The government’s decision to demonitize Rs 1000 and Rs 500 currency notes has suddenly brought banking into centre stage of public awareness. The impact on day to day working of banks have been massive, institutionally they were neither prepared nor trained to cope with the pressure of public interaction on such a large scale, but one must admit bankers have risen to the occasion magnificently, Few aberrations apart by relatively junior officials in private banks.
In the mid nineties private banks were given licenses as part of economic liberalization, These new banks realizing that for them to take on public sector behemoths technology should be the key differentiator so all of them started on core banking software platforms, Younger people today take net banking and ATMs for granted, readers of slightly older vintage will remember that even as late as early nineties ATMs were a rarity and nobody had heard of net banking. Today practically all banks have moved on to CBS platform. Earlier technology initiation and absorption was left to the banks, for the first time government is taking initiative to nudge the public at large and banks to move towards digital banking.
Digital platforms and internet on mobile has revolutionized retail E Commerce and if you look at it banking is a logical progression, Major private banks and public sector banks have developed Apps for mobile phones. It is conservatively assumed that India has over 900 million mobile phone users, out of which nearly 60 million are smart phone users, and this number is rising very rapidly.
The technology has been there for some time, the mobile based transaction banking has gained traction with the advent of smart phones and internet on mobile with 3G and 4G. However security of transactions on apps will take centrestage now. Some spactacular frauds have taken place and more would happen a we go along.
One thing stands out and the reader would be well advised to keep this in mind. Unlike traditional banking transactions digital banking is run and administered centrally by a relatively small team of officers directly under the corporate office of a bank. The average branch banker has little or no clue how to resolve a problem if a customer faces one. They at best escalate the issue to their controlling office on Email.
App based transactions can be interrupted for many reasons, poor connectivity or internet coverage could be one. Suppose you want to purchase something from an E commerce portal and you want to pay for it using your mobile banking app which gives you access to your bank account, many servers would be talking to each other in nano seconds, The Ecommerce portal would be talking to the the bank’s server and Visa or MasterCard server, a onetime password (OTP) would be generated and after you type the password a verification leg would be carried out, and on the return leg you would get a confirmation that the purchase is complete, you would also get an alert from the bank that a purchase has been carried out by debiting your account, Any financial transaction on mobile has multiple legs before and after it hits the bank’s core banking platform. Each transaction originating from a server generates an unique transaction number, it could be alpha numeric or numeric when this data packet hits the core banking platform that also generates a unique transaction number. If any of the transaction leg fails, a tedious process of reconciliation takes place at the back end by matching these transaction numbers and checking at which level the transaction has failed. Reversals of debits are carried out based on these reconciliations. How good or bad digital banking software is, will be determined by how it is designed to handle exceptions. By exception I mean when a transaction leg fails for whatever reason. It could be that you are travelling by car and just for a few seconds you loose connectivity on your mobile.
Few years ago, while designing a path breaking pilot project of financial inclusion of economically backward laborers who lived in Dharavi and hailed from Allahabad U.P we faced some unique issues. The bank in partnership with one of the largest mobile phone companies was developing a money transfer platform; The model was to enable money transfer from Mumbai to Allahabad using the distributors and dealers of the mobile operator. When you actually put minds of professionals together who hail from completely different industries, and you are trying to create a platform which involves money transfer one can imagine the complexities involved. From the banker’s side compliance and risk people raised the issue of fake currency and if a customer complained who would carry the can? The legal guys from the mobile operator spoke in raised tone, asking whether they were in mobile telephony business or currency business. Then we came to the issue of recovering service tax for the transaction, because the IT guys said two different tranches would have to be designed. When we came to the issue of reversal of debited amount if the second leg of the transaction failed Finance and Accounts people flatly refused to authorize debiting Service Tax account. Now we were facing a situation where the bank would recover service tax for a service which it had not delivered. I am narrating these nuggets to highlight the amount of brain storming that goes before some platform takes shape for the public to use.
The more involved the senior and top management is in digital banking initiatives and development of a platform the better it is. There are those senior bankers who feel intimidated by young tech savvy executives and generally keep quite during meetings. Then there are those who very frankly admit, they know banking but little about technology, they are unafraid to ask very basic but pertinent questions, they are the best contributors.
Many interesting new platforms will be launched in the forthcoming year. Youngsters have taken to the digital media in a big way, it is the middle aged and pensioners who would have to take a leap of faith in this brave new financial world
With over 25 years of experience in the Banking industry, he has had a front row view to some of the biggest changes in the banking industry. He is now between assignments.
