Chet Kamat is CEO and managing director of Oracle Financial Services Software (erstwhile iFlex), a majority owned subsidiary of Oracle and an integral part of the Redwood Shores, California-based firm?s Financial Services Global Business Unit. He brings more than 25 years of financial services, consulting and business transformation experience to his role at Oracle Financial Services Software. According to him, banks in India have moved on from the first stage of technology adoption around core product processing. ?However, they really need to address the challenges of customer expectations and channel innovation, and at the same time leverage the large amount of information they are gathering about their customers,? he tells Sudhir Chowdhary in a recent interaction. Excerpts:
What is your perspective on the continuous evolution of the financial services industry as well as the technology that supports modern banks?
At Oracle, we have a large and diverse customer base in the financial services and insurance (FSI) industry that gives us a unique vantage point to appreciate the changes the sector is witnessing globally. These changes are taking shape along multiple dimensions, including demographic changes in various countries and
geographies, and the level of technology adoption in various markets.
Speaking about global markets?in Africa, the focus is on moving a large part of the parallel economy
into the legal economy. The growth driver lies simply in regularising the system. In Asia, banks are looking at leveraging technology uniquely in
order to meet the constraints they face in the marketplace. In the Middle East, Africa and South East Asia, Islamic banking is gaining popularity.
In mature markets like Europe, banks are facing a unique situation of an aging and shrinking population. They are over-banked, the costs are high and hence banks are looking for technology to lower their operational costs. Besides these regional trends, there is the evolution of mobile and internet, which is pushing innovation, and there is the continuous pressure from regulatory changes that is driving change in banks operations.
In India, investments in banking technology can be split across product processors, customer-facing technologies and data-handling technologies across risk analytics, compliance and insights. A lot of the core investments in product processing have already materialised as part of the technology upgradation cycle. However today, the focus is more on improving customer interaction by adopting technologies across channels, and being able to use the large amount of data to bring a 360-degree perspective of the customer. Technology has been instrumental in enabling banks to work towards profitability and meet regulatory requirements.
In India, the upcoming new banking licenses are likely to bring in an element of disruption. These new banks have a challenge in competing with established players and will fuel a new wave of innovation in the market place.
What has been Oracle Financial Services Software?s contribution and role in the broader transformation of the industry?
As a banking solutions provider that has been serving banks around the globe for decades, we have had the privilege of participating in the banking transformation across continents, countries and regions. Our
solution is based on open standards and open systems and hence has been easy for banks to adopt. We use open standards based solutions like Oracle Database using Java and other standard platforms. The second contribution is the breadth and scale of our footprint. We are able to incorporate the insights and learnings from multiple implementations across a variety of different markets so that the best practices and capabilities adopted for large and established banks around the world become available to almost any new bank.
Is Oracle Financial Services Software?s business profitable?
As per our quarterly results, our revenue in FY13 was R3,500 crore, a growth of 10% from FY12. We had a fairly strong solid performance.
What are the key BFSI trends defining the sector?s transformation?
Typically, you will see banks routinely going through a technology upgrade cycle. It usually starts with one or two banks being the first movers; they step up and upgrade their technology and soon enough all other banks follow suit. Banks in India went through this journey in the area of core product processing. Broadly, banks tend to evaluate products based on three aspects; one is around processing transactions? for loans or deposits, trade finance, payments and so on. The second focus area is the customer interface, that is, how a bank can deliver a superior customer experience. The third area of focus is risk and compliance analytics.
If you look at where the focus of the market is today, it is around two
dimensions. One is?how does a bank stand out along every touch point of customer interaction. The other dimension is?how does the bank deal with the data that is being built up in the organisation, either from an insights perspective or from at the perspective of finding an intersection of risk, analytics and profitability. Essentially, the primary question is?what is the key differentiating service that a bank can offer to its customers. All of them require an ability to operate in a multi-channel model and hence we see a lot of potential here.
In the future, there will be a lot of interest around social media, mobile banking, banking on the cloud, gamification among others. Non-traditional modes of communication and engagement will allow banks to develop increasingly intimate and personalised customer interactions.
What are some of the challenges that ?new banks? should prepare for, given they are going to compete with established players?
New banking licence aspirants have the luxury of choices that they can make to take the challenge of competing against incumbents head on and carve out a differentiated position. This is where Oracle Financial Services Software has a compelling value proposition for new bank licensees, because we can bring together the
entire technology stack in a pre-integrated fashion that substantially reduces time to market for them.
Banks have to decide what they are going to start with. They can opt to
enter in either the retail banking or the corporate banking space. Within the corporate banking domain, they might want to start with specialised services like payments, trade finance etc. Their preference will depend on the long-term plans for growth. That?s how they have to manage their time to market. For example, when global corporate banks enter a new country, they might choose a particular offering, such as trade finance. Once they have established their presence, they could graduate to a comprehensive bundle of offerings.
The retail banking model is going to be very interesting. With the mandate to have 25% of the branches in rural markets, and stiff competition from mature players in the urban markets, the new banks will have to look at innovation to gain the competitive edge. They will need to leverage technology to keep their costs down, bring in unique products and value added services to differentiate themselves and use channels (internet, mobile, tablets, etc) in ways that have not been done yet.
To assist banks in their expansion and growth plans, we have developed an industry reference model, which is a model of banking business best practices. These best practices are very tightly aligned and can be instantiated in our products. This gives banks a head start on building the processes. New banks are fortunate in not having a large amount of legacy data, which would save them a lot of energy and time. We have worked with a number of startup banks all over the world and have all the requisite experience to be able to support banks in their journey.
What is Oracle Financial Services Software?s strategy for India?
India has a competitive banking space. Customers are looking at low cost, convenience and flexibility. India is a strategic market for us both from a talent stand point and business opportunity provided by the banking industry. Banks in India have moved on from the first stage of technology adoption around core product processing. However, they need to address the challenges of customer expectations, and at the same time leverage the large amount of
information they are gathering about their customers.
For example, one of our oldest customers is HDFC Bank?we started working with them when they had just two branches. Today, HDFC Bank has over 2,700 branches across India plus financial inclusion, powered by Oracle Financial Services Software portfolio. Their business was fairly modest when they started, but today, 40% of India?s online RTGS transactions happen through HDFC. Other large banks that are benefiting from our solutions include Syndicate Bank, Canara Bank and a host of other regional banks.
