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Conference highlights Internet advantage for Indian banks and financial institutions

Madanmohan Rao

Mumbai; February 3, 2001

The Internet and mobile telephony can provide significant competitive advantage for Indian banks and financial institutions in an environment of increasing deregulation and globalisation -- but also open the door to new competitors, according to speakers at a recent conference here in Mumbai.

About a hundred conference delegates, five hundred trade show attendees, and forty exhibiting companies from a dozen countries gathered in Mumbai for the second annual Bank Technology India 2001 conference and trade show (www.banktechnologyindia.com) focusing on the impact of information technologies in the banking, finance and insurance sectors.

Banks need to provide products not just for the private and corporate sectors but also for the masses; here they face new opportunities and new competitors such as retailers, according to keynote speaker Tristan Grieveson, regional managing director of financial services company Sema Technologies.

Consumer brands like Sony, Virgin and Tesco are branching out from the retail sector to offer banking services as well, he said. Banks will have to improve their responsiveness to fashion and fads, quicken launch speed, be able to change direction nimbly, and unveil a variety of loyalty schemes.

"Financial product cycles are getting shorter, and there are more products to launch and support," Grieveson said. Many banks are thus turning to outsourcing operations like card services.

"Efficiency of operation is being supplanted by effectiveness, and an 'in-house' mentality is giving way to the concept of the extended enterprise," Grieveson observed.

This applies to ATMs, Internet banking, e-commerce gateways, CRM, mobile commerce, financial content, human resource issues, and various other banking operations and channels.

"We are witnessing the rise of a new kind of bank: the network bank," said Swarup Choudhury, country manager of IBM's financial services sector in India.

"Consumer power is increasing, new intermediaries are cropping up, customer information is becoming a saleable asset, financial and geographical boundaries are diminishing with de-regulation and globalisation, and customer loyalty is becoming a key competitive asset," Choudhury observed.

The successful network bank builds customer intimacy, enhances information content, and excels in infrastructure and operations, he said. There are even Internet-only banks emerging in the U.S. and Europe.

Already, U.S.-based companies like Sears, which outsource from India, are requiring all affiliate companies to move their interactions to e-banking platforms.

"India is often called a 90 per cent country - many things are left 10 per cent unfinished. We have to be better in implementation, especially in areas like banking services," Choudhury urged. "Start simple, think big and move fast," he advised.

Indian IT companies are leveraging the Net to offer their services to banks and finance companies around the world, observed Shammi Nagpal, managing director of Messe Frankfurt India, the host of the conference. The Mumbai-based arm of the German trade show giant Messe Frankfurt recently hosted an India pavilion of local IT companies at European Bank Technology 2000, the world's largest forum of its kind.

"Indian banks should not simply dismiss technology. Look at the two Indian automobile companies who had a monopoly for decades, only to be majorly sidelined by more customer-centric and technically savvy competitors," said Rostow Ravanan, co-founder of MindTree Consulting.

MNC and private sector banks in India are more nimble than their public sector counterparts in this regard. Global Trust Bank is mixing a technology-driven yet customer-friendly image in its ad campaigns. ICICI Bank is creating "e-channels" for the suppliers of its clients like Hindustan Lever.

Banks must create a new position: VP of Alliances, Ravanan urged. CitiBank's Suvidha initiative in Bangalore has forged major alliances with Indian Oil, Jet Airways, as well as several grocers and restaurants. The CitiBank site in the U.S. even links directly to e-commerce services.

"The speed of speed is changing. Companies need to fractalise their organization, become world class players, and look for benchmarks within and outside their industry," he urged.

Mobile banking seems to have caught the attention of many players in India, though there is a lot of "noise" in this area.

"Mobile Internet in Japan has found a critical mass of 10 million users in less than two years, faster than any prior medium," said Makarand Padalkar, product marketing head at i-Flex solutions.

Key factors for rapid adoption of m-banking include price, service, usability, and trust. "We are also witnessing a rapid growth in the availability of network-ready PDAs," Padalkar said.

M-commerce will be more immersive, pervasive and intimate than the Internet experience. But promises of services like WAP have gone from stages of hype to disappointment; this will be followed by realism and then market growth, he said.

As bandwidth increases along the wireless spectrum - SMS, WAP, GPRS, EDGE, and 3G - so also applications will evolve from basic information services and transactions to online music and video, Padalkar said.

