BFSI Sector at Inflection Point

CIOReviewIndia Team | Monday, 21 September 2020, 04:27 IST

BFSI Sector at Inflection Point

Technology disruption is causing ripples across industry segments. But there is one sector in particular which is witnessing maximum reverberations. That is the BFSI sector. To understand how businesses in the BFSI sector are adopting new technologies and business models, CIOReviewIndia organized a webinar in partnership with Ospyn Technologies which provides digital transformation solutions to businesses across industries. There were several illustrious guests on the panel who shared their views on the changing dynamics of the BFSI sector.

The panelists were:

· Kishore Kumar, Founding Director & CTO, Ospyn Technologies 

· Abonty Banerjee, Chief Digital and Marketing Officer, Tata Capital

· Gururaj Rao, CIO, Mahindra Finance

· Bhasker Rao, Director - Technology Infrastructure, Deutsche Bank

Low-code platform: A New Normal for the Dynamic BFSI Requisite  

Considering the changing requirements of businesses in the BFSI sector, Kishore Kumar, Founding Director & CTO, Ospyn Technologies, started the discussion by explaining how a low code platform can prove to be the panacea for the sector. “Until very recently, technology has been seen as a business enabler. But I think it is changing now. Technology is becoming more than an enabler. There is a higher convergence of technology and business that is happening currently and financial institutions are no exception for this. Complete digital enablement is the only way forward to bring about this big change. We have three different forces acting in any business. We have the customer, the business itself and the technology.

Kishore Kumar, Founding Director & CTO, Ospyn Technologies

Customer expectations are changing rapidly and at the same time niche players are venturing into the market. Disruptive technologies are making foray into the sector and compliance regulations have become more frequent. So, businesses need to be more agile and flexible. The balancing act is actually done by the technology. Hence, technology is now playing an important role than ever before.”   

"For digital transformation to happen in its true sense and benefit the business, the non-core systems and support system must be completely automated."

“For digital transformation to happen in its true sense and benefit the business, the non-core systems and support system must be completely automated. Otherwise while your core system might be automated and operational, the support systems might be falling apart. You might have systems that do not communicate with each other. Longer lifecycle is going to be a really big challenge wherein from requirement to protection if you need to roll out a particular system, it might take a long time which is not acceptable in the current scenario.”

“If we look at the financial services segment, the paradigm shift is quite evident. Financial institutions are looking for technology partners. They want technology systems to have faster time to market. They are looking for reduced TCO (Total Cost of Ownership) and flexible pricing model. Hence, the need for a low code platform has become more prominent. You need vendors that are able to give you platforms that are low code enabled. The platform must be highly customizable and configurable. It should empower the business users to configure the platform and roll out a deployment. It should also have an intuitive user experience.”   

“In a typical lifecycle of solutioning, you have to go through multiple processes right from collecting the requirements of the business all the way to deploying the solution. The number of these processes must be reduced to become agile and flexible. This is a new normal wherein vendors are required to provide not hard coded systems but platforms that are low code enabled wherein the users can customize the system as per their requirements.”        

BPM can give you an excellent low code mechanism to do that so that you can respond to the market situation very fast.    

“In the BFSI segment, while there are core systems for banking, the non-core systems and support systems are equally important. Banks are looking at automating their window office communications which are built completely on BPM solutions. You can create your own workflows. You have various extension points where it can be customized easily without the help of IT staff. This will enable people to modify the system and execute the releases. You can have these enhancements done from time to time so that you are better equipped to meet the requirements of the customer.”      

“If you take customer onboarding as an example, you would not want it to be a part of your core system because you would not want your core system to change very often. Such functions will have to undergo changes on regular interval for example changes related to compliance regulations or customer experience. So, it is about building agility outside of the core system which is very important. BPM can give you an excellent low code mechanism to do that so that you can respond to the market situation very fast. All in all, dependency on the vendor is going to reduce, and businesses are going to seek faster time to market at low cost.”     

The Right Digital Transformation Approach for Financial Institutions

Abonty Banerjee, Chief Digital and Marketing Officer, Tata Capital elaborated on the importance of devising the right approach for digital transformation in the BFSI sector. “I believe we are lucky in the sense that the digital transformation of BFSI sector is better staged as compared to other industries. If you look at the sector at large, most organizations have embarked on this journey some years ago and many are in advanced stages. As a sector, that really helps when you are faced with an extraordinary situation such as a pandemic.

Abonty Banerjee, Chief Digital and Marketing Officer, Tata Capital

There are a few things that are important. The first is that what is the receptiveness of the organization and what is the receptiveness of the customer in this transformation journey. The brilliant change that has happened, although due to an unfortunate event, is that both have become receptive. The products that are being rolled out are having far more acceptance if they are contactless and the customers are willing to use digital levers and interfaces like never before.

Within the organizations as well, there is an increase in the level of acceptance. It is the job off the digital transformation department to ensure that all levers are made available quickly. If you are able to turn things around quickly and deliver something for both your internal users and customers, it is likely to see super adoption. It is up to us to use this opportunity to create interfaces which are usable and platforms which are more nimble and agile because we will find far greater acceptance now.          

How the NBFCs should Rise to the Challenge of Technology Disruption    

Gururaj Rao, CIO, Mahindra Finance demystified the conundrums associated with technology disruption in the BFSI sector. “Today, everybody knows the acronym called VUCA – Volatile, Uncertain, Complex, and Ambiguous. Let me give you an example. An AI tool is capable of creating an entire news item that says Russia has declared war on the United States. Just imagine if it goes rogue. It would cause a war between countries. Another example is from the telecom sector. Today, telecom companies are in deep financial trouble. Just imagine if this industry were to collapse completely. If telecom collapses, you will not have any technology to use. That is the kind of change which is possible. What happens to a country where all the citizens are given an opportunity to learn how to use AI? Just imagine what happens to that country. Suddenly you have huge potential because everybody can leverage technology.”

