Trends to dominate the BFSI industry.

A market place is not a picnic spot, it’s filled with fierce competition. The ever-changing landscape, where riding on a trend can be the difference between tremendous success and utter failure. Here are the top local trends that BFSI industries need to follow to stay relevant and ahead of the competition.

Services will matter more than products –

To service is to sell is the philosophy to dominate the market right now and for coming days. Banks will leverage their rich customer data to "service first", rather than sell. Sales will happen because banks anticipate service moments. This will need large technology investments to sense "customer moments" and respond to them in real time. Banks will shift their beliefs from a product-oriented organisation to a customer-driven organisation. Customer will make the rules.

Paperless and online –

When it comes to the process of applying for a loan or opening a new account, customers desire speed, ease and transparency, along with instantaneous decision-making capabilities. These are no longer a luxury but instead have become a hygiene factor and a necessity. They would also like the power to customise as per their needs and more choices for financial products and service. Future banking will be online and paperless with digitisation. Tab banking and mobilebanking will take the throne. With the help of Aadhar platform, loans will be disbursed within mere seconds and virtual cards will be issued instantly

Personalisation will be the key –

More effort will be put in to make the whole experience more personalised. India has more than 440 million millennials, more than China. This mobile-first consumer segment wants choice, convenience and personalisation; customised offers and an experience that is easy and intuitive while also being contextual. With infrastructure development and increase in smartphone usage, customers expect to use services anywhere, anytime. This is revolutionising the consumer experience. People are increasingly using mobile devices to research potential purchases, compare prices for goods and services and transact using mobile banking. 

Contributor of Banking Liberalisation

It is true that the 1991 budget changed the face of the Indian economy, he changed the norms and enable private banks to be born. He changed the rules of the game, but there are many players as well who contributed largely in the uplifting the Indian banking sector from the shambles. N. Vaghul is one of them.

N Vaghul, former chairman, ICICI.

He ushered in the new financial segment.

N Vaghul did not build the institution, but he knew who could. If ICICI Bank and its affiliates have not only survived butt thrived and its executives are part of the Indian financial services landscape today, it is undisputed because of - Vaghul the visionary. Vaghul was a commercial banker who started his career in State Bank of India and became the youngest chairman of a state-run lender - Bank of India - at 44. He quit banking in disgust due to interference from bureaucrats.

But things changed when Rajiv Gandhi needed someone with financial expertise, then RBI governor RN Malhotra called upon Vaghul to head ICICI. He turned a staid term-lending institution into a vibrant financial powerhouse with interests ranging from stock broking to lending to infrastructure, with insurance and advisory rolled into the mix.

Many financial supermarkets have come into existence since liberalisation in 1991, but the thought leader for all of them was undeniably Vaghul. If IDBI, UTI and SBI all ventured into various wings of financial services, they all took a leaf out of ICICI's strategy laid down by Vaghul.

His ability to engage comfortably with people at various levels without being conscious of the hierarchy made him an acceptable and popular leader.

In pre-liberalisation days, when the public sector was the monarch of the economy, a job in SBI was considered an achievement. Those who got such jobs stayed with the organisation until retirement. But Vaghul quit to take up teaching at the National Institute of Bank Management when a militant Shiv Sena union was poised to make trouble for him as HR head of SBI. The party at that time had an anti-south Indian platform.

The Industrial Credit and Investment Corporation of India (ICICI), as it was known then, was no different from Industrial Development Bank of India (IDBI) or Industrial Finance Corporation of India (IFCI). If 25 years later ICICI is miles ahead, it is because Vaghul saw no future for the lender unless it was transformed.

ICICI Bank is today worth Rs 1.52 lakh crore; IDBI Bank, which had a bigger market share in the 1980s, is at about a 10th of that, while IFCI has almost faded into irrelevance.

The poster boy of banking liberalisation.

Before the 1991 budget by Dr Manmohan Singh that changed the face of the Indian economy, the government had the full authority over the economy and the banking sector. Banking sector had no sense of private entrepreneurship. Though the budget of 1991 changed the rules of the game, there were many players who made a tremendous contribution of their own in liberalising the banking industry.

C. Rangarajan, RBI governor (1992 – 1997)

Before 1991, the banking section was much different than today. There were no rules for bad loans, the bank didn’t have any fixed deposit schemes. There were no mentions of either profit or loss in banking sections. And to open a branch banks had to wait for months to get the RBI’s permission. There was no financial marketplace. RBI dictated the exchange rates based on what the bureaucrats felt it should be, they also decided who got loans. All in all, bankers did not do banking, they were mere executioners.

That is till the C. Rangarajan became the governor of the RBI, public sector banks are still largely in bad shape, but there're competition and consumers have been able to fund their dream homes and cars through loans. Also, individuals have made fortunes by buying bank stocks in two decades. All thanks to the banking reforms Rangarajan lead from 1992 to 1997.

Besides playing an active role in rupee devaluation as deputy governor, Rangarajan laid the foundation for modern Indian banking without having to turn the economy, markets and banks inside out. He was met with some resistance when he prescribed capital norms and he had to convince stakeholders that this was an essential step to make the system more vibrant, viable and reliable.

Under the leadership of Rangarajan, private banks came into being. He unleashed the competitive spirit in Indian banking, resulting in the HDFC Banks and ICICIs of today. He was instrumental in ending the government's monarchy over the banking sector and stopping its abuse of power and position by monetising debt, which had made monetary policy ineffective and undermined RBI's independence.

Rangarajan's imprint was not only confined to monetary policy, it also extended to the elimination of automatic monetization and a shift in the issuance of government bonds to market-based auction system that reduced the fiscal dominance of monetary policy and led to the development of government debt markets.

