My first blog at bankingscape.com
I am writing this blog when almost the whole world is under varying degrees of lock-down due to the rampage of Covid-19. The world economy is reeling under the impact of lock-downs and Governments are laying out various revival packages. Banks have a very important role to play in kick-starting the economy after the lock-down is lifted in phases. In this blog, I will examine whether ‘digital’ is indeed the way forward.
Bankers, payment and fintech professionals: Working behind the scene
Banking as an industry, never sleeps and never fails to fascinate. While the medical fraternity, the law enforcement officers and the government officials, are braving the attack from the front, the banking, fintech and the payment networks are silently working behind the scene. They are ensuring that the payment machinery remains functional and that individuals and organisations can have access to their own funds and the benefits/grants that governments and other institutions are providing to them. This is very critical to the common man who is stuck at home and needs to make essential purchases of food items and medicines. The organisations also need funds to start functioning, as soon as the lock-down is relaxed. So far, the banks, the payment networks and fintech service providers have played a stellar role in keeping the payment and funds transfer machinery well oiled.
The challenges of physicality
While the technology being used in banking and payment networks is ensuring that funds move smoothly to the beneficiary and basic servicing of accounts happen through internet banking and mobile apps, there are challenges on the physical side of banking. Branches are barely functional and many ATMs remain out of service due to restrictions on physical movement resulting from the lockdowns. Call centres have huge wait times, with most agents working from home and unable to resolve queries fully due to lack of full access to backend systems.
When BCP (Business Continuity Plans), DRP (Disaster Recovery Plans) seemed grossly inadequate!
Most banks and their service providers have business continuity and disaster management plans. They are also required to have regular drills to test the working and efficacy of these plans. I myself have seen and drafted many such plans. But none of these plans were made for a lock-down across countries. Most plans were made for one city, state or country not being functional at a time and alternative locations were identified, fortified and tested regularly. I am sure most officials in Continuity Program Offices in various organisations must have been at their wits end, trying to get their organisations back into working mode. They must have worked furiously along with their IT, Network and Facility managers to activate ‘work-from-home’ for most employees. Laptops, desktops, VPN, video conferencing paraphernalia had to be provided quickly to those working from home. I am sure that all the BCP documents across organisations, are getting rewritten and/or updated to cover domestic, regional and international epidemic scenarios.
Data security in the reality of WFH (Work from Home)
Network and data security play a vital role in the banking and payments industry. The CISOs in these organisations and their teams are bound to be ‘walking on egg shells’. Even a small negligence or oversight could lead to a gaping hole in the organisation’s data and financial health and have far reaching implications on the economy as a whole. WFH is not a new concept. But to scale it up to such proportions to ensure work gets done in the back ground to ensure uninterrupted service, would have forced the CISOs to think ‘out of the box’ while keeping the data security requirement sacrosanct.
Digital is a long way off, ‘Phygital’ is the reality in the near future
I am sure the management in most banks must be wishing they had a fully functional digital bank as an alternative to the brick and mortar banking that they lead today. True, many banks have attempted to set up the digital avatar of their banks over the last few years. To be fair, these leaders have shorn their traditional mindset and have tried to catch up with the nimble start-ups in the fin-tech space, by either acquiring them fully or making large investments in them. Some banks have been prowling the fin-tech by-lanes to identify potential game changers or disruptors and partner with them. Banks have opened up access to their banking platforms through APIs. They have encouraged sand-boxing of many promising applications made by start-ups. It is due to all these efforts and investments in open banking that the banking channel is working well even under such nation-wide lock-downs. But a full-blooded alternate to brick and mortar banking is still a long way off.
Digital banks are far and few across the world today. A full fledged digital bank is a distant dream in countries like India. The harsh reality is that we are not ready – infrastructure wise, economically as well as culturally. I am sure that when the lock-down was first announced in India, even the active proponents and thought leaders at the forefront of digital banking would have withdrawn cash from an ATM and kept it at home, just to take care of situations when digital doesn’t work! It is a reality that India and many similar countries do need last-mile physical access to banking and financial products. Digital banking is fine and something to look forward to, but ‘physical’ is also needed. The serpentine queues seen at branches and ATMs after the Government of India transferred money to the account of MGNREGA beneficiaries confirms this. This is further vindicated by the queues at business correspondent outlets and white label ATMs. Even the posh residential colonies in containment zones in the lock-down areas felt the need for last mile physical access which prompted some banks and white label ATM operators to provide mobile ATM vans at their gates!
In conclusion
In the days to come, banks will have to strike a strategic balance between their physical and digital channels and ensure both channels work optimally, such that one channel becomes a dependable fall back for the other, in times of need.
Very much true. Even during the lockdown a few thousand rupees in the cupboard has given more confidence to people than a 6 digit sum in their bnk accounts. Also, post lockdown too the focus would be on contactless I believe because both consumers and shopowners are hesitant to use handle cash , cards or pinpads.
Thanks for the feedback Prateek. Post lockdown, while bigger establishments may move to contactless, the small kirana shop and the vegetable ‘thelewala’ will still be using cash. It will take a few more years for the full migration to contactless. By then, all of us would have got vaccinated for the virus/