UID: A Major Game Changer For Indian Banking

UID will prove as an enabler of sorts for banks to bring in more customers to access banking services

UID, among the most ambitious projects undertaken by the Indian government, could well turn out to be one of the biggest examples of how technology can change the rules of the game. Speaking at the CII Banking Tech Summit 2011, Dr. K C Chakrabarty, Dep. Gov., RBI, hailed UID as a major game changer for Indian Banking and IT experts alike proclaimed in unison that UIDAI's ability to bring India's vast un-banked population into the ambit of access to banking services, makes it capable of changing the very dynamics of the Indian banks. What this means for the banks is the need to build their systems around the UID architecture. And, they will need to get started now.

Various other technologies like online banking, social networking, cloud computing, mobility architectures, Big data, SOA will also prove to be major game changers for the next phase of banking in India.

Building Systems Around UID Processes

Given the vast proportion of the population still untapped in terms of access to the banking services, this is a major challenge as well as opportunity for the Indian banks trying to find ways to increase their customer base. UID will prove an enabler of sorts for banks to bring in more customers to access banking services. Citizen identification is one of the major impediments in the way of filling the gap between the banked and the unbanked.

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Citizens registered under UIDAI and with the possession of UID numbers would automatically comply with the 'Know Your Customer' (KYC) norms set by the RBI. Thereby, eliminating the long drawn procedure of capturing customer details during the registration process for opening a bank a/c. UID will ensure citizen identification in the rural areas at individual, family and village level. According to Hanuman Tripathi, Group MD- InfrasofTech, "The identification will ensure that bank A/Cs can be opened with much ease because the KYC norms will be taken care of."

Therefore, banks need to innovate and build systems around UID architecture to deliver full range of financial services. "UIDAI and banks should engage in a close knit relationship and develop systems that would act as a one stop shop for the consumers to access banking and other services," suggested Dr. Chakrabarty. However, technology alone cannot ensure the required impact and will need to be complemented with the right set of products from the banks. As Dr. Chakrabarty recommended, banks will need to have products that suit the customer requirements and also offer more choice, given the fact that although 75 million no-frill accounts are opened for the poor in india, there hasn't been enough amount of transactions happening in those accounts. Right mix of technology and relevant products will hold the key.

Besides enabling outreach to the unbanked and fulfilling the financial inclusion agenda on top of the banks' priorities, UID will also help banks operate more efficiently. "UID will go a long way for banks in acquiring customers faster," said Murli M. Natrajan, CEO- Development Credit Bank (DCB) . He further added that DCB will be collaborating with UIDAI.

Drivers For Next Generation Banking

As more citizens gain access to banking services, the banks should think big in order to scale up to the huge demand this will bring in. A bold step towards this can be how can banks make themselves paperless, chequeless and cashless in the times to come.

The first priority is to get all banks on to adopting Core Banking Solution (CBS), including all RRBs. Next, a multi-channel approach using handheld devices, mobiles, cards, micro-ATMs, branches, kiosks etc. can be used. However, what also needs to be ensured is that the transactions put through such front-end devices are seamlessly integrated with the banks' CBS.

RBI on a regular basis publishes an IT vision document which prescribes guidelines and directions to banks to provide an ecosystem that would enable advanced banking practices. Dr. Chakrabarty suggested that banks have Automatic Data Flow (ADF) facility from their MIS server to the CBS, which would free up manual resources from these systems and they can be engaged in more productive work.

He also underlined the importance of increased competition among the IT products and solution providers to bring down the prices of advanced products to reasonable levels. These products would include mobile banking, social networking, advanced analytics, Big data, cloud computing etc. However, in the midst of this barrage of offerings banks would also need to ensure that the transactions are made easier and more secure.