Banking on the Cloud – The Accelerating Cloud Transformation Journey of Indian Small Finance Banks

By Hardik Doshi, Director Sales – Commercial West, VMware India

Out of 646 million active Internet users, rural India has 352 million, which is 20 percent higher than urban areas. Approximately 750 million mobile subscribers use smartphones, and the rural smartphone market is growing at a CAGR of 6 percent while the urban market is growing at a CAGR of 2.5 percent. And the country has one of the fastest growing digital payments volumes in the world – growing at about 50 percent annually over the last five years. UPI payments are growing at 160 percent annually, and the Reserve Bank of India recently introduced a UPI feature for older phone models that has the potential to bring in 400 million rural users into the digital payments’ economy. Indian banking is going digital at an unprecedented pace spurred by Government push for digitization and changing customer expectations. Indian small finance banks must accelerate their digital drive to keep pace with the rapidly evolving landscape.

India is powering ahead on the financial inclusion agenda with schemes like the Pradhan Mantri Jan Dhan Yojana bringing in almost 472 million accounts. And digitally empowered Indians from across the country are now demanding on demand access to banking services, cashfree payments, and greater autonomy over their financial transactions. The market is ripe for disruption by digital native fintechs and neo banks with innovative low-cost products and services that can be easily accessed by previously unbanked populations. The business of banking has never been tougher for small finance banks. From payments to deposits and loans, small banks across the country must now reconsider their market and operational strategies with a firm focus on a robust digital foundation.

Moving to the cloud is of course the first step for any digital transformation journey. But for small finance banks, this is not without some challenges. Security is a primary concern, coupled with budget constraints. They don’t have the skilled resources to manage cloud transition and management on their own. There are regulatory and compliance requirements to be considered as well. But it is now evident that the sector cannot evade the cloud transformation drive. It is crucial for staying ahead of competition, improving operational efficiencies, acquiring new customers, and growing their business. Working with an experienced partner who can advise and guide the cloud strategy as well as deploy cutting edge solutions aligned with the organization’s objectives is a good idea.

In my experience, most small finance banks today are well aware of the critical need to move to the cloud. Most small banks approach the cloud transformation journey with the clear objective of improving operational efficiency, achieving the scalability and agility to offer personalized, relationship-based services, and to ensure business continuity and quick disaster recovery. They want to modernize their infrastructure with a robust cloud and virtualization strategy. Compliance and security are also top of the agenda. For example, a state bank wanted to modernize their ageing datacenter infrastructure, simplify lifecycle management with visibility across the IT infrastructure. And they wanted a standardized and secure private cloud operating model. We helped them transform their datacenter with an on prem, and hybrid cloud infrastructure and cutting edge disaster recovery on our multi-cloud platform. We also deployed a micro segmentation security strategy.

The bank was able to manage its infrastructure better with greater visibility and control. They simplified day to day operations and automated capacity management. They were also able to reduce dependency on hardware as with an on-demand pay-as-you-go DR they also had an option to burst the capacity in cloud for critical workloads. With these agile cloud based DR solutions they were able to reduce cost and stay compliant. Another microfinance bank started their journey with a managed hosted service provider partner in an OPEX model after RBI issued a banking licence. Once business picked up they wanted to grow at scale, protect their own technology IP and meet RBI regulations on security and compliance parameters. They decided to establish their own managed hosted DC & DR instead being managed by service provider partner. This was a 360 degree shift for the IT team involving a deep transformation of people, process and technology. We helped them transform their entire DC and DR project with complete Software Defined DC approach with built in security and enhanced monitoring solutions just 6 to 8 months. Our solution efficiently managed close to 1000 workloads today.

In order to manage high volume transactions per seconds (TPS), many co-operative and commercial banks are looking to modernize services around their channel delivery, net banking, mobile banking, integrations with fintech solutions. We are working with some of these banks to transform these services from traditional monolithic to containerized and microservices architecture. Modernizing workspaces across small finance banks is another area of focus. Large public sector banks and private banks have already achieved this and now the smaller banks are looking to replicate this new work model. Their priorities include enabling their sales force, external agencies, and employees to securely access applications across devices, securing content, and eKYC of new customers. They want to secure all data across end point devices, ensure seamless integration with the CRM portal and provide content locker similar to digi-lockers for customer data. We are working with these small finance organizations to deploy end user digital workspace solutions. These banks also want to maximize financial inclusion endeavors to address Pradhan Mantri Jan Dhan Yojana in remote areas. With our Enterprise Application and Mobile device management solution we have been able to bring support their initiatives of taking banking to rural and remote areas.

The banking sector is one of the key pillars of the Indian economy. If the country has to achieve its vision of becoming USD 5 trillion economy by 2027, then it must focus on extending financial services to every corner of this vast country. Small finance banks have a critical role to play in this and must now focus on accelerating their cloud transformation to scale up and implement modernized, customer centric and innovative strategies.