Digital Banking A New Frontier in Indian Business

Presented at
CONVERGENCE -10th International Conference on
Prof Chowdari
Prasadin Management
Digital Business:
New Frontiers

And

Dr KS Srinivasa Rao
05th February 2016

Flow of Presentation
Introduction to Banking, Information Technology, Reforms
Committees of RBI for Technology in Banks & Various Developments
Digital Banking - Meaning
Review of Literature, 16 Articles in Research Journals & 13 Reports
Objectives of the Study & Research Methodology
RBI Guidelines, Payment Settlements : Vision 2015 and IDRBT
Digital Banking Products & Services offered by various outfits
Status of aggregate business of banks in India for 3 years 20122015
Cyber Risks, Financial Inclusion, PMJDY, Rupay, Payment Banks, mBanking
ATMs, Big Data on Digital Banking from RBI website, Conclusion
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Digital Banking in India

Introduction to Banking, Information Technology,

Reforms
Indian Banking System - Commercial, Developmental, etc
Organisational changes, Operations and Geographical Spread, Legal
and Technological interventions and Offering of various types of
products
Functioning of banks can be divided into three phases viz.,
(i) prior to 1969 - first nationalisation,
(ii) between 1969 to 1990 - growth period and
(iii) after 1991 - consolidation with the introduction of Economic Reforms
through Liberalisation, Privatisation and Globalisation (LPG)

Use of computers for back-office reconciliation extended to frontoffice operations in due course leading to introduction of Online
Banking
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9. Investment
Banking and
10. Infrastructure Financing

8. Importance
of SME
segment

7.Generate
more feebased income

Retail
Banking
2. Wealth

Indian
Banking :
Opportunities
& Challenges

6. CRM and
Data
warehousing

2/8/16

1.

Management /
Growth trend
3.Demand

for Low
Cost Banking
Solutions
Branches
vs. ATMs to
increase
4.

5. Mobile
Banking and
Internet
penetration

Focus aspects of Commercial

Banking
Core
Banking (CBS)
Electronic
Banking
Any Branch
Banking

MIS &
Intranet

POS Terminals
and Cash
dispenser

Card
Management

Corporate
Network

Document
Management
Risk
Management

CRM

ATMs

Resource
Management

BANKS BUSINESS
2/8/16

Digital Banking

LOANS & MISC. SERVICES

RAISING DEPOSITS

BANKS BUSINESS

Committees of RBI for Technology in Banks &

Various Developments
RBI formed 12 Working Groups and Expert Committees on
Mechanisation / Computerisation in the Banking Industry (19822013) as given in Table-1.
Major recommendations of these were on MICR Technology, Use
of standardized cheque forms/encoders, settlement operations in
the Clearing Houses, Computerisation of branches by increasing
their connectivity, Issues relating to Payments System, Cheque
Clearing for Securities Settlement, Electronic Funds Transfer (EFT)
System, Electronic Banking, Doing Banking by Using Technologies
like - internet and networking, Cheque Truncation, etc., to increase
efficiency, quick service, productivity and transparency.
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Digital Banking in India

RBI Working Groups / Committees

on IT
S.
No.
1

2
3
4
5

6
5/2/2016

Year

Name of the Committee

1982 Working Group to consider feasibility of

introducing MICR / OCR Technology for
processing of Cheques
1984 Committee on Mechanization in the
Banking Industry
1987 Committee on Communication Network
for Banks and SWIFT implementation
1988 Committee on Computerisation in Banks

Chairperson

Dr Y B Damle, Advisor,
Management Services
Dept., RBI
Dr.
C.
Rangarajan,
Deputy Governor, RBI
Sri. TNA Iyer, Executive
Director, RBI
Dr
C.
Rangarajan,
Deputy Governor, RBI
1994 Committee on Technology Issues relating Sri.
W
S
Saraf,
to Payments Systems, Cheque Clearing Executive Director, RBI
and Securities system in the Banking
industry
1995 Committee on Proposing Electronic Funds Smt.
K
S
Shere,
Digital Banking
in India
7
Transfer and Electronic
Payments
Principal Legal Adviser,

