Simon Paris, Global Head of Banking, SAP, talked to Harshal Kallyanpur about trends in the BFSI sector and about competing with Indian companies in the core banking space
At the global level, most organizations are focused on managing risk and regulatory compliance. The risks here include credit, liquidity, market and operational risk, while on the compliance side it is all about meeting various banking regulatory requirements.
The second area that banking organizations globally are focusing upon is reducing organizational complexities. They are largely looking to retire legacy applications, modernize, streamline and consolidate their IT infrastructure and become a lot more agile.
Organizations in the US are focused upon reducing cost and complexities while those in Spain are more concerned on sustaining their operations and survival. As opposed to this, banking organizations in India are focused on growth, while ensuring that their systems are cost-efficient, lean and agile.
Indian BFSI organizations are seeing good growth due to the existence of a relatively untapped market. They are heavily focused on customer acquisition, scaling up the number of accounts, increasing the speed at which new products can be launched, knowing customer segments and making offerings to different segments in real time.
Has the BFSI segment been a major contributor to your revenues?
If you look at the services that we offer, there is one set of solutions that helps banks manage their core processes such as transactional banking. For us, that includes all the various types of accounts be it checking, loan, savings etc, deposits and withdrawals, or anything that’s a part of the core banking process. We have around 180 customers running their transactional banking systems with us and around 83 million accounts that are live on SAP today with another 70 million in the process of going live.
The other solution that we offer is around analytical banking, which ties back to risk management. We have 150 to 160 customers managing their liquidity & credit risk and regulatory compliance on our systems. There are many more who are handling the risks associated with process controls and access controls in their banks using our solutions.
Is Cloud computing proving popular in this sector?
If you look at bank-to-bank connectivity, it is really swift. However, bank-to-corporate connectivity and corporate-to-bank connectivity is fairly inefficient, in comparison. We are working with a number of banks to bring this process into a Cloud environment in order to standardize, simplify and make it easier to execute. Corporate connectivity is a key area of interest for most banks in India and this could open up some good opportunities for Cloud adoption.
From the point of view of moving applications to the Cloud, there will be many conservative banks that will take years before moving their core banking to the Cloud. However, we already have some customers that are consuming banking services such as core banking from the Cloud. For example, we recently worked with Capgemini, to help smaller financial services companies that can’t afford to implement core banking on their own, to consume core banking services via the Cloud. Non core banking applications can move to the Cloud first, corporate connectivity between corporates and banks can be delivered and managed from the Cloud; core processes will take longer to move to the Cloud.
What’s the role of enterprise mobility in banking?
If you look at the mobile phone penetration in India, in the deeper parts of the country, and at the lower levels of the social demographic pyramid, mobile phones, not smartphones but simple phones, become increasingly relevant for inclusive banking. We can bring in what are estimated to be about a billion unbanked people into the banking population and improve the overall economics, which is good for society and for overall growth.
People who have had no access to banking systems will be able to, with minimum levels of identity, open a bank account and manage their finances. At the other extreme, the new and affluent young professionals are smartphone-centric and tend to do a lot of activity using these devices. There’s also an opportunity to target them with a mobile banking application.
Mobile banking means different things to different people. It can mean transacting via your mobile device, accessing your bank account, looking at your bank statement and more interesting concepts such as mobile money or mobile wallets. However, it also entails mobile device management and managing security on these devices.
A lot of banks want to deploy their internal applications on mobile platforms. Therefore, we are looking at providing not only the platform to create such applications, but also the solutions that help manage and secure these devices. We are also focusing on providing solutions that help mobilize the workforce and give them a data-rich, interactive enterprise application experience on their mobile devices.
From a technological point of view how do you see this space evolving?
As volumes of data increase, organizations will face the Big Data problem. The relational databases sitting on a physical drive, traditionally designed to process limited volumes of data, will not be able to handle the growing volumes of unstructured data.
If a bank wants to look at the day’s closing or at the month’s closing, its liquidity position, or do any kind of contract segmentation analysis, many of these reports can take over eight hours, or even overnight, to generate. If we use a combination of columnar based approaches and in-memory based computing, we have up to a thousand, 10,000 or in some cases even a 100,000-fold improvement.
In the overall concept of CRM, the mobile will be seen as the new front office, analytics will help you get to know the customer better and in-memory computing will gain importance from the point of view of running a massive amount of data analysis to determine real time pricing and customer-focused campaigns.
For us, India will be one of the fastest adopters of our in-memory solution, HANA, followed by corporate connectivity, analytics including BI, enterprise performance management, budgetary planning and consolidation and GRC as well as HR in the area of ERP and general ledger applications.
There are several local companies who are also providing core banking and other applications relevant to the banking space? How do you view these companies in terms of competition?
Software needs to be easier to consume. We have passed that stage where software implementation projects were large and carried out with lots of manpower. Taking note of this, we have invested close to 600 million euros into our core banking platform to deliver a rich, preconfigured, quick to deploy, easy to consume, lower cost software experience.
We developed our banking platforms, which were to scale for larger global banks such as Bank of America or Deutsche Bank. The challenge for us now is scale down the platform to make it easy to consume for the tier-2, 3 and 4 banking organizations. The others have come from the opposite direction, developing a solution which is simple, for the tier 3, tier 4 level customers.
Their challenge is to scale up their software to the global level. We think its easier to scale down from very large to small than to go from small to very large. Therefore, organizations such as Wipro or Infosys are partners to SAP on core banking. For instance, though Infosys has Finacle and we compete with them on certain features, we are working with them on a project to deploy SAP’s multi channel mobile banking solution alongside Finacle for a banking organization.