Institutional banking hops onto digital train
Customers now expect a seamless experience in wholesale banking too, said Shankar Subramaniam, Managing Director, India Head-Global Transaction Services at Bank of America.
The overnight shift to remote work in March 2020 caught most banks unprepared and unequipped, with barely any technological process in place to adjust with the new normal. "Banks had to pull up their socks," said Shankar Subramaniam, Managing Director, India Head-Global Transaction Services at Bank of America, at the BFSI Leadership Summit, hosted by YourStory and EnterpriseStory on July 16.
Watch the BFSI Leadership Summit 2021 themed ‘Banking On The Future’ here.
Until now, banks were lagging in the race of digital transformation. India's fintech startups, with fewer regulations, have capitalised on technology to revolutionise retail banking operations. However, the pandemic affected corporate banking too.
"Banks did not have a choice. They had to get that (digitisation) done if they wanted to continue activities with their customers," Subramaniam told Madanmohan Rao, Research Director at YourStory Media, who moderated the fireside chat.
The road to digitisation
On the corporate banking front, the first thing banks focused on was putting External Commercial Borrowing (ECB) processes in place. "Banks really needed to have a robust ECB process," said Subramaniam.
For foreign banks like Bank of America, which thrive on customer relationships and a wide network of operations, helping corporate borrowers raise money through the ECB route is both essential and lucrative. Corporate borrowers seek ECB, given that the loans are in foreign currency, and cost much lesser because of the difference in domestic and international interest rates.
While most banks had a process, others tested it and got a process in place in the first few months. The priority was to get the ECB processes up and running, and get clients up to speed on the revised processes, said Subramaniam. The banks ensured transactions continued without significant impact, he added.
The road to efficiency
It was only when the basic processes were in place that banks focused on efficiency. "For the last six to eight months, everybody (banks) is trying to make it easier," said Subramaniam.
At Bank of America, the client-servicing teams spent a lot of time educating customers about the ECB processes and requirements, he added. "We tried to keep it as simple and straightforward as possible," said Subramaniam, since the customers were working from home too.
Banks are now focused on using digital solutions by onboarding with video KYC (know your customer), using e-signature platforms, and trying to solve client queries online. However, investment banks' work involves a lot of paperwork. The pandemic pushed them to adopt paperless methods, where clients could access documents online.
"Banks have used the pandemic situation to take pretty seamless digital solutions forward," said Subramaniam.
To buy or to build
Now that banks have started their digitisation journey, the question is whether they develop their own solutions from scratch, or partner with fintech companies that have developed better products.
"Expectations from clients are also increasing," said Subramaniam. "Customers have seen how seamless personal banking has become, and they are expecting that in wholesale banking too."
Banks are exploring multiple options they have as they keep pace with the changes to support the new economy—e-commerce companies and unicorns. The requirements from such clients are also changing because services are as important as credit for them.
"Speed is absolutely imperative. We are talking real-time now. People are going to be operating on 24x7 basis. That is going to be the norm," Subramaniam noted.
On the one hand, banks have to follow a set of regulations set by the Reserve Bank of India, while on the other they have to respond to customers' expectations. "We have to meet data security protocols, and upgrade with limited technology budgets," he added.
The challenge is to transform from dated technological infrastructure. "While buying a product from fintech companies seems to be the simpler-faster option, it comes with its own challenges," Subramanian said.
However, he sees banks and fintechs as "complementary and not necessarily always competitive". Fintechs have the technology and solutions, while banks have the customers, especially corporate banking customers.
"Partnerships are the future," he said, "They are here to stay."
Watch videos of all the session from the BFSI Leadership Summit 2021 here.
Edited by Rajiv Bhuva