How small finance banks are transforming the financial needs of rural India with the cloud

How small finance banks are transforming the financial needs of rural India with the cloud

With the growing need for digital inclusion across the country, rural India has also seen widespread adoption of digital payment modes and mobile apps, fueled by hyperlocation and the pain points of switching from cash-based transaction mode to services. digitized. With the BFSI sector in constant evolution, small financial banks (SFBs) have reached a nascent stage of evolution. These banking institutions aim to develop a viable business model to serve the financial needs of marginalized sectors of society.

Many of these new-age banks use the cloud and AI/ML to make faster, more informed decisions for their clients, with rapid risk assessments. For example, image and video analytics are used to automate loan processing and sophisticated analytics are used to speed loan restructuring at ESAF Small Finance Bank. When it comes to consumer preferences and purchasing behavior, the bank uses deeper analytics provided by Oracle’s autonomous data warehousing and analytics cloud services. This information enables the bank’s frontline workers to have informed interactions with customers to provide better service. Similarly, Shivalik Small Finance Bank offers a full suite of digital services to its clients, including UPI, E-mandate, online client onboarding, gold loans, and additional digital services by partnering with fintech institutions and neobanks. Mr. Shabeer Mohamed, Senior Director, Oracle Digital in a discussion with CXOThoy share your detailed thoughts on the same.

What is leading the rise of small financial banks??

Financial inclusion has become an imperative, with India rapidly advancing its digitization agenda: it is a way for all unbanked citizens to gain access to basic banking services. Small finance banks (SFBs) have acted as catalysts to accelerate this important movement. After almost seven years of existence, SFBs gradually gained momentum and have helped the underserved in the most remote parts of India to achieve financial inclusion. Over the past three and a half years, MFS have achieved a CAGR of 42%, followed by private banks at 13%. %

With rampant digitization and the introduction of new technologies, MFS were able to expand into digital banking and new business avenues. They were able to simplify processes for customers, develop new products for them, and improve the overall banking experience for customers. In recent years, many banks, including MFS, have embraced emerging technologies such as the cloud, artificial intelligence, machine learning, chatbots, and more, under which the banking industry has undergone a major transformation.

What is the role of AI/ML in the BFSI space and how are these technologies making the sector more efficient??

AI and ML have inevitably become important pillars of digitalization in all sectors. A study of Gartner found that by 2025, the 10% of companies that embrace AI/ML engineering best practices will get three times more value from their AI/ML efforts, compared to the rest of the companies that don’t. The BFSI sector, especially, will benefit from such technologies with the constant change in the way banking operations are carried out and how customers interact with banking products and services. For example, one of the banks in Spain took advantage of Oracle’s machine learning and analytics solution. They quickly saw results across the board in a number of processes. For example, a standard banking process, such as risk analysis for granting loans, was transformed; Previously, textbook derivation models were used, but Oracle Machine Learning was able to power sophisticated algorithms. The result was a 7% improvement in model accuracy, which translated into a 12% increase in loan benefits.

Driven by a competitive landscape, changing business models, increased regulation and compliance pressures, as well as disruptive technologies, financial services leaders are using the cloud to increase profitability and improve the customer experience. Cloud-native capabilities powered by AI and machine learning are accelerating the development of hyper-personalized digital banking services.

AI can go a long way in improving the customer experience and streamlining processes. For example, as reliance on digital banking accelerates, customers will expect faster responses to their questions and better personalized services. Here, AI can help meet customer requirements by integrating chatbots with digital banking. AI can also help aggregate data to predict future intent and have a more meaningful conversation with the customer. With the right uses of conversational AI and ML and NLP (natural language processing), a better customer experience can be created. AI can also help banks eliminate any system anomalies and prevent potential data fraud by identifying suspicious behavior or money movements.

Cloud adoption is gaining prominence among banks, despite being a highly regulated sector. This is because some cloud providers, such as Oracle, offer a second-generation cloud platform that is designed to provide banks with security, reliability (disaster recovery, high availability), and powerful capabilities for large and complex deployments. .

