Over the last 12-18 months, we have seen a lot of focus by NASSCOM on emerging markets, and this is a very good thing. However, we need to identify the opportunities and connect with the right bodies there.
The real problems arise when we sign up for a project, and do not know about how we can execute the contract, the issues we are likely to face on the visa front, cross border taxation, etc. If NASSCOM can help bring clarity on these issues, it will be great.
Q: Making a breakthrough in the banking products marketplace, a highly competitive segment, must have been a challenging task. Yet iCreate has managed to do it. What would you say are the factors that have contributed to your success?
Part of the reason why banking is very competitive is because of the size of the marketplace. Obviously, over a period of time, innovation stops when there are only large players out there. I think the only way newer companies can come in is when they challenge status quo, figure out where they can innovate and take the message to customers that there are more efficient, faster, cheaper and better ways of doing what they are currently doing.
The next level is finding customers with whom this message resonates, and use that success story to propagate the message.
Q: What are the positives that you have brought into the banking space?
What we have done in this space is centered around decision enablement. The product suite we have on offer – Biz$core – is built on our familiarity with the functional nature of every system banks use. Therefore, when we are at a bank implementing Biz$core, the key is to connect our solution into the bank’s ecosystem quickly. Given our expertise across various industry standard core banking and other transactional systems, we have built a Biz$core data adapter tool that maps to the transactional systems and takes a productized approach to data integration. Nearly 70-80 percent is out-of-the-box with minimum customizations. All this ensures that Biz$core is up and running, and powering the bank’s decision needs in 100 days or less.
Typically, it would take a bank around three-to-five years to get a solution like ours in place. We have been able to put our heads together, figure out ways of making things better, leverage technology better, leverage our understanding of the domain better, and been able to develop a ready-made product-based offering that solves a bank’s problems in a shorter period of time, and reduces Total Cost of Ownership. We have created more of a control system for a bank, to help it understand what is working, how to remove what is not working, and the control systems that need to be put in place. These are the kind of strategic decisions that banks can take using our solution. Our packaged value proposition has led us to have conversations with customers, which in turn have become the trigger for business.
Q: Are you targeting a very niche segment within the banking domain? What is the challenge that banks are facing that you are helping address?
Banks the world over, have invested in implementing operational systems such as Core Banking systems (CBS) and other transactional systems which contain a wealth of data about their operations and customers. However, the nature of these systems and also the fact that banking operations have been automated through the implementation of multiple best-of-breed solutions has resulted in little or no data integration. This has reduced the ability of the IT teams of the banks to service the increasing information requirements of their managements and regulators.
While implementing Core Banking systems in banks in several emerging markets including countries in Africa, Eastern Europe, Asia Pacific, Middle East and South Asia (including India) we found that typical banks had over 10 enterprise databases! An inordinate amount of time (over 70 percent) was being spent by the IT departments of banks in trying to access this data. Further analysis proved that most of the effort was centered around consolidating information for customers and organisation units to be used for reporting to management and regulators. We felt this effort could be drastically reduced with the implementation of an enterprise product which could integrate data across multiple enterprise databases and automate MIS reporting.
We decided to develop Biz$core—an integrated Reporting, Business Intelligence (BI), Analytics and Performance Management product, recognizing the fact that this space is now coming of age. There is an overall buzz around Analytics, BI, etc. and a lot more focus on these areas than ever before. Until now, banks have been focusing on automating their transaction processing. Their focus has been on doing what they do better, faster and by leveraging technology. iCreate however, is concentrating more on the Analytical domain which is about enabling C-level bankers to make better decisions for their banks.
Q: You talk about the BI and Analytics segments coming of age. Are Indian banks reaching this stage too? Is there a big potential for your products in the domestic market?
We are pushing on emerging markets, and India is part of this story. It is true that the level of investment in this area in emerging markets is currently very low. Emerging markets however, are places where banks are looking at leapfrogging technologies and getting on par with large global banks that are more advanced in terms of Analytics and BI. They are keen to reach this level faster, which is where a solution like ours comes into play. We offer them a continuum of capabilities that will enable them to make better decisions. From aggregating the data, building a single view of the data across the bank, to providing reports and dashboards, providing predictive Analytics, to predicting the ability to cross sell to customers—we are helping banks make better decisions and choices.
Essentially, we are helping customers move step-by-step, until they reach the advanced level of decision-making. In emerging markets, probably 40 percent banks are still not completely advanced in terms of solutions. They are not mature enough to consume these solutions. Around 30-40 percent of banks have made some investments in advanced solutions, but these are not necessarily to do with predictive Analytics, etc. There could be 10-20 percent banks that are ready to consume higher-end solutions. This is typically the mix in emerging markets, which is also reflective of the Indian situation.
Q: As you mentioned, a certain segment of banking customers is still not ready for advanced Analytics and BI solutions? Does your solution begin at a lower level and then provide banks with an upgrade path?
We have designed a solution which has an upgrade path, the ability to evolve over a period of time and mature. Most banks have made investment on the transactional systems side, and as I said some has between 15-50 transactional systems, each of which capture data differently! They often have separate credit card systems, debit card systems, core banking systems, loan management systems, mortgage systems, treasury systems, trade finance systems, etc. We work with the HDFC Bank which has 70 systems! These banks need to get a unified view of their data, capture the history of that data over a period of time, integrate the data, and build the repositories and data warehouses on which an advanced solution can sit.
Very often, we help banks get to phase I, by deploying our out-of-the-box banking enterprise warehouse to build the foundation of a single organisational data repository that can be leveraged by these customers. Any investment that banks make is usually targeted at achieving one or more of these three goals—productivity and efficiency (in our case efficiency of decision-making); innovation (in our context leveraging technology around data to innovate) in order to engage better with clients through a product that gives them an edge and differentiation; and to achieve Governance, Risk and Compliance (GRC).
