(L to R) IDBI Intech’s Sanjay Sharma, Citibank’s Sridhar Iyer, ICICI Bank’s Abonty Banerjee, Mint’s Tamal Bandyopadhyay, Kotak Mahindra’s Aruna Rao, Yes Bank’s Amit Sethi, and Pinstorm’s Mahesh Murthy at Mint’s conclave in Mumbai on Wednesday. Photo: Abhijit Bhatlekar/Mint  (Abhijit Bhatlekar/Mint )
(L to R) IDBI Intech’s Sanjay Sharma, Citibank’s Sridhar Iyer, ICICI Bank’s Abonty Banerjee, Mint’s Tamal Bandyopadhyay, Kotak Mahindra’s Aruna Rao, Yes Bank’s Amit Sethi, and Pinstorm’s Mahesh Murthy at Mint’s conclave in Mumbai on Wednesday. Photo: Abhijit Bhatlekar/Mint
(Abhijit Bhatlekar/Mint )

How technology is changing banking

Mint’s debate on the impact of technology and social networking on the banking landscape

Mumbai: New media and the use of the Internet will make banking easier, cheaper and create new opportunities to tap the already saturated urban market, panellists at Mint’s “IT in Banking Conclave" said. Despite security issues and user reluctance to adopt new media, this form of banking is here to stay.

Mint’s “Clarity Through Debate" on “New Technologies Set to Give Banking a Facelift" on 29 August in Mumbai focused on the impact of technology and social networking on the banking landscape. Abonty Banerjee, head, digital channels, ICICI Bank Ltd; Amit Sethi, senior president and chief information officer, Yes Bank Ltd; Sridhar Iyer, director, digital business, Citibank India; Mahesh Murthy, founder and CEO, Pinstorm; Aruna Rao, executive vice-president, Kotak Mahindra Bank Ltd; and Sanjay Sharma, managing director, IDBI Intech Ltd formed the panel. Tamal Bandyopadhyay, deputy managing editor of Mint, moderated the discussion. Edited excerpts:

Bandyopadhyay: You can use the new media to your advantage and at the same time it has become easier for the consumers to discredit a bank.

Sharma: The digital world has expanded a lot and the banks cannot ignore it. Today’s generation does banking only through the Internet. A large number of people who are coming to banks are users of the social media channel. They need personalized solution and you cannot offer that without using digital technology.

Another point is the Internet is bringing down the cost of transactions. I think banking will be done only on technology. As Bill Gates said, banking is necessary, bankers are not.

Sethi: Banking is the art of being where the customer is. So if my customer is on social media, Internet, mobile, the bank will have to be there. How do we use these forums to reach out to the customers is something every organization has to decide on its own. There are people who will be extremely euphoric and use all the strategy around social media, while some may be extremely fearful and feel it may disrupt the way they function.

All organizations will have to be there on social media and follow some kind of mobile policy. This is to create products, manage reputation or just to get feedback for something new you are launching and, most importantly, to get young crowd to join your organization. I think mobility has done what the Internet could not do. The Internet is yet to reach the rural masses but it’s helping us do inclusive banking and reach people that we otherwise would not have been able to reach.

Rao: First, there were mobile phones, then we became Internet-enabled and then came social media. It is very exciting in terms of what it can do for us. We can all see how it has started shaping consumer behaviour. We have seen banks as well as other providers making us understand our customers and shape their behaviour. At the same time, there are risks and uncertainties. As multiple technologies and people are involved, you don’t know how the customer is going to respond.

Iyer: Technology has changed our lives and banking is only a subset of it. There are three things that a customer does to approach a bank. First, he looks at how to search information and a lot of that has changed; then the entire application process for a product has changed; and the service model for the customer has changed. The social media is just an addition. Facebook and all have huge customer bases that may help us grow but just because of that it doesn’t mean that it is an area for banks to jump in. There are certain aspects of social media which are not very effective. We will probably get a lot of likes and followers for our banks page, but how do we use it to our benefit and our customers’ benefit is the question.

Murthy: On social media, there are 30,000-40,000 mentions on Indian Banks every day. A year ago, half of those mentions were during working hours but now only 15% of those are during working hours and 85% are outside working hours. It is important that we listen to everything that is said and figure out if it is a service issue or a non-service issue. If it is a service issue, we immediately need to solve it. Secondly, one should profile those customers who are happy with you and those who are not, and what the bank learns from it.

If the customer is asking you something on a Saturday, are you going to solve it on Monday? The biggest challenge now is to make the marketing team, the product development team and the human resources team to work together round the clock.

Banerjee: The customer profile is changing. He has more information, more access and is becoming more demanding. The customer is also much more engaged with us. He is willing to interact more and it is up to the banks to use this. The banks should wake up and solve their service issues or create a lot of interaction with them. The social media is the best way to do that.

But sometimes we get carried away by the size of the social media. The social media does not work in isolation and works with the rest of the channels and one must be very clear as to what spaces one wants to occupy in the social media. You just don’t want to end up answering complaints because it is not the only objective.

Another important thing is that with cloud computing, the cost will significantly go down.

Bandyopadhyay: How is banking changing to meet the change seen in customer behaviour?

