The country’s top banks are increasingly focusing on technology investments to provide better customer experience and bring operational efficiencies, either by increasing the workforce with people from information technology (IT) backgrounds or through investments and partnerships with technology companies.
To put it in perspective, the IT expenditure of HDFC Bank is to the tune of 8-9% of its total expenses whereas ICICI Bank invests close to 8-9% of its total operating expenses.
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The country’s largest bank, State Bank of India, has also been increasing its expenses on IT. Its IT spend grew exponentially by 49% year-on-year in the previous quarter.
“Our approach to technology is really simple. Build and strengthen on the foundation already created, but pivot to modern technology at the same time through partnerships with fintech and also create our own technology capabilities,” said Ramesh Lakshminaryanan, CIO and group head – IT, HDFC Bank.
HDFC Bank has launched Xpress Car loans – a digital API platform for auto financing that helps customers get loans digitally through a straight-through process facilitating credit to an auto dealer’s account in around 30 minutes.
The lender has also launched ‘SmartHub Vyaapar’ which enables digital on-boarding of merchants for payment acceptance and servicing of banking transactions for the merchant community.
“These investments by the bank can help it address modern-day digital volumes and also help build resilient and always-active architecture,” Lakshminaryanan said.
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What is interesting is that banks are getting more aggressive in hiring IT professionals. For example, around 85% of entry-level hiring made by SBI has the basic know-how of technology, chairman Dinesh Khara said at a recent event. Not only that, the bank is also employing mid- and senior-level staff with IT background.
Similarly, Axis Bank’s digital banking vertical of 1,500 people has around 70% IT professionals. “In the same manner that you would not outsource a branch manager or a credit officer, you cannot outsource your technology any longer if you are a bank,” Rajiv Anand, DMD, Axis Bank, said.
ICICI Bank’s investments in technology are focused on unlocking the value of data and building resilient system architecture to enable acquiring new customers, service existing customers, cross-selling and risk management. The lender has also made investments or tied up with fintech firms – ranging from a biometric payment solution to satellite-tech companies – that provide insights on BFSI consumers, according to an analyst presentation.
“The bank’s focus on improved tech capabilities will continue to pave the way for asset and liability growth and is likely to keep operating expenses elevated for the bank,” Punit Bahlani, an analyst at brokerage Nomura, said in a note.
The Reserve Bank of India (RBI)’s intent behind pushing banks to adopt technology was to curb over-reliance on outsourcing critical technology platforms to IT companies. The dependence on such third party providers exposes lenders to significant financial, operational and reputational risks, the central bank had said in its draft guidelines.
“When we look at our external service providers, we do face challenges as our time to market depends on their ability to deliver, and this is a component that we closely monitor, Khara had said at the event.
Sanjiv Chadha, MD & CEO of Bank of Baroda, recently said in the last three years, the lender had grown its business by around 35-40%, but investments in the workforce and opening of new branches have substantially come down, mainly because of using more technology. “The usual link which was there in growing the business and footprint has broken for all time to come,” he said.