IT in Banks: Been there, Done that?

Friday, October 03, 2008

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Even though banks are the biggest users of IT, they're not completely trouble free. Many practical problems still stare them in the face such as lack of integration between applications, managing heterogeneous environments, combating security problems, and improving employee productivity. We discuss all these problems with some live experiences, and even provide some live solutions to them.

Banks in India are perhaps the heaviest users of IT today. In fact, over the last two years alone, we at PCQuest have seen 60 different IT projects having been deployed by 21 leading Indian banks. That's almost 3 projects to a bank. Even their IT budgets paint a similar picture. According to our Best IT Implementation awards survey (June 2008), out of the total IT budgets of all leading Indian enterprises that participated, 61% belonged to companies in the BFSI segment alone. With so much IT usage, one would presume that banks would have the least number of problems as compared to other Indian enterprises. Well, we have a few surprises coming your way!

Woes of a public sector bank
I recently interacted with the manager of a leading public sector bank of India, and came across a different kind of challenge, which unfortunately IT has still not been able to resolve-that of extracting maximum productivity from employees. The scenario in this case was pretty grim. Employees come to the bank at a fixed time (and even late some times) and leave at fixed timings. They refuse to stay back late, even if they're asked to do so in an emergency. They refuse to take up work of a fellow employee who couldn't come to office on a particular day. Moreover, they don't tolerate any kind of rebuking from the manager. If it does happen, then they don't come to office on the next day, or come up with excuses that they don't know how to operate the computer, etc. What's more, if they don't come on the next day, then they coax some of their other fellow colleagues to also take leave with them.

That's not all. The manager can't apply leave without pay on them, because they have enough Earned Leave in their account to last for at least two years. If the manager does escalate a complaint to higher authorities, then bureaucracy kicks in, and it takes months before any kind of action is taken. As if that is not enough, employees of public sector banks are usually a part of an employees' union, who would take up the matter if action is taken against their union member.

It may sound like anarchy, but many public sector banks today face this challenge, especially in the non-metros. It's not as if employees are completely at fault. The public transport infrastructure in non-metros for instance, is not as good as it is in the metros. Employees come to work from nearby or even distant towns and villages. For them, missing the evening train means a lot of trouble, because the next train probably leaves late in the night. Hence, they're reluctant to stay back late even by fifteen minutes as they risk missing the train.

To add fuel to the fire, banking customers are becoming ever more demanding. For instance, in retail banking, customers don't have time to wait in long queues, or come back another day. They need speedy resolutions to their problems, or else they will shift to a competing bank. There's no dearth of banks to shift to for customers today. So the hassled bank manager has no other choice but to handle the task himself, which his employee has refused to take up. If such incidents happen too often, then even the manager can take up voluntary retirement and apply for a job in a private bank that pays double the salary.

So ultimately, whichever way you look at the situation, it's the bank that looses. This is rather ironical because like we said in the beginning, banks are the heaviest users of IT. Most leading banks in India today have deployed many advanced core banking systems, and offer facilities like any-branch banking, electronic funds transfers, ATMs, etc. They can easily track the performance of their various branches and tell which ones are performing better than others. However, some of the core issues still remain to be resolved.

Private Banks are not 'worry free' either
It's not as if private sector banks are free of worries. For instance, one private bank that I know of has a fancy machine that prints out tokens on thermal paper. There are all sorts of buttons on it that have to be pressed before the token finally oozes out. As a lot of customers that come to the bank are not at all tech savvy, they don't understand how to print a token from this contraption. So they end up pressing wrong buttons (and lots of them), making the machine go haywire, causing paper jams, etc.

Wouldn't it have been much simpler to have a single button that takes out a token number and the banking counter to go to? The bank employee could then log the type of service that the customer came to avail (if that's what the bank wants to analyze).

Similarly, there are lots of other problems that private banks face. Integration between their various applications for instance, is a challenge. If one bank offers multiple services, then chances are that they've hired different agents to handle them. So they would all approach the same customer independently. The famous (or shall we say notorious) phone calls you get when you're relaxing on a lazy Sunday afternoon from your bank asking you to pay up your over due credit card amount, even though you've already paid it is another classic case of a lack of application integration.