Iyer: At Citibank, we use social media to reach out to our customers. We use the customer insights we gather form our followers from Facebook. For example, to identify an appropriate location for an ATM, we used Facebook. There are quite a lot of ways one can use the social media which, I believe, is a great tool to understand customers better.

Banerjee: The customer cycle is changing at each point—starting from the point of listening. The voice of customers could earlier be reached by traditional ways of doing a research where you go and ask questions but now lakhs of people comment on your product. One is not a substitute for another as we still need quantitative data but we have to look at it in conjunction to opinions about you. It is important to integrate all these things with the customer around you as you can no longer just look at your transaction analysis to know what is happening in this world.

It is very easy to seek information especially through mobile applications and by just placing your product on the Internet.

Murthy: Broadly we are seeing search, social media, video and mobile. In search, everybody wants to be found. The videos are more of an educational tool and nobody wants to read—everyone wants to watch a video. There are still 700 million non-Internet mobile users but they have SMS access. These are the four key areas that will see a lot evolution.

Rao: I would like to share an anecdote. We started getting calls for price of a share. When our call centre told the caller to get the information from the newspaper or a site, the caller said he was calling from a village where newspapers come a day later; he has his mobile app and trades through our brokerage.

We also found out that social media is a very non-threatening way to start interacting with young, inexperienced first-time customers.

Sethi: The banks have started using analytical data to understand everything about a particular customer. And, mobility is a very important aspect for every customer and banks are using mobile phones heavily to send information back and forth.

Sharma: There are many challenges that these banks are facing. One of the biggest challenges is to look after the large number of queries that these customers bring. The idea is how to use this mobile device in a more effective manner and provide more services. The mobile is the simplest device to use and if banks are able to exploit this device effectively, the possibilities are endless.

Bandyopadhyay: Banking is becoming cheaper and easier but what are the flip sides of the new technology?

Murthy: One thing about new media is that its negative aspects get highlighted more than its positive contributions. What I want people to understand is that any day it’s safer than giving your credit card to an unknown guy in a restaurant. Indeed, there are issues but they are fewer than what they used to be.

We should avoid over-regulation. Education is important and the true solution—education of the banker, the customer, and most importantly, the education of the government, the regulator. You open them up and there will be progress.

Bandyopadhyay: Do you find the banking regulator coming in your way?

Sharma: I don’t believe that. With every new product, there will be challenges and risks associated with it. The regulator has to intervene in such situations. For instance, if you don’t know the rules of the mobile banking game, there will be risks. I don’t think that we are over-regulated.

Sethi: What has happened over a period of time is that everybody believes that the regulator is some kind of a stopper but actually he is an enabler in a big way. The regulator is actually asking banks to become more customer centric, and the regulator is not keeping the banks away from putting data on a cloud. The banks just find that too risky.

Without understanding the environment one should not just rush into it as it is a new technology.

Iyer: I think the first risk is us—ourselves for hyping stuff like the social media. Banking is not the safest thing and we should not get carried away by the social media—to take banking all the way there does not make sense. We need to understand the mood of the customers and how they operate. This is the way to go.

The second risk is of customer loyalty. With increasing technology and customer expectations, relationships based on customer loyalty are passé. The customers are not loyal to us because we are a relationship bank. They will be loyal to us if we respond to their needs.

Another important thing is that banks need to be very careful about what they do and how they manage their books. Mass errors are very common these days with the use of technology that we have.

Banerjee: I think the regulator wears two hats. They are very proactive and act as an enabler. So far, we have not got a negative response whenever we have gone to the regulator with a new product or idea. In the last two years, they have added more clarity and given us more freedom and flexibility.

But the regulator is also a customer protector and as banks we have to live with that as we cannot have it both ways.

Rao: At the end of the day it is not only about social media or new media but also many other things. As far as risk is concerned, it is not customer risk but our ability to strategize well. About 67% of the new project spends are invested in new media and we have to be very careful as to how we make these investments.

Murthy: I think the best thing about this entire change in medium is that it has opened up a set of opportunities. If we don’t take advantage of them, someone else will.

Bandyopadhyay: Where do you see the banking landscape in terms of technology in the next five years?

Sharma: I think everything will turn digital. We will only be talking about how to make this medium better. It will be a 100% virtual world.

Murthy: We will move from atoms to neutrons. It will be less and less about how to read it in a brochure but people will get more emotional and personal about branding. Customers will demand servicing 168 hours a week and not just 40 hours. Our jobs will be more like the air traffic control—once you are done with your shift at 8 in the night, someone will drive the bank till 8 in the morning.

Iyer: We will see banks having very strong analytics and they will cater to very specific consumer trends. Over the years, banks will become custodians of information rather than being custodians of cash.

Sethi: Everything is going to move in line. By ‘in line’, I mean transactions, management. Things will move much faster—there will be service on demand and product on demand.

Banerjee: Mobile banking will definitely take over other traditional transaction channels. The job of the banks will be to make it simple. I also see non-banking players coming in with their products.

Rao: The customer will become even more powerful and this will force collaboration among banks and create operational ease. But no matter how much this industry changes, branches are here to stay. Everybody likes to sometime connect with their banks.

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