All these standards and their supported services will co-exist, as consumers integrate mobile devices into their lifestyles. "Yesterday, people spent time to save money. Today, they spend money to save time," said Karanvir Singh, president of Voxtron Dezign Lab.

"Mobile banking in India used to mean banking services offered by mobile vans in villages. It will soon embrace mobile phones," he joked. Though WAP and the Net seem to be hogging much media attention, there is still a significant role for pure voice-based telephone banking services via voice portals, Singh said.

In addition to service efficiency, content will play a key enabling role in offerings like e-finance, said Jamal Mecklai, CEO of online financial services site eMecklai.com.

"People are willing to pay for certain kinds of perishable financial content, such as bullion prices," Mecklai said.

Financial services companies stand to gain a lot from the Net and mobile phones, but should also pay attention to providing users with offline support, he cautioned.

"The market for financial services in India will really take off after the various data backbone and international Internet connectivity projects mature. Digital products - such as financial intelligence and services - will proliferate," predicted Arun Jethmalani, CEO and co-founder of financial content company ValueNotes.com.

"Word of mouth is one of the most powerful marketing tools on the Net. On financial sites, compelling content is a key reason why people come back to the sites," he observed.

Numerous content syndicators and aggregators are entering the financial services game. "It is OK for a financial site to have about ten per cent of its content in the commodity category, the way newspapers feature content from newswires. But the rest should be original value-added content," recommended Anurag Garg, director of IndiaCapital.com.

Traditional boundaries between banks and finance companies are blurring, and many are also entering the fray in the area of payment gateways for e-commerce.

Despite the potential of online fraud, there is an increasing acceptance of secure electronic channels of payment instead of cash, said Nandu Kulkarni, head of the payment systems group at i-Flex Solutions.

Companies offering e-security services in India include Single Point Associates, Financial Technologies, and Ernst&Young.

Electronic payments accounted for only 1.2 per cent of the total consumer spend in India this past year, but can experience growth rates of up to 50 per cent in the next three years, said Piyush Khaitan, vice president of Venture Infotek, which provides payment gateway solutions to over 80 e-commerce sites and ISPs in India including Rediff, VSNL and Mantra Online.

"In addition to debit cards, stored-value smart cards have a huge potential in India," said Khaitan.

"In India, the cost of printing and maintaining cash has become too high. Increased supply of cash is not the answer - demand must be curtailed. Instead, online options should be encouraged," Khaitan urged.

On the regulatory front, significant steps have been taken in India in terms of standardizing technical issues for electronic payment mechanisms such as smart cards and debit cards.

"India is one of a dozen countries worldwide which currently has progressive cyberlaws for e-commerce," said Sunil Jain, managing director of Elcom, an e-procurement solutions provider.

And as deregulation moves to other financial services areas like insurance, gearing up human resources in an IT-intensive environment will open up new challenges for  training and education of employees.

"Web-based e-learning solutions can be effectively harnessed by banks in front-office activities like account opening," said Sunil Khandlikar, CEO of India operations for Learning Byte International.

This training can be extended beyond bank employees to the extended ecosystem of contractors and agents. Web-based knowledge management solutions are also key in organizational learning, Khandlikar said.

As new styles of corporate governance emerge, listed banks are also coming under pressure to increase shareholder value, observed Sanat Rao, banking consultant at Infosys.

New players are also emerging in "middleware" categories, such as integration with the SWIFT network, bridging channels with XML, and plugging into data warehouses.

Mumbai-based bill presentment and payment site BillJunction.com (servicing ISPs and utility companies) is a notable example in this regard. "Banking in India has changed more in the last two years than in the last two decades," observed Rao.

Innovative strategies are emerging in providing services to corporates, SMEs, NRIs, and urban retail segments.

Payment service providers and eCRM companies will need to differentiate their offerings between B2C and B2B sectors, said K.P. Nair, vice president at 247Customer.com. "There is a continually shifting line at the outsourcing boundary, as CRM software platforms and CRM service companies mature in their offerings for banking and finance players," he observed.

The best CRM is being practiced in the banking sector, according to Gayatri Balaji, VP at CustomerAsset.com.

In the insurance sector in the U.S., a fifth of IT spending will go towards CRM, she said.

IT in the insurance sector will be another focus area at the next Bank Technology India conference in Mumbai, in February 2002.


The writer can be reached at madan@techsparks.com

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