Banks face tech resilience test as Covid-19 boosts digital services

• Early this month, 80-90 per cent of SMSs and OTP messages failed to get delivered when telecom service operators implemented the template registration and scrubbing regulations formulated by the Telecom Regulatory Authority of India (Trai) to eliminate spam and fraudulent commercial communications. 
• In December last year, the Reserve Bank of India (RBI) had pulled up HDFC Bank over outages and asked the bank to stop all new launches in digital services.

Why did the outages happen? While Indian banks have no doubt been investing in technology to scale up their digital banking capabilities, the technical glitches are due in part to the huge surge in the use of online banking in the wake of the Covid-19 pandemic.

Avinash Raghavendra, executive vice president and head of information technology at Axis Bank, says both customer behaviour and employee expectations underwent a major transformation in the aftermath of the pandemic. The adoption of digital channels increased substantially among customer segments that had until then preferred branch visits.

Axis Bank’s mobile and internet banking platforms witnessed a surge in online payments, transfers and fixed deposit openings after the pandemic struck. Between April 2020 and January 2021, mobile banking transaction volumes doubled to 39 million, while internet banking transaction volumes grew 60 per cent to 7 million.

Dinesh Khara, chairman of State Bank of India, said last week that SBI’s digital banking platform, Yono, has 35 million registered users. The bank is opening over 35,000-40,000 savings accounts a day through its mobile app, and Rs 16,000 crore worth of pre-approved personal loans have been disbursed to 12.82 lakh customers through Yono in the current fiscal year. To be able to serve this growing body of digital banking users, Khara said, SBI is constantly augmenting the supporting infrastructure.  

Raghavendra explains that banks need to be constantly on guard against cyber threats and tech outages. “We have been investing disproportionately on building resilient infrastructure over the last couple of years. Resilience is an area where all leading financial institutions will constantly need to raise the bar,” he says.  

Axis Bank has identified five thrust areas to make its technology landscape future-ready — evolving digital ecosystems and regulatory compliance; agile and DevSecOps methodologies (a mindset that involves making all employees responsible for IT security); an application programming interface (API)-driven approach; automation using artificial intelligence (AI) and machine learning (ML); and moving to the cloud. 

Not all banks have had a smooth ride on this digital journey, the result of a mismatch between business demand and the technology architecture, says Mahesh Ramamoorthy, managing director, banking solutions, FIS India. The key is “how well your business architecture is aligned to your technology structure. When it comes to managing fast-changing transaction behaviour among customers, the right level of agility from the banking system is the need of the hour.”

Subram Natarajan, director and chief technology officer, technical sales, IBM Technology Sales, India/South Asia, believes that the banking industry necessarily needs a rebirth. “Financial services are being mixed in with services or products from other areas and industries, and banking is becoming embedded — sometimes almost invisibly — in non-bank business processes,” he says. 

According to a study by the IBM Institute for Business Value, core banking activities that have long been profitable are being rapidly commoditised. The competition comes not only from fintech startups, but, more importantly, from some of the most powerful businesses in other industries, and regulators are encouraging disruption to boost technological innovation. 

The RBI, for instance, has been proactive whenever banks fail in giving customers a seamless experience. Raghavendra of Axis Bank agrees with the regulator’s stand. “The pandemic and the resultant change in customer behaviour has accentuated the role of technology. Hence, it is natural that both customers and regulators expect banks to provide 24x7, reliable world-class services,” he says.

Axis Bank has been using advanced tools like AI, bots and natural language processing to improve the quality of its customer interaction. The bank’s Conversational AI for its inbound channel serves the customer with 650 concurrent calls, with a daily volume of between 60,000 and 75,000 interactions.

Raghavendra also explains how the bank handled the recent disruption in banking services and OTP delivery: “Since we work with multiple aggregators, it helped us to swiftly divert OTP and other transactional communications traffic to an aggregator who was delivering a higher success rate. And with Trai extending the deadline for compliance, we are making doubly sure that all our communication traffic is registered.”

One-time hiccups and other muddles
 
The Trai’s Telecom Commercial Communications Customer Preference Regulations (TCCCPR), 2018, had directed telecom operators to implement a way to scrub spam messages over their networks. Banks and other registered telemarketers were required to register their templates with the telcos, which they failed to do in time. This resulted in delays and failure in the delivery of OTPs and other SMSs when the regulations were implemented earlier this month.
 
Says Himanshu Goel, telecom expert and CEO of management consulting firm Azpiro Systems: “This could have been avoided if telemarketers had educated their customers about the upcoming change. Banks should also have got the templates approved in time.”
 
He adds that the templates are stored in a distributed ledger format (the technology underlying blockchain) but there is a layer of application software that filters messages sent over the network. This means that the software was preventing message templates (including those for OTPs) that were not in the distributed ledger being marked as spam and prevented from being delivered.
 
In February, in response to a writ petition filed by Paytm Payments Bank Ltd and One97 Communications, the Delhi High Court had asked Trai and the telcos to strictly implement the regulations, in order to curb unsolicited commercial communications.