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Banks told to Explore Dashboard with Real-time Info on Services

RBI Urges Banks to Create Real-Time Service Dashboard Enhancing Transparency for Banking Services

Source: Article by ET Bureau published on Dec 29, 2023, in Economic Times titled “Banks told to Explore Dashboard with Real-time Info on Services”

Analysis for a Layman

Banks have recently faced technical issues causing temporary disruptions to their apps, net banking, and payment services. These outages inconvenience customers who can’t access their accounts or make transactions.

To address this, the RBI (Reserve Bank of India) has suggested that banks create an online dashboard providing real-time updates on:

  • The availability of net banking and mobile apps.
  • The status of payment services such as credit cards, UPI (Unified Payments Interface), and IMPS (Immediate Payment Service).
  • The functionality of settlement systems like RTGS (Real-Time Gross Settlement) and NEFT (National Electronic Funds Transfer).

This dashboard, referred to as the “SEWA portal,” would allow bank customers to check the status of these services before attempting transactions. If a service is down, customers can choose alternative options.

Banks have also faced penalties for frequent service disruptions. This live status page will help them identify and resolve problems more quickly. Additionally, customers can compare the reliability of different bank apps and payment channels.

The RBI believes that this transparent view will encourage banks to improve their systems, add extra capacity, and prevent outages more effectively. Some banks may also consider outsourcing technology services that require better supervision.

It remains to be seen if banks can establish this helpful dashboard for users soon. While it may require coordination, it will provide peace of mind for online banking customers.

Banks told to Explore Dashboard with Real-time Info on Services

Impact on Retail Investors

For investors in bank stocks, the RBI’s guidance on creating a service dashboard underscores the risks associated with recurring technology disruptions and outages in today’s digital payment landscape. However, it also presents opportunities for adaptation.

In the short term, investors should monitor whether private banks like HDFC Bank, ICICI Bank, and Axis Bank face regulatory actions or penalties due to technology failures that affect consumers. The recent embargo imposed on HDFC Bank demonstrates that persistent weaknesses can have a significant impact on business operations. Fines and license restrictions directly affect revenue streams.

Over the medium term, openly communicating technology platform stability and performance metrics would benefit banks. Banks that provide reliable and trustworthy digital banking options may gain market share. Customers who prioritize usage and pricing could reward minor advantages in service quality.

Top banks upgrading their technology also help them save costs through automation over time. Being proactive now positions them better to compete with fintech challengers in the retail banking sector.

For vendors like Mphasis, LTI (Larsen & Toubro Infotech), Mindtree, and others that provide banking IT services, transparency requirements may drive more outsourcing contracts to specialized players. However, accountability will increase, ensuring that robustness, security, and responsiveness standards are met.

In summary, adapting systems to prevent and manage digital outages offers a first-mover advantage. On the flip side, regulatory risks should also prompt investors to seek clarity from banks regarding their mitigation strategies.

Impact on Industries

The RBI’s proposal for a SEWA dashboard providing real-time updates on banking services availability has positive effects on interconnected industries such as:

Fintech Software: The creation of a nationwide real-time monitoring system with suitable redundancy to maintain transaction pipelines opens up opportunities for specialized software vendors to offer packaged solutions or support integration projects. Banks would prefer scalable and secure technology partnerships that meet compliance standards.

IT Services & Infrastructure: Expanding capacity on digital banking platforms presents opportunities for IT giants like TCS (Tata Consultancy Services), Infosys, and others to modernize legacy systems through cloud adoption, dedicated payment networks, and more. Third-party data center partners also stand to benefit.

Telecom: Enhancing connectivity infrastructure to ensure round-the-clock banking services through upgraded networks, localized data centers, and cybersecurity enhancements will continue to generate strong demand for telecom equipment providers and business-focused connectivity firms like Airtel Business and Jio.

Fintech Startups: With reliability becoming as important as convenience, smaller fintech firms must also invest in resilient architecture. Those who gain trust through a track record of reliable performance can increase adoption faster when major bank platforms face disruptions, thanks to transparent public visibility.

Overall, the emphasis on ensuring that digital banking services are available at all times focuses on continuity planning and systemic capability improvements, rather than just incremental upgrades.

Long Term Benefits

Over the next 5+ years, the introduction of public real-time service dashboards in banking could lead to the following structural improvements:

  • Resilient Infrastructure: Banks would undergo a structural overhaul of their technology foundations to handle peak capacity, security threats, and process complexity, improving maturity.
  • Responsible Innovation: The rollout of new features would prioritize stability, with rigorous testing before launch. The pace of innovation would align with execution capability.
  • Level Playing Field: Uniform visibility would enable objective comparisons of bank platform availability, preventing weak IT budgets or governance from hiding behind marketing claims.
  • Business Continuity: System redundancies, instant failovers, and geographic contingencies would become standardized, minimizing the impact of outages.
  • Trust Building: Reliable functionality would establish credibility, particularly with historically underserved segments like rural markets, driving financial inclusion. Advancements would feel more inclusive.

