8/2/2019 Group 3 - IT in Retail Banking
1/23
Red BookIT in Retail Banking
Pavan Murali
Visram R
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2/23
Retail Banking in India
1. The Retail Banking Industry in India isworth $300 Billion
2. Majority customer base in the retailbanking sector belongs to themiddle aged, working class section
3. People are dissatisfied with thepublic sector banks especially dueto bad customer service
1. Mature in terms of money supply,product range & reach
2. Resilient to economic crisis ,
regulated by RBI standards3. Retail lending constitutes 12.36%
of the Indian banking system
4. Expected CAGR growth of 25%reaching Rs.575000 crore
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StrategyRetail Banking
Constant product innovation to match requirements ofthe customer segment
Quality service and quickness of delivery
Introduction of new delivery channels
Tapping of unexploited potential and increasing thevolume of business
Detailed Market Research
Cross Selling of Products
Tie Up Arrangements
Business Process Outsourcing
How can technology enable delivering a competitive advantagewhich is consistent with a banks strategy?
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Major IT Applications
Currently,NGPay is adominantservice,but hasseveral
drawbacks
Incompatibility across platforms
Fewer ServicesFull range is not available
No SMS Reminders or Alerts
No integration of accounts
No bill pay facility
Non consumption
Non convergence of commerce
1 Mobile Banking & SMS Banking Solutions
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Major IT Applications
Paperless banking achieved throughonline banking, online bill payment &e-Statements
Eliminate pass books & chequesSeamless transactions between banks
NEFT & RTGS options to customers
Tax filing
e-Payroll Management
Subscribe to services & alerts
Complaint registration facility at allATMs
2 Green Banking Solutions
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Major IT Applications
Extends number of customer
touch points - channels at publictransit places
Drive adoption of onlinechannels
Statements & account enquiries
Order cheque books & demanddrafts
Increase member loyaltyKiosk users are 80% less likely toleave
Providers: Celent, NCR Corp
SelfServic
eK
iosks
3 Branch Automation & Self Service
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7/23
EGG.COM - Most profitable bank in the UK
World's largest internet bank
2 million customers
$20 billion worth transactions every year
No physical branches (Egg.com)
Accounts opened only through internet &/orcustomer care centers
Services such as Tax filing
Cross sells services such as investment advice,portfolio management
4 Business Transformation through IT
Major IT Applications
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Major IT Applications
Analytics to cross sell &up sell services
Tie ups possible withother services too(Convergence)
Can be used in theentire lifecycle
management ofcustomer
Provide information andenhanced services to
customers
Resource intensiveimplementation but
high returns
Sales Force Automationtool can be used for
opportunity
Sign up for the UIDService
Instead of going in forUID, attempt throughPAN (KYC) to reach
market faster & gain afirst mover advantage
5 Customer Relationship Management
CRM is a comprehensive approach that aligns business strategy,corporate culture and supporting information technology, so thatthe customer relationship proves mutually beneficial to bothcustomer and enterprise
8/2/2019 Group 3 - IT in Retail Banking
9/23
CRM in India
Methodology of study - Customer Relationship Management
SecondaryResearch onthe theme
InitialHypotheses
Primaryresearch
based on thehypotheses
SecondaryResearch
Analysis andFindings
LearningConclusion of
study
Initial Hypothesis - Customer Relationship Management
CRM solutions are amainstay for banks to
manage their HNW clients
CRM solutions areexpensive, and difficult toimplement and use. Banks
which do not have thescale are unlikely to go for
these at this juncture
Banks which haveimplemented CRMsolutions still are unsure on
how to use them, andreturns are not being
measured
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CRM in India
The NEED
To provide one view for the
customer and to provide oneview from the Banksperspective. Ease of transactionand lessen transaction costs
To supplement deposits, loans,mutual funds and insuranceproducts
To give customers options totransact on all their accounts
using multiple channels likeinternet, phone and SMS
Telemarketing, need for
corporate retail bankingcustomers
Tools
CRM systems always need a core banking ERP system to sit on top of. Most banks tend to use
solutions from known CRM vendors. They lack the technical expertise to build custom solutions.
