'Automation is the key thing for banks'

The role of IT has become so integrated and pervasive with banking that it is impossible to think of banking processes without an effective IT system in place, says SPS Grover, Vice President - Technology Sales, Oracle India Private Limited, in an interaction with B.V.Shiva Shankar, Associate Editor, CIOL, Cybermedia. Excerpts:

CIOL: How important is technology in the banking sector?                                                                               SPS Grover: The buzzword today is 'Innovation and technology' in every industry. Over the last couple of years technology has revolutionized industry dynamics and the way economies work. Amongst many, the banking industry has pioneered the adoption of information technology and gained tremendously from it. Over the years, banks have been among the first consumers to understand how to use technology to simplify finance for its customers and deliver unique service in the face of intense competition and customer demand.

The role of IT has become so integrated and pervasive with banking that it is impossible to think of banking processes without an effective IT system in place. Today, the failure of IT infrastructure could render a bank dysfunctional.

CIOL: What are current trends in the banking technology space? Is there any specific trend you would like to share?                                                                                                                                                               SPS: Banks are primarily focused on three areas: meet customer's service expectations, cut costs, and manage competition. For this banks are exploring new financial products and service options that would help them grow customers and business, and at the same time retain existing customers. Any new financial product or service that a bank offers will be intrinsically related to technology. Although the road to IT improvement is never-ending, banks continue to make steady progress across the board. Some trends:

• Growth in electronic payments will accelerate over the next couple of years. Innovative, multi-channel payments will continue to grow on the retail side.
•  Heightened attention to security and fraud control - Fraud and security concerns remain top-of-mind for many banks. Several factors are driving banks to invest more heavily in security and identity management and human resources to combat fraud. Such factors include: increasing concern regarding regulatory compliance; vulnerability created by check imaging and the need for new check fraud measures; and continuing attacks against cards at both the POS and ATM.
•  Customer Relationship Management - CRM has today evolved into a customer-centric philosophy that must permeate an entire organization. In Banking, CRM is about offering a better proposition to the customer after understanding his or her entire portfolio of investments with the bank. Customers nowadays acknowledge CRM as an enterprise wide software solution with back end integration rather than being understood as a stand-alone software module for call center or Sales Force automation or selling on the web.
•  Core banking applications - Core banking applications helps provide complete front-end and backend automation of banks. Indian Banks are widening their operations increasingly, this means they need to engage in the practice of core banking. Banks are increasingly looking for solutions to manage and operate their core banking functions effectively. Core banking is helping not just the banks to retain customers and lower the service cost to customers but is also allowing customers to interact with their banks seamlessly.
•  Risk management is another area where core-banking applications can help. Getting the risk management systems in place and gathering the necessary data for internal ratings-based (IRB) approaches for credit risk and the Advanced Management Approach (AMA) for operational risk are the priority areas for the Indian banking sector. The recent wave of consolidation amongst the smaller banks showcases the importance of compliance to the sector.
•  Co-operative banks - As larger banks are setting up in the rural areas, the smaller co-operatives are looking at ways to counter this competition and hence, are increasingly opting for better technology solutions The key area of technology that these banks are looking at is, core-banking solutions in order to modernize and provide better customer services.

CIOL: How do banks respond toward adopting technology solutions?

SPS: Automation is the key thing that banks need to have in place. This industry is very quickly adopting newer technologies to keep pace with growing competition & growing customer base. It involves a combination of centralized networks, operations, and a core banking application. Automation enables banks to offer 24x7x365 service using lesser manpower. But to be really competitive, banks need to think beyond just basic automation.

For example, Saraswat Bank, a Mumbai based co-operative bank in 2005 migrated its core banking application to the Oracle Database 10g platform and deployed Oracle Real Application Clusters (RAC) 10g to optimize system performance. It experienced an increase in their profit by 40%, growth by 30% with support from Centralized Banking Platform.

CIOL: Please share details on some of your solutions that you are currently offering to your customers in the banking segment.

