BFSI Digital Transformation - Cloud Driven Innovation In The Industry

Cloud has played a key role in the digital transformation journey of the BFSI industry. The industry is now distancing itself from conventional ways and is adopting cutting-edge technology. The focus has now shifted to cater to the end customers with technology fuelled experiences which is cost-effective, agile, and auto-scalable. 

The COVID-19 pandemic put the entire debate on how and when to adopt the cloud to an end. The cloud-based systems proved its mettle when the lockdown was imposed across the world. The BFSI industry has been a frontrunner in adopting cloud capabilities.     

In a recently concluded roundtable organised by BW Businessworld with some of India’s top technology leaders across industries, a wide range of topics was discussed including auto-scaling, enhancing customer experience, open banking APIs, managing fraud risks and data analytics.  

Cloud technology, the need of the hour: 

Businesses are frequently confronted with the challenge of reducing TCO (Total Cost of Ownership) while delivering higher ROI (Return on investment).

“Understanding TCO and ROI over a given period requires committed investment and strategy on the application technology side,” said Global CTO at Biz2Credit and Biz2X Vineet Tyagi.

Tyagi also mentioned the significance of improving existing technology applications to make them cloud-native.

“A bit of architecture and technology refactoring is required to understand how applications can become cloud-native. This means going beyond using infrastructure as the service aspect of the cloud to that of a platform as the service aspect of the cloud,” he said.  

He also explained the benefits of moving from VMs (Virtual Machines) to containers.

“We have containerised our applications heavily, as it allows running smaller units of applications which can be auto-scaled. Auto-scaling is a great strategy to convert CAPEX into OPEX,” Tyagi pointed out.  

“As application-load increases, we can auto-scale to handle it. This has worked well for us. We have moved from 5000 applications of lending in a month to performing 60,000 applications in six hours,” he added. 

Deepak Deshpande, (currently consulting for start-ups) CTO at Lentra AI, highlighted the challenges which are faced during scaling-up cloud infrastructure.

“Scaling up cloud infrastructure to the optimal capacity is a big challenge essentially in a cloud-based lending system. For instance, consumer lending is heavily used much more during the festival season whereas business lending is uniformly used throughout the year,” Deshpande underlined. 

“In the festival season we have to scale up as there are over 300000 transactions done in a day, following which we have to scale down, that’s how we have managed the peak demands,” he added. 

Deshpande said that there are two major reasons they use private clouds over public clouds. 

“We use private cloud basically due to cost factors and data-privacy perspective. As we cater to multiple customers on it, it can be supported via a multi-tenant model. Initially, the big traditional banks were not comfortable with public clouds but in the past one year things have started to change,” he explained.

Redefining customer experience: 

Businesses are now looking forward to creating useful, smooth experiences for their customers. The challenge is to ensure that customers are getting the right messaging and a better customer experience in every interaction with the brand.  

Senior Vice President – Payments, Business Excellence and Data Technology Head at Innoviti Payment Solutions, Amit Ahuja underlined the importance of enhancing customer experience through cloud infrastructure.  

“In today’s world the competitive BFSI sector needs much more agility and rapid innovation to meet the demands of the customers,” Ahuja said.

Cloud serves as an important platform for better collaboration between several parties in facilitating an improved customer experience. 

"Cloud infrastructure and services enable better collaboration between internal teams, partners and customers resulting in enhanced productivity, faster development cycles, and increased speed to market,” he commented.

With a better understanding of the market demands, the cloud has a scope for innovation to better serve the customer.  

“By enabling businesses to rapidly adjust the processes, products and services to meet the needs of the market, cloud computing has and can further facilitate rapid prototyping and innovation,” Ahuja explained. 

The CTO at MoneyTap (Freo), Ankan Singhvi highlighted that cloud services help in minimising cost while improving customer experience at the same time.

“A major advantage of using cloud services is that one does not have to think about the cost factor when you are trying to enhance customer experience,” he said.

 Also, the cloud can help identify the problems faced by customers beforehand. 