However, there are risks associated with publishing visibility irresponsibly or causing trivial customer complaints without appreciating the scale of difficulties involved. Balanced education about the progress made is necessary to mitigate these risks.

Overall, unrelenting transparency has the potential to structurally transform banking technology in terms of reliability, accountability, and consumer experiences, increasing user confidence and participation over the long term.

Short Term Positives

In the next 1-2 years, the RBI’s proposed dashboard for banking services offers several immediate benefits, including:

  • Empowered Customers: Instant visibility enables account holders to plan transactions with awareness of potential outages, allowing for better budget management.
  • Responsible Pricing: Banks with superior technology availability may justify higher fees based on quantifiable service quality differentiation disclosed openly. However, value messaging must resonate with users who experience tangible improvements.
  • Vendor Scrutiny: Clear visibility into recurring issues allows banks to quickly identify weak links in outsourced providers or partnerships, applying penalties or switching contracts as needed to demand performance.
  • Motivated Management: Public metrics serve as a performance indicator, similar to app store ratings for fintech operators. Leadership reputations become attached to technology stability, motivating urgency in stabilizing systems. Care should be taken to avoid hasty decisions.

The extent of progress, however, depends on the compatibility of the dashboard across banks, effective communication by branch staff, and fair interpretation of reported data by customers, given the complexity of the scale involved.

Companies Impacted by RBI’s Proposed SEWA Dashboard

Indian Companies Gaining:

  • Fintech Companies with Real-time Data Analytics Solutions: Companies providing real-time data monitoring and analytics solutions for banks could benefit from increased demand for building and maintaining the SEWA dashboard. This could include cloud-based data integration platforms, visualization tools, and AI-powered anomaly detection systems.
  • Digital Payment Infrastructure Providers: Increased focus on transparency and real-time information about payment channel availability could benefit companies providing UPI gateways, mobile wallets, and other digital payment infrastructure. Improved service reliability and customer awareness could drive higher transaction volumes and market share for these players.
  • Banks with Robust Digital Infrastructure: Banks with reliable and efficient digital infrastructure and payment channels are likely to be positively perceived by customers in the SEWA comparison. This could lead to increased customer confidence and potentially attract new customers from banks with frequent outages.
  • IT Consulting and System Integration Firms: Expertise in implementing, managing, and securing complex IT systems would be crucial for banks setting up and maintaining the SEWA dashboard. This could benefit IT consulting firms with experience in financial technology and digital transformation projects.

Indian Companies Potentially Losing:

  • Banks Reliant on Outdated IT Systems: Banks with inadequate or outdated IT infrastructure might face challenges building and maintaining the SEWA dashboard, potentially leading to technical difficulties and reputational damage. This could put them at a disadvantage compared to banks with more modern and reliable systems.
  • Small and Mid-Sized Banks with Limited Resources: Implementing and maintaining the SEWA dashboard could require significant investments in technology and resources. Smaller banks might struggle to keep up with the requirements, potentially impacting their competitiveness and customer satisfaction.
  • Third-Party IT Vendors with Poor Service Records: The RBI’s focus on IT system stability and incident response could put pressure on third-party vendors responsible for managing bank IT systems. Vendors with a history of outages or slow response times might face scrutiny and potential loss of contracts.

Global Companies Gaining:

  • Global Technology Providers with Expertise in Real-time Data Solutions: Leading technology companies specializing in real-time data analytics, cloud computing, and cybersecurity could benefit from increased demand for these solutions within the Indian banking sector.
  • Global IT Security Firms: The emphasis on system stability and incident response could create opportunities for global cybersecurity firms to offer expertise and solutions for preventing and mitigating IT outages in banks.

Global Companies Potentially Losing:

  • Global IT Vendors with a Significant Presence in India: Any negative fallout from the SEWA initiative on Indian banks with outsourced IT services could indirectly impact global IT vendors operating in the country. Reputational damage or loss of major contracts could harm their business prospects in the region.

Market Sentiment:

  • Positive for fintech companies, digital payment infrastructure providers, and banks with robust IT infrastructure.
  • Mixed for other banks, with potential benefits for those investing in modernization, and challenges for those with outdated systems or IT outsourcing issues.
  • Positive for global technology and cybersecurity firms with relevant expertise.
  • Neutral to slightly negative for global IT vendors operating in India, with potential risks depending on their relationships with specific banks.

Note: This analysis is based on the provided information and may not be exhaustive. Other companies could be impacted depending on their specific businesses and relationships with the banking sector and technology providers.

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