How India’s Digital Financial Growth Has Raised the Performance Stakes for CIOs of Banks

How India's Digital Financial Growth Has Raised the Performance Stakes for CIOs of Banks

The adoption of digital transformation across the Indian marketplace has accelerated the demand for online financial services, especially in the banking sector. Individuals, small business owners, and large corporations have all moved to online channels for most of their transactions. This transition has resulted in tremendous growth in the e-banking sector.

E-banking has evolved in India, gaining strength at every turn. Technology, innovation, and government policies have been the prime movers in the surge in the e-banking sector. ATMs, credit cards, debit cards, electronic fund transfers, and online and mobile banking are all powering the engine of e-banking – making it a norm rather than an exception. With the digitalization of banking services and the move towards India being a cashless society, there is an upward momentum in e-banking which is non-reversible.

The Growth of E-banking is in Leaps and Bounds

According to IBEF, in 2022, the total “assets across the banking sector (including public and private sector banks) increased to USD 2.67 trillion.” Here are more stats exhibiting the growth:

           •Between 2016 and 2021, bank credit grew at a CAGR of 0.29%.

           •The total credit extended surged to USD 1,487.60 billion in 2021

           •During the same time (2016-2021), deposits soared through the ranks at a CAGR of 12.38%, reaching USD 2.06 trillion in 2021.

           •As of May 2022, the bank deposits stood at USD 2.11 trillion.

According to the Ministry of Electronics and IT (MeitY), India made 7,422 crore digital payments in FY22 at a 33% growth rate, up from 5,554 crore transactions reported in FY 2020-21.

As of January 2022, over 2.55 lakh ATMs under the National Financial Switch (NFS) were reported. Notably, the total number of cards in circulation in the country breached the 100 crore mark in 2021.

The figures are clear, digital channels associated with e-banking in India are growing at an exceptional rate, and trends indicate the growth will accelerate even further due to the penetration of online banking and the internet across the population of India.

Digital Financial Growth Comes Under RBI Scrutiny

As with all other sectors undergoing digital transformation and accelerated growth, e-banking is also on a path fraught with risk and challenges. The Reserve Bank of India (RBI) has been very active in monitoring all e-banking activities for breaches in compliance regarding customer experience, privacy, data security, and other statutory adherences.

Digital transformation in the banking and finance sectors has catapulted the CIO into prominence. Hardware, software, devices, cloud migration, ML and AI, IoT, and customer experience — all come under the purview of the CIO.

Cybersecurity and Customer Privacy

Thwarting cyberattacks and hacking are of primary concern for all online banking services. With sophisticated modes of hacking, e-banking infrastructure is susceptible to cyber threats at all levels. A successful hacking attempt could result in substantial financial losses for both the banking institution and the customer.

E-banking also entails the collection of customer data which is termed as strictly confidential and should be shared only for purposes deemed necessary for financial services as requested. Disclosure of this data inadvertently or due to technology glitches and perhaps even incorrectly designed banking applications has raised several alarm bells for the protection and privacy of data.

Regulatory Compliances and Protocols

Banking operations, including online activities, are governed by strict guidelines and regulations as defined by the Reserve Bank of India. However, exponential growth in the e-banking sector has resulted in many of these regulatory compliance needs being broken or disregarded. Regulatory breaches are serious offences by law and result in the financial institution being penalised by governmental authorities. The RBI has been extremely active in monitoring the performance of banking systems and tools when it comes to the customer experience they provide. There have been several well-publicised instances of the RBI admonishing and penalising banks and even curtailing their ability to launch new products or offerings in response to poor application performance and customer complaints.

Legacy, Migration, and the Cloud

Merging the old with the new and migrating to newer technologies and platforms without downtime is an arduous task for any CIO. Banks have been using tried and tested software for decades, and any changes are met with opposition, as nothing should get broken and disrupt regular operations.

Rewriting software, migrating to the cloud, upgrading legacy systems, acquiring new hardware, and moving operations online is an enterprise-wide activity that is required to be planned and executed with due diligence, quality, and minimum downtime.

Technology, Infrastructure, and Customer Experience

Enterprises offering financial and banking services and solutions must develop and deploy them using the right technology based on adequate performance platforms. After all, online banking is a 24/7 operation involving the financial transactions of customers and businesses both nationally and internationally. Customer experience, scalability, performance monitoring, error handling, minimum downtime, and response times are all central to the success of e-banking.

With the rapid growth in the number of users and services, many e-banking services are facing degraded performance and low standards of customer experience. As a result, enterprise-wide performance testing and certification are prerequisite for any rollout of e-banking solutions.

Also, as mandated by the RBI, all e-banking applications should satisfy the minimum requirement of performance and customer experience for all online banking operations. All e-banking services and software will need to be tested for performance under conditions such as the number of users, connectivity, networks, spikes, traffic, bandwidth, and varying endpoint configurations.

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