The banking sector has traditionally been one of the more lucrative sectors for the information technology industry. India’s IT giants have been catering to the technological needs of many of the world’s top banks, and the same trend will be seen in the Indian banking sector with the Reserve Bank of India bringing in a host of technology measures and initiatives.
With India having more mobile phone subscribers than those with bank accounts, it has become essential for the banks to bridge the digital divide and introduce the unbanked sector to the financial mainstream. To facilitate this and the streamline the process, the Reserve Bank of India introduced the Mobile Payments Forum of India, a working group on mobile banking to examine different aspects of m-banking. The group focused on three major areas of m-banking: technology and security issues, business issues, and regulatory and supervisory issues.
In order to promote cashless transactions, the Reserve Bank of India in May raised the limit of mobile banking from 1,000 rupees per transaction to 5,000. According to National Payment Corp. of India, nearly 31.7 million rupees were transferred via mobile phones in September, while the issuance of Mobile Money Identifiers, or MMIDs, neared 15 million rupees.
Device manufacturers, banks and telecom operators have started offering apps and SMS-based services in this space. One of the latest entrants in this is Obopay, a mobile payment service provider. Obopay, which is set to expand across the country on the back of a partnership with handset manufacturer Nokia, had already joined with Union Bank of India and YES Bank.
Automated data flow (ADF)
In November 2010, the Reserve Bank of India issued an approach paper for automated workflow data, in an effort to streamline its data collection processes and also ensure the quality of data obtained. The Reserve Bank collects data for its analysis throughout the year from all banks in various methods — manual, automated and semi-automated — thereby leading to increased workload to ensure data integrity.
After the announcement, banks were allowed to work on their own strategies to conform to the XBRL taxonomy suggested by the central bank, thus ensuring the Reserve Bank of India and the banks all had standard and consistent data points. This move has presented IT and ITES firms with a lot of opportunity both in terms of product development and offering services. It is estimated to bring in as much as 5 billion rupees in business to the IT sector.
Product companies such as iCreate and Ramco have quickly caught on to this trend, coming out with products that directly addresses the Reserve Bank’s request. ICreate’s Biz$core ADF is an all-encompassing banking solution that takes care of business systems and compliance and incorporates intelligent analytics to help in decision making. Biz$core also has a built-in ADF solution that outputs return submissions and other necessary reports in XBRL and other formats.
In an interview with RCR Wireless News, Naresh Kurup, iCreate’s head of marketing and communications, said the product comes with a lot of prebuilt intelligence tailor-made for banks. This makes the product customization and deployment possible within 100 days for any given bank, Kurup said. “The idea was to cover the entire banking spectrum and offer a breadth of functionalities that the banking sector would need — be it retail, credit or compliance — and also produce a solution that takes care of the core business decision making and compliance as well. Based on RBI’s directive, ADF was a logical extension of our Biz$core solution that we thought would add value to our product, and this has been welcomed by major banks in India.”
While leading banks like Dhanlaxmi Bank and HDFC Bank have selected Biz$core as their ADF solution, IndusInd Bank has taken the entire Biz$core suite, including analytics, for their operations. A senior official from one of the leading banks in India told RCR Wireless News that ADF would definitely help them streamline their processes and meet the Reserve Bank’s standards. He further added that between the two options of choosing a total system that would take care of their internal systems/MIS, which had common data points with ADF, and creating stand-alone XBRL reports that were derived out of their current reports, banks would most likely decide to go with a technology solution like Biz$core, which would make it a single solution for analytics, reporting, managing internal operations and also satisfying ADF.
XBRL / iXBRL
Around the world, XBRL and iXBRL standards have also presented immense opportunity to ITES companies in the content, publishing and data conversion industries. While major international banks and financial institutions already have systems like Biz$core which automate generation of XBRL, individual companies still meet their XBRL needs by outsourcing their needs to companies like RR Donnelley or TaurusQuest, to name a couple. With Indian banks also getting into XBRL, there will be demand from local markets and banks for such services.
Commenting on the Reserve Bank measures, R. Venkatakrishnan, a chartered accountant and partner at R. Venkatakrishnan & Associates, Chennai, said: “The requirement of the Reserve Bank of India should be viewed in the context of its primarily role as regulator of a financial system that has been significantly integrated into the global financial markets. The RBI, as regulator, is mandated with the responsibility of ensuring an orderly financial system and managing the monetary practices of the country.
“Take, for example, inflation,” Venkatakrishnan continued. “Traditional economics would attribute purchasing power and money available in the system as one of the drivers of inflation. The RBI normally uses the monetary policy as tool to control the quantum of money supply to either raising the liquidity ratio of banks or the interest rates. One of the problems that RBI has been facing with is the lack of integrity in the data available as much as the timely availability of such data. The move by RBI is probably entirely in line with the XBRL concept. In this case, RBI could have brought the taxonomy to facilitate greater clarity in understanding and interpretations.”
The Reserve Bank of India has been conducting research on online forums and message boards, asking for public opinion on what consumers would like to see on its website to make it more informative and user-friendly. Based on the many inputs received, the Reserve Bank has been contemplating getting onto Social Media starting with Twitter. This comes as part of the central bank’s steps toward improving its Web presence and attracting greater traffic to its website.
Reserve Bank Deputy Governor K.C. Chakrabarty cited analytics and social media as the two key points in the impact of technology in Indian banking in coming years. He says social media can be a double-edged sword. “For banks, use of the social media has its pros and cons. One influencer can drive thousands of potential customers to a website. However, that same influencer can spread his or her dissatisfaction, causing erosion in brand equity and profitability,” he added.