Almost a decade ago, automation was introduced into the Indian Banks. During this time, personal computers and servers have been installed and are being continuously installed along with banking software packages at various branches. This has automatised many of the bank branches’ activities. But this has still to be met as per the banks expectations and help deliver enhanced customer service. We have to enter into new markets and deploy new products quickly to get the best out of this automatisation.
But the point to be seen is, whether all these products are friendly with the customers and profitable to the banks. Is this network enough to move both information and money efficiently. Is the top management of the banks getting the right information on time to enable them take better and faster decisions. Whether the technology which we are using today is open enough to integrate seamlessly with emerging technologies. Such type of questions are arising increasingly in the present liberalized and highly competitive environment. Many nationalized banks are not ready to accept the same. All the issues associated with the above automation stem from two main things. Firstly, the drawbacks of the existing branch banking software and secondly the lack of networking infrastructure are the main constraints. Both combine to create islands of information which do not help effective decision making.
Existing branch banking applications do not afford some very important facilities such as the bank cannot deploy new retail products and new delivery methods quickly and economically. And then the bank branch cannot have an enterprise – wide view of its assets, liabilities and profitability. Further the banks cannot integrate corporate and treasury operations to gain synergies. Only a centralized banking solution can enable the provision of facilities which are critical to the efficient and effective functioning of a bank. A centralized banking solution does not mean a main frame.
In fact, the latest advanced solutions run on powerful saleable, secure and cost effective systems. With such centralized solutions, the bank can retain or simply upgrade its existing software and hardware. These solutions give the bank the flexibility to start computerization at a lower scale with few branches and scale upwards afterwards and connect hundreds of branches in a multi – tier manner.
In the present Indian scenario, there is a preponderance of brick and mortar branches and any solution which does not provide for a minimum data base at a branch for operations purposes will not work when the number of branches multiply to higher numbers. Actually, the banks buy only when they need to expand services or add new facilities. Contrary to this, solutions available on proprietary mainframe technology do not enable the banks to start small and also have very high incremental costs. These solutions were designed in an older era and are hence rigid when it comes to customizing especially for Indian conditions. The proprietary mainframe based solutions do not provide for a smaller backup database at the branch level. The risk of having all customer data residing only at the head – office is well known.
A more realistic approach is provided by the open UNIX and Windows NT based solutions. In addition to the central database the head office, there are lean branch databases which allow customers to avail of banking services even during communication link failures which is not at all an uncommon phenomenon in India. And because of the cost effectiveness of the open technology, this combination of the central server and small branch servers alongwith their databases is far more economical than the expensive proprietary mainframe and proprietary database and cost – effective to maintain and upgrade in the longer run.
It is imperative that Indian banks start to seriously consider migrating to a centralized banking approach which is flexible and based on open technology. It is the most cost – effective way to increase back office efficiency which would enhance front – office effectiveness. With this centralized banking customers get more varied and faster services. The customer will have access to “anywhere banking” wherein anybody can transact against his account from any of the bank’s designated retail outlets/branches. The customer can have banking as per his convenient timings. Customers will be able to have comprehensive account sweep and on-line funds transfer facility which will enable better funds management for large corporate customers. This will remove time consuming inter branch reconciliation and transactions between branches is sorted and stored at the head office system and resolved before being posted. A relationship banking practice is possible with centralized information of the customers. The customers are treated in a more holistic manner rather than as a set of accounts.
With centralized banking, it is easily possible for the customers to avail custom made & innovative products more quickly. Centralized solutions are usually highly parameterized softwares and changing combinations of various parameters give rise to new banking products. Hence defining and implementing new banking products becomes much faster and easier for everybody. Further, a centralized system on open and latest technology insulates the bank from any type of obsolescence by providing a standard based architecture using client server, Web technologies and distributed objects. The bank also has the option of individually implementing forex, securities operations and money markets in day to day operations.