The future of banking in India hinges on three areas – sustainability, central bank digital currencies (CBDC) and hyper-personalisation. To explore the potential that can be unlocked in these spaces, FinancialExpress.com and IBM, gathered a group of India’s top bankers, financiers and insurance leaders for a unique and parallel roundtable discussion. The goal: Outline what the future holds in these areas for Indian banking and financial markets with the advent of new technologies. Here is the outcome:
Contextual relevance of hyper-personalisation key to maximise benefit
The bank now is literally a flick of a finger away. From investment to insurance, trading to transferring funds, financial services are tailor-made to suit your requirement and profile. However, how much is too much when it comes to personalisation?
This was what leading luminaries of the financial world discussed and debated at the first roundtable on “Responsible Hyper-personalisation of Banking Services”. Most of the panellists at the table agreed that hyper-personalisation is important but it has to be need-based.
As Nitin Chugh, Deputy Managing Director and head of digital banking, State Bank of India highlights the need to see a “gradual shift to hyper-personalisation in things which are relevant, contextual.”
Bringing in a tech perspective to the observation, Namrata Singh, Partner-Private Banks, IBM Consulting, India & South Asia, added that though “The role that AI is playing is to understand and give the customer a choice of a technology solution, but it needs to be used intelligently and the relevance of the tech usage is key.” She explained her point by citing an example that supposing she knows the client would like to choose between options then it becomes easier to create options. As a result, she highlighted how organisations are making a fair amount of investment in AI to just know the person and enable bringing forth relevant choices.
Technology, they say is a great leveller. However, the concept of personalisation has been core to financial operations for a long time. The importance of technology is the “ability to add scale to the degree and reach of personalisation,” according to Charu Mathur, Chief Digital Officer and Head-Business Strategy & New Initiatives, IndusInd Bank.
It is no doubt an evolving system and use-case-based data mining is crucial in bringing about a meaningful impact. Kalpesh Doshi, Group Chief Information Security Officer, HDFC Life Insurance pointed out that “hyper-personalisation is a journey, going full ballistic is not an option. It is important to identify pockets with maximum impact” with regards to a company’s business profile.
Anurag Ashish, Head of Retail Business, Federal Bank corroborated the point and explained that ultimately most financial organisations are part of the “service industry… the degree and how much value hyper-personalisation initiatives offer is important.”
Essentially leaving choice on the table for the customers is important too. Goutam Datta, Chief Information & Digital Officer, Bajaj Allianz Life Insurance reiterated that clarity of concepts is important, “simplification and contextualisation of offerings are extremely crucial, technology comes much later.”
For the industry, according to the speakers, it is important to allow the customers to decide what they need for maximum benefit of hyper-personalisation to come through. They were unanimous in agreeing that it is an evolving process and the rough edges need to be sharpened. There is no dearth of data available to financial institutions, and the tech is available to record it, but a business hypothesis and use-case is important to maximise the impact after a thorough analysis.
Adoption of CBDCs: India’s approach to the future of currency
While hyper-personalisation was being discussed, simultaneously at the second table, there was much excitement brewing around India’s adoption of a central bank digital currency (CBDC) and the many use cases it has. A few months back, the Reserve Bank of India introduced a pilot of the e-rupee or the central bank’s digital currency for India. It was therefore with good reason that the adoption of CBDC and India’s approach to the future of its currency was the topic of discussion at the table.
Setting the context, Satyen Kumar Jadeja, Principal, Account Technology Leader, India & South Asia, IBM, said the interest created by Bitcoin and its underlying technology Blockchain has led many central banks globally to trial digital currencies. “Around 107 central banks globally are experimenting with CBDCs and the number keeps increasing, but only a few nations are going to implement it,” says Jadeja. “It would be great to get multiple perspectives on this.”
Deepak Sharma, President and CDO, Kotak Mahindra Bank, points out the difference between a digital currency and a cryptocurrency given the buzz the latter had created. “Digital currency as we know it is a fiat currency in token form issued by the regulator, while cryptocurrency is not traceable and goes beyond borders, hence many countries had an issue with it. The moment there is a cryptocurrency, it breeds a parallel economy, which creates systemic risk,” he says.
This is why countries that were initially open to crypto are now moving away from it. On the other hand, central bank issued digital currencies like the e-rupee are managed and regulated by the central bank. “While blockchain or distributed ledger technology is used, the way it is managed is different. Here, there is no mining, it is the issuance of tokens,” says Sharma.
Touching upon the primary use case of a digital currency, Ayashkant Mohapatra, Chief Information Officer, Bank of Baroda Financial Solutions Limited, says the ease of how you spend and how you manage your money is where the use case for digital currency will work. “People are excited to see the use cases. A lot of back-end processes can be settled. In India, we are already used to wallets, so the challenge of implementing them will not be there. Adoption will happen fast,” Mohapatra says, optimistically.
Jeetendra Yadav, Head of PMO and Digital Platform at Union Bank of India adds that he sees a good use case for digital currency in foreign remittances and trading purposes. “Digital currency payments will certainly reduce the turnaround time,” he says.
