India Bringing Mobile Banking to Every Village

In several recent speeches and press conferences, Reserve Bank of India Deputy Governor K C Chakrabarty has vigorously advocated improving bank technology to help the "common people" and the unbanked. He said yesterday at a press conference that he is working on a plan to cover every village with mobile banking services by 2015. In this case, "mobile banking" means a bank-operated vehicle that rolls into a neighborhood and provides basic services such as deposits and withdrawals.

Chakrabarty also said that the Reserve Bank has a roadmap for setting up a bank branch in every village with a population of more than 2,000 by March 2012.

Chakrabarty has been critical of his country's banks' adoption of technology. "The opportunities presented by adoption of technology have not been fully exploited and the customer still has not been able to enjoy faster, cheaper, and easier banking services," he said in a speech last week. He offered several reasons why:

1. Absence of a strategic vision and action plan — "For a plan to succeed there must be a vision and strategy driving implementation," he said. "There is clearly an absence of vision of how technology is going to drive business and customer relationship. Thus technology adoption in banks is a result of external pressures rather than a vision shared by the bank staff percolating right down from right up or a corporate vision of the positive externalities that will result. "

2. Technology focus is not customer-centric — "Technology must be implemented with the customer in focus," Chakrabarty said. "Technology must enable customer facilitation in terms of cost, time and convenience. It should be dovetailed to customer needs and expectations. In sharp contrast, technology implementation in our public sector banks appears to be more for regulatory and policy compliance. This has oriented the banking technology to be more employee-friendly rather than customer-friendly."

3. Business process re-engineering was not done — Business process re-engineering integral to leverage manpower for business growth and increased profitability has not happened at the desired pace, he said.

4. Absence of simple cost effective delivery model — "We have yet to put in place a cost-effective, decentralized and realistic delivery model," Chakrabarty said. "Fledgling delivery models are being tried out experimentally. Fixing a problem/glitch when it happens is the weakest link. This issue is even more important considering that increasingly larger number of hitherto un-banked people will interface with the banks through hand-held/mobile front-end devices. The credibility of the entire system will be at stake and take a hit if the problems are not promptly resolved as they arise and real time solutions are not proffered."

5. Information and technology has been segregated — "There was no business and IT plan to leverage technology for increasing business and profits," he said. "IT should help banks not just to deliver robust and reliable services to their customers at a lower cost, but also generate and manage information effectively. Information comprises data collected based on principles of integrity, reliability, and accuracy. Banks are collecting humongous quantities and warehousing volumes of data relating to customers and transactions. The information is not subjected to meaningful analysis, usage and creation of a database with an objective to meet not only the diversified internal and external MIS requirements but also using this information to increase the volume of profitable business using unique techniques of Customer Relationship Management. It would not be wrong to say that "Information" from "Information Technology" is missing."

6. Lack of infrastructure — Banking penetration requires some basic infrastructure to be in place, he noted. "There needs to be robust digital and physical infrastructure for banking services to reach un-banked and inaccessible areas," Chakrabarty said.

7. Lack of collaborative efforts — "Since the challenge is huge, a planned, strategic and massive concerted effort is needed from all stakeholders which was not well appreciated earlier," he said. "It is now well recognized that taking banking to the masses and providing cheaper, easier and faster service requires a greater collaborative effort which was lacking earlier."

In short, "the benefit of technology has not percolated to common people," he concluded. "As a result, banking transactions have not become cheaper, easier and faster due to deficiency in delivery model, absence of BPR, and lack of infrastructure. What is needed at this stage is a planned, strategic and massive collaborative effort from all stakeholders to leverage technology in an effective way, bringing more people into banking fold, reducing costs and, thereby, ensuring benefits of technology indeed results in cheaper, easier and faster transactions, particularly for our small and retail customers."