As India’s fifth-largest bank, as well as its youngest, Yes Bank has taken to helping businesses adopt digital banking and finance strategies. Consumers have pulled the nation up into the world’s leading ranks for mobile and online commerce and payments — why shouldn’t businesses follow suit?
In its efforts, Yes Bank has just released a new knowledge report on digitizing corporate banking procedures. “Digitizing Transaction Banking” was unveiled last week by Yes Bank CEO Rana Kapoor, alongside software public policy organization NASSCOM.
According to Kapoor, India’s banks are experiencing a shift in the adoption of technology. As alternative FinTech players enter the market, digital banking will proliferate in the market, and business clients won’t want to be left out.
“While there are significant developments in the B2C payments, the B2B payments landscape is also undergoing a tectonic shift with the influx of new financial technologies revolutionizing the way banking services are offered to corporate and retail customers,” Kapoor said in a statement announcing the report.
Kapoor and NASSCOM President R. Chandrashekhar provided a joint introduction to the report, discussing what those “tectonic shifts” involve.
According to the executives, the nation is quickly participating in the Internet of Things, and technology is overhauling the traditional lifestyle of consumers and businesses in India. That means big changes in what corporates want their banking experiences to look like.
“To succeed in the digital world, it is becoming increasingly important to adopt habits and culture of digitally native companies,” the authors said. “While digital banking concepts in India are still in nascent stages, with few scalable profitable models, we believe that the digital battleground presents a unique opportunity to reduce costs, develop new propositions and business models, attract new customers and explore customer value to its maximum.”
The report identifies the strategy for digital corporate banking as “Digical” — that is, a combination of digital and physical. Just how much of each side, however, is a delicate balance.
Waves Of Innovation
Yes Bank’s report identifies 2004 as the year digital banking truly began to take off for businesses. It began with the introduction of electronic payment modes and the replacement of bulk paper checks with bulk files with payment processing instructions. These processes served as a catalyst for other digital transacting methods, like processing electronic receipts from debtors, the introduction of ERP and accounting platforms.
When it comes to trade financing, the report’s authors said regulations have forced the paper check to stick around a bit longer. But recently, banks have begun to develop online platforms for companies to upload trade finance documents, like letter of credit requests.
But there remains a lack of straight-through processing in many of the digital services offered to corporates, the report added.
For digital corporate banking to truly take off in India, Yes Bank argues that there are key characteristics innovative solutions must include.
The first is customization. For banks, this means the investment in digital assets must help bridge the gap between banks and their corporate customers, like payment hubs or enterprise service bars. These solutions, the report explained, allow banks to provide a customized front-end experience to businesses, while standardizing formats and protocols on the back end.
Online security is another primary demand for corporate banking clients, Yes Bank said. For digital banking, this involves authentication, confidentiality, data integrity and non-repudiation.
Yes Bank pointed to three areas in which it is exploring ways to enhance online banking security. Public key infrastructure is one recommended by the Reserve Bank of India; it involves the secure holding of a user’s digital certificate needed to authorize transactions online. The bank said it is also exploring biometric authentication technologies and challenge-response tools, which require soft tokens installed on mobile or laptop devices.
Corporate clients don’t necessarily want to give up human interaction for an entirely digital banking experience, the report added. Omnichannel services will be crucial to meeting enterprise banking needs, meaning customer service remains the same quality across channels.
Then, there’s the ART approach to enhancing digital banking — alliances, relationships and technology. These are three aspects of adopting digital tools, encouraging banks to partner to develop new solutions, using data to understand customer relationships and investing in technology and supporting contemporary solutions through channels like smartphones and social media platforms.
Finally, Yes Bank advises the nation’s financial institutions to embrace a digital reorganization. Banks must provide a straight-through experience to corporate clients, and that could mean reorganizing the underlying infrastructure of processing transactions. Automated document processing from the front end to the back end of the bank will be key.
How To Proceed
Yes Bank identified a few key areas in which these strategies should be deployed, including SME banking and corporate mobility. The FI added that commercial cards and digital wallets are also likely to be key tools for businesses moving forward.
But naturally, there will be some resistance to this change. According to the bank, sophisticated payment services and technologies remain stuck in the “early adoption” phase of their rollouts.
“Banks have the resources to modernize their corporate relationships, but many continue to rely on old practices,” the report concluded. That, coupled with unique manual processes that corporate clients each deploy, means overhauling enterprise banking services to be more streamlined and digital will not itself be an easy process.
Kapoor and Chandrashekhar said that the near future will be a time to watch in India’s corporate banking industry.
“The next few years will be certainly very exciting for banks,” they wrote in their introduction, “with an interesting interplay of various technologies, coupled with banks and other financial institutions collaborating with the tech companies through ART that will challenge the banking and payments landscape in our country and across the world."