Tuesday, September 25, 2012


When I was about 6 years old I used to travel to the bank with my father. I use to be one of the events for my small life that point of time. Going to the bank and the ambience of the bank system was an of great experience to my life. Waiting at the counter for withdrawal of money use to help me skip hours from my study schedule since it use to take more time to withdraw money. The Pension day use to be hectic for the banks since they have to deal with so many papers of pension withdrawal forms.

Today the same banking system has changed more than any one dreamt about it. Technology has worked as an accelerator for turning around the entire banking system process. Now we get scared to hear that we will have to visit bank branches for any work. Passbook has been replaced with soft copy of statements. Free Services have now turned into paid services and moreover banks have become small in structure size.

Internet has replaced the business operation module of the banking system. The banking system adopted technology with the prime focus of reducing the crowd arriving at the banks door. With the growing new generation adoption of internet and other technology helped banking system to introduce internet banking which reduced their cost of operation as well as reduced their fixed cost of operating too. Earlier banks required huge space for running their operations and managing the crowd at their door step.

With internet banking physical office got replaced with virtual office which reduced the fixed cost part of the banking system. Introduction of internet banking further reduced the stationery cost of the banks primarily in the form of papers. But more than cost savings banks went ahead with expansion of their business models which has increased the banking network penetration. By saving cost on paper and rent banks invested heavily on product innovation married with marketing. Earlier banks never used to do extensive marketing of its products but with technology innovation they came up roaring up products marketing which mainly focused on 3rd party products. Today banks are offering services married with products. Technology has increased the efficiency levels of the banking system in terms of internal data management and better customer efficiency.


• Straight-through processing.

• Transformation of service channels.

• Collaborative channel management strategy.

• Branchless banking for financial inclusion.

• Business correspondents.


• Enterprise risk management.

• Real-time executive dashboards.

• Real-time security management.

• Risk-based authentication.


• Customer analytics.

• Efficient customer data management.

Today banks are more able to design products according to the customer usage simply by grilling hard the data management system. The design the credit card limits according to the usage through efficient data management. ATM has becoming banking withdrawal centre for all of us. Today we have to wait for few minutes to get the money in hand. Mobile banking has also increased and reduced efficiency and cost respectively. Banks are now promoting mobile apps demonstrating their easy process of services.

Now I find the competition among various banks stands at efficient process of internet banking with less cumbersome process. Designing of easy process of apps is the new innovation being derived by the banks through which further business growth in acquisition of new clients. Indian banks are finding more business growth through innovation of apps and banking software even at the back end of the system which will help them to get on to the nerves of the consumers.

Trends in innovation in products and services offered:

• Savings Accounts with Auto Sweep Facility

• Smart Cards

• Virtual Bank

• Electronic Data Interchange (EDI)

• Image Processing

• Business intelligence and customer relationship management applications

• Optimizing Customer Reach

• Innovation in Delivery Channels

The recent foray of the Indian banking system towards mobile banking is the biggest proof of the growing hunger of increasing the banking network in India. India has 700 million+ mobile subscribers, but only 240 million individuals with bank accounts, 20 million credit cards, 88,000 bank branches and 70,000 ATMs. Of the households without a bank account, 42% have at least one mobile phone. This is just a snapshot into the penetration that mobile has achieved in a relatively small period of time.

Transferring of money has increased over the past couple of years which gives immense opportunity for Private Equity segment to do investments in Technology. Mobile banking in India is set to generate a fee-based income of INR202.5 billion (approx. US$4.5 billion) over the next five years, mainly driven by lower transaction costs, favorable regulatory environment and the UID project. By 2015, US$350 billion in payment and banking transactions could flow through mobile phones, compared with about US$235 billion of total credit-and debit-card transactions today. As mobile-money initiatives take shape, the projected fee income in India from mobile payment and banking transactions could exceed US$4.5 billion by 2015.

The above data is well clear to make one understand that Private Equity will find substantial growth in investments from the this gen next banking business models. The success of MPesa in Kenya has provided an appetite for a host of global players whose entry into the Indian market is only a matter of time. In other words it has opened up the gates for more investments to come and build the business growth opportunities.

NPCI, encouraged by the launch of IMPS for individual-to-individual money transfers, is all set to foray into the field of merchant payments. RBI has already permitted the payments institution to go ahead with merchant payments and NPCI is all set to start the operation with 7 banks. A question might come up that what type of revenue growth one Private Equity investor will get from this segment in coming days. Well electronic payments from below 5% of the total value in 2005 went up to 88% in FY10, largely due to the electronification of business-to-business payments. Now, one can easily make the calculation of ROI being generated through this industry. At the same time Indian banking space is yet to penetrate into India as compared to the developed nations. In simple words we are still far behind. More penetration will lead to more development and use of these services which results to stupendous growth for the investments.

Banks should come up with a model for educating the knowledge level of the consumers so that they could link the innovation at their level with the consumers. This will further translate to generate more consumers particularly those who never used Banking system. Technology alone has given growth mainly from Urban India but the rural India still remains to be untapped zone


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