Here’s how Federal Bank uses open banking, Blockchain and RPA, IT News, ET CIO

There is a clear dynamic in the direction of open banking models. The duo of open banking model and APIs serve as a unique platform to improve customer loyalty practices and build new business flows in a secure, agile and future-proof method.

Shalini Warrier, Federal Bank’s Chief Operating Officer, supports this trend when she says, “We plan to significantly expand the capacity and infrastructure around open banking in the near future. The open banking and API concept helps banks discover new business models and revenue pools. It could be seen as partnering business expansion where we bring trust, compliance and core banking to the table while the partner brings agility, marketing and innovative ways to reach the customer. It also brings synergies, process efficiency and cost reduction. “

With the open banking model, various financial services, which were previously only restricted to the bank’s applications, are unbundled and opened up to fintech partners in order to develop innovative models. The concept is compliant and ready for global banks and Indian companies are swiftly adopting the framework.

“Even though the world is talking about PSD2 and EU driven open banking models, I believe that we in India have a much more robust and scalable open banking infrastructure. India Stack, including Aadhaar, eKYC, UPI, FastTag, DigiLocker, etc., and the extent of its adoption are testament to this notion, ”believes Warrier.

“With regard to the transfer of customer data to third parties, we develop our own regulations that comply with PSD2 and the GDPR. While account aggregation regulations are already out and some NBFC-AA licensees are already in the works, ”she says.

Giving shape to open banking

The rush among companies to create APIs without a well-thought-out strategy has created a mess, with redundancies, poor maintenance practices, and limited visibility that negate many of the potential benefits.

Warrier took care to avoid such pitfalls. “While we respect and follow processes and ensure that risk is adequately mitigated in all of our development work, we recognize the importance of being agile and being able to react quickly to market dynamics and partner requirements,” she says.

The Bundesbank therefore has development centers in Bangalore and Kochi, which serve as a talent pool to meet these requirements. By and large, the key factors the team uses to explore resources other than technical know-how are understanding of the open banking ecosystem and fintech technology, and the ability to create robust and scalable solutions for tomorrow.

“We have set up an API Center of Excellence to ensure that the bank is well equipped for the API-driven growth of the future. We take care of the entire spectrum of open banking, from agile development to customer experience and business models. Platform for fraud, risk, compliance, security and governance frameworks, ”she says. “We conduct continuous quality assurance and stress tests to ensure that cycle times and performance meet expectations.”

Federal Bank uses IBM API Connect on Cloud for its open banking platform. The solution offers the bank flexible, scalable, stable and secure multi-channel support – mobile, web and traditional banking for its customers.

** You can find more information on the Bank’s API strategy here – Revealed: The Bundesbank’s API strategy.

Apart from APIs and open banking, the Bundesbank has aggressively introduced digital technology.

Digital transformation

Warrier migrated transactions to the digital channel a year ago. The cost advantages realized at this point in time were in the range of 60 to 65 percent. After building skills and incentives for customers, the number rose to 77 percent.

The Bundesbank introduced AI, ML, Conversational Bots and RPA to automate various internal and customer-oriented processes. These initiatives have further reduced costs and helped customers deliver visibility and services in the optimal time.

The branches of the Bundesbank made a large number of customer inquiries about calls that were answered by the internal customer representation team. The bank has now forwarded around 20 to 25 percent of these inquiries to an AI-controlled chatbot.

“We have automated a number of processes in online banking etc. using RPA tools and we have very encouraging results on validation. With RPA, we have automated repetitive operational tasks and other such processes in the bank. The online demat opening process is a value proposition with Federal being the first and only bank to offer such a service. There are already around 35 processes in RPA and another 20 odd processes will go live soon, ”she added.

With regard to blockchain, the bank has developed a platform for overseas transfers that uses distributed ledgers to facilitate transfers in a secure and efficient manner.

“We are the leading provider of transfer services in the country, with almost 15 percent of the country’s transfers being processed by the Bundesbank. So developing a blockchain function in this area is a key factor in growing the business and making things a lot smoother for our remittance partners, ”adds Warrier.

This is the second and final part of ETCIO’s interaction with Shalini Warrier, COO, Federal Bank.

May 26, 2021