But, the unfortunate part is his reforms were discontinued after his tenure. The Narasimhan committee proposed the DE-liberalisation of the banking sector as the RBI became hesitant about moving ahead with the liberalisation because of a deep-rooted suspicion of open markets. 

Business Process Reengineering

Business Process Reengineering involves the exhaustive redesign of core business processes to achieve astonishing improvements in overall productivity, cycle times and quality of work. In Business Process Reengineering, companies start with a blank sheet of paper and rethink existing processes and hold them in a way to deliver more value to the customer. They typically adopt a new value system that places increased emphasis on customer needs. Companies may reduce organizational layers and eliminate unproductive activities in two key areas. First, they redesign functional organizations into cross-functional teams. Second, they use technology to improve data dissemination and decision making.

How Business Process Reengineering works:

   Business Process Reengineering contains five major steps. Managers should:

·         Refocus the company’s values on customer’s needs.

·         Redesign the core processes, often using information technology to save time and make improvements.

·         Reorganize a business into cross-functional teams with end-to-end responsibility for a process.

·         Rethink basic organizational problems and people issues.

·         Improve business processes from top to bottom, all across the organization.

Companies use Business Process Reengineering to:

Companies use Business Process Reengineering to improve performance substantially on key processes that impact customers. Business Process Reengineering can:

·         Reduce costs and cycle time. Business Process Reengineering reduces costs and cycle times by eliminating unproductive activities and the employees who perform them. Reorganization by teams decreases the need for management layers, accelerates information flows, and eliminates the errors and rework caused by multiple handoffs.

·         Improve quality. Business Process Reengineering improves quality by reducing the fragmentation of work and establishing clear ownership of processes. Workers gain responsibility for their output and can measure their performance based on prompt feedback.

Why Banks opt for Tab Banking?

Offering a collaborative, electronic process can meet your customer’s expectations and evoke a sense of loyalty. This can translate into greater customer retention and wallet share. Whether a customer is opening a new account, applying for a credit card or making an account change, tablets offer an interactive way for customers and representatives to complete a transaction.

From ICICI to the HDFC, every major bank in India offers tab banking. Although tablets are considered mobile devices, they have a place in a bank’s multiple business channels, including the branch. In fact, tablets could close the gap between the customer’s satisfaction rating and the bank’s perception of their service. In addition to improving customer service and potentially appealing to a broader audience, tablets offers a wide array of benefits to the banks, such as,

Going Paperless: By adopting an e-process that includes electronic signature capabilities, there’s no need to print and waste papers. The process is totally electronic from start to end, saving banks the cost associated with managing papers.

Multichannel Support: The same tablet application can be used in-branch, in-field and even by customers in the comfort of their own home. A similar process across multiple environments makes a bank’s multichannel strategy a reality while contributing to a better customer experience.

Collaborative Process: Instead of a stiff customer/representative interaction, tablets promote collaboration. 

Tablets are versatile devices that banks uses as leverage to improve the customer experience and benefit the organization by implementing paper-free, efficient processes.

Guidelines to make outsourcing in Insurance well structured.

IRDAI - Regulator Insurance Regulatory and Development Authority of India, has proposed outsourcing regulations for insurance companies operating in India, under which they can take services of individuals for activities such as medical examination, investigation of claims, and recovery. As per the exposure draft, every company should put in place a comprehensive board approved the outsourcing policy. In considering or renewing an outsourcing arrangement, an insurer should subject the agency to appropriate due diligence, the regulator said in the proposed IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2016. “The insurer shall satisfy itself that the outsourcing agency’s security policies, procedures, and controls will enable the insurer to protect confidentiality and security of policyholder information,” according to the draft.

   

The new norms have been welcomed by the industry, as it will help regularize the outsourcing. As a better structured outsourcing mechanism can be put in place adhering to these rules. “The proposed regulations are trying to give a more structured and better shape to outsourcing activities by clearly defining core and non-core activities,” Puneet Sahni, Head-Product Development, SBI General Insurance, adding that the new norms will “positively” impact business processes and customer interests.

The proposed rules will bring more accountability, as outsourcing relationships will be governed by written agreements that are legally binding for a specified period. That clearly describes all material aspects of the outsourcing arrangement, including the rights and responsibilities of all parties. 

Why Vietnam is becoming the next big Outsourcing destination?

Offshore outsourcing is a time-tested way of saving on cost that almost every multinational company has accepted and used. Outsourcing the business processes in an emerging economy enable them to create the infrastructure and get the labor at a much cheaper price, than their native country.

  

Once India used to top the list of nations preferred for outsourcing, but that is changing. With the India’s economy reaching new highs every year, even surpassing the China in the race. In this growing economy where youth is getting better prospects than before and with middle class getting more and more empowered, the low labor cost might soon disappear. Foreseeing this, outsourcing companies are looking for new destinations to outsource to. And they are eyeing the Vietnam.

    

Vietnam’s economy quietly slipping, with the worst drought in the last decade country is far below the ambitious GDP aim it had set for itself. It’s becoming the next hot destination for offshore outsourcing. With Vietnam’s talent pool increasing in technical areas and modern tech infrastructure, as well as its reasonable rates, mean it’s catching the attention of tech companies big and small.

“The Vietnamese have a very strong desire to work with other parts of the world because they value the positive flow of money and funding coming into their country,” said Anna Frazzetto, chief digital officer and senior vice president at recruiting firm Harvey Nash. “All the big players are setting up their own facilities. If the companies that are the gold standard in technical competency are setting up house in Vietnam that says a lot about the technical talent Vietnam is offering.”