“You find about the upcoming customer issues even before they experience it. There is a lot of background services which are running which will let you know that the customer is not able to use the product at all,” Singhvi mentioned.

He provided an example to further elaborate his point.  

“We use AWS for various services, including image recognition service. It allows us to detect whether the customer is using a selfie which has already been tagged as a fraud in the past or whether the customer is using someone else's selfie,” Singhvi said. 

 Banks of the future: 

Several leading banks in India have already adopted the open banking module, and the future of banking is digital. 

The Vice President – Cloud Practices & Consulting at SEARCE, Ankit Sinha was optimistic about the future of open banking concepts in India.

“The world appreciates the concept of open banking, and India is now emerging as one of the leading pioneers in this domain. Five years back, we kept hearing that APIs will become the new currency of the networked economy,” he said. 

Banks are now heavily investing in the development of APIs and are able to offer a more seamless and efficient customer experience. Sinha provided an example to further elaborate his point. 

“Federal Bank has 172 APIs which are now available for any developer to build all kinds of user experiences, merchant experiences. This is a pattern across the industry; some of the largest banks have looked at APIs as the product, and have deeply invested in the product management of APIs,” he commented. 

In the new landscape, banking is now adopting the cloud at a fast pace. The industry is ready to adopt the agility, speed and innovation found in the technology sector.  

“It’s a great time to be working in the sector as on one hand there are banks offering banking as a service and then there are large cloud companies offering banking as a platform and are bringing in the best tools and technologies so you can quickly build on top of it,” Sinha said.  

Battling fraud through innovation: 

As the fraud risk environment changes, so do the need to adapt and innovate. Traditional approaches to fraud mitigation are not sufficient and cases of fraud are on the rise. 

Krishnaswami, VP-IT at Aptus Value Housing Finance India Limited said that the mantra should be - Prevent fraud and minimize risk while going forward.   

Krishnaswami highlighted that technology is playing a major role in bringing down instances of fraud. 

“We have technologies today right from capturing customer’s KYC where you verify all his details digitally. Even business verification, residence verification, and property evaluations can be done digitally which help in eliminating frauds at the initial stage itself,” he said.

 Krishnaswami provided an example to better understand the risk perspective while lending out loans.  

“While lending housing loans we know the end use of the loan and the risk is minimal as the customer is also emotionally attached to it. On the other hand, while evaluating SME it is difficult to know the end use of the loan, and credit risk assessment is the key," he commented. 

Redefining data analytics: 

A multitude of analytical techniques which are now available can parse large quantities of data in real-time which were generally overlooked by conventional statistical methods. 

Sinha pointed out that utilizing data is important to usher into the age of data analytics. 

“The ability to harness the data is the critical part as we know that we are entering into the AI/ML age,” he said.

Sinha pointed out that there are three common challenges about data analytics that are intensively discussed in leading fintech firms- data silos, privacy fears, and dearth of talent.

“Unlocking data out of silos is and will remain an ongoing challenge for humanity, there is the question of privacy too and we have made a special team to ensure security and privacy. Also, dearth of talent is a critical issue and we need to up-skill more people,” he said. 

The Founder and COO at Scriptbox, Sanjiv Singhal underlined the possibilities which one can achieve by successfully applying AI/ML. 

“AI takes multidimensional insights into action right away in place of the traditional approach of applying empirical rules,” Singhal said.

He came up with an example to prove his point. Singhal said, “20 years ago while managing credit card fraud, a set of PhD holders used to work for HNS which would develop rules and it took 6 months for it to roll into practice, today it is almost real-time.”  

Data analytics can also be used to detect behavioural patterns through its algorithms.

“AI/ML is important for us due to the high volume of behavioural data and patterns that can be identified using it. For instance, we would like a client who logs in multiple times a day to reduce his engagement and another client who logs not even once in a year to increase his engagement," Singhal pointed out.  

“This is where we think AI/ML will work well,” he added. 

The panellists concluded the roundtable by stating that the digital revolution is still in its nascent stage and will play a major role in redefining the BFSI industry of the future.