1999 Committee on INFINET

2001 Committee on Legal Aspects of Bank Frauds

Sri.
Vasudevan
Expert
Dr.Mitra

2002 Working Group on Electronic Money

Ms. ZarirCama RBI

10

2003 Working Group on Cheque Truncation and e- Dr.R B Barman, Executive

Cheques
Director, Reserve Bank

11

2011 Working Group on Information Security, Shri G Gopalakrishna, RBI

Electronic
Banking,
Technology
Risk
Management and Cyber Frauds

12

2013 Committee on Comprehensive Financial Dr.NachiketMor,

Services for Small Businesses and Low Board Member
Income Households (formation of Payment
Banks)
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Digital Banking in India

RBI

RBI

DEVELOPMENTS IN
BANKING & IT

2/8/16

ALPMs
CLEARING HOUSE
CAR,CRR,SLR,PS,NPAs
CREDIT/DEBIT CARDS
NICNET,I-NET, RABMN
INFINET, RBINET
BANKNET, NDS, SFMS
MICR, ATMs, SWIFT
DEMAT, IT ACT-2000
INTERNET BANKING
ECS, EFT, SEFT, RTGS
CROSS SELLING
Digital Banking

ALM & RM, MIS

CRM, KYC, AML
Core Banking Solutions
KISAN /SME CARD
CREDIT INFO BUREAU
DISASTER
MANAGEMENT
Cheque Truncation
CYBER CRIMES
HACKING, PHISHING,
PHARMING, TROJAN,
SKIMMING, ETC
SMART CARDS
DIGITAL BANKING
9

Digital Banking - Meaning

Internet has brought in the biggest change in the way we
have been banking for centuries.
Digital banking is the present trend in banking using the
internet and much more, based on SMAC model, which puts
customer first and cuts costs
SMAC stands for Social, Mobile, Analytics and Cloud.
SMAC makes banking business more agile and customer
centric which contributes to the building of the Digital
Banking.
Other elements are Data and User-experience that
contribute to the concept.
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10

Review of Literature, 16 Articles in Research Journals

& 13 Reports
16 Articles between 1998 and 2016 on IT, Networking, ATMs, Credit
Cards, Debit Cards, Internet Banking, Mobile Banking, ECS, RTGS,
Mobile Wallet, Payment Banks, Cloud Technology, SERV-QUIL, etc
13 Reports on Digital Banking between 2012 and 2015 by
Consulting / IT Companies like Infosys (2012), WIPRO, Efma (2013),
McKinsey & Company (2013), India Brand Equity Foundation
(2013), Deloitte Consulting (2014), PWC (2014), Happiest Minds
Technologies (2014), Cognizant (2014), E&Y and IBA (2014), BCG
and IAMAI (2015), DBS Group Research Equity (2015), McKinsey &
Company (2015), and PWC- ASSOCHAM India-2015

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Digital Banking in India

11

Objectives of the Study & Research Methodology

Objectives of the Study:
1. To understand the importance of Digital Banking in Indian Banking System
2. To analyse the advantages in business through Digital Banking for the
Stakeholders including intermediaries (IBA, Payment banks)
3. To understand the importance of SMAC as a competitive Strategy for Banks
(Wallet)
4. To create Awareness of Threats and Challenges of Digital Banking (Crimes)
Research Methodology:
Exploratory mainly as the concept is still at the evolving stage in India.
Secondary Data was collected from various sources of Bank Websites,
Newspaper Advertisements and Information through Press Releases.
Objectives of Research were verified through the information available but
not tested by any hypothesis.
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12

RBI Guidelines, Payment Settlements : Vision 2015

and IDRBT
Corporate Governance of Banks in India

IT Governance is an integral part of the Corporate Governance

IT sustains and extends business strategies and objectives
Responsibility of the Board of Directors and Executive Management.
Every commercial bank branch is at some stage of technology adoption like Core Banking Solution (CBS), or
alternate delivery channels such as internet banking, mobile banking, phone banking and ATMs.