We have also partnered with multiple AI and ML startups that provide solutions such as multilingual conversational AI and NLP-based process automation for various verticals, including banks. These innovative companies hosted on Oracle Cloud help banks achieve automation and digitization at attractive prices. Some examples are e42.ai, Gnani.ai, deepvisiontech.ai, etc.

How are FFS facing cybersecurity challenges while leveraging the cloud??

The cloud is becoming a game changer for financial companies and that is why security becomes a very important principle to be able to manage their businesses. With more than four decades of experience managing the world’s most important mission-critical information – data – we at Oracle approach everything with a security-first mindset and our solutions are designed to deliver high performance at low cost. . According to a recent cloud threat report from Oracle and KPMG, it was found that due to a fragmented approach to data security, misconfigured services, and confusion around new cloud security models, there is now a lack of trust that organizations that are part of security must solve. of business culture. Additionally, the study found that nearly 75% of IT professionals consider the public cloud to be more secure than their own data centers; however, 92% of IT professionals are not confident that their organization is well prepared to protect public cloud services.

Oracle’s second generation cloud infrastructure offers security at its core. We have made available two second-generation cloud regions in India, spread over two different seismic zones (in Mumbai and Hyderabad) to help SFBs comply with data residency regulations and aid in better disaster recovery.

In our ongoing effort to help customers ensure their most important information is protected from breach, we recently expanded OCI’s built-in security services and capabilities. New capabilities include OCI Network Firewall, Oracle Threat Intelligence Service, Oracle Cloud Guard Threat Detector, expanded Oracle Security Zones, and Extending Oracle Cloud Guard beyond cloud security posture management for OCI. All of these have been well received by our banking customers.

How do FBS take advantage of the OCI? Please share some implementation examples.

Oracle has been supporting SFBs in their digitization process for some time. For example, Shivalik Small Finance Bank, ESAF Small Finance Bank, and AU Small Finance Bank, among others, all leverage Oracle Cloud Infrastructure to run their businesses.

Shivalik Small Finance Bank, with a network of over 4.5 lakh clients, leverages Oracle Cloud Infrastructure to deliver a superior experience to its clients. The bank enjoys the benefits of products such as API Gateway, Integration Engine, Database, among others. The bank implemented phase 1 of the API Gateway and the integration engine in 3 months through the Oracle Integration Cloud service. They expect a 25-30% reduction in total cost of ownership along with 10-15% improved efficiency through the use of OCI.

Small Finance Bank ESAF, with more than 550 branches in India, leverages Oracle Autonomous Data Warehouse and Oracle Analytics Cloud to develop meaningful insights with a segmented view of the database. Internal decision makers now have access to core business analytics on an individual basis. The bank also aims to better integrate industry data to better understand customer behavior and preferences.

Small financial bank from AU leverages cloud technology to bring modern financial services to millions of “unbanked” citizens and businesses in rural India. About 80 percent of the bank’s technology is powered by Oracle, and Oracle’s cloud technology supports every part of the loan application and account management process. The bank has embraced Oracle’s analytics, machine learning, integration services, blockchain, and even chatbots. Most importantly, Oracle Cloud is helping the bank keep customer data current, accurate, accessible, and secure.

We have many examples of these types of small finance and cooperative banks that are taking advantage of our state of the art, second generation, meidad Certified data centers in Mumbai and Hyderabad.

What is the future of FBS in the country with the rapid technological acceptance?

FBS have a crucial role to play in ensuring that financial services are provided to all citizens of India. This is especially critical in a country where nearly 191 million people are unbanked. With the help of new emerging technologies like the cloud, FBS will be able to speed up their agenda by making banking simpler for users.

In an effort to improve the banking ecosystem in India, FBS offer services such as account opening, online payments, money transfers, and also services such as micro-credit. By doing so, FBS are making a great contribution to the growth of India’s digital literacy quotient. Through its services, a new generation of people will be financially educated and everyone will have the opportunity to play an important role in the financial and digital ecosystem of India.

Leave a Comment