Since banking is a highly regulated industry, banks need to invest in solutions that enable them to provide regulators with the insights they require about their functioning within the ecosystem. iCreate has built products that enable banks to solve the specific problems they face when trying to achieve the three goals. We help them build the data infrastructure that makes it easier for them to create a reporting capability that helps the decision makers. We are helping banks do future gazing. We are enabling them to navigate through their complex, decision-enablement journey.
Q: As an emerging company, are you ever challenged by bandwidth issues? Can you compete effectively with larger IT players?
Typically, the large systems integrators such as IBM, Accenture, Cognizant, or Infosys type of companies go to banks, understand their requirements, and design, develop, test and deploy a solution. This takes time and requires a lot of resources.
Our approach on the other hand, is different. We have gone into ‘factory mode’ where we already understand what the banking customers need, and deliver a solution ‘out-of-the-box’. This is cheaper that building it. To that extent, for an emerging company, it is not that much of a challenge as it would be for a system integrator. Therefore, does being a start-up hamper our ability to do complex projects? The answer is no. We have taken a different approach. Our solution is built in our labs by a dedicated R&D team. The effort that we need to deploy the solution on the client site – to make it relevant, live and usable, is significantly lower, which is why it is so much easier for us. We neutralize the advantage of scale that larger companies offer, with our innovation in terms of productisation.
Apart from technology, the other important ingredient of our success is our deep understanding of the domain. We see ourselves more of a banking solutions company than a technology company. We understand and address the problems that bankers have in our space, because of our understanding of banking. Deep banking knowledge is coupled with technology innovation.
Q: Will the Cloud help transform the banking industry?
Cloud computing it is a huge buzzword today. However, industrialization of Cloud-based solutions is still in the early stages. While the technology is maturing, people are still trying to figure out the use cases and how to make money on them. One segment where the Cloud has done really well is the SME sector, that does not have enough money for CAPEX investments and can now run and use applications on cutting-edge technologies because of the Cloud.
iCreate for instance, is a huge consumer of enterprise apps running on the Cloud. We have an advantage owing to the Cloud as we do not have to build our own data applications.
Having said that, the banking sector is different from any other vertical. The difference is that a bank’s processes are extremely sensitive. Also, there are a lot of laws and regulations that govern all this sensitive data. The result is that while there will be adoption of Cloud-based solutions, to gain efficiencies in the banking context, it will be for non-core applications. It will be for fringe applications which do not deal with sensitive data related to the customer or financial information. It will be more about asset management, the ATM network, and anything that sits on the periphery. This will of course change once the Cloud technology gets industrialized, once there are private Clouds and when security is no longer an issue.
Mid-to-top tier banks, where CAPEX is not such a problem, and where any reputation risk as a result of security is very high, will be the last to adopt Cloud-based solutions, Some cooperative banks, micro-financing institutions, and the credit unions in certain geographies, however will embrace the Cloud. These are the SMEs of the banking space. They will not have the capability to invest in the same kind of technology infrastructure that their larger peers have. They may take a risk with Cloud-based solutions based on specific cases. However, as a sector, I think banking will be the last to adopt the Cloud.
Q: What would you say are the critical trends shaping the banking sector?
The trends that we are tracking closely, building into our solutions, and readying ourselves for, include mobility, which will be big. Mobile devices are intersecting with multiple industries, and banks today are reaching unreached customers through the mobility channel. The second trend is risk and compliance. While this is not a technology trend, it is receiving huge attention in the area of banking. The tools that will come into play will be significant. Right now, most of the decisions and controls that exist in a bank are to do with internal structured data. My view is that there will be a lot more dependence on external unstructured data in the future. Banks will need to marry their internal structured data with external unstructured data to understand the ecosystem better. Due to this, Big Data will gain importance. We are looking at different banks and trying to figure out what kind of data they have access to, how it can be married with internal data, and how that will bring efficiency into internal decision-making.
Q: What is the potential of rural banking? Do you see yourselves in this space?
Yes and no. There are last mile challenges in rural banking, even though everyone agrees it is the right thing for the country and its economy. We have worked in Africa where we have seen banking leveraging mobile technology, smartphone based technology. By leveraging mobility, countries have been able to get a lot more people into the banking system.
Q: iCreate has been primarily focusing on emerging markets such as Eastern Europe, Africa, the Middle East, etc. Why did you choose to stay out of the US market, and what have been the advantages of doing business in the geos where you are currently present?
We have done work in Africa, and other emerging markets including India. Our view is that we will go after customers where our value proposition speaks loud and clear, and where customers using our solution experience a significant improvement. Right now we are focused on emerging markets because most of them are underinvested, and it makes business sense for us. While the US is a huge market for the Indian technology industry, we may not go for the large banks, but rather for the vibrant, mid-tier banking segment, which is very big. These banks are facing problems similar to other banks we are working with in emerging markets. The larger banks in advanced markets are looking for companies with greater maturity and credibility. We want to build our resume of customers to an extent, before we go to the advanced markets. We have consciously chosen to work in markets closer to home, where it is easier for us to reach and where we can easily access the C level guys. It is easier for us in these geographies as competitive activity is lower. Given that we are a start-up, we want to build maximum credibility for ourselves by working with multiple banks.
Q: What are your plans for the year ahead? How will you strengthen your value proposition?
We see a lot of appreciation for our offerings in the marketplace. Clearly, there is an opportunity. We have been able to talk to a number of bankers, engage with them, understand their problems and figure out