Payment Settlements in India - Vision 2012-15

Vision Statement: To proactively encourage electronic payment systems for ushering in a lesscash society in India and to ensure payment and settlement systems in the country are safe,
efficient, interoperable, authorised, accessible, inclusive and compliant with international
standards.

IDRBT, Hyderabad
It is a Think-Tank for promotion of technological research and consultancy. IDRBT has outlined its
plans to launch a Digital Banking Framework in 2016 aimed at making Digital Banking versatile
by incorporating new channels of payments .
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Digital Banking in India

13

Digital Banking Products & Services offered by

various outfits
S.
Type of
No.
Bank

1
Public
Sector

5/2/2016

Name of the Bank

Technological &Innovative
Digital Banking Products and Services

State Bank of India

In-touch,
InCube
(Start-up
Branch),
(3.7 lakh touch
ExclusiF (Wealth Management), ATMs,
points, 16,415
Point of Sale Terminals, Core Banking,
branches, 56,930
Internet Banking, State Bank Anywhere
group ATMs
Smart
Mobile
Banking,
Business
including MultiCorrespondents, Customer Service Points,
Function and SelfBuddy (Anyone, Anytime, Anywhere), SBI
Service Kiosks and
Quick (Missed Call Banking), Foreign Travel
Cash Deposit
Card, SBI Online Customer Acquisition
Machines, 2.4 Lakh Solution (OCAS) and SBI Self Service
POS Terminals and
Kiosks (Bank @ Your Service 24x7), e58,571 Customer
Smart SME (e-Commerce Loan), e-auctions
Digital Banking in India
14
Service Points)
and e-CRM

Public
Sector

Public
Sector

Public
Sector

5/2/2016

SBBJ

Mobile ATMs, Green Channel

Banking,
SBBJ
e-LOBBY,
Internet and Mobile Banking, eTrade,
e-Tax
Payment,
eRemittance, Quick Missed Call
Banking

NEFT, RTGS, Cash Deposit Kiosk,

Panjab National SMS Banking, IMPS, e-Statement,
Bank
ECS, Fee Portal, Mobile Banking,
Internet Banking, EMV Debit Cards,
Talking ATMs, Doorstep Banking,
Credit Cards

Rapid Funds2India, Baroda Flash

Bank of Baroda Remit (with UAE Exchange), Speed
Remittance
(with
UAE/Lulu/Al
Ansari Exchange), MTSS and Swift
Digital Banking in India
15
Remittance

Public
Sector

Public Sector

Andhra Bank

Digital Wallet, Speed Pay, etc

Union Bank of India

1. IMPS through branches for Retail and

Corporate customers
2. Mobile Passbook ( M Passbook)
3. Missed Call facility for Mobile Banking &
Account balance
4. SMS based value added services
Blocking Debit Card
Balance enquiry of various accounts
Aadhar ID seeding
Enable/Disable user id of internet banking

Old Private
Sector Bank

Karnataka Bank

Old Private
Sector Bank

Federal Bank

5/2/2016

ATM and Branch Locator

Core Banking, Internet Banking, Money Plant

(ATMs), Quick Remit (for NRIs), Moneyclick, KBL
ApnaApp and KBL m-PassBook
FedBook (mobile app), Co-branded VISA Credit
Card (with SBI), Automated Chat Facility
(Virtual Relationship Officer), e-Passbook App

Digital Banking in India

16

10

11

12
13
14

15

New
Private
Sector
Bank
New
Private
Sector
Bank
Foreign
Bank
Foreign
Bank
Regional
Rural Banks
(RRBs)
Cooperativ
e Bank

