This Is How Technology is Helping Small Banks to Compete with Large Ones

During the second half of 2015, when the Reserve Bank of India issued small finance bank license to 10 institutions of around 70 applicants, the regulator had to edge up in its goal to achieve financial inclusion.

While upgrading to small finance banks, these financial companies, largely microfinance institutions (MFIs), reported challenges in terms talent acquisition, updated technology, product innovation, etc. But very few spoke about the competition.

Even though the customer base for these small finance banks was different than that of a large bank, it indeed competes with the PSUs like State Bank of India and Punjab National Bank, if not private banks like HDFC Bank or Kotak Bank.

But like they say, there is nothing that technology cannot do. Entrepreneur India evaluates how these small banks can use technology to compete with their larger counterparts.

Access at a Lower Cost

Ittira Davis, Chief Operating Officer, Ujjivan Small Finance Bank's says technology has helped the banks to take banking to customer's doorstep while reducing transaction and turnaround times (TATs), which eventually helped in eliminating paperwork or another unwanted process.

"Technology has enabled us to open multiple channels to serve customers and reduce our operating costs – such services are usually offered to only premium customers of universal banks."

Customer Acquisition

AU Small Finance Bank has equipped almost all its functions with technology and has invested almost USD 40m in this process. Amiya Dikshit, CTO at AU claims that the technology stack selected and implemented by the bank is at par with some of the leading banks in India and hence, its customer acquisition and servicing TATs across Loans and Current and Saving accounts would be one of the best in the banking industry in India.

Discussing, some of the initiative spearheaded by the bank, the CTO said, "We are weaving an open source Architecture for managing entire customer lifecycle and offer him an easy and convenient Banking. A lot of initiatives are underway for the same. We are already doing a paperless acquisition of savings account customers through eKYC where accounts are getting opened within 10-15 minutes at a location convenient for the customer. We are working on opening Joint Accounts and Current Accounts faster through fully digital or digitally assisted route."

The bank is also looking to roll out AI capabilities across various use cases to reduce operational cost and increase efficiency and build capabilities around analytics to understand customer behaviour and demographic split to push for deeper wallet penetration of customers.

Last Mile Connectivity

While on the other side, for ESAF Small Finance Bank, technology has enabled the ease of delivering last mile connectivity through tab banking and digital sourcing.

In fact, the bank collaborated with FIS, a global financial software company, and supported the partnership with an experienced IT department with the sole motive of improving ease of doing banking.

"The cost of resources in delivering last mile connectivity would not be feasible for large banks. As proven campaigners in delivering last mile connectivity we always have the edge with local people as staff," shared K Paul Thomas, MD and CEO, ESAF while adding that, "Remember, for tackling the last mile issue we have to tackle issues related to transportation, infrastructure, density of population in rural and remote areas and mobility of the population apart from lack of education of the beneficiaries on financial products. They find it difficult to understand products like, bank accounts, cheque facility, bank loan or overdraft and insurance. Yes the task was huge, I am happy that we are competent enough to meet them without many issues."