(L to R) Venkatesh Hariharan, director (fintech) iSpirit, Sandep Goenka, co-founder and COO-ZebPay Bitcoin exchange, Leslie D’Monte, national technology editor-MINT, Deepak Sharma, chief digital officer-Kotak Mahindra Bank, B. Madhivanan, chief technology officer-ICICI Bank and Nitin Chugh, country head, digital banking- HDFC Bank. Photo: Abhijit Bhatlekar/Mint
(L to R) Venkatesh Hariharan, director (fintech) iSpirit, Sandep Goenka, co-founder and COO-ZebPay Bitcoin exchange, Leslie D’Monte, national technology editor-MINT, Deepak Sharma, chief digital officer-Kotak Mahindra Bank, B. Madhivanan, chief technology officer-ICICI Bank and Nitin Chugh, country head, digital banking- HDFC Bank. Photo: Abhijit Bhatlekar/Mint

Technology is driving shifts in the banking and financial services sector

A panel of banking executives discuss the impact of the digital tsunami being felt in the banking sector

Mumbai: A digital tsunami has hit all of us. Its impact is being felt especially in the banking sector, with disruptors like fin-tech start-ups, payment banks, cryptocurrencies, and millennials who are used to Uber and AirBnB kind of services. In this context, B. Madhivanan, chief technology and digital officer of ICICI Bank; Nitin Chugh, country head (digital banking) of HDFC Bank; Deepak Sharma, chief digital officer of Kotak Mahindra Bank; Sandeep Goenka, co-founder and COO of Zebpay Bitcoin Exchange; and Venkatesh Hariharan, director (fintech) of iSpirt, shared their thoughts as panellists at the 11th Mint Annual Banking Conclave. The discussion was moderated by Leslie D’Monte, national technology editor of Mint. Edited excerpts:

Your views on the digital opportunity...

Madhivanan: Besides established banking technologies dominant in the past decade—core banking, ATMs, internet, and mobile in its early stages—the world has primarily moved to the world of apps, the world of APIs (application programming interfaces), and a completely new way of looking at processes that are customer journeys. Banks have been trying to keep up with this curve.

Mobility is becoming the choice—no more the last mile but the last metre connection. Services are getting delivered in the form of apps and maybe as we go along, completely in the form of voice-enabled stuff and image patterns. And a big chunk of our actual transactions, including new acquisitions, is happening through the app world.

As we speak, at any point of time, about 450-600 odd APIs that are getting generated.

They help us marry legacy technology with the world of digital transactions. The top 50 would give us the ability to tie up with any of the partners, whether it is digital or physical. Other major areas include the world of data and this is where artificial intelligence (AI) comes into play. Finally, on the operations side, it’s business as usual coupled with robotics and automation. At last count, we had automated almost 700-800 processes using robotic automation process (RPA)—both within the bank and outside.

Chugh: Apps have really changed the whole experience. Now if the experience has changed, expectations have changed too. And if the expectations have changed, you can no longer have processes—you will now have customer journeys. Now the journey will obviously differ from one consumer to the other. That brings us to a point that if a million customers are going to have a million journeys, and let’s say do 10 transactions each, you are talking about 10 million potential journeys that are unique and different from each other. That brings us to this whole concept of hyper-personalization. And that is what people are expecting. People are saying that it should talk to me because I have my own identity. That will only be possible by using data in a manner that you can make sense of it, by applying the new technologies of machine learning, artificial intelligence, and maybe at some point in time, deep learning to be bring about an experience change which is completely personalized for that individual.

All this obviously means that business strategies have to change. You can no longer sit and plan for a business model based on some of the old assumptions, and assume that customers will continue to accept whatever is coming their way. Because people are saying—why should I have to wait? Why should I have to go and compare? Why can’t you come and tell me what is best for me?

If such expectations are going to drive change, business models and strategies will have to keep pace with that. This is the big shift which is happening already. And all of it is obviously getting enabled because of the availability of technology.

Sharma: When we look at digital, we don’t just look at it as some kind of future tech or some cool gadgets or gizmos.

We serve a vast variety of customers. A large pool comprise those we call ‘customers of yesterday’. That means they are using technology that is not mainstream. They still want a personal experience by walking into a branch or calling up the contact centre.

The ‘customers of today’ are comfortable with mobile apps, online banking and ATMs. And there are the millennials, or GenZ or ‘customers of tomorrow’, who are always restless and looking at newer ways to interact and engage with a bank—be it through social media, conversational banking, or bots.

A large part of digital value comes from cutting across all three customer segments.

We are moving from processes to journeys, and doing automation—using APIs and straight-through processes (STPs)—and using technologies like AI to improve customer interactions and journeys, and predictive algorithms to predict what kind of products are more suitable for a customer—or for a relationship manager, when he or she meets a customer to recommend a product. We are also using predictive algos to understand the risk profile portfolio. Technologies come and go. It’s how we apply these technologies to solve a business problem that finally brings in the big shift.

Hariharan: We at iSpirt feel that the next big growth opportunity for the banking sector is what we call the India Two segment.

This is basically that segment of the country that is between Rs2 lakh and Rs5.5 lakh of annual household income. And the digital and India stack and Aadhaar, etc., offer a huge opportunity to banks and NBFCs (non-banking financial companies) and fintech firms to serve this market segment at a price point that was not possible before.

I think the next big opportunity is going to be cash-flow based lending to this particular market segment.

Many individuals who access loans would have actually taken a loan for the first time. Further, many borrowers are new to credit. This provides an opportunity in terms of financial inclusion.

So far, most of the lending we have done has been loan against property or collateral-based lending. Cash flow-based lending has not been a big part of the industry as data has not been available. In the next 3-4 years, there will be a huge lending opportunity as almost 5 billion invoices are uploaded to the GST system on a monthly basis. You are also seeing the transaction volumes on UPI rise dramatically. On the back of UPI, you can use the UPI inflow data to kind of do cash-flow based lending.

What about bitcoin and blockchain technology?

Goenka: Three years back, nobody wanted to talk to us. Now at least everybody wants to know more about us. That’s encouraging. I think we represent the part of fintech that is a leapfrog technology. A lot of times, the conversation is steered away from cryptocurrencies to blockchain.

However, there is not a single large-scale blockchain implementation in any financial institution—there are only pilots. Blockchain is extremely slow and very difficult to scale. Blockchain’s strength is its immutability and security of transactions that are recorded on this database, but blockchain cannot work without an associated token attached to it, which is a cryptocurrency like blockchain.

Trying not to talk about cryptocurrencies like bitcoin when talking about blockchain, is an oxymoron. That said, I believe the technology we represent is a huge opportunity for the financial sector, for banks and for financial institutions. Like the fear of any new technology, we’ll change the narrative (from fear) to the potential benefit of this technology.