Ladies & gentleman,
It is always a pleasure to be
amongst senior representatives of the banks to share some thoughts on the
challenges faced by them. As a person who strongly believes that technology
holds the key to the future success of African banking, IT although has been
gaining attention has yet to be addressed with renewed vigour by most of the
African banks.
The impact of Information Technology has been felt
mostly in the financial sector, as “information” is the key tool in this
sector. The business environment around drives banking and financial services.
As businesses have become more efficient internally and have embraced such
ideas as enterprise resource planning and straight-through processing, it has
become even more critical for financial institutions to provide services that
support the new corporate culture.
In recent years, the BFSI (Banking, Financial Services
& Insurance) sector has been undergoing rapid changes, reflecting a number
of underlying developments. Internet, wireless technology, and global
straight-through processing have created a paradigm shift in the BFSI Sector -
from brick-and-mortar business to businesses virtually across time zones,
geographical locations, access points and delivery channels.
The most significant has been advances in
communication and information technology, which have accelerated and broadened
the dissemination of financial information while lowering the costs of many
financial activities.
A second key impetus for change has been the
increasing competition among a broad range of local and global institutions in
providing banking and related financial services.
Third, financial activity has become larger relative
to overall economic activity in most economies. This has meant that any
improvement or disruption of the financial markets or financial infrastructure
has broader economic ramifications than might have been the case previously.
There is
thus the need for not mere technology up gradation but also integration of
technology with the general way of functioning of banks. Technology has
demonstrated potential to change methods of marketing, advertising, designing,
pricing and distributing financial products and services and cost savings in
the form of an electronic, self-service product-delivery channel.
Optimising
the use of funds –and building up of intelligence for empirical decision making
which has a relationship with the critical aspect of asset-liability
management, which in turn has a direct impact on the balance sheet of banks as
a whole.
These challenges call for a new, more dynamic,
aggressive and challenging work culture to meet the demands of customer
relationships, product differentiation, brand values, reputation, corporate
governance and regulatory prescriptions. Technology holds the key to the future
success of African Banks. Financial institutions that can make the right
investment decisions and use technology appropriately will reap the rewards of
customer retention and deepened relationships.
In order for technology to take
care of the emerging requirements, there are four key mantras to be adhered to,
·
A proper plan with continuous updation is critical
·
Need for business process re-engineering
·
Need to address the issue of human relations in a
technology environment
·
Sharing of technology experiences
Another change, which is taking
place –slowly but at a steady pace is the use of alternatives to cash by most
of the constituents of banks. The large-scale use of cards for settlement of
financial transactions – whether credit cards or debit cards or even the new
smart cards – proves beyond doubt that cash is slowly losing the prominence of
the yesteryears. It is gratifying to note that banks are quickly adapting
themselves to provide for non-cash based services too.
This development has, however,
to be looked at from an opportunity for banks to cash in on certain invisible
benefits. It is a recognized fact that the cost of servicing a transaction
conducted through an Automated Teller Machine or through an electronic mode
such as the Internet or Mobile – as in the case of Internet Banking –is
substantially less than a physical service to a customer from a counter of a
bank. The need of the hour is therefore, to encourage the wide spread usage of
such cost effective payment modes.
The proliferation of ATMs and
the network of ATMs are all but indicators of the initiatives of banks in this
direction. With the cost of handling cash and the associated risks being an
inherent part of the cash based society, non-cash based payment systems offer
an excellent choice for reduced costs to banks thereby resulting in better
overall financial results. Such efforts need to be augmented and consolidation
of these would result in better results for the banking sector as a whole.
The transition of the Internet from an information
gathering and sharing medium to a viable means of exchanging goods and
services, changed the face of the Internet forever. Internet is emerging as a key delivery as well as core banking tool – but
then it requires a great deal of security when online banking and funds related
activities based on Internet are implemented. Suitable firewalls, proxy
servers, authentication of messages, and more robust security features would
have to be developed.
The growth of the Internet has coincided with another
major phenomenon – the introduction of the mobile phone. The growth in the
number of cellular subscribers has eclipsed that of any other technological
development in the 20th century, including the Internet. There are
nearly 1.5 billion cellular subscribers, compared to less than 150 million in
1997. Despite the current economic downturn, this figure is predicted to grow
to over 2 billion by 2004.
The Internet has had important inflexion points that
have marked its evolution. Undoubtedly, the launch of the Netscape browser in
1994 marked the point at which the worldwide web moved into the mainstream.
Suddenly, this unknown network became a medium that people could use. The subsequent
launch of Yahoo’s portal technology later that year added another layer of
utility, allowing users to find areas of interest quickly and easily. The third
inflexion point came with the launch of Amazon.com, the first global Internet
only retailer.
The mobile phone and the Internet remained largely
distinct and separate until the Japanese wireless network operator, NTT DoCoMo,
launched its i-mode ‘always-on’ mobile Internet service in February 1999. The
viral growth of imode had an enormous impact on people’s perception of the
viability of high-speed mobile data networks. As of mid-2001, the number of
imode subscribers had grown to almost 28 million, and that number continues to
grow at approximately 300,000 per quarter. The success of i-mode is set to
replicate elsewhere in the world, particularly as network operators’ rush to
deploy 2.5G and 3G services for their customers.
Bank of America Securities estimates that the number
of wireless Internet subscribers will reach 400 million by end of 2003. As data
services on mobile networks increase, the types of Internet services that have
proved popular on desktop PCs will undoubtedly migrate to wireless devices.
More interesting, though, is the range of mobile-specific applications that are
emerging, from signing documents on the move using a secure mobile identity, to
paying for auction items using SMS messaging.
Key advantages of going mobile is:
Immediacy. Consumers are constantly moving, working, commuting,
travelling, socializing and shopping. M-commerce lets them buy goods and
services as soon as the need arises.
Connectivity. Users sharing a common location or interest can be
instantly connected via text messaging and mobile chat capabilities.
Advertisers can use such access to promote products and make special offers
with the expectation that subscribers will answer and listen to their messages.
Localization. With the deployment of positioning technologies, such
as the global positioning system (GPS), companies can know users’ whereabouts
and will be able to offer goods and services specific to their location.
Data portability. Users can store profiles of products, company
addresses, information about restaurants and hotels, banking details, payment
and credit card details, and security information, and access these when needed
for purchases or for making contact, all from their mobile handsets.
Benefits of wireless and mobile banking are huge, esp.
in region like Africa where penetration of wired connectivity is very low, and
access of majority to computer and Internet is absent
To conclude I don’t want to
forget to “add caution to the wind”; the increasing dependence of banks on
computer technology needs the perspective of addressing the risks of computer
frauds. The Basle Committee of Banking Supervisors has addressed some of the
operational risks arising out of security breach of banks computer systems and
misuse of computer products in its document “ Risk Management for Electronic
Banking and Electronic Money Activities”.
The risk of failure of any
system is the most important risk to be contended with, and the participants in
any system would have to be insulated against this risk - which constitutes the
systemic risk, which is prime concern to central banks. Banks have to take the best
possible risk control measures and ensure that adequate risk reduction
mechanisms are in place before any new system is in place.
Thanks