Mapping ICT Impact

Indian banking is one sector which has undergone rapid change and transformation. Hence, what we have today as banks is completely different from what we had as banks yesterday. Similarly, banks tomorrow will be completely different from banks today. One technology that has and will always be consistent in transforming the face of the Indian Banking System from yesteryears to what it is today definitely happens to be the information and communication technologies.

In recent times, the Indian banking industry has been without fail working towards the development of technological changes and its usage in the banking operations for the improvement of their efficiency. To get the benefits of enhanced technologies, Indian banks are continuously encouraging the investment in information technology (IT), ie, ATMs, e-banking or netbanking, mobile and tele-banking, CRM, computerization in the banks, increasing use of plastic money, establishment of call centers, etc.

ICT Advancements

The massive automation at branch level reduced have errors in calculations and transactions and resulted in customers getting error-free service and was supplied with printed account statements. After the financial sector reforms ie, entry of new private sector banks and with the introduction of internet, banks opted for single centralized databases instead of having multiple databases for all their branches which resulted in low cost vis-a vis decentralized networks.

Then came data warehousing which in itself is the complete solution for providing strategic information. Not only this, it makes available the total view of the bank, makes the bank's current and historical information easily available for decision making, makes decision-support transactions possible without hindering operational systems.

Following it is the latest one that is facilitating m-banking. Combining the mobile and the banking sectors will have benefits not just for consumers but for the economy on the whole. SBI has recently joined hands with Bharti airtel to set up a joint venture, which will extend mobile banking service to the unbanked. ICICI Bank has tied up with Vodafone Essar whereby both entities will offer a bouquet of financial products such as savings accounts, pre-paid instruments, and credit products through a mobile phone based platform. Axis Bank, has signed an MoU with Idea Cellular, whereby Idea will act as a business correspondent of Axis Bank to provide the bank's financial products and services through its retail outlets.

Key Drivers

Technology to enhance customer experience is what is going to be the key to boosting banking sector's growth in the coming days. 'Business Transformation Program', encompassing technology, is a customer-centric initiative to offer the convenience of banking on a 24x7 basis, at all major centers in India and abroad. This would be done through deployment of the core banking solution integrated with delivery channels like the ATM, internet, phones, mobiles, kiosks, and call centers.

CRM has been the talk of the town for quite a long time but it can be taken to higher levels of sophistication only to grow customer experience satisfaction. It can be done with channel integration. Channels can be branch, ATMs, internet or now, mobile channels. Integrating all these channels will be highly in demand-a mobile platform-as the whole arena plays a critical role nowadays in banking.

Moreover, technologies like 3G and WiMax is also expected to meet the business needs to the sector. Today, majority of banks are trying to equip themselves with wireless data cards wherever it's feasible and in the next phase, and get a terrestrial cable net, keeping a data card back-up. So, these technologies are expected to enable the sector to meet those bandwidth demands with smooth and faster data transfer and networks.

Challenges

Fraud, identity theft, spam, phishing and a host of other malicious internet threats are increasing and becoming more sophisticated by the day. And, with more of the financial business going online, it has become urgent for banks to overhaul their IT security strategy.

The current competencies, skills levels and the preparedness of bankers are totally inadequate for them to face these new challenges. Banking and financial institutions are storehouses of highly confidential customer data, something which places huge security demands on their network infrastructure. Some of the major challenges faced by Indian banking industry includes-

Compliance is a major challenge. According to a recent Deloitte study on global financial institutions' security strategy, regulatory and legislative compliance is ranked by financial institutions as one of their top five security initiatives. Banks, however, are challenged by the need to limit the overall cost of implementing compliance, which has been alarmingly high so far.

Then comes the vulnerability of OTP password. One-time passwords are vulnerable to social engineering in which phishers steal OTPs by tricking customers into providing one or more OTPs that they used in the past. The password may be used as quickly by the attacker as the legitimate user must use the OTP, if the attacker can get the OTP in plain text quickly enough.

Moreover, the two-factor authentication spoofs is also a matter of concern. Security experts have long touted the need for financial websites to move beyond mere passwords and implement the so-called 'two-factor authentication'-the second factor being something the user has in their physical possession like an access card.

IT security issues also need to handle through a well-defined information security management structure adopted by the bank, working at strategic, tactical and day-to-day operational level. At the implementation level, the bank should deployed various advance security mechanism and best-of-breed products like centralized AV solution, firewalls, IDS, RSA tokens, ADs, SSL certificates, SSO, DR solutions, among other. Security services where the bank does not have the required competence needs to be outsourced to SI, who are implementing controls as based on the security management directives.

Looking Ahead

The neck to neck competition, and the inevitable need for making a wider outreach at low costs and thinning interest margins is expected to coerce banks to find newer ways of reducing costs and still offering quality services to customers. To achieve this feat, there is no other way than using modern technology generously. As the current state of technology stands, it is not a substitute for human beings. Technology, being the servant, has to be under the care of a master.