In the digital cross-hairs

Banks will have to do far more to meld technology with their business, with CTOS playing a pivotal role.

“We no longer have the luxury of CTOS focusing only on technology or application development. They will be the fulcrum on which the digital journey revolves” SHALINI WARRIER

Executive Director, Chief Operating Officer & Business Head (Retail), The Federal Bank

“Most financial institutions responded quickly to deliver basic digital solutions, but there is a sharp need for the smooth integration of these digital experiences” PUNIT SOOD

Head, Natwest Group (India)

“Clients want a more flexible pay-per-use model, rather than purchasing equipment. Asset-as-a-service is gaining in technology and banking” DILIP KHANDELWAL

Global Head of Technology Centres Deutsche Bank

“Profiling the customer — demographic or otherwise — has become more important than before. In that sense, engagement using digital channels has made interactions more effective” ABONTY BANERJEE

Chief Digital Officer, Tata Capital

The chief technology officer (CTO) is the new all-rounder in a bank. “No longer do we have the luxury of CTOS focusing only on technology infrastructure, or application development. They will be the fulcrum on which an entity’s digital journey revolves,” says Shalini Warrier, executive director, chief operating officer and business head (retail) at The Federal Bank. Just how different will that journey be?

Warrier points to the bank’s approach to the government's Guaranteed Emergency Credit Line last year, when geeks guided the business team’s frontline officers. “This would not have been possible if it was not for the fact that the CTO had his eyes and ears to the ground, and knew what would work for customers and employees.”

The catchment area for CTOS may not be from legacy banks. HDFC Bank’s new CTO, Ramesh Lakshminarayanan, is from Crisil — the first major hire by Sashidhar Jagdishan after he moved into Aditya Puri’s corner-room. Prior to Crisil, he was the co-founder of a data and analytics start-up, Pragmatix Services Pvt Ltd (still earlier, though, he was with two foreign and one Indian private bank). What few bank chief executive officers say on record is that they are in the midst of re-arranging the furniture internally — the CTO will take centre stage to ensure they don’t become part of the furniture.

An Accenture report in 2019 said that legacy banks invested 1$ trillion globally over the preceding three years, but this had not delivered the anticipated revenue growth. Only 12 per cent of banks appeared to be committed to a “digital-first strategy”; another 38 per cent were transforming, but their digital strategies lacked coherence. The remainder had not made visible progress on the digital front and “investors are showing a lack of confidence in their future prospects.”

This is ominous for banks, as the

supply of capital can dry up. In India, it can be severe for state-run banks, handicapped as they are by low capitalisation, and without the headroom to invest in capital — be it technology or people.

“Banks have to decide how much to invest, when to invest and, how to align with compliance issues,” points out Prasad Rai, vice-president (strategic clients group) at Oracle (India). The explosion in UPI (Unified Payments Interface) transactions has

put massive pressure on banks’ core banking solutions, and an upgrade is costly. Also, UPI is free, while banks pay a switching fee to the National Payments Corporation of India which, in turn, is a non-profit organisation. There is another problem as well, as a senior banker points out — “at least six per cent of your operating expenses has to be in technology,” but bank annual reports do not spell out technology spends at all.

More to the rewiring

Punit Sood, head, Natwest Group (India), notes that that there are laggards: “While most financial institutions responded quickly to deliver basic digital solutions as physical banking capabilities shut down, there is a sharp need to increase the smooth integration of these digital experiences. Organisations which were already ahead on the digitisation curve were able to respond quickly, while others are still catching up.”

What’s also being turned on its head is the way business is imagined. “In traditional industry, clients are increasingly demanding a more flexible pay-per-use model, rather than purchasing equipment outright. This concept of asset-as-a-service is now gaining in the technology and banking industry,” notes Dilip Khandelwal, the global head of technology centres for Deutsche Bank. It’s also reshaping other relationships — like that between the CTO and chief marketing officers of banks, which has metamorphosed from that of a service provider to a partner.

Then there is the bespoke aspect. “Profiling the customer — demographic or otherwise — has become more important than before. So, in that sense, engagement using digital channels has made interactions more effective, efficient and impactful,” says Abonty Banerjee, chief digital officer at Tata Capital. But at the industry level, there is no empirical data on how commercial banks, or shadow banks, have mapped the demographic profiles of their customers — in particular, those of millennials, who expect a banking experience akin to hailing an Ola, ordering on Swiggy, or shopping on Amazon.

All this, even as technology makes them faceless customers. One way out is for banks to acquire fintechs to jumpstart their new-age ambitions, but given the valuations, it may well be the latter that are better placed to acquire banks — or for that matter, pure-play tech giants or digital retailers.

An irony is that even as we have set foot in a new world, a few eyes are firmly on the rear view mirror. The Reserve Bank of India’s discussion paper, Governance in Commercial

Banks, released on June 11, makes no reference to the role that CTOS are expected to play. “The surprise is not that IBM’S Deep Blue defeated Garry Kasparov, but that he still managed to win a game,” says a tech-banker on the condition of anonymity. In other words, it’s the people behind the technology that matters. And they can’t be ordered online.