The Indian banking industry is passing through a transition where the interface of financial services and technology is being seen as critical not only for staying ahead of competition but also for financial inclusion. As a major technology solutions provider to the industry, Oracle is playing a lead part in this transition. TEAM INCLUSION reports
“Sustainable growth is not possible without having commitment for financial inclusion and ensuring that the unbanked get banked. But I think it is also about engagement. It is great that now everything can be mobile-driven. However, how do you get more products and services being delivered through that particular platform is the challenge for us to resolve. Oracle is trying to do a lot in that space.”
Sandeep Mathur, Managing Director, Oracle India
Technology plays very important role in banking. Oracle, with its range of innovative products and services, is catering to the technical needs of the banking industry in India as well as globally. The company is known for its proven technology leadership in every area of financial services — banking, capital markets and insurance. So far, the technology firm has enabled the success of over 900 financial services customers in more than 135 countries, which establishes a firm pedigree in its favour.
Besides having core competency in the technical domain, what makes Oracle different is its commitment for financial inclusion. Sandeep Mathur, Managing Director, Oracle India, is keen to help banks in achieving it. He believes that while financial inclusion is a crucial element of sustainable growth, there are a few obstacles to overcome. “There is no doubt about the fact that sustainable growth is not possible without having commitment for financial inclusion and ensuring that the unbanked get banked. But I think it is also about engagement. You open a current account saving account (CASA), but what are you going to do beyond that? That is one dimension. How do you keep on engaging with people who have opened these bank accounts? It is great that now everything can be mobile-driven. However, how do you get more products and services being delivered through that particular platform is the challenge for us to resolve. Oracle is trying to do a lot in that space,” he says.
According to him, India’s middle class will form 350-400 million people over the next 10-15 years and a lot of young people are coming into the workforce. “They have myriad of options in terms of investment. How do you get them included in the banking sector? How do you make sure that they are investing in the right set of areas, going forward? Oracle is prioritising its products and services for that particular segment. Technology can help in increasing social mobility and smooth delivery of banking products and services,” he says.
The most important point from the industry standpoint is to know the present and future needs of the customer, adds the Oracle India Managing Director.
However, Mathur is optimistic. “For a long stretch in history, India was the biggest GDP contributor to the world. Any time somebody says India is an emerging market, it is actually quite funny because about 150 years ago there were discussions and debates in the UK about two emerging markets for investment. One was Argentina and the other one was the United States. So we are reclaiming in some sense our turf through course correction and it is an exciting journey that we are on,” he says.
Innovation can lower the costs of delivery platforms. For that, corporations in general need to spend much more resource and energy for making their business, innovative and responsive.
Oracle’s top management has thought about solving this problem in two different ways. One is through functional architecture and the second, of course, is research & development (R&D). Oracle is active in the entire gamut of these two spaces. In the past few years, it has done a lot of acquisitions and expanded its internal R&D. Last year alone, the company has spent about $5 billion in R&D. Through a combination of functional architecture and R&D, Oracle is aggressively pushing to deliver its quality products and services at competent prices.
On the cloud platform, another crucial element of IT services, Oracle has an edge in offering the choice to customers. Its products and services can be easily enabled on the delivery platform that a customer needs. However, regulatory checks are blocking the healthy progress of the cloud computing. So, while setting up one’s private cloud, caution must be exercised for installing the right kind of infrastructure.
Oracle has a mechanism in place to provide all those products and services either on the customer’s domain or from a cloud platform.
Through these characteristically different features, Oracle is able to give its clients an agile environment in which they can offer new products and services and continuously engage with their various stakeholders.
Technological obsolescence , Mathur says, is a problem and the challenge is to effectively address the specific technology-linked requirements of emerging market players at low cost. Mathur says, “Technology has also evolved and the return on investment under this segment has enhanced over a period of time. While it is important to stay at the cutting edge, it is also important to tie yourself in with technology companies who understand the importance of being able to reduce the cost over a period of time.”
Modern age banking relies heavily on technology. Since greater emphasis has been laid on technical perfection in banking operations, the role of technological service providers has increased many-folds in the last two decades. That compels companies like Oracle to essentially meet the needs of customers with solutions that are tailored to financial services.
After nearly a decade, the Reserve Bank of India is now set to issue fresh banking licences. It had last issued licences in 2003-04 when two banks — Kotak Mahindra Bank and Yes Bank — were allowed to come up. Before that, the central bank had given licences to 10 private sector banks in the early 1990s. On both occasions, the aim of the central bank was to upgrade the technological benchmark of Indian banking, and it worked out well. The new banks brought with them a new technological paradigm that later rubbed off on to all banks, including public sector and regional rural banks.
These changes have made ample space for technical expertise-based companies like Oracle.
Now, once again the Indian banking landscape is set to be changed as a few more new private banks will come up within the next couple of years with a mandate of extending financial inclusion. Hence, technological companies like Oracle will again be much sought after. No doubt, competition to offer the customer cheaper and reliable banking services has to take place through the technological interface.
Oracle’s technology relieves the key pressure points in today’s financial services market that arise from increased regulatory interventions, highly complex global operations and customer demand for new innovative services. It integrates a solid, secure technology foundation with the adaptability and extensibility to meet changing market conditions. With focused approach on industry standard over the years, Oracle has carved a niche for itself in cash management, trading, payments, lending, private wealth management, asset management, compliance, analytics, etc.
Saloni Ramakrishna, Senior Director, Oracle Financial Services, notes, “Business agility expected from us corresponds to improving operational efficiency and managing costs. I can see financial inclusion as an encouraging business goal for Indian bankers. It is a business with a natural social objective and notionally, nothing could be better than a business focused on inclusive growth. We must plan financial inclusion as win-win for all stakeholders. However, this really requires a lot of strategy planning at the senior management level.”
Ramakrishna says Oracle is trying to maximise its business footprint in India. “We are looking at a whole new set of customer profiles that we would want to work with. Technology will enable it and that will actually make customers much happier with us. So if we look at a single ID for the customer and if we can find out what is the cross-channel experience and enhance the customer experience, we are in good shape,” she says.
Unlike most other industry insiders, she has different take on cost reduction. “Reducing cost is an operational status but if reducing cost is your way to better your balance-sheet, then you are in the wrong business. How do you increase revenues while managing cost? Retaining the customer is where you are actually saving a lot of money. This is where your data, technology and analytics can really be of great help. “
She points to the technology-driven changes in corporate priorities, including banking. “Today, the landscape has changed hugely. Now the shareholders’ role is increasingly important. And they are so many — customers, market, regulators, employees, etc. The last is the speed, the turnaround time. Absolutely that is how information is and the value of information increases exponentially if the fragmentation is reduced.”
Oracle offers world-class financial solution for financial sector institutions. It is better known for delivering innovative services with best-in-class performance — leveraging a multi-channel sales, service, marketing and transaction solution that is pre-integrated with core banking. Also Oracle gives fair experience to its clients for securing operations with end-to-end risk management — service-oriented architecture with a banking specific data model and process library — multi-GAAP, IFRS, multi-book code processing.
According to a survey released last year by India’s largest IT services provider, Tata Consultancy Services, the frequent users of cloud applications are the companies that manufacture the technology that enables cloud computing, while healthcare service providers are the lightest users. The report added that the most aggressive adopters of cloud applications are companies in the Asia-Pacific and Latin America.
However, cloud computing is changing how IT delivers economic value to countries and industries. As par an industry report of research firm IDC, IT cloud services helped businesses around the world generate more than $600 billion in yearly revenue and 1.5 million new jobs. A Microsoft-commissioned study, conducted by IDC, predicts that cloud computing will generate over two million jobs in India by 2015. And a study by IDC for EMC India concluded that cloud computing in India would be a $4.5 billion market by 2015.
However, for cloud computing to evolve into a successful model in India, the attendant security concerns would have to be addressed. Consumers of this technology work towards understanding the return on investment as they convert their capital expenditure models to operating expenditure models with the help of cloud computing.
As a leading player of this domain, Oracle has lot to do with these issues. With adopting required changes, it has emerged as one of the largest database software product providers in India. Now it is growing on the global aspirations of Indian companies, and this clearly is a growth opportunity for the company. The company’s Indian business operations, which accounts for 7,000 customers in fields as diverse as telecom, banking and governance, is exploring range of businesses with its new technological solutions.
Mathur knows the inner business dynamics of India and has laid out a comprehensive roadmap for Oracle’s business in the country. India is a growing market for technology adoption and it is undergoing a transformation. Indian companies have global aspirations and are actively looking to enter global markets, either through organic or inorganic routes. “Our technologies help them integrate the businesses as quickly as possible. Keeping this in mind, we are trying to make our technologies simpler to reduce IT complexities. Our plan is to integrate every layer of the technology stacks, so that they work together as a single system,” concludes Mathur.
Ajay Tankha’s Banking on Self-Help Groups presents a well researched study on the existing functioning of self help groups (SHGs) and their future roadmap. Though the book relies heavily on techno-formal narrative in identifying the policy gaps and limited ground available for SHGs, concern for the marginalised stays into the core.
Though, heavily footnoted and dense with references, the author succeeds in his primary aim to produce a factsheet on the working status of SHGs in India. Three core issues are the prime focus of the study — (i) cost-effectiveness, (ii) sustainability, and (iii) impact.
These assess the development cost of SHGs and related institutions, the sustainability of SHGs and community institutions models, and eventually the economic and social impact on SHG members. The author also covers the work being done under the aegis of National Rural Livelihood Mission and Nabard for the next level development of SHGs.
When the first time SHGs were linked to banks in Udaipur in 1992, no one imagined that this programme will take off on such high scale. Two decades later, the total numbers of SHGs have crossed over 5 million and these groups are partnering with banking in rural areas for achieving greater financial inclusion for more than 75 million households.
Tankha gives ample facts to prove it. In recent years, commercial banks, including regional rural banks (RRBs) and cooperative banks, have found in SHGs their natural clientele. The banks, with some regional variation, are doing exceptionally well with SHGs and causing good socio-economic impact. Because of this experiment, now a sizable number of women are under the fold of institutional banking.
SHGs are taking the membership of primary agricultural credit societies (PACS) and reviving the prospect of cooperative banking in India. This is a high time for these institutions to work more closely and provide an alternative to the exploitative microfinance institutions.
This will help cooperative institutions, too, in their revival. RRBs are doing remarkably well with SHGs and that giving hope for a better mechanism of microfinance. This will reduce poverty and enhance the entrepreneurial zeal in rural areas.
The book has lot of success stories and these show how SHGs are becoming important route for government benefit programmes. However, credit support remains the main plank of the SHG movement and that should be in reckoned by the policymakers. SHGs are driven by collective action and peer performance with the financial support of banks — unlike an individual borrower, their response to banks are reliable and decided by the standard of group.
The focus in last few years has been to strengthen the capacity of SHGs. That purpose seems served by now. So, a bigger model — like an SHGs’ federation — should enter the ideation phase. As SHGs are meant for collective right based credit access, getting strongly organised would be the right step in bringing about financial inclusive in the country.
The book offers a good overview of the actual performance of SHGs in the last 20 years. And it concludes with a detailed discussion of proposals and institutional arrangements that offers the way forward for the continued growth of SHGs as a channel for socio-economic change in rural areas of India.
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Inclusion is the first magazine dedicated to exploring issues at the intersection of development agendas and digital, financial and social inclusion. The magazine makes complex policy analyses accessible for a diverse audience of policymakers, administrators, civil society and academicians. Grassroots-focused, outcome-oriented analysis is the cornerstone of the work done at Inclusion.