Cloud tech fuels NBFC growth
As part of the NBFC’s TOMORROW conference, Banking Frontiers hosted a high powered panel discussion titled ‘ Extracting the real Value from Cloud to Drive Digital Transformation and Business Growth’. Moderated by Manoj Agrawal, Group Editor, Banking Frontiers, the eminent panel comprised Rishikant Dubey, CRO, Muthoot Microfin, Kunal Kathpal, Chief Risk Officer (CRO), Hinduja Leyland Finance, Prabhakar Tiwari, Chief Growth Officer, Angel One, Rajesh Krishnia, Head of Enterprise, BFSI, Nutanix India
Cloud technology is one of the most powerful emerging technology and solution. As an approach for many businesses in the financial sector, NBFCs have been trying to make meaningful use of the cloud and derive maximum value for the business.
Earlier the BFSI sector was a bit reluctant to adopt cloud systems due to concerns of data breach and security system lapses. There wasn’t much clarity on how they function and how to integrate them into different legacy systems. But the cloud system is now a reality, as there have been many security-side and analytic-side modifications and have been whole-heartedly integrated into many legacy systems.
Banks and financial institutions have adopted cloud services because of seamless computing and fast services. Digital transformation through cloud is happening by way of payment systems, internet banking, etc, which has led to high customer satisfaction.
Prabhakar Tiwari says: “I agree, that’s a big revolutionary change. And it has impacted both start-ups and large organizations.” Today the idea is to use cloud for business transformation; the agenda has changed from pure IT to investment and profitability. “Data architecture and data analytics have become the backbone of any organization. All this data helps us to personalize customer journeys and take advantage of that. I’m very enthused by the algorithm compute ability of cloud and we leverage big data a lot at Angel One.”
Gone are the days when companies used to operate in functional silos. Today, it is possible to generate data at all customer touch-points both internal operational data, customer data and then keep on tweaking the products and services. That has become a clear-cut way cloud is redefining business today.
Cloud computing for Hinduja Leyland Finance, which is diversified into various parts of India, has played a pivotal journey. During the pandemic, on the back of realtime data availability, it was possible for the business to continue to function smoothly. Many companies in the BFSI sector are also using cloud infrastructure for data backups. In the past, backups were done in batches once in a day or once in week. Kunal Kathpal says: “Now with cloud, data integrity and data availability has touched a new high, where these data backups happen on a realtime basis, and this information is floating so that in case there is a BCP event, the data can be recalled.”
NBFCs are no longer seen as second to banks. They’re moving ahead faster. One of the major factors being, they have
played a pioneering role by adopting new business models, technologies, policies and opportunities.
Any new common infrastructure is hugely beneficial for the economy, but there are risks attached. There are undisputed benefits, but we also know that cyber threats are increasing every day. There are many different aspects of risk which can pose a challenge. Security is only one of them. Scalability and cost can be an issue, manpower can be an issue as switching over to cloud requires expertise to be able to do it efficiently. Governance and compliance are other challenges. The risk exposure remains, according to Rishikant Dubey.
Kunal Kathpal added: “With cloud computing, you’re moving your data which is something that a customer has trusted on your brand name and he’s given you his personally identifiable information and certain times SPI (sensitive personal in-formation) also. How do we secure such sensitive data? As an organization, we take different steps for different type of data, like for the SPI we will not mostly move to cloud, because at the end of the day we have to be very sensitive as well as very risk aware.”
One way of mitigating these kinds of risks is to be in control of your own data. When you are riding on another
company’s infrastructure like Microsoft or Amazon cloud service, you have to develop the capability of protecting your data. The businesses need the expertise and permissions to be able to audit them.
So how does cloud help NBFCs synchronize data between customers products and infrastructure? How does this convert to business value?
In the past, there were data warehouses to store the data, on which data analytics would be done. This data would be somewhat predictive but not prescriptive. Rajesh Krishnia explains this in detail. “Today, the data points are not just from the organization’s legacy system or branch offices, but you’re also following the same customer on social media and on his journey in real-time as he’s making payments to you. The hybrid world of cloud allows us to marry the old data marks that had with the new data that is available, so that we can make decisions in real time. Today, an NBFC can your loan in 60 minutes or even sooner. With AI and ML capabilities and analytical and storage capabilities the cloud offers, we’re now going to be storing tons and tons of information about a customer. Cloud has done a good job by marrying the old systems of analytics with the new system and start offering prescriptive points to the customer, rather than just try to be predictive of what this person is going to do next. I think that’s one area where cloud has played a very pivotal role.”
In recent times, fast growing fintech companies have paved the way for NBFCs.
They’ve had many takeaways from them in terms of customer engagement and their applications in business to the relevant segments as a business proposition. Like with Angel One, that went through a transformational experience from having a brokerage model to becoming a true FinTech company. The business invested heavily in tech by way of people and technology. “I think we really understand where NBFCs stand today, their struggles and their opportunities. It’s about understanding consumer facing technologies and psychographics. And when you look through those lenses, then you’re not competing with any bank, fintech or any other NBFC, you’re competing with Netflix, Uber, Swiggy, Zomato and such companies. Customers’ want the services at the push of a button. Today’s generation doesn’t have the patience, they are spoilt for choices. So not only in the same asset class, I have multiple companies competing, but I have different asset classes competing with each other. The relationship has changed. It’s not a sellers’ market anymore. It’s a buyer market,” says Prabhakar Tiwari of Angel One.
Risk management itself is a series of experiments, so there are bound to be failures. The need of the hour is dynamic riskmanagement in all aspects and to be able to
learn from these experiments. There cannot be traditional risk management at a startup or a high-risk management or analytics AI, ML-based risk man-agement in a traditional company. The model that some NBFCs have adopted is by tying up with fintechs and trying to work the business through their analytics. The juncture these businesses have arrived at now is not only doing business by themselves, but combining with others to do the business.
While there are positives to using public cloud, there are certain risks as well.
So, t h e way f o r ward f o r most organizations is going the way of hybrid cloud. NBFCs expect customers will run their applications both out of public as well as private cloud. Within public cloud itself, they may use multiple vendors for different services there. Another risk is getting tied to a single vendor. An NBFC should have the freedom to move between services. “I should be able to move my applications or move my data together. And that really is very critical. And that’s where hybrid cloud really plays a very pivotal role,” according to Rajesh Krishnia. Hybrid cloud also acts as bridge between different systems and new partners, “where the choice at the end of the day will be with the customer. If he is going to use a particular service on premise in his data centre, he should be able to do it. But if he wants to leverage a particular service on one particular cloud, he should be able to do that as well. That really is the way forward.”