Gururaj Rao, CIO, Mahindra Finance

“Today, we are seeing new technologies coming up rapidly, everything being experimented, customer journeys being drafted and redrafted. At the same time, a customer would want security, convenience and legal comfort. So, are we getting that? How do we tackle VUCA? The answer is by another VUCA. By having a clear Vision – what is it that you want to do as an organization? What is the value that you want to provide and to whom? Having an Understanding amongst all the resources of the organizations that we are moving towards the same goal is the need of the hour. Next thing which is required is Clarity – with regard to the specific activities’ synchronization - how things would move, when would they move, at what speed and in which in this direction. And the final one is Agility. That’s what the leadership requires today.”    

"Technology is not a magic wand. There is a risk factor involved in both using and not using a technology. One must evaluate the opportunity and the risk and then go for its adoption. A reimagining of customers’ requirements must be done by NBFCs."   

“It is not that NBFCs are new to volatility and unpredictably but things are a bit more challenging today. No organization can work in silo. Organizations have to work in an ecosystem, and with various partners. From being independent to becoming interdependent, it is not an easy philosophy. And the way you work has to be simple and light. It cannot be a complicated process with heavy overheads. You have to be light on your feet; you have to be agile. For all this, information technology is going to be the driver. But technology is not a magic wand. There is a risk factor involved in both using and not using a technology. One must evaluate the opportunity and the risk and then go for its adoption. A reimagining of customers’ requirements must be done by NBFCs.”

“A lot of institutions and mechanisms have been created that have disrupted the financial services sector. But every organization has to plug into the ecosystem. Government itself has created its own digital database. How do private organizations tap into those? That is the challenge to be addressed.”

“So, it is time to realize that there will be disruptions mainly driven by technology but the organizations have to be clear about their strategy, be agile, follow the path of simplicity, and revisit the customers’ experiences and journey.”        

The Ideal Approach for Automation in Banking and Financial Services

Bhasker Rao, Director - Technology Infrastructure, Deutsche Bank expounded on the nuances of automation in the BFSI sector. “It is an agile world and no organization can sustain without embarking on digital transformation. Natural calamities such as the current one, though unfortunate, have proved to be a blessing in disguise, bringing the best out of mankind in terms of technology. It has opened up opportunities for technologies to be leveraged to the maximum potential.” 

Bhasker Rao, Director - Technology Infrastructure

“When we talk about automation, it is a very generic term. It can mean very different things to different people. At a high level, it would mean you are replacing human work with something like robotics. At a lower level it could be about how the technology path is growing and there is no work being done without at least a bit of automation involved in that.”

“The first aspect is the demand for automation in terms of what is the trigger for the need of automation. An organization in the banking and financial services space has to see which areas have seen automation and cannot survive without automation now. Then we will delve deeper into the technology, discussing the types of automation like RPA, chatbots etc. And finally, I will touch upon IT infrastructure automation.”

"An organization in the banking and financial services space has to see which areas have seen automation and cannot survive without automation now."

“What is the model that works as things change? Technology people traditionally have come from siloed organizations. They come with their own skills and competencies. But there are changes happening in the industry such as moving to cloud and operating in an agile fashion. The skills needed to deliver this are going to be different.”

“It all begins with trying to understand how profitability can be enhanced and improvement in efficiency can be driven. So, the measures being undertaken are aimed at mainly cost reduction. Once you start doing automation, you realize that you are reducing the variation. Customer or user experience depends on how consistent the service is. So, the key aspect is to bring in consistency.”

“Automation makes the services more available, round the clock, across geographies, thus driving its growth. Thirdly, as a company what happens at the board level is the discussion on how they are leveraging technology. As the company moves on to cloud, have they shed their legacy infrastructure or not? Are they automating their work? If these things are deliberated over during a board level meeting, it uplifts the stakeholder’s confidence. It differentiates the product or brand in the market. The company is seen as digital and that drives the need for automation.”

"When we have to involve a human being, it has to be for a high purpose or high value. So, we need to automate the routine work and really enable the human value."

“Fourth aspect is the dearth of talent. Getting niche skills and talent is so difficult. The potential of human mind is so much that we have to leverage it more. When we have to involve a human being, it has to be for a high purpose or high value. So, we need to automate the routine work and really enable the human value.”

“In the back office operations of a bank, a lot of automation has been done. In front office operations as well, there are several functions such as algorithmic trading, market analytics etc that are being automated. On the technology side, be it application development, testing, production, or customer interface, a lot of automation is happening which in fact is embedded into these.”

“When it comes to IT Infrastructure automation, one of the complaints from our developers is that how soon can a virtual machine be provisioned. Imagine now if I allow my application development to operate on cloud, in few seconds he is able to get a virtual machine. This is one of the many examples of the level of stability enabled by automation.”

“So, how do you enable automation in an organization? There are three terminologies. First one is called Automation; the second one is called Integration; and the third one is called Orchestration. Automation is sometimes misunderstood to mean everything. Automation is basically writing a script to automate a singular task, for example configuring storage boxes. But when you want to enable this automation for self service, it requires integration. Then if you want to plug that into an overall process, there is a need for orchestration.”

“So, there is a huge opportunity in automation for the banking sector in particular. The technology is rapidly making inroads into the sector and things are changing every day. We should keep pace with it in order to embrace it.”   

Providing such deep insights to the audience, the panelists painted the complete picture of technology adoption in the BFSI sector and the way forward for banks and financial institutions.