I Flex core banking system is used at SBI. It also provides a built in CRM solution. Only class Acities use CRM systems at SBI
Custom CRM package developed by i2 is used by Axis Bank, supplements core bankingplatform
ICICI uses home grown solutions, but we are fast outgrowing it. 80 different systems in place,there is a need for consolidation
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11/23
CRM in India
Parameters paramount for technical implementation
Initial cost of software is just 20% of the total initiative cost - the rest beingthose pertaining to implementation, training, maintenance etc.
Prior relationships are key for vendor selection
Cost of development is a main driver
Implementation Problems
Changemanagement. Bankemployees are notaware of how touse these systems
IT support staff arealways short in
number and areoverworked
Training costs arehigh, during trainingemployees areunavailable for
regular work
Integration with allother systems
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CRM in India
Benefits
Returns
One view of the customer for boththe customer and for the bank
Technology in initial stages. There is aneed to fine tune and use thesesystems in ways consistent with howother banks use them
Turnaround time for closing leads,opening accounts and closingservice requests has been drasticallyimproved. Campaign definition and
performance tracking can be donebetter
Helps manage high net worth clients,helps offer a range of end to endservices which HNWs expect from
their banking partners
Indian banks still do not know how to measure returns from a CRM system. It is also difficult tomeasure unless customer retention gains higher priority than customer acquisition, which is notgoing to be the case in Indian markets for at least another 10 years
IT spends for small projects are a part of discretionary spending. Unaware and unsure if returnsare measured
Customer staying with a bank utilizing more services brings us 5 times more revenue than anew customer. That justifies any amount of IT spend on CRM systems
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Most banks areexperiencing high
growth (>100% YoY).Financial Inclusion is on
its way up
CRM makes sense onlywhen you need to cross
sell
Costs are prohibitive forsmaller banks, returns
are minimal
Traditional mechanismsof generating leads areworking, why invest in
something new?
We can automaticallybuild CRM systems when
UID becomes morewidespread is the
general notion
There is no need togenerate leads. Pull
based customerrelationships is the driver
for growth
Existing systems and corebanking platform helps
generate more thansufficient (much morethan usable) reports
Retention is not aproblemA customer is
a customer for life
CRM in India
Non Implementation
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CRM in India
Future Outlook
Indian banking industry is maturing differently from other developed economies.This is primarily due to the large section at the bottom of the pyramid in India.Mainstream banking will take a longish amount of time to adopt CRM systems.
CRM systems for high net worth individuals is key in the near future
CRM systems will be put into place, but how effectively they will be used will be thedifferentiator
CIO and top management drive will only increase as years go by
Real Time forecasting and cash management will be a real need for all bankshowever small they are. Therefore, CRM becomes an absolute necessity in thefuture
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15/23
CRM in India
Conclusions
Most of the CRM implementation's failure can be attributed to over-emphasis on technicalaspects and on neglect of strategy and people. The choice of technology should bederived from the strategy that the firm has visualized and who are going to use it
The processes involved in customer management need to be aligned to the best inpractice
Firms start implementing CRM without even deciding upon the objectives to be achievedthrough the exercise
There should be proper performance measurement mechanism and control methodologythat can give insight (and control) into the status of the implementation process as well ason its success
Owing to CRMs' high initial costs as well as high implementation costs, the downtimerequirements, lack of clear ROI measurements, long gestation period before the profitsstart showing up etc. have also served as important factors in slow and gradualpenetration of CRM
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Major IT Applications
Virtualization & Server Consolidation
Lower number of physical servers - reduce hardware maintenance costs
By implementing a server consolidation strategy, space utilization efficiency in datacenter goes up
Prevent one application from impacting another application when upgrades orchanges are made - Sandboxing
Develop a standard virtual server build that can be easily duplicated which will speedup serverdeployment
Deploy multiple operating system technologies on a single hardware platform (i.e.Windows Server 2003, Linux, Windows 2000 etc)
6
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Virtualization
Virtualization in Banking
Increasing customer base, leading to a need to handle large volume of data
Banks expect to scale rapidly. IT infrastructure is expected to be complex. Need to simplify
Allows for an agile infrastructureBanks can focus on their core competencies
Banks implement different kinds of virtualizationapplication, network, OS, presentation,storage
Tools
VMware
Microsoft virtualization solution
Hitachi storage solutions at work
Composite data virtualization software
Red hat KVM Virtualization
Server Dynamic and responsive data center
Presentation Seamless remote execution of applications
Application Change how Line of business applications are managed
OS Multiple OS on single desktop
Vi t li ti
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Virtualization
Methodology of study - Virtualization
Secondary
Researchon thetheme
InitialHypotheses
Primary
researchbased on thehypotheses
SecondaryResearch
Analysisand
Findings
Conclusionof study
Initial Hypothesis - Virtualization
Banks go forvirtualization to cut costs
and save space andutilize resources
effectively
Banks look to improveperformance through
virtualization
Only large banks go forvirtualization. Hardly anyof the small banks see aneed for the technology
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Virtualization
Successful implementation of Virtualization in Banks
Need: arrest infrastructure cost and save data centerspace
Server and desktop virtualization using VMware
Deployment cost cut down by 1/3
St. George Bank, Largestbanking group in Australia
Need: Support its formidable growth
Desktop virtualization using VMware
3 times decrease in cost and increase in lifetime
Woodforest bank, Largebank operating from
Houston
Need: Cut costs. Manage applications centrally
Desktop virtualization using VMware
50% reduction in TCO. 70% reduction in upgrade time
Mahesh bank, Large Coopbank in South India
Need: Save space. Reduce power consumption
Server virtualization using Microsoft virtualization solution
40% energy savingsBahrain Islamic Bank
Need: Reduce power consumption. Group consumed 5to 6 MW of power
Adopted Server virtualization. Cut increase in utilizationto 200 KW from 600 KW.
Credit Suisse, largestbanking group in
Switzerland
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20/23
Virtualization
Findings from primary survey
Typicalobjectivesof
virtualizationin Banking
Save on power, cooling and rack space.
Increase uptime. Handle standby efficiently without disturbing
production.Server/network consolidation is a key objective
More efficient usage of space in datacenter is another.
Overall result in less cost and improved efficiency
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Virtualization
Implementation Methodology
Planning Business Case ROI Model
POCNetwork =>
Hardware =>Desktop Application
Ability to handle informationsecurity
Support provided, time to recovery Financial strength Client testimonials
Cost
Features
Market Share Licensing Maturity
Vendor Selection
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Virtualization
Post Implementation and other findings
Performance Monitoring Collect historical data. Add corresponding costs to it. VMWareCapacity planner
Checks resources over a period and gives consolidation recommendation
Classic problems post of Implementation Application not supported Over provisioning Network mapping Remote addressing Application communication breakdown
Old and Legacy Systems Usually not touched. Dont want to disturb operations Old systems - reuse if possible. Scrap if out of warranty
Why banks dont implement virtualization Dont trust the technology Costs outweigh benefits, given the risk Management doesnt want to disturb what works fine Unable to get user buy-in Bank size is too small to achieve noticeable benefits
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Virtualization
Conclusions
Most Implementation project failures are because of poor planning
Create peak volume during normal hours
Reduce costs, use less resources and get same performance
Banks that have outsourced find it easier to virtualize
Vendor strategy and company strategy must match
Importance of vendor being financially stable
Banks are never sure that all scenarios have been handled during testing.
A bug can be because of the component virtualized, or because of thevirtualization itself