India's ICICI Bank sets up digital department to explore blockchain

Rage Comment : Technological progress is constantly changing the internal structure and operation mode of banks. The new wave of digital technology with blockchain as the core has brought new opportunities for upgrading and evolution. Blockchain can change the functions of existing banks and strengthen the interaction between banks and customers; however, the traditional model and business growth points of banks have not completely lost their significance, so the transition from tradition to modernization still needs a certain amount of time to accumulate. This process is destined to be bumpy. Therefore, if banks want to control their own destiny, they should actively explore new technologies and maintain their own technological advantages.

Translation: Annie_Xu

According to the news report, Chanda Kochhar, CEO and Managing Director of Industrial Credit and Investment Corporation of India (ICICI), said:

The bank has set up a Chief Technology and Technology Officer (CTDO) and a Technology and Digital Group (TDG) to work on improving the bank's digital technology. ICICI believes that blockchain can make the banking industry safer and more prosperous.

The TDG group will help banks improve their digital technology capabilities in commercial, retail and wholesale banking, treasury, and small and medium-sized enterprise businesses.

ICICI Bank, India’s largest private bank, plans to use AI chatbots to act as quasi-bankers that can provide loan advice and remittance services.

Adopting blockchain technology

ICICI plans to use blockchain to improve customer service experience, and Kochhar said blockchain can reduce costs and improve scalability.

For example, blockchain can be used for import and export trade. Banks can use blockchain to connect the entire trade process, including the place where the goods are produced, the place where the export certificate is issued, the acquisition of trade documents and bank payments. Kochhar said that open ledgers make the process more transparent, thereby reducing fraud and preventing data entry errors.

The IBM white paper points out that the shared ledger can provide traceability, immutability, consensus and certainty for asset transfers in business networks. It can reduce complexity, cost and time; support shared, trusted procedures, trusted recording methods and better discoverability.

New department to provide benefits to customers

Kochhar said the CTDO will work closely with different business units to find digital solutions for specific customer problems.

ICICI Bank is the first bank in India to use online banking, which customers can access through smart watches, tablets, smartphones, laptops, and desktops. In addition to online banking, ATMs, mobile banking, and smart watches, customers can also conduct real-time remittances and other banking services on social networks, which can reduce transaction costs.

Three years ago, ICICI expanded its tablet banking service, where bank staff can visit customers’ homes or offices directly, obtain photos of KYC (know your customer requirements) documents, send them to the bank, and then open a bank account within a few days, making the entire process paperless.

Kochhar said that when investing in tablet banking, they realized that it could improve sales efficiency and increase sales staff's sales volume; and the return on investment was extremely high.

Tablet banking opens up a new world

After tablet banking improved efficiency and supported KYC compliance, the bank has stepped up its back-end digital offerings and improved the client side. Kochhar said this is about rethinking the complete customer service process from account opening to account switching.

Transactions at bank branches usually require bank employees to open five separate computer windows at once, which is time-consuming and limits the number of transactions that employees can complete in a certain period of time. The digitization of the core system simplifies the process so that only one computer window is required for the transaction process.

Three years ago, the bank obtained relevant information from third-party suppliers, and bank employees also simplified the process of solving customer problem solutions. This movement is called "youthization" and actually solves the deep-seated needs of customers.

Kochhar said the campaign was carried out from top to bottom and bottom to top. Everyone who interacts with customers and suppliers uses digital tools to simplify processes. Before making a decision, we discuss various ideas extensively to find the best solution.

Banks need to make information technology accessible to everyone, rather than confined to the bank headquarters. Bank executives visit each branch to ensure systems, user experience and network bandwidth. Kochhar said that if employees are happy, the user experience will be better.

Digital technology improves management model

The digital strategy includes improving administrative functions so that employees can complete tasks, request vacations, and finalize emergency rosters even when they are away from the office, without having to spend long hours logging into the system on their office computers.

Chanda Kochhar

While banks build their own services, they can also consider cross-sector collaboration. Kochhar said banks can internally implement the functions of mobile wallet companies and Internet finance companies as long as they can maintain technological advancement.

Of course, there will be competition for personnel and collaboration. ICICI Bank hopes to become a leader in the Internet finance industry and compete with other companies in many areas.

Combined Solution

It is not appropriate to throw customers to third-party service providers because customers may have established a long-term relationship with the bank. For example, ICICI Bank provides mobile wallet services in-house. The bank cooperates with companies in the e-commerce field so that customers can shop online and then pay for the goods using the bank's digital functions.

Kochhar believes that branches will remain an important form of presence and growth for banks, but they will operate in a different way.

90% of transactions are now done outside the bank, yet branches are still busy because they need to provide empowerment and presence. Banks use branches to connect with customers in different parts of the country because physical presence is essential to expand banking business.

In the future, the branch will focus on customer value-added services.

How digitalization is changing the banking industry

Alok Shende, founder, chairman and chief analyst at consulting firm Ascentius Consulting, said that the digital world is increasingly interacting with traditional banks. The white space between traditional and new banking will not be flat or linear.

The financial industry will compete with small, insignificant but skilled players in the digital world. Only 10%-15% of digital data will be analyzed in the search for new insights. As the amount of data increases at an exponential rate, banks will gradually lose the ability to profit from new assets.

Centrum Broking Ltd., a brokerage firm, pointed out that the traditional banking model feels a strong threat from new technologies. The Unified Payments Interface (UPI) will gradually replace mobile wallets. UPI does not require a separate bank account, unlike current mobile wallets that only serve people with accounts. This benefit expands UPI's customer base, while banks' customer base is more limited.

The World Bank reports that 35% of India's 636 million people have bank accounts, while 80% have mobile phones. Researchers Siddhartha Khemka and Sweta Chawla, who wrote the Centrum Wealth Research study, said UPI has a higher market penetration than mobile wallets.

There is still room for further progress for banks

Consulting firm PricewaterhouseCoopers (PwC)'s "Retail Banking 2020: Evolution or Revolution?" The document points out that banks are in the middle of multiple trends. The initial focus of digital technology is to optimize existing products and services. A new wave of technology is about to come, and more efficient data acquisition and analysis will provide more target customer products and services."

Mobile banking will disrupt the distributed model and payment industry. Examples include instant video conferencing between product experts and P2P mobile payments. Security and authentication methods will gradually evolve, and all sales, services and product shipments will be completed online.

PwC points out that technology allows people to change banks at will and improves the relationship between banks and customers. The third wave of technology will allow banks and their partners to collect more customer information.