Challenges to Next Generation Banking

Anirban Mukherjee (Roll No.56) Jayesh Kamble (Roll No.36) Muralidharan R (Roll No.58) Nirmal Pattnayak (Roll No.74) Sameer Kasawkar (Roll No.120) Sanjay Pednekar (Roll No.77) Yogesh Gupta (Roll No.122)

India : Demographic Challenges

India is the only Country where the working population would increase for the next twenty years Estimates of United Nations suggest that by 2041, working age population in India will increase by 312 million, while in China it will decline by 126 million. Creating gainful employment for this order of new entrants to the labour market is a daunting challenge but not impossible.

India : Demographic Challenges

Indias Current Growth Rate is around 8% and it is expected to be around 10% during 12th Five Year Plan With this growth rate Indias share in World GDP would go up from current level of 2% to 10% by 2030. While Services form a major part of our GDP at 65%, it would be a challenge to absorb the huge workforce. Focus needs to be diverted to industry and agriculture.

Major Challenges for the banking Sector

Change in customer service delivery

Change in product design and

manufacturing

Change in product availability and

distribution

Change in risk and credit decisioning

Customer Service

Close Relationship between a Customer

and Profitability

Customer Centric Institutions are a mix

of highly profitable customers providing

todays profit and those with a calculated

potential of growth

Goal of Financial Inclusion

Customer Expectations Keep your Customers Happy and Survive

Shifts in demographics, income, attitude and

behaviour, in addition to easily accessible

information, are empowering customers to demand greater autonomy, responsiveness and transparency from their banks.

Freedom of Choice

Personalised Products
Shift Loyalties

Customer Expectations

Channel Amplification Service Accessibility Customer Serviceability Data Privacy and Security Customer Expectations

Customer Imperatives

Channel Amplification

Better Communication : Increase Profit

Potential

Better Mobility : Increase Competitive Agility

Better

Customer

Insight

Find

new

Opportunities

Magnify Existing Channel Offerings (ATMs,

Kiosks, Mobile banking)

Simplified Banking Experience

Customer Demands would be for :

More Choice in terms of Product

Selection

Simplified Banking Forms and

Procedures Prompt Services and Alerts through Multiple Channels Zero Tolerance to Hidden Charges and

Risk Management
With reference to the overall risk management challenges the risks, a bank may face, can be divided into three

categories :

Operational Risk

Credit Risk
Market Risk

Managing Operational Risk

As Operational Risk management is centralized function to ensure quality of data and standardized reporting across the organization. This will require technology solutions to meet the operational risk challenges in enterprise-wide deployments, data security and identity management. It is also felt that that advanced and sophisticated systems should be introduced to ensure that suspicious events which can lead to fraud can be tracked and logged. Incident/Event should also be tracked in a similar fashion. Tools can be used to derive patterns and analysis of such events using data mining techniques to manage operational risk.

Managing Credit Risk

Credit Risk is the most important risk component of a bank as it has direct impact on the banks books Banks needs to look beyond CIBIL for customer credit worthiness and should look into creating a more mature information system and rating model. Financial Innovations needs to be cautiously used and a detailed impact study should be done before banks go for enhanced exposure

Managing Business or Market Risk

The role of technology was identified to be of paramount importance in managing business risk. With all requisite information available, systems are in place to generate ad-hoc reports and single source of truth can be maintained. This would help organization not only to manage business risk but also provide competitive advantage which business intelligence, analytics and data mining techniques.

BanksWay Ahead

Providing a Simplified, yet fully loaded

banking experience is the need of the hour

for the banks. Banks will need to take the participative view of the customers and design banking processes, products and channels in such a way that banking

experience remains easy and simplified and

at the same time can offer world class products and services at competitive prices.

Conclusion

The economic downturn coupled with the growing

competitive environment has led to a new era of

consumerism.

The long term success by any bank cant be achieved

without the development of new business ideas,

innovative retention.

products

and

services

and

customer

Banks would have to instill in their DNA the enablement

of a positive and consistent customer experience that would transform them to a trusted partner.