We implemented a three-pillar strategy—’Indulge,’ ‘Nudge,’ and ‘Purge’—to enhance our digital transformation efforts: Sony A, South Indian Bank

In an insightful interaction with Express Computer, Sony A, CIO of South Indian Bank, shares the bank’s digital transformation journey. South Indian Bank, with its deep-rooted history, has embraced significant technological advancements over the years. The conversation highlights the bank’s strategic focus on digital adoption through a three-pillar strategy—Indulge, Nudge, and Purge—resulting in 98% of its transactions now being digital. Sony also gives insights on partnerships with fintech, AI and machine learning applications in underwriting and fraud detection, and cybersecurity measures.

South Indian Bank, with its nearly century-long history, has undergone significant technological transformation over the past few years. How has the bank’s digital transformation journey evolved so far?

At South Indian Bank, our legacy has been a blessing, giving us the privilege of serving generations of customers. However, we recognised that banking has rapidly transformed, and we needed to keep pace. In 2017, we set up a dedicated digital vertical, which I’ve led since its inception. Our focus shifted from internal processes to enhancing customer experiences. Back then, around 45-50% of our customers transacted digitally, but we knew we could improve.

We implemented a three-pillar strategy—Indulge, Nudge, and Purge. “Indulge” ensures that customers who prefer our services can easily navigate and self-serve on digital channels. “Nudge” focused on gently guiding customers toward digital services. Instead of pushing them, we trained our staff at nearly 2,000 branches to assist customers, like helping a 60-year-old print a passbook and then showing them how to access it digitally. This approach gradually increased digital adoption.

As a result, today, 98% of our transactions are digital. Branch visits are now mainly for service, support, and cross-selling, allowing us to better understand customer needs. The “Purge” strategy focused on automating and eliminating redundant processes, streamlining operations significantly.

In Europe, many physical branches of different banks have shut down post-COVID, with a shift towards digitisation. Considering this, where does South Indian Bank stand in terms of digitisation? While branch footfall is mainly for transactional purposes, a significant part is also for customer support services. Do you think the entire process can be digitised, similar to the Western model?

That’s a great question. In India, even though transactions at ATMs have reduced, cash in circulation continues to grow alongside digital transactions. This creates a unique situation where both physical and digital banking coexist. In India, physical branches are still considered essential hubs, especially when it comes to trust. People want to ensure their hard-earned money is secure, and often prefer face-to-face interactions for advice and support.

While digitisation is advancing, the need for physical branches remains. However, the nature of activities in branches is changing. We might see a hub-and-spoke model, where a few large branches remain, while smaller branches cater to new markets. South Indian Bank is also partnering with fintech companies, blending our physical presence with their tech capabilities to offer unique solutions. So, while we don’t foresee a major reduction in branches in the near term, optimisation will certainly happen.

Since you mentioned fintech partnerships, could you share if South Indian Bank already has any existing partnerships? Are there any potential partners you’re currently exploring?

About a year and a half ago, when we began our strategy, one area we hadn’t explored was credit cards. We partnered with FPL Technologies and launched a co-branded metal card called OneCard, a premium product with digital acquisition, attracting 90% new customers. This became a successful new business line, and we continue to focus on it.

This year, we created a dedicated business unit for strategic alliances and digital partnerships. This team, reporting to me, focuses on partnerships across liability, assets, wealth management, insurance, and mutual funds. They handle discussions and facilitate the entire process, ensuring speed in decision-making and seamless integration with tech, infosec, and compliance.

We’ve partnered with Upswing on the liability side, giving us access to platforms like Moneycontrol, where users can compare and invest in deposits, including ours. We’ve also piloted our own digital deposit acquisition program. On the asset side, we’ve launched a digital co-lending platform with FEDFINA, a Federal Bank subsidiary, which is growing well. More partnerships are in the pipeline, and we aim to make this a parallel channel to our branch-led efforts by year-end.

Moving on to the biggest buzzword currently, AI, are you leveraging the benefits of AI for any AI-powered solutions or GenAI in your operations? Could you share how you are utilising these technologies?

As you rightly pointed out, AI is a buzzword with a lot of hype, but we need to refine its use to see what truly makes sense. I’ll share some use cases we’ve found valuable. In underwriting, particularly in the retail segment, we use machine learning models to create scorecards that help scale underwriting for smaller ticket sizes, ensuring control over the portfolio.

We also use AI for fraud detection, where it helps classify transactions as potentially fraudulent based on risk assessment scores. Depending on the score, we decide whether to challenge the customer.

Additionally, we’re using AI and NLP for conversational journeys. When it comes to GenAI, we’re working on internal projects involving large language models (LLMs). Since banking is highly regulated, we ensure that data stays within the bank. One project, for example, focuses on using an LLM to assist staff by providing internal guidelines directly, avoiding the need to search through multiple sources.

We’re also exploring AI for digitising physical documents and looking into how GenAI can accelerate application development, which would help reduce costs. Importantly, everything we do is carefully documented and auditable, whether for internal or external auditors or regulators. We’re also exploring partnerships with fintechs and analytics companies to experiment with these solutions further.

Given the increasing threat of cyberattacks, what are South Indian Bank’s strategies to safeguard customer data and maintain cybersecurity resilience?

At South Indian Bank, we approach cybersecurity by addressing two key areas: securing our systems and protecting our customers from fraud.

First, on the system side, we follow a “defence in depth” strategy, ensuring every layer of security—from the perimeter to internal systems—is tightly controlled. This includes managing the added complexities of cloud-based systems, ensuring consistent security across private, public, or hyperscaler environments. We also heavily invest in availability and automation to detect and respond to potential threats early, minimising the risk of large-scale attacks.

On the customer side, we’ve developed innovative tools like e-Lock and e-Limit to help customers protect their accounts. With e-Lock, users can lock their accounts from any digital transactions, adding an extra layer of security even if someone gains access to their passwords or OTPs. e-Limit allows customers to set transaction limits, giving them more control and customisation based on their preferences.

We also emphasise educating our customers, especially older individuals who may be more vulnerable to fraud. Through these tools and constant awareness efforts, we help them stay secure in the digital world. All of this is backed by 24/7 monitoring and ongoing investments in our cybersecurity infrastructure.

What do you see as the key challenges and opportunities in the banking industry, particularly regarding technology? How is South Indian Bank trying to capitalise on these opportunities?

There are four key points to address. First is availability. I’ve mentioned this several times because it’s critical. Take UPI, for example. Over the last 7-8 years, it has become an explosive payment channel with unmatched growth. Unlike before, when we would scale up during festivals like Diwali, now any player in the ecosystem can launch a scheme anytime, forcing banks to ramp up services unexpectedly. So, availability is a challenge due to its unpredictability. Banks need elastic systems that can scale up or down as required.

The second challenge is cybersecurity. As we discussed, banks need to stay ahead of both external and internal threats because even one mistake can be costly, whereas fraudsters only need to succeed once. It’s a constant battle.

The third area is regulation. India has a very proactive and strong regulator in the RBI, which has set clear guardrails over the last several years. Each quarter, new expectations are introduced, and there’s a strong collaboration between the regulator and banks.

Lastly, the upcoming Digital Personal Data Protection (DPDP) Act adds privacy as a critical dimension. Banks will need to adopt a consent-based architecture, being mindful of how data is used not only by the bank but also by partners throughout the customer lifecycle.