much of the communicate about transformation in public region banks (PSBs) will come to naught if reforms in technology procurement are not dealt with squarely. the present procurement methods based totallyon opposite auction and ‘lowest bidder wins’ have served nicely up to now. however these methods areseverely constraining in relation to procurement of the first-class virtual generation and innovation, the deployment of which is now a need to for survival, even greater so for PSBs.
So what certainly is digital and the way is it one of a kind from the generation we have recognized a lot of these years? to realize this, permit’s step again and observe how the sector of generation in banking has advanced in the final five years. Banking technology has changed right into a “2-speed world”. Thebasic underlying structures in which purchaser transactions manifest and customer’s primaryinformation is saved contain the conventional layer. this accretion must be dependable in order thatthe information is secure and bills take location on time. it is known as “slow speed”, because anyalternate on this layer is carried out cautiously and slowly so as not to disturb the bank’s working ordanger lack of sensitive records.
but, being a minimal expectation, this accretion does now not differentiate one bank from any other. The layer of era on pinnacle of this primary layer is what differentiates one bank from some other. that is thevirtual layer, which houses the applications that the clients or employees use to engage with the bank.for example, the mobile applications we use to engage with our financial institution reside in this layer of technology. it’s miles called “high pace” layer due to the fact banks update this layer rapidly. they can test on this layer with progressive capabilities and offerings to decorate navigation ease and make the software more engaging. similarly, they can also discard a function if it isn’t always applicableanymore. customers have commenced watching for this after being delighted by means of the speedyintroduction of attractive functions by way of successful internet companies which includes Amazon and Google. prevailing banks of the destiny will need to champion this art of innovation within the digitallayer.
The procurement of era in a 2-speed world has to operate at two distinct speeds. Procurement approachthat fits the conventional slow pace layer may be counterproductive for the high–velocity digital layer.
For a deeper understanding, allow’s realize the traditional way of purchasing technology and theproblems it creates. PSBs purchase technology via a reverse public sale process. Bidders compete withevery other by means of lowering expenses in a stay online public sale. generation is frequentlyoffered at rock-backside expenses. on occasion, PSBs are pleasantly surprised at the low fees at whichthey may be able to buy era. however thereafter, all of it goes downhill. the bottom cost bidders thenhave to make up their profitability via slicing corners on service and excellent. Banks (and their clientsultimately) pay thru their noses because of delays in technology tasks or exorbitant value ofadjustments, as and when required.
Painful as it’s miles, banks were able to get by means of so long as their technology requirements have been stable and trendy. The application in traditional layers inclusive of core banking platforms or human aid management software vary handiest a lot from bank to bank and specs can be pretty sharplyparticular to permit like-to-like contrast in a opposite public sale bidding procedure. that is impossiblewithin the digital layer where frequent adjustments are anticipated.
therefore, banks need to adopt a new approach. They need to address a broader variety of carriers ongreater bendy contracts. an entire new type of providers comes into play: the designers. digital packagesdepend closely on creative design of interfaces and services. Innovation and creativity can’t be boughtwith reverse auctions. They want to embrace new technology along with cloud and open supply. Banksneed to reinforce capabilities in-residence and no longer depend upon providers for the entirety. since the expertise right here can’t be employed at the distinctly inflexible public zone service conditions, banks may need to hire skills in unique subsidiaries.
Procurement can get even the maximum seasoned public quarter bankers labored up a piece. The “3Cs”—CVC, CBI, CAG—loom large here. notwithstanding its said choice to stay at arm’s length, that is oneplace in which government has been pretty lively in making guidelines to the banks. The Reserve bank of India (RBI) has been instead strict with troubles referring to era procurement and cyber protection. if theyneed to supply at the very public promise to convert public region banking, both the government and RBIneed to renowned the new “2-velocity international” of era.
Saurabh Tripathi leads Asia-Pacific virtual banking practice, and Rajiv Gupta heads the India technologyexercise at Boston Consulting organization. The views expressed in the column are non-public. this is thevery last in a two–part collection on virtual transformation of banks.
