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On navigating digital banking though the crisis with Finacle’s Rajashekara Visweswara Maiya

  • COVID-19 is creating a lot of stress on consumers and their financial institutions.
  • Core provider Finacle's head of cloud business joins us to discuss how banks are rapidly digitizing.
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On navigating digital banking though the crisis with Finacle’s Rajashekara Visweswara Maiya

Banking systems are being put to the test, surviving the impact of the current pandemic. In many cases, this crisis accelerated digital transformation programs. There is increased demand for digital solutions that require banks to seriously think about their legacy tech stacks and models. Joining us on the podcast is Rajashekara Visweswara Maiya, Finacle’s VP, head of business consulting, Cloud & Blockchain Business.

We discuss banking’s role in helping the economy recover and how the shutdown of physical branches and manual processes being unavailable have led to increased access to digital services. We also talk about how banking modernization has suddenly become an urgent goal, leaving banking management to question which programs truly make a difference to the end-user.

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The following excerpts were edited for clarity.

The crisis

Even though I’m not old enough to comment on the 1929 crash, I have experienced 4 crashes. This crisis is completely different because the other three were liquidity risk related. COVID-19 is liquidity risk related but also includes solvency risk. The combination of liquidity and solvency risk is a global phenomenon that affects every industry.

The impact on banking institutions

After the last crisis, banks were required to keep greater capital reserves. Too Big to Fail also ensured some banks were strong enough to make it through. These precautions enabled banks to address some liquidity risk but solvency risk is compounded now. Our clients’ customers are asking for moratoriums, reduced interest rates, and breaks in loan payments.

Small and medium businesses contribute to more than 60% of global GDP. They also contribute to more than 50% of global employment. When they go down, that has severe impact on every industry. That’s when central banks must revive SMB businesses as quickly as they can. Once SMBs recover, employment will rise, spending will rise and the economy come back. That’s why you’re seeing every country aid SMBs.

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The opportunity for digital for two kinds of banks

There’s an opportunity for banks to create large SMB portfolios because funding is coming from the government. Financial institutions should be able to onboard many of these SMBs using digital capabilities. That will help banks revive their operations, revive their digital journeys, and transform themselves to take care of the next set of crises.

The traditional banks were planning for digital transformation slowly. And challenger banks, which offered digital banking from day one, were limited in just offering deposit products. COVID-19 is forcing banks to go digital faster than their original plans. It has also challenged challenger banks to offer full-fledged banking services. They have to get into SMB banking, financing, overdraft and letter of credit type services.

Traditional banks have a lot of strength around their domain, processes, knowledge, and experience. But they have challenges around technology. Challenger banks, on the other hand, have the technology advantage but don’t have the domain experience to come out with new products. This is where fintechs will come in and help both entities.

Scaling up

Our client base has moved into an online, real-time core banking solutions years back. This crisis requires them to leverage technology to become digital. When the pandemic hit, consumers wanted to move funds from the stock market to their banks. But there were no branches open to do that. Most of Finacle’s customers had used their technology advantages to expose APIs and developed a comprehensive digital onboarding so their customers can open accounts, transfer funds, and create deposits within 90 seconds. That’s the power of these types of banks to attract funds without branches open.

For banks that haven’t adopted digital core banking, they’re trying to advance their digital plans. No one expected the volume to pick up so fast. Some banks needed to accelerate their digital plans while others were focused on fast scaling.

Changing the nature of work

COVID-19 is changing the way banks work. Instead of coming to the office and maintaining physical relationships with vendors, they all moved into remote logins and remote connections. The term we use for this type of working is distributed agile. Agile is generally thought of as co-location. But people can’t co-locate now, so many banks are still working on being agile but in a distributed way. Banks are trying to overcome their challenges.

The business of banking and the banking business are both going to comprehensively change going forward. More than 30% of closed European branches may not open again. Similarly, in the U.S., that number may be closer to 50%. This will bring about new ways of working — banks need to look at low touch, high tech ways of working.

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