Investment in digital banking infra lags rising scale

Banks must assess the scalability of their digital banking applications on a regular basis, experts said.This comes at a time when the twitter handles of various banks have been flooded with complaints over data outages. On Monday, largest lender State Bank of India (SBI) said that some of its digital banking services had been impacted due to a technical glitch. While SBI resolved the issue, similar outages have recently affected services of DBS Bank and HDFC Bank.

“Typically, these outages happen when there is an exponential increase in transaction volumes — month-end, quarter-end or year-end, or when there are some upgrades of the application (typically for customer-facing channels like internet banking, mobile banking, etc). It is then that products and services enabled on these channels get impacted or degraded. Either the IT infrastructure goes down to capacity utilization or the application itself has challenges with handling high, concurrent volumes, or it could be due to a combination of both,” Asim Parashar, partner, PwC India, said. “Resiliency and scalability have to be assessed for their applications (transaction processing and payments) and their underlying infrastructure on a continuous basis.”

A majority of transactions on these banking channels is done through the unified payments interface. A total of 91.9 billion digital transactions were undertaken in April-December, compared with 20.7 billion transactions in 2017-18 (April-March), the latest data from the Ministry of Electronics and Information Technology showed.

While banks have been focusing on technology investments to enable better customer experience and make operations efficient, a more concerted effort is required to manage the load of rising transactions, said experts.

“There are two aspects. Firstly, load is increasing, and secondly, people are not proactively investing. Graceful degradation models are not fully implemented, sizing is not proper and nobody is studying the load systematically and proactively. Online transactions may have increased  fivefold in the last five years. But, investments in digital infrastructure has not happened to support this. Perhaps the rise in transactions has not added that much to the bottom line and so people are conservative in investing,” Muraleedhar Pai, executive director, Maveric Systems, said.

“The expenditure that banks are incurring on technology today is reactive. In banks, chief financial officers would not like to spend much on digital infrastructure because it does not add much to the top line or the bottom line,” he added.

Current technology infrastructure of banks largely lacks innovation. Banks must ensure that their staff is adequately prepared to manage and deal with any technical glitch in a real-time manner. They must also be provided with requisite facilities for the same. Additionally, banks need to make sustained investments for monitoring of end-to-end business transactions, said experts.

“Given how crucial banking is to a customer’s day-to-day operations, technical outages and glitches are likely to have a significant impact, including breach of their sensitive personal data. Accordingly, it is of material importance that banks and lending entities take adequate steps, including investing in the necessary technological resources and security measures, to resolve and reduce frequency of such outages,” Namita Viswanath, partner, IndusLaw, said.

However, banks will take time to scale up their digital banking processes as requirements vary from entity to entity, say bankers.

“The scale is very unpredictable. While we look at it from a March 31 perspective, I know that on March 31, IPL also started. When IPL starts, Dream11 fantasy cricket transactions also happen. As a bank, you will budget for higher transactions during IPL. These things can happen at a fixed period. Scale is very specific to the institution. Some institutions may have built up scale on their internet gateway, but not on the backend. Some may have built up scale on the backend, but not on the internet gateway,” the chief information officer at a leading private bank said on condition of anonymity.

“To summarise, it is the unpredictability of scale that is proving to be a big factor for banks. This is an area where you cannot scale directly, it takes some time. Depending on the level of investments that have already been done, one can end up spending a month or one could end up spending multiple months,” the person quoted above said.

Source; Financial express

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