Indian banking sector is mass growth opportunity for IT

Compared with established global markets, India is still in the early stages of IT implementation in its banking and securities sector. However, according to Gartner Principal Research Analyst Moutusi Sau, the country is the fastest growing adopter amongst emerging Asia Pacific (APAC) players when it comes to finance sector IT spend, although “India is slightly behind on the curve” when compared with China.

The Indian banking sector is developing at a pace not seen before, Gartner reports. It predicts that the country’s IT spending by banking and security firms will reach $8.9bn in 2017, an increase of 9.7 per cent from 2016. This growth rate is set to remain until 2021.

“This is much higher than the global average of 3.5 per cent for 2017,” Sau notes. “It is also higher than the growth rate for China in 2017, which is five per cent.”

Sau cites sector investments in IT services as growing the fastest at 13.8 per cent in 2017, and that this is due to the industry investing more heavily in business processes.

“There is a high propensity amongst Indian banks to invest in software and IT services,” she says. “There is double digit growth rate in both these key segments, with applications growth in software leading the pack.”

She goes on to note that business intelligence (BI) and analytics are top priorities for banks across APAC, followed closely by digitisation and then mobile and cloud services.

“BI/analytics will help them capture customer data and analyse how it can be used for cross-selling. Digital marketing will improve the acquisition of customers. Plus [the sector is] also looking into mobile applications and development of cloud services and solutions.”

The Indian banking sector has put ‘digital transformation’ high on its agenda, especially after the country was rocked in 2016 with the sudden demonetisation announcement. This pushed the industry to work quickly to enhance its customer facing platforms and invest in payment tools.

“Technology is influencing banks’ business models top to bottom – strategic, tactical and operational,” notes Niraj Vedwa, Global Head – Banking, Payments and Cards at Tech Mahindra. “This encompasses products, services and business processes. Banks are working on a war footing to design new products and services and redesign their existing ones to leverage today’s disruptive technologies,” he highlights.

Many different solutions are being researched and invested in, including a variety of payment technologies.

“Banks in India are now focusing on safe, secure and easy to use technology for customers, as technology should be an enabler,” says Niranj Sangal, Group CEO, OMA Emirates. “We have recently seen, post demonetisation, the usage of cards at point of sale (PoS) moving up. Banks are now building their PoS networks, especially in tier two and three towns.

“Cards, point of sale and payment systems, including biometrics, have emerged as the biggest focus area in banks’ digital transformation agenda. In addition, interest in internet and mobile banking has grown considerably in India thanks to the spread of digital connectivity and mobile phones creating attractive opportunities.

“Technology promises to offer hundreds of millions of people access to financial services for the first time due to its wide reach, convenience and low cost of delivery.

“India is experimenting with new ideas for financial inclusion in almost all areas requiring immediate focus. However, there is a wide variation in the technology agendas and implementation capabilities across different banking players,” he adds.

Clearly not all is plain sailing. One of the challenges analysts are observing, for example, is an insular view of banking leadership compared with the rest of the industry. This is reflected by low spending on high-level digital technology, a shortage of talent to execute projects and an overt focus on legacy systems such as enterprise resource planning (ERP). There are also concerns regarding short-term ROI and security, plus issues around the ‘readiness of the market’.

“While banks are all geared up to create and roll-out the latest technologies, they hit a road-block as the market is at different levels of maturity when it comes to embracing new products and services. While some offerings are ‘pull’, others are ‘push’,” Vedwa highlights.

To help move things forward, local and international vendors are attempting to work more closely with banking and securities firms to develop partnership models. Their aim is to co-innovate and co-develop solutions which best suit the region’s banking business.

“Vendors are helping the banks to come up with blueprints for IT transformation, shortlisting the best candidates for implementation and developing agile models in order to show quick ROI,” Vedwa notes.

On a positive note, this growing interest in banking and securities IT adoption has made India a strong nurturing ground for many fintech players, who are now working hard to bring new products to the Indian market.

It’s exciting times for the sector in India, and the pace of change doesn’t look set to slow. Analysts believe that many technologies will begin to play bigger roles in India’s banking market, including advanced analytics, digital security, compliance tools, robotic process automation and machine learning.

“As India is one of the fastest growing economies in the world, the banking sector is expected to see phenomenal growth,” Vedwa says. “There are interesting times ahead. The sector is undergoing a massive overhaul, with technology playing the biggest role. New technologies, such as chatbots, augmented reality, the Internet of Things and blockchain, could all be game changers,” he concludes.


Also read:
India takes the tough path to digital payments


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Keri Allan

Keri Allan is a freelance journalist and editor who has been covering the engineering and technology sector for over 15 years, writing for titles including E&T Magazine, The Engineer and Arabian Computer News.

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