers)5. Floating ATMs (SBI)6. Mobile ATMs (Van)7. Micro ATMs

8. White-labelled ATMs9. Brown-labelled ATMs10. And now…..Talking ATMs (for blind in Canada : Oct 22,1997) -from UBI in Ahmedabad in Sept 2012; 11. 1.50 lac ATMs@POs12. Use of Analytics!

IBS Challenges etc 3205/01/2023


Conclusions• Prognosis for Indian banks is positive with Domestic Credit as a percentage

of GDP having grown substantially over the last decade.• Technology has transformed the landscape of Indian banking • Implementation of core banking has automated basic processes• Core banking platform have also given banks a strong launch pad to offer

digital channel capabilities building out their online and mobile channel offerings• ATM deployments and technology-enabled Business Correspondent (BC)

network allowed banks to service large parts of Indian hinterland.• Transformed customer experience and an optimized cost structure will

separate the leaders from the laggards in the industry• M-Banking is now order of the day making the traditional banks as ‘virtual’

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Education

Digital Banking in India 05022016