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IPA, AI & Blockchain to fuel transaction banking

Pitchai Mahalingam, head – Operations & Transaction Banking at Federal Bank, discusses the impact of COVID-19 on transaction banking business, fintech partnerships, etc:

Ravi Lalwani: Which are the booming sectors for transaction banking in India? How have things changed in the last 3-4 years?

Pitchai Mahalingam: Transaction banking includes cash management, trade finance and supply chain finance products. Most of the sectors use transaction banking products to manage their working capital. The sectors which have a huge supply and distribution chain will have major requirements – eg FMCG, pharma, chemicals and fertilizers, cement, oil, etc. Banks have worked on customized solutions for specific industries, they also offer packaged products to small and medium industries and structured products to large corporates. They are providing working capital solutions for the whole supply chain by offering transaction banking products. The growth of digital capabilities has also helped the corporates to avail the benefits of quick access to funds.

Federal Bank offers an integrated transaction banking solution called ‘Fed e Biz’, that caters to the digital need of our transaction banking customers. This platform is helping the customers to digitally manage their cash management, trade finance and supply chain finance requirements. We have implemented a blockchain based remittance platform for managing inward remittances, which is helping our customers and partners.

Due to the diversity in the needs of our corporate clients, we have a simple corporate mobile banking application ‘FedMobile’ which helps to cater needs of customers like sole proprietors and partnerships.

Can you share details about the collaboration with fintechs?

We strongly believe collaboration with fintechs will help us to provide specialized service to our clients. We use these partners for developing innovative solutions. Our mantra is ‘collaboration and cooperation’ with fintech partners; they are not our competitors.

We have recently launched a digital platform on the cloud in partnership with our fintech partners, where the invoices raised by our corporate customers on their dealers are presented to them digitally and the dealers are able to accept the invoices, make payments, manage debit / credit notes and automate their reconciliation. We offer this on a platform which is accessible by all the counterparties with a 360-degree view of the transactions.

What advances has the bank made in risk and compliance for transaction banking in the last couple of years?

We have implemented many checks and controls as part of the processing of the transactions through our customer channels and the processing systems. From the considerably basic 2- factor authentication to more sophisticated rules engines, we have a plethora of capabilities in risk management.

We also have a strong transaction monitoring mechanism whereby doubtful transactions are identified based on identified scenarios on the risks and regulatory compliance and necessary action is taken. We have introduced additional level of authentication for high value transactions. We also have automated reconciliation processes and have set up controls to monitor utilization of the limits.

What is the impact of COVID-19 on transaction banking business? What are the challenges faced by your department?

The COVID-19 situation has impacted us both positively and negatively. On the positive side, our digital transaction volumes have increased, and many customers have migrated to our alternate channels. As we process the transactions received through digital channels through STP, we have not faced huge challenges. We also have put strong control measures to monitor transactions and reconcile our books on a continuous basis. On the negative side, due to the lockdown, we have seen a decline in volume of transactions.

How is your team reaching out to your clients after COVID-19?

We communicate with our customers mainly through our relationship managers and specialized corporate branches other than email and SMS channels. We try to understand their difficulties and we provide necessary help in processing their transactions. We also conduct industry specific webinars for our customers, involving industry leaders, credit rating agencies, etc, to exchange information and understand the difficulties faced. We also publish lot of information through the social media.

What new measures, products and services are in the pipeline for the transaction banking customers?

We are working on consolidating our digital capabilities in transaction banking area. Most of our product offerings are already digital enabled. We are focusing on offering digital channels on transactions which require physical documents, by using digital signatures, e-stamping, etc. We are also focusing on making all the processes straight-through and wherever required, we are already using RPA. We are now working on IPA, AI technologies for further automating the processes. We are exploring new technologies like blockchain to offer transaction banking products.

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