BPM is new tech buzzword at Indian banks

The Indian banking industry is currently in a phase of transition. While PSU banks are shedding flab by implementing VRS schemes and deploying technology aggressively, private players are looking at consolidating their strengths through mergers or acquisitions. With speed being the key differentiator in service delivery, BPM solutions could hold the key for banking players as they look to become one-stop shops for insurance, equity investments and of course banking. Srikanth R P reports

According to Punit Jain, while banks have invested a lot in core banking solutions, the ability to handle and process documents still remains an issue

This is one experience that is shared by many other Indian customers every day. After submitting a sheaf of documents to open a demat account at a private bank, Akash Patel, a savings account holder at the same bank, has been waiting for his demat account number for more than a month. When Patel contacted the bank’s customer service centre, he was given a lame excuse—the bank said that since the account executive handling Patel’s account had left the organisation, the bank had no clue about the forms submitted by him. Disgusted with the experience, Patel has vowed never to deal with the bank again.

As Indian banks go all out to woo the customer, they are not only relying on their network of branches but are also hiring direct sales agents (DSAs). While DSAs provide the much-needed number of accounts, the bank does not have much control over the agents. This results to a delay in processing of documents and many a time leads to a very angry customer. If the bank could control the flow of documents through the organisation, it would lead to better control and faster turnaround in responding to the end-customer.

Solution

This is where BPM solutions could help. Says Punit Jain, VP, Sales and Marketing, Newgen Software Technologies, “With every bank in the country fighting over the retail market, the main difference will come from faster service, without compromising on quality. While banks have invested a lot in core banking solutions, the ability to handle and process documents still remains an issue. For example, if a customer opts for a home loan, his creditworthiness has to be checked. This typically involves processing documents at the branch level and routing them to product experts at the branch. But as product experts handle the entire processing at branches, the dependency on them is extremely high. Further, as few experts and officers are handling both applications and queries, the burden on them is increasing with the increasing volume of applications. The result—high turnaround time in responding to a customer.” Jain proposes a BPM solution that would automate business processes to help banks achieve the desired results.

For example, the processing of certain documents for say, trade finance operations, could be done at a central location instead of routing them to branches. Even in case of retail loan processing, a BPM approach could help banks in not only lowering the time taken to process a loan request but also track the exact status of each loan application. Market analysts say that in most cases, the turnaround time for responding to a customer has been reduced from four to five days to less than a day. As all documents are electronically filed, the risk of losing a particular document is also eliminated.

Even in credit approval processing, BPM solutions can go a long way in reducing the time to collate and analyse client history for granting or reducing credit. This concept can be extended to making credit history and information on a customer collected in one part of the country available across branches so that the same can be reused at another instance of a credit request. While private banks like HDFC Bank are leading the pack in adopting BPM solutions (it has adopted Staffware BPM solutions), the biggest beneficiary of BPM solutions would be PSU banks as they have huge networks.

Bullish on India

While most banks have invested in core banking solutions, most of them do not have an automated process to manage and track their documents. BPM vendors like Staffware and Newgen are naturally bullish on the Indian banking space as it is still a huge untapped opportunity. According to RBI, there are 65,000 branches in India of which 46,000 branches (70 percent approximately) are rural or semi-urban branches. Even after an extensive drive for automation, only 13,000-odd branches are automated.

The impact of lack of technology and infrastructure in the Indian banking space is summed up perfectly by Paul Maguire, country manager, Staffware when he says, “Today, the majority of PSU and co-operative banks do not have a homogeneous system. This results in incompatibility and since data collection and storage is not centralised, banks cannot provide real-time online data or even simple facilities like ATMs. Further, since the Indian banking industry lacks automation there is a lack of methodology to aid the continuous comprehension and management of business processes that interact with people and systems, both within and across organisations. This process can be greatly enhanced if a BPM solution is installed in conjunction with a core banking solution. Also, since processes are extremely tedious, a lot of costs are incurred in employing a lot of people who could otherwise be effectively deployed in areas where their productivity could be used more effectively.” But the real difference, Maguire believes will come from the level of service each bank offers to the end-customer.

He adds, “Most urban banks offer more or less the same product. But it’s the services and value-addition that can create the key differentiator and swing a customer’s decision in either opening an account or accepting a financial product from a bank. BPM can offer the banks the key differentiator that can swing customers in their favour.”

With the need to follow regulatory norms like BASEL II and regulations from organisations like the RBI, Indian banks need BPM solutions to compete and survive in the market, says Paul Maguire

Similar to what ERP was to the manufacturing sector, BPM is now being seen as the technology to adopt among banking and insurance firms as both these sectors handle a lot of paper documents. Globally, spending on BPM solutions is expected to increase to $6.32 billion by the year 2005 according to research firm, Aberdeen. The market for BPM solutions in the Asia-Pacific region is expected to grow from 20.7 percent in 2003 to 36.1 percent in 2005. Total BPM spending is estimated to grow at a CAGR of 29.3 percent during 2001-05 with financial services being a key BPM spender. With both competitive and regulatory pressures more intense than ever, the Indian banking sector looks a ripe sector for BPM vendors to tap.

Says Maguire of Staffware, “India is one of the key BPM markets in the Asia-Pacific region. With the need to follow regulatory norms like BASEL II and regulations from organisations like the RBI, banks need BPM solutions to compete and survive in the market.”

Says Anand Narayan, vice president, IT, HDFC Bank, “We have adopted BPM solutions for lowering our operational costs while maintaining higher levels of service. The BPM solutions will not only help in ensuring consistency of service across all locations but also enable us to allocate work dynamically. We also have the ability to use a single BPM infrastructure to cater to multiple departments and functions.” Similarly, ICICI Bank is also using BPM solutions from Staffware to streamline and accelerate core processes such as account opening for retail banking and trade finance for corporate banking.

srikanth@expresscomputeronline.com