ICICI Bank in India has created a chief technology and digital officer position (CTDO) along with a technology and digital group (TDG) to work on improving the bank’s digital capabilities, Chanda Kochhar, managing director and CEO noted in an interview, according to Mint, an Indian business publication. Blockchain technology, the bank believes, will make banking more secure and robust.
The TDG group will help make the organization develop its digital capabilities for its commercial, retail and wholesale banking, its treasury business, and its small and medium enterprises business.
ICICI Bank is the country’s biggest private bank. It is planning to deploy artificial intelligence-infused chat bots to serve as quasi-bankers that can assist in loan choices and do remittances.
Harnessing The Blockchain
The bank plans to use blockchain technology to make banking more robust for customers. Kochhar said blockchain technology provides lower cost and scalability.
ICICI Bank can use blockchain technology in imports/exports trade, for example. The bank can create a link from the point where exports get made and certificates are received to the point where they give confirmation and another group of banks provide funding. Having the process on an open ledger makes it more transparent, thereby reducing fraud and removing data entry mistakes, Kochhar said.
The shared ledger can provide provenance, immutability, consensus and finality for transferring assets in business networks. It reduces complexity, costs and time. It supports shared, trusted processes and enables trusted recordkeeping and better discoverability, according to an IBM white paper.
New Division To Benefit Customers
The CTDO will work closely with different business units to achieve digital solutions for customer specific issues, Kochhar said.
ICICI Bank was one of the first in India to use online banking. It now allows customers to use smartwatches, tablets, smartphones, laptops and desktops. Customers can do real-time money transfers and banking on social networking sites in addition to using Internet banking, ATMs, mobile banking and smartwatches to reduce transaction costs.
The bank expanded into tablet banking three years ago. Under tab banking, a bank officer visits a customer at their office or home, takes pictures of the know-your-customer (KYC) documents, sends them to the bank, and establishes a bank account within days – paperlessly.
Kochhar said in investing in tab banking, they realized it boosted sales productivity and allowed sales people to do more transactions. The returns were quantifiable.
Tab Banking Opens New Doors
Once tab banking improved productivity and assisted meeting KYC rules, the bank added more offerings to digitize the back end and improve the customer end. Kochhar said it is about rethinking the banking experience from the time someone opens an account to the time they seek to switch accounts.
Transactions at the branch level normally require a bank employee to open five separate windows on the computer. This requires more time to do a transaction, causing the employees to clear fewer transactions in a given period. Digitizing the core system simplified the process so the transaction takes place in one window.
Three years back, the bank gathered input from third party providers and its employees on simplifying processes for faster resolution of customer issues. This “youthization” campaign gained insights into real problems in completing customer requests.
The campaign was both a top-down and bottoms-up approach in which every person who interacts with customers, including vendors, come up with ways to make things easier with digital tools, Kochhar said. The ideas were discussed and prioritized before decisions were made.
The bank needed to make information technology usable to everyone, not kept in the bank’s headquarters. The senior executives visit branches to ensure systems, user experience and network bandwidth. Kochhar noted that an employee will only give a good user experience if they are happy.
Digital Improves Administration
The digital strategy includes improving administrative functions. Employees can complete tasks, apply for leave, and list personal information for emergencies while they’re out and about as opposed to having to long in on the office computer.
The bank will consider partnerships in some areas while creating its own services in others. Kochhar said banks can accomplish functions done by mobile wallet companies and fintech firms internally as long as they stay abreast of technology.
There will be situations where people will compete with one another and situations where they will cooperate. ICICI Bank wants to stay ahead of the fintech players and compete with them in some cases.
A Mixed Approach
Passing a customer to a third party service provider would not feel right if the customer has already spent a lot of time with the bank. ICICI Bank has provided mobile wallet services inhouse, for example. In the area of e-commerce, the bank works with outside companies to allow customers to make a purchase online, then use the bank’s digital capabilities to pay for their purchase.
Kochhar believes branches will remain an important part of the bank’s presence and growth. But branches will work differently.
Ninety percent of transactions today occur outside of a bank, she noted. Nonetheless, branches are busy since they provide a franchise and a presence. The bank uses the branches to reach out to customers deeper into the country. To grow, a physical presence is needed.
In the future, branches will focus on value-added customer services.
How Digital Changes Banking
Alok Shende, founder, director and principal analyst at Ascentius Consulting, said the digital world is increasingly intersecting with traditional banking. He said the interregnum between the past and the new version of banking will not be smooth or linear.
The financial industry will compete with smaller, nimble players adept in the digital world. Only 10% to 15% of digital data is analyzed for new insights. As data volume grows exponentially, banks are losing their capability to gain from the new asset.
Centrum Broking Ltd., a brokerage, noted that traditional modes of banking face a serious threat from new technology. The Unified Payments Interface (UPI) can make mobile wallets redundant. UPI does not require a specific bank account, as opposed to exiting mobile wallets that serve only those who have an account. That benefit significantly expands the pool of customers UPI can tap, versus banks with a limited customer universe, Centrum noted.
About 35% of India’s 636 million people have bank accounts while 80% have access to mobile phones, according to the World Bank. UPI could penetrate more homes than all the mobile wallets combined, noted Siddhartha Khemka and Sweta Chawla, researchers writing the Centrum Wealth Research note.
PwC, the consulting firm, noted in a paper, “Retail Banking 2020: Evolution or Revolution?,” that banks are amidst a multi-wave trend with digital focusing first on optimizing existing products and services. The next wave is underway, where enhanced data capture and analysis provide more targeted customer offerings and better services.
Mobile banking will disrupt distribution models and the payments industry. Examples include instant video conferences with product experts and P2P mobile payments. Security and verification will advance to allow all sales, service and delivery to be done online.
Technology is making it easier for people to switch banks and it is improving relationship. The third technology wave will have banks and their partners create extensive profiles on all customers, according to PwC.
Featured image from Shutterstock and Facebook/ICICI.