SPS: : A prominent issue facing banks is in accurate analysis of financial data to identify business opportunities - whether cross-sell and up-sell opportunities. This is where technologies such as data warehousing or data mining come into play here. These drivers that present a compelling case for banks to consider Business Intelligence (BI) and analytics software tools that can turn data piles into relevant and useful information and enable businesses to take better informed business decisions.

Another key aspect to consider is the need for a centralized database. With multi-branches, the databases should be updated instantaneously, irrespective of the branch.

One of the key Oracle applications for the banking sector, Oracle Financial Services Applications (OFSA) has been built specifically to serve the unique needs of financial service organizations. The OFSA suite includes Oracle performance analyzer, transfer pricing, activity based management, financial data manager, warehouse builder, marketing online, transfer pricing online, budgeting and planning, risk manager and Oracle financial data manager. Oracle Financial services application (OFSA) has been implemented in more than 15 banks in India and in more than 250 banks worldwide. Oracle is offering the Oracle Financial Services Applications (OFSA) to serve the unique needs of financial service organizations.

Business Intelligence

Oracle has complete and open portfolio of BI (business intelligence) technology and applications, combining database, middleware and analytic applications into one comprehensive offering to provide a unified business view. This enables organizations, including banks to distribute intelligence pervasively, gain complete and timely insight, and drive more effective decisions at all levels of the organization. Oracle BI is hot-plug gable with Oracle and non-Oracle environments - so organizations can fully leverage existing data sources, systems and applications to achieve long-term flexibility and investment protection.

Oracle is taking BI to the next level by embedding BI capabilities within applications and business processes them to automatically execute queries, evaluate conditions and calculate key performance indicators

SOA

With the current trend of businesses moving toward globalization, mergers & acquisitions, and industry consolidations, business and business processes have become more complex. This is true even in the banking and financial industry. There is a need to ensure smooth integration of people and processes to maintain business momentum. The emergence of service-oriented architecture (SOA) and grid computing offer banks the promise of a flexible, scalable IT infrastructure. But creating an open architecture doesn't come without challenges; such as upgrading legacy systems and changing established behaviors. The SOA architecture enables services to be created, managed, and orchestrated into composite applications and business processes.

Security

Identity management (IDM) and access control are major concerns for companies, like banks, that engage in business online and are the two main aspects to safeguarding information. Companies need to identify each network user and then determine which resources he or she is allowed to access. Some companies enforce separate access policies for each application. While this approach provides maximum flexibility in the short term, it soon becomes a liability as online business processes grow in number and complexity. Companies need to create a new identity management framework for each new application, and users must remember a growing number of user names, passwords, and login procedures.

Security or identity management is no longer just a technology issue; it has become a business issue. An information security framework allows banks to reduce threats and improve compliance. Oracle Identity Management (IDM) is an integrated, scalable and robust identity management infrastructure that allows enterprises to manage end-to-end lifecycle of user identities across all enterprise resources both within and beyond the firewall. A component of Oracle Fusion Middleware, Oracle IDM provides access and identity management, identity federation, user provisioning, LDAP directory services and web services management, enabling greater agility, better decision-making, and reduced cost and risk to diverse IT environments.

CIOL: What role does technology play in regulatory compliance?                                                                    SPS: Indian banks that have global aspirations or footprint will need to shift to advanced approaches to remain competitive in the global market. Advanced approaches require good quality data and technology to analyze it, and skills to use the data. Banks need to put in place, the necessary IT infrastructure to support this. Only then can risk management be improved.

Compliance pressures on banks are likely to increase in the future. Already, banks in different parts of the world have to comply with Sarbanes-Oxley, Anti-Money Laundering (AML), IAS39, IFRS in addition to Basel II. Penalties for non-compliance are likely to become tougher in the days to come. Banks require technology solutions that are integrated and are capable of addressing the compliance issue across the enterprise.

Oracle offers compliance architecture tailored for organizations in the Financial Services industry combining pre-integrated Oracle Applications, Database and Middleware into a single overarching framework that helps financial institutions prepare for existing and future compliance requirements, while improving performance, lowering costs and driving profitability. Oracle's Compliance Architecture, which supports the seven pillars of regulatory compliance for financial services institutions, incorporating both Oracle applications and technology, also helps banks to achieve stringent Basel II compliance.