Speaking about the adoption of digital currency in the financial services space, Devang Rawal, Head, Corporate and Institutional, Aditya Birla Finance Limited says the mood is of “cautioned excitement.” There is excitement around traceability, and issues of transparency can also be addressed. “From a credit perspective, I am excited about the permanency of the settlement mechanism. If, while lending, I can ensure the end use and track it, it brings about phenomenal transparency. Today, we can’t track the rupees we have lent to the last person using it. I can create a controlled risk monitoring system based on a digital currency. It also allows me to look at digital supply chain funding, digital logistic funding, digital agricultural or pharma funding in a far bigger way,” points out Rawal.
At the same time, he says there is some need for caution. Are banks and NBFCs ready with the systems, architecture and infrastructure to reap the benefits of a CBDC? Will there be a different accounting system and will there be multiple ledgers, he asks. “The RBI report is clear that CBDC will not replace an existing system, but it is supposed to aid it,” he sums up from a lender’s perspective.
On the consumer side of CBDC, Naresh Jha, Senior Vice President, Digital and Innovation, HDFC Ergo General Insurance says technology has changed the way money is seen – from plastic money to various other form factors.
“Earlier, money never had a face,” he says. “What is going to happen with digital currency is that it will have a face. The moment that happens, the uncertainty goes away. Earlier money never had a specific purpose. Now with digital currency, money can have a purpose.”
He goes on to explain how money can be programmed. “If you combine technology and purpose, it opens a huge space in insurance and financial services. Money can be used for a particular contract only, for example. Spending discretion can be brought in, where tokens can be used only for specific things.”
But what about the anonymity of money? Well, there is a trade-off. At the same time, the total cost of implementing a CBDC is still a work in progress. Jadeja sums up that once India starts scaling the use of CBDC, technology costs will start coming down. Interoperability of CBDC and blockchain is an area in which a lot more work needs to be done.
Digital Innovation and Sustainable Finance: The next Frontier
The third topic, “Digital innovation and sustainable finance: The Next Frontier,” also had some incredible panelists with deep subject expertise. They included:
Nikesh Gupta, the Chief Operating Officer at Aditya Birla Finance; Suhail Ghai, Chief Digital & Information Officer at Max Life Insurance; Naveen Chaluvadi, chief digital officer, Yes Bank; K V Dipu, Senior President and Head of Operations & Customer Service; and Roopa Satish, who heads portfolio management, CSR and leads the ESG practice at IndusInd Bank; Rishi Aurora, Senior Partner & Financial Services Sector Leader, India /SA, IBM Consulting, IBM apart from Shailja Singh, Director Technology Sales, Enterprise, India/SA, IBM.
Most seemed clear that while the nub of the discussion had to be around the reduction of carbon footprint and staying sustainable, it was important that all stakeholders within an organisation stayed aligned on the priorities and on the current imperatives to ensure fruitful outcomes in this journey. This could be around the approach to planning, or what Nikesh Gupta, COO at Aditya Birla Finance best described as “products, people and processes.” The panellists felt sustainability encompassed not just steps that heightened asset and operating efficiencies but were also about staying mindful of the benefits that would result from deploying innovative solutions.
Rishi Aurora, Senior Partner & Financial Services Sector Leader, India /SA, IBM Consulting, IBM underlined the point that while one could look to various solutions to sustainability, what was most important is “how do you measure sustainability.” For, at the end of the day, “what gets measured, gets the attention.”
Agreeing with this, Shailja Singh, Director Technology Sales, Enterprise, India/SA, IBM underlined the importance of reporting that needs to come with it and the need for a comprehensive software that can be in sync with all the frameworks and templates for compliance. It is also imperative, she felt, that efforts are made to bring in that transition from fossil fuels to more sustainable options, a gradual process perhaps, but then inevitable.
While this did resonate with all, the panellists also agreed with Suhail Ghai, Chief Digital & Information Officer at Max Life Insurance about the point that “it could not remain a boardroom discussion and needed to percolate right across the organisation” and stay core especially at operating managers’ level. However, as it was pointed out during the discussion that since one could better anything only if one was able to measure it and therefore the mindset and approaches also had to be tuned towards ensuring a measurable impact.
For business transformative outcomes with sustainability at its core, organisations had to have certain preconditions and enablers. This, as Roopa Satish, who heads the ESG practice at IndusInd Bank, explained, would ideally entail building awareness and a focus on capacity building (for upskilling was critical for both nurturing and deployment of innovative solutions).
While most would seek positive impact on revenue if not reduction of risks, the panellists also felt the management horizon in this had to be long term.
Everyone also felt that there was enough data available and it was quite possible to do advanced modelling and prepare industry-specific credit underwriting tools, or perhaps derive the benefits from deploying IoT (in say insurance). All in all, sustainability cannot be sustained as a boardroom discussion and if an organisational goal is to achieve better results then hands at the operational level will have to get involved and shift the focus to measurement.