Common challenges faced by banks
Apart from problems that specific to public sector and private banks, there are lots of common challenges to be addressed as well. For instance, despite using so much technology, most banks have been unsuccessful in reducing queues. While many banks have taken the concept of single window customer servicing to resolve this problem, there are many who still make their customers hop from one window to another, and make them spend hours in each queue.

Maintenance of existing IT infrastructure is another challenge. Many of their ATM machines for instance, fail because they can't handle the load, and many others run out of paper and are therefore unable to print receipts. Hopefully, when the ATM sharing finally happens, these problems should reduce (and possibly new problems will emerge!)

We've already discussed the integration issues earlier. However, the key point to make here is that most leading banks today have fairly complex IT infrastructures, meant to handle a number of business needs. Managing this complexity is a challenge in itself. In fact, we interacted with the IT heads of some of India's leading banks, and they all unanimously agreed that their IT infrastructure complexity has increased over the recent past.

Being the early adopters of technology, banks have large, complex IT infrastructures to manage. So much so, that they're now finding it difficult to add more equipment in their data centers. Their data centers are overflowing, making them ever more difficult to manage. Plus, banks are also undergoing major expansions into rural areas and nationalized banks are even exploring foreign markets. So obviously, they're likely to use IT for achieving these objectives effectively.

Security issues
Many CIOs that we interacted said that security was a key area of concern for them, and something that they're aggressively looking to resolve in the near future. With online banking becoming more popular, the security risks associated with the same have of course become a cause for concern. Customers are still apprehensive of using a bank's services online, due to all the phishing attacks and fake websites out there. I'm sure everyone would have heard of some story or the other about a friend, relative, or colleague getting phished.

Another type of security issue is the physical security, for which IP surveillance is a must. We've heard about enough number of bank robberies to believe in the importance of IP surveillance.

What can banks do?
We've described a lot of challenges that banks are facing today, and it might be a little difficult to understand how IT can help in some of them. For instance, a bank's CIO can't do much about the public transport system in non-metros, nor can he take up HR issues and force changes to policies that have been around for decades. However, there is a lot of scope for IT to handle these problems a little differently. If employees can't stay back late hours, then it's important to extract the maximum work from them during the office timings. Make them more productive within the same working hours.

 For instance, workflow management solutions that automatically move jobs across different stages of a process should be used. Moreover, they should raise alerts and escalate matters in case a task is stuck somewhere.

Likewise, HR Management systems can be used to track employee productivity. Not only should they track employee productivity, but also reward top performers and alert the low performers. This will automatically drive in a sense of competition amongst the employees. Web 2.0 based intranets and knowledge management systems can be used by banks to allow more social networking amongst employees and managers.

The issue of Infrastructure complexity can be resolved in several ways. One of them for instance, is to do server virtualization in the data center. It reduces the total number of servers, thereby saving a lot of real estate and improving server manageability.

There are also solutions available to cater to the expansion plans of banks. In rural areas for instance, the biggest challenge is prolonged power cuts. Generators can't keep running throughout the day, and even if they do, they're not sufficient to power the IT infrastructure. They also cause a lot of noise pollution and smoke in the environment. That's where solar panels for charging UPS batteries can be deployed.

To cater to expansion in foreign markets, solutions are needed that can help the banks understand the rules and regulations of the various countries, and ensure compliance to their legalities.

Critical Success Factors
One thing to be kept in mind is that IT is not the panacea to all the problems faced by banks. It is at best a business enabler. The change management has to be handled by the bank effectively. For instance, what good is a core banking system, if a bank still doesn't offer single window service to its customers? Banks must realize this and try to improve their existing policies.

Quick decision making is another critical success factor to using IT. If despite using IT, decisions are not taken on time, then the system is bound to fail. Take the hassled manager example we gave for the public sector bank. If the manager raises a complaint about a non-conforming employee, then action on the same has to be taken immediately. The bank must be agile enough to respond to such issues. At the same time, it must also be quick enough to reward an employee for good performance. Otherwise, it will set negative perceptions about the IT system amongst the employees. Otherwise, the system would be treated as something that only rebukes employees and does not reward them.

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