BS Banking Annual 2019: 'Conventional, digital banking will co-exist'

From left: InfrasoftTech MD & CEO Rajesh Mirjankar, PwC India Partner Vivek Belgavi, ICICI Bank Business Technology Group Head V V Balaji, IndusInd Bank CIO Biswabrata Chakravorty, and Ujjivan SFB MD Nitin Chugh at the Business Standard Banking Techn
Will the technology teams run banks in the future? 

Nitin Chugh: In times to come, tech skills are going to be in demand — at least people who understand tech, people who have appreciation for tech, and more importantly, people who can make sense of tech. So, those skills, I would imagine, are required at all leadership levels, not just at the chief executive officer level. 

Vivek Belgavi: Banking as it exists today has two main functions. One is the core product — manufacturing, which is underwriting, the core skill of a banker, and that will remain as long as the industry exists. But the second function, which the banker ended up doing, is distribution, and that is where a lot of disruption is happening, with technology companies coming in. I do think bankers would be needed. We might call them something else, but the ability to gauge risk and price it appropriately is a skill which will be required forever.

Biswabrata Chakravorty: Bankers will co-exist because, to define the direction of the product or the journey of the customer, and of course, the risk aspect of it in terms of underwriting, understanding and refining the models of analytics all require expertise, which bankers possess. The tech tools are there to harness that expertise and provide value to the customer. So that is the way I see this bridge happening.

How do you straddle the urban and rural markets?

V V Balaji: There are three types of customers. One set of customers says I’ll do it myself. The second set requires some validation, they require some advice on complicated transactions, and then there are customers who want to do it through somebody, and delegate their work to others. So, banking has to cater to all the three sets of customers. 

Rajesh Mirjankar: The divide between rural and urban is slowly reducing and it’s largely owing to the way telecom has improved across the country. This is the case with almost every other country globally; as telecoms improve, this divide diminishes. And with personalisation at the mobile app level, I am, in fact, in more touch with the customer, then asking him to step into the branch. It’s related to a more in-depth understanding of the customer’s needs.   

Chakravorty: There are many different segments of customers today — whether it is our generation, our elders and then all the way down to Gen Z — and a “one size fits all” approach is no longer relevant, whether in an urban or a rural landscape. 

The penetration of the internet and smartphones has helped propagate aspects like digital or mobile banking, and it is not confined only to the urban market. In the rural market, we can open an account completely without paper in a span of five minutes. Does it mean that there is no touch to your question? Yes, there is touch. There is a concept of relationship manager there as well, and he has an engagement to manage. Therein lies the value in data, who is he interacting with, how well and how often. For urban customers, obviously, data analytics plays a big role nowadays. All the banks are using that very aggressively to provide solutions to customers depending on whatever segment and journey they are on.

Will bank branches exist only for older people, with the rest being on digital? Is this the future of banking?

Chugh: I think it’s a mix of all of that. No bank will set up a branch saying that this is only for seniors, or only for people who want to deposit cash. Most banks will set up branches which will serve a homogeneous set of customers around the area that they want to operate in. But the people who would like to come to the branches, obviously, that composition has changed already. We’ve seen that happen in metros — people like us don’t go to branches anymore. It’s gradually happening in the smaller cities. It might take a little longer in the rural markets. 

We’ve not yet arrived at the most optimum way of designing branches to cater to every segment. So, we will have to continue looking at all the segments of customers that branches are required to cater to. But the rebalancing is probably happening a lot more in some segments of customers like ours, where we have completely moved away from going to branches. And that obviously is resulting in smaller branches.

Going forward, will two sets of people run banks — the traditional bankers and the tech guys?

Balaji: It is all about the entire banking industry being upgraded digitally. Recently, in one of the meetings, our tech partner said that in the next two years the amount spent by the technology team would be far less than the technology spend by other functions within the organisation. The division of what is technology is getting blurred, because the entire business is driven by technology. Technology is not taking over business, business is adopting the technology.

Is it true that bankers don’t understand technology and are often taken for a ride? 

Mirjankar: I would not say bankers do not know technology. We have interacted with banks from 1995 and I can tell you that the technology industry has followed bankers’ instructions to build banking systems. There is no banking system today that tech folks can say they built on their own. It is only after the mobile era started that new technology companies said this is a new way of doing banking and you can do your customer on-boarding on tablets. And in that way, bankers are far smarter than technologists in their field. 

The other aspect of this is that technology per se is overhyped. A lot of tech guys say they can take over banks, but ultimately you cannot. The tech guys need a banking structure. By themselves, they cannot do this. 

Belgavi: That a bunch of coders are creating all this is a myth. Currently, I am working a fair bit on the fundraising side, especially for growth-stage fintech. And what you realise is that when folks are putting in money, they are looking for a team which has got relevant banking experience. 

Having said that, it is the only ecosystem in the world that has WhatsApp, Google, Amazon and local start-ups playing on a level playing field. The unified payments interface is exciting. There are some players, especially in insurance, that have a newer way of underwriting. Also, most of the fintech stories today are collaboration stories, and banks on this panel have partnered with 50-100 such startups in different areas. 

But most of the work is happening primarily in the payments space… 

Belgavi: I would have agreed with you two years back, but lending is becoming an exciting space. Then there is an area, which I call khata tech — accounts being done at the last mile, insuretech has picked up, and neobanking is the flavour of the season.

Has technology made banks vulnerable to fraud?

Nitin Chugh: It would not be right to say banks are not careful. Safety is the number one agenda on everyone’s mind. And as much as you can discuss cybersecurity, nobody can tell you with 100 per cent certainty that they are secure. Because new things keep happening. What we can ensure is to be on guard and make sure we are not vulnerable. In the business of hacking — and it is a business — people are very sophisticated. I think we should not say banks are not prepared, and as much as people are investing in technology, they are also investing in security. And we have not seen any large- scale frauds on the cybersecurity side in India.

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