In the aftermath of COVID-19, cost efficiencies will be key decision drivers. Banks will need to efficiently deal with increasing non-performing assets and declining net interest margins. Simultaneously, public sector banks (PSBs) cannot afford to drop customer experience further and lose out to their digital counterparts. Banks needs to rethink their approach towards the total IT spend and should start considering the pay per use model especially after the PSB mergers. This will help them focus on their core business activities while their IT needs can be managed by experienced IT providers.
In a Cloud First, as a service landscape, almost everything – be it infrastructure, platforms, software, or services like risk, compliance and fraud management – is available on a pay per use model. However, when it comes to cloud adoption, private and public sector banks (PSB) in India have taken two very different approaches – even with the same set of guidelines from the RBI that permits the use of cloud (even public cloud) with some stipulations.
While private sector banks have made some strides with adoption of hybrid cloud, public sector banks have been slow to follow. Those PSBs that have adopted cloud have stuck to private clouds that are as expensive as the existing traditional solutions. This prevents them from passing any benefit to the customers or reinvesting in innovative solutions.
Addressing PSB concerns around cloud adoption
The main banking concerns around cloud have been with data security and privacy. Financial data is sensitive, and banks are reluctant to give away control of that data and move their core banking platforms to the cloud. However, hybrid cloud is a great solution to this problem. A hybrid cloud approach allows banks to keep mission critical applications on a private cloud and move non-core activities like back office processing to public clouds.
Adopting the hybrid cloud model can offer public sector banks the advantages of the pay-per-use model, compute capabilities and the option to integrate with future-ready applications through APIs. In a world moving towards open banking, Indian PSBs cannot delay taking this first crucial step towards the future of banking anymore.
The question is, will Indian PSBs drop their ‘wait and watch’ approach and take confident strides towards a cloud-first future?
The future is flexible
Banks are taking note and striding forward towards a more flexible future. For instance, for one of our large PSB clients, Wipro has enabled end-to-end outsourcing on an Application Service Provision (ASP) model. This provides a core banking solution (CBS) and allied solutions in over 100 SCBs and CCBs across India in over 3,500 branches in an integrated environment. The ASP model has 6 key advantages:
- Rapid migration and deployment - Banks can be moved onto our existing setup within 6-8 months
- Single CBS - Seamless implementation of business rules and compliance process across banks
- Seamless migration - Banks can migrate to a newer version of the application solution and infrastructure solution with no dependency on their hardware and software
- Shared infrastructure - Low cost services infrastructure to increase the reach of banks in the rural areas
- Centralized operations - Centralized application and network support from Wipro’s shared services center on a shared model
- Improved management reporting and dashboards - Banks get the benefit from improved MIS reporting and dashboards
As banks explore these new models, it is clear that opting for pay-per-use models can offer significant cost advantages and convert CapEx to OpEx. At Wipro, we have enabled this model for several clients. This helps them free up capital that PSBs can deploy for other IT investments. A third-party managing assets like data centers would also be able to keep them up to date on security and latest technology without the banks having to worry about software updates.
A shift to the cloud and OpEx model will give PSBs the required agility and resources to navigate these turbulent times and be ready for the next innings of Indian banking. Are you ready to change the game?