5/2/2016

ICICI Bank

Rail Ticket
(IRCTC), etc

HDFC Bank

Click2ProtectPlus and others

Citi Bank

e-Core Banking through ATMs

Standard Chartered
Bank
66 Grameen Banks
sponsored by
Commercial Banks

Booking

on

Website

Standard
Chartered
Breeze-Mobile
Banking
Online Transaction services from Regional
Rural Banks, Internet Banking (nontransactional services view only) for
weak Banks
Saraswat
ATMs, NFS Network, E-payments-VISA Bill
Cooperative Bank
Payment, Go-Recharge, RTGS, NEFT,
Ltd.
Missed
Call
Service,
GOMO-Mobile
Digital Banking
in India
17

16

17

18

19

20

Wallet
Banking
(2004)
Wallet
Banking
(2009)

Wallet
Banking
(2015)

Payment
Bank
(2015)

Payment
Bank
5/2/2016(2015)

Oxigen

MobiKwik

Paytm

Instant Money Transfers anytime

anywhere using IMPS, recharge your
Phone or book a Movie ticket
Mobile Recharge, DTH Recharge, Utility
Bills, Online Shopping

Online Mobile Recharging, Online Bill

Payments, Online Bus Travel, Credit and
Debit Card Payments, Net Banking, BCCI
Payments, Mobile Wallet, etc

Deposits, Cash Management, Manpower

FINO Pay Tech
and Technology (partnering with ICICI
Bank), Recharges for Mobiles, Utility Bill
Payments, Ticket Booking, Insurance
Distribution,
and
Assisted
Online
Shopping
Tech Mahindra
A first of its kind Tap N Pay, Contactless
Mobo Money
Digital Payment Solution (Near Field
Digital Banking
in India
18
Communication)

Status of ASCBs in Deposits for

2012-2015
Deposits (Rs. Crores)
10,000,000
9,000,000
8,000,000
7,000,000

Public Sector Banks

Private Sector Banks

6,000,000

Foreign Banks
Total

5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0

5/2/2016

2013

2014

Digital Banking in India

2015

19

Status of ASCBs in Advances for

2012-2015
Advances (Rs. Crores)
8,000,000
7,000,000
6,000,000
Public Sector Banks
5,000,000

Private Sector Banks

Foreign Banks
Total

4,000,000
3,000,000
2,000,000
1,000,000
0

5/2/2016

2013

2014

Digital Banking in India

2015

20

Status of ASCBs in Investments for

2012-2015
Investments (Rs. Crores)
3,500,000

3,000,000

2,500,000

Public Sector Banks

Private Sector Banks

2,000,000

Foreign Banks
Total

1,500,000

1,000,000

500,000

5/2/2016

2013

2014

Digital Banking in India

2015

21

Status of ASCBs in Total Assets for

2012-2015
Total Assets (Rs. Crores)
12,000,000

10,000,000

Public Sector Banks

8,000,000

Private Sector Banks

Foreign Banks
Total

6,000,000

4,000,000

2,000,000

5/2/2016

2013

2014

Digital Banking in India

2015

22

Status of ASCBs in Net NPAs for

2012-2015
Net NPA (Rs. Crores)
180,000
160,000
140,000
Public Sector Banks

120,000

Private Sector Banks

Foreign Banks

100,000

Total
80,000
60,000
40,000
20,000
0

5/2/2016

2013

2014

Digital Banking in India

2015

23

Status of ASCBs in Net Profit for

2012-2015
Net Profit (Rs. Crores)
100,000
90,000
80,000
70,000

Public Sector Banks

Private Sector Banks

60,000

Foreign Banks
Total

50,000
40,000
30,000
20,000
10,000
0

5/2/2016

2013

2014

Digital Banking in India

2015

24

Status of ASCBs in Total Income for

2012-2015
Total Income (Rs. Crores)
1,200,000

1,000,000

Public Sector Banks

800,000

Private Sector Banks

Foreign Banks
Total

600,000

400,000

200,000

5/2/2016

2013

2014

Digital Banking in India

2015

25

Status of ASCBs in Total Expenditure for

2012-2015
Total Expenditure (Rs. Crores)
900,000
800,000
700,000
Public Sector Banks

600,000

Private Sector Banks

Foreign Banks

500,000

Total
400,000
300,000
200,000
100,000
0

5/2/2016

2013

2014

Digital Banking in India

2015

26

Cyber Risks, Financial Inclusion, PMJDY

Human risk is a big problem for Indian financial institutions. Banks need to start
proactively educating their employees and customers to prevent cyber threats.
Improving awareness of the different threats that currently exist, including e-mail
fraud, Phishing, Vishing, Smishing, Skimming, Hacking, and Trojan.
Financial inclusionor inclusive financing is the delivery offinancial
servicesat affordable costs to sections of disadvantaged and lowincome segments ofsociety

Pradhan Mantri Jan-Dhan Yojana(Prime Minister's People

Money Scheme) is National Mission for Financial Inclusion
to ensure access to financial
services, namely Banking
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Digital Banking in India
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Rupay, Payment Banks and mBanking

RuPayis an Indian domesticcard schemeconceived and launched by NPCI.

It was created to fulfil theRBIs desire to have a domestic, open loop, and
multilateral system of payments inIndia.
RuPay facilitates electronic payment at all Indian banks and financial
institutions and competes withMasterCardandVisain India.
The term Payment Banks is new in Indian context. In Sep 2013, a
Committee on Comprehensive Financial Services for Small Businesses and
Low Income Households, headed by Nachiket Mor, was formed by RBI.
By January 2014, the Nachiket Mor committee submitted its final report
and one of its recommendations was the formation of a new category of
banks called payments banks.Out of 41 applicants in the race, on 19
August 2015, RBI gave "in-principle" licences to eleven entities to launch
payments banks
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Digital Banking in India

28

11 Payment Banks licensed by RBI

in 2015
1
2
3
4
5
6
7
8
9
10
11
5/2/2016

Aditya Birla Nuvo

Airtel M Commerce Services
Cholamandalam Distribution Services
Department of Posts
FINO PayTech
National Securities Depository
Reliance Industries
DilipShanghvi, (founder of Sun Pharmaceuticals)
Vijay Shekhar Sharma, (CEO of Paytm)
Tech Mahindra
Vodafone M-Pesa
Digital Banking in India

29

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30

Big Data on Digital Banking from RBI website,

Conclusion
RBI Website has Payment Settlements data (Volume in Mns and
Value in Bns) for 12 years between 2004-2005 and 2015-2016*
(*Partial) on parameters like:
RTGS, CCIL Operated Systems,
Paper Clearing, Retail Electronic Clearing, Cards,
Prepaid Payment Instruments (PPI) and Mobile Banking (from 2011)
Grand Total of these seven have recorded a steep growth
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31

10 Varieties of ATMs in India

1. On-site ATMs
8. White-labelled ATMs

2. Off-site ATMs
3. Solar based ATMs
4. Bio-metric ATMs
(for illiterate
customers)
5. Floating ATMs (SBI)
6. Mobile ATMs (Van)

9. Brown-labelled ATMs
10. And now..Talking
ATMs (for blind in
Canada : Oct 22,1997)
-from UBI in Ahmedabad
in Sept 2012;
11. 1.50 lac ATMs@POs
12. Use of Analytics!

7. Micro ATMs
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IBS Challenges etc

32

Conclusions
Prognosis for Indian banks is positive with Domestic Credit as a
percentage of GDP having grown substantially over the last decade.
Technology has transformed the landscape of Indian banking
Implementation of core banking has automated basic processes
Core banking platform have also given banks a strong launch pad to
offer digital channel capabilities building out their online and mobile
channel offerings
ATM deployments and technology-enabled Business Correspondent
(BC) network allowed banks to service large parts of Indian
hinterland.
Transformed customer experience and an optimized cost structure
will separate the leaders from the laggards in the industry
M-Banking is now order of the day making the traditional banks as
virtual
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