Group 3 - IT in Retail Banking

8/2/2019 Group 3 - IT in Retail Banking

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Red BookIT in Retail Banking

Pavan Murali

Visram R


2/23

Retail Banking in India

1. The Retail Banking Industry in India isworth $300 Billion

2. Majority customer base in the retailbanking sector belongs to themiddle aged, working class section

3. People are dissatisfied with thepublic sector banks especially dueto bad customer service

1. Mature in terms of money supply,product range & reach

2. Resilient to economic crisis ,

regulated by RBI standards3. Retail lending constitutes 12.36%

of the Indian banking system

4. Expected CAGR growth of 25%reaching Rs.575000 crore


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StrategyRetail Banking

Constant product innovation to match requirements ofthe customer segment

Quality service and quickness of delivery

Introduction of new delivery channels

Tapping of unexploited potential and increasing thevolume of business

Detailed Market Research

Cross Selling of Products

Tie Up Arrangements

Business Process Outsourcing

How can technology enable delivering a competitive advantagewhich is consistent with a banks strategy?


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Major IT Applications

Currently,NGPay is adominantservice,but hasseveral

drawbacks

Incompatibility across platforms

Fewer ServicesFull range is not available

No SMS Reminders or Alerts

No integration of accounts

No bill pay facility

Non consumption

Non convergence of commerce

1 Mobile Banking & SMS Banking Solutions


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Paperless banking achieved throughonline banking, online bill payment &e-Statements

Eliminate pass books & chequesSeamless transactions between banks

NEFT & RTGS options to customers

Tax filing

e-Payroll Management

Subscribe to services & alerts

Complaint registration facility at allATMs

2 Green Banking Solutions


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Extends number of customer

touch points - channels at publictransit places

Drive adoption of onlinechannels

Statements & account enquiries

Order cheque books & demanddrafts

Increase member loyaltyKiosk users are 80% less likely toleave

Providers: Celent, NCR Corp

SelfServic

eK

iosks

3 Branch Automation & Self Service


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EGG.COM - Most profitable bank in the UK

World's largest internet bank

2 million customers

$20 billion worth transactions every year

No physical branches (Egg.com)

Accounts opened only through internet &/orcustomer care centers

Services such as Tax filing

Cross sells services such as investment advice,portfolio management

4 Business Transformation through IT



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Analytics to cross sell &up sell services

Tie ups possible withother services too(Convergence)

Can be used in theentire lifecycle

management ofcustomer

Provide information andenhanced services to

customers

Resource intensiveimplementation but

high returns

Sales Force Automationtool can be used for

opportunity

Sign up for the UIDService

Instead of going in forUID, attempt throughPAN (KYC) to reach

market faster & gain afirst mover advantage

5 Customer Relationship Management

CRM is a comprehensive approach that aligns business strategy,corporate culture and supporting information technology, so thatthe customer relationship proves mutually beneficial to bothcustomer and enterprise


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CRM in India

Methodology of study - Customer Relationship Management

SecondaryResearch onthe theme

InitialHypotheses

Primaryresearch

based on thehypotheses

SecondaryResearch

Analysis andFindings

LearningConclusion of

study

Initial Hypothesis - Customer Relationship Management

CRM solutions are amainstay for banks to

manage their HNW clients

CRM solutions areexpensive, and difficult toimplement and use. Banks

which do not have thescale are unlikely to go for

these at this juncture

Banks which haveimplemented CRMsolutions still are unsure on

how to use them, andreturns are not being

measured


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CRM in India

The NEED

To provide one view for the

customer and to provide oneview from the Banksperspective. Ease of transactionand lessen transaction costs

To supplement deposits, loans,mutual funds and insuranceproducts

To give customers options totransact on all their accounts

using multiple channels likeinternet, phone and SMS

Telemarketing, need for

corporate retail bankingcustomers

Tools

CRM systems always need a core banking ERP system to sit on top of. Most banks tend to use

solutions from known CRM vendors. They lack the technical expertise to build custom solutions.

I Flex core banking system is used at SBI. It also provides a built in CRM solution. Only class Acities use CRM systems at SBI

Custom CRM package developed by i2 is used by Axis Bank, supplements core bankingplatform

ICICI uses home grown solutions, but we are fast outgrowing it. 80 different systems in place,there is a need for consolidation


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CRM in India

Parameters paramount for technical implementation

Initial cost of software is just 20% of the total initiative cost - the rest beingthose pertaining to implementation, training, maintenance etc.

Prior relationships are key for vendor selection

Cost of development is a main driver

Implementation Problems

Changemanagement. Bankemployees are notaware of how touse these systems

IT support staff arealways short in

number and areoverworked

Training costs arehigh, during trainingemployees areunavailable for

regular work

Integration with allother systems


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CRM in India

Benefits

Returns

One view of the customer for boththe customer and for the bank

Technology in initial stages. There is aneed to fine tune and use thesesystems in ways consistent with howother banks use them

Turnaround time for closing leads,opening accounts and closingservice requests has been drasticallyimproved. Campaign definition and

performance tracking can be donebetter

Helps manage high net worth clients,helps offer a range of end to endservices which HNWs expect from

their banking partners

Indian banks still do not know how to measure returns from a CRM system. It is also difficult tomeasure unless customer retention gains higher priority than customer acquisition, which is notgoing to be the case in Indian markets for at least another 10 years

IT spends for small projects are a part of discretionary spending. Unaware and unsure if returnsare measured

Customer staying with a bank utilizing more services brings us 5 times more revenue than anew customer. That justifies any amount of IT spend on CRM systems


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Most banks areexperiencing high

growth (>100% YoY).Financial Inclusion is on

its way up

CRM makes sense onlywhen you need to cross

sell

Costs are prohibitive forsmaller banks, returns

are minimal

Traditional mechanismsof generating leads areworking, why invest in

something new?

We can automaticallybuild CRM systems when

UID becomes morewidespread is the

general notion

There is no need togenerate leads. Pull

based customerrelationships is the driver

for growth

Existing systems and corebanking platform helps

generate more thansufficient (much morethan usable) reports

Retention is not aproblemA customer is

a customer for life

CRM in India

Non Implementation


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CRM in India

Future Outlook

Indian banking industry is maturing differently from other developed economies.This is primarily due to the large section at the bottom of the pyramid in India.Mainstream banking will take a longish amount of time to adopt CRM systems.

CRM systems for high net worth individuals is key in the near future

CRM systems will be put into place, but how effectively they will be used will be thedifferentiator

CIO and top management drive will only increase as years go by

Real Time forecasting and cash management will be a real need for all bankshowever small they are. Therefore, CRM becomes an absolute necessity in thefuture


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CRM in India

Conclusions

Most of the CRM implementation's failure can be attributed to over-emphasis on technicalaspects and on neglect of strategy and people. The choice of technology should bederived from the strategy that the firm has visualized and who are going to use it

The processes involved in customer management need to be aligned to the best inpractice

Firms start implementing CRM without even deciding upon the objectives to be achievedthrough the exercise

There should be proper performance measurement mechanism and control methodologythat can give insight (and control) into the status of the implementation process as well ason its success

Owing to CRMs' high initial costs as well as high implementation costs, the downtimerequirements, lack of clear ROI measurements, long gestation period before the profitsstart showing up etc. have also served as important factors in slow and gradualpenetration of CRM


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Virtualization & Server Consolidation

Lower number of physical servers - reduce hardware maintenance costs

By implementing a server consolidation strategy, space utilization efficiency in datacenter goes up

Prevent one application from impacting another application when upgrades orchanges are made - Sandboxing

Develop a standard virtual server build that can be easily duplicated which will speedup serverdeployment

Deploy multiple operating system technologies on a single hardware platform (i.e.Windows Server 2003, Linux, Windows 2000 etc)

6


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Virtualization

Virtualization in Banking

Increasing customer base, leading to a need to handle large volume of data

Banks expect to scale rapidly. IT infrastructure is expected to be complex. Need to simplify

Allows for an agile infrastructureBanks can focus on their core competencies

Banks implement different kinds of virtualizationapplication, network, OS, presentation,storage

Tools

VMware

Microsoft virtualization solution

Hitachi storage solutions at work

Composite data virtualization software

Red hat KVM Virtualization

Server Dynamic and responsive data center

Presentation Seamless remote execution of applications

Application Change how Line of business applications are managed

OS Multiple OS on single desktop

Vi t li ti


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Virtualization

Methodology of study - Virtualization

Secondary

Researchon thetheme

InitialHypotheses

Primary

researchbased on thehypotheses

SecondaryResearch

Analysisand

Findings

Conclusionof study

Initial Hypothesis - Virtualization

Banks go forvirtualization to cut costs

and save space andutilize resources

effectively

Banks look to improveperformance through

virtualization

Only large banks go forvirtualization. Hardly anyof the small banks see aneed for the technology


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Virtualization

Successful implementation of Virtualization in Banks

Need: arrest infrastructure cost and save data centerspace

Server and desktop virtualization using VMware

Deployment cost cut down by 1/3

St. George Bank, Largestbanking group in Australia

Need: Support its formidable growth

Desktop virtualization using VMware

3 times decrease in cost and increase in lifetime

Woodforest bank, Largebank operating from

Houston

Need: Cut costs. Manage applications centrally

Desktop virtualization using VMware

50% reduction in TCO. 70% reduction in upgrade time

Mahesh bank, Large Coopbank in South India

Need: Save space. Reduce power consumption

Server virtualization using Microsoft virtualization solution

40% energy savingsBahrain Islamic Bank

Need: Reduce power consumption. Group consumed 5to 6 MW of power

Adopted Server virtualization. Cut increase in utilizationto 200 KW from 600 KW.

Credit Suisse, largestbanking group in

Switzerland


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Virtualization

Findings from primary survey

Typicalobjectivesof

virtualizationin Banking

Save on power, cooling and rack space.

Increase uptime. Handle standby efficiently without disturbing

production.Server/network consolidation is a key objective

More efficient usage of space in datacenter is another.

Overall result in less cost and improved efficiency


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Virtualization

Implementation Methodology

Planning Business Case ROI Model

POCNetwork =>

Hardware =>Desktop Application

Ability to handle informationsecurity

Support provided, time to recovery Financial strength Client testimonials

Cost

Features

Market Share Licensing Maturity

Vendor Selection


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Virtualization

Post Implementation and other findings

Performance Monitoring Collect historical data. Add corresponding costs to it. VMWareCapacity planner

Checks resources over a period and gives consolidation recommendation

Classic problems post of Implementation Application not supported Over provisioning Network mapping Remote addressing Application communication breakdown

Old and Legacy Systems Usually not touched. Dont want to disturb operations Old systems - reuse if possible. Scrap if out of warranty

Why banks dont implement virtualization Dont trust the technology Costs outweigh benefits, given the risk Management doesnt want to disturb what works fine Unable to get user buy-in Bank size is too small to achieve noticeable benefits


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Virtualization

Conclusions

Most Implementation project failures are because of poor planning

Create peak volume during normal hours

Reduce costs, use less resources and get same performance

Banks that have outsourced find it easier to virtualize

Vendor strategy and company strategy must match

Importance of vendor being financially stable

Banks are never sure that all scenarios have been handled during testing.

A bug can be because of the component virtualized, or because of thevirtualization itself

Group 3 - IT in Retail Banking

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