Ramaswamy Venkatachalam, managing director, India and South Asia, FIS, elaborates on the company’s strategy to service the new banks that are coming up:
Manoj Agrawal: While India is facing demonetization, FIS is on the path of monetization with 5 new customers. What is your strategy?
Ramaswamy Venkatachalam: When RBI announced the list of in-principle licenses, we saw that most of those who got the licenses for small finance banks were MFIs. We worked with Bandhan to convert into a bank and drew many experiences. MFIs always have special needs, and they need to keep things simple. This experience helped us understand the MFI business and we were able to highlight our experience and value proposition to the new banks.
For a new bank to be set up, there are 2 dimensions – the banking application themselves and second being running the system (infrastructure + networks + support services such as help desk, etc). Traditional system integrators typically source the various components applications, hardware, etc from different vendors and pull them together as an integrated offering. Our model is what we call domain integration, where we cover both dimensions but with an additional emphasis on bringing the domain expertise in banking and payments to the forefront. This is the true bank in a box, which means we provide pre-integrated switching, core, internet banking, treasury, etc.
The new banks have to compete with banks that started investing in technology in the 90’s and they had time to build components like Internet and mobile banking in phases, as market demanded those capabilities. Today banks cannot afford to start with just a basic application like core banking. They will have to offer clients as full a range including channel solutions and integrated systems for seamless customer interaction. The challenge is to ensure minimal risk in such a large scale integration with multiple interacting systems and implement the system with a very quick time to market.
The other aspect to consider for a new bank is cost pressures of owning and running large, complex IT systems. Here again many older banks have invested in technology in-house but today there is a view to conserve capital for the core business and adopt a ‘payby-use’ model. Considering the pressure to show profitability in 3 years, capex investments have to be low. Capex and opex have to be measurable, especially for the IT component. They are in a better position to justify opex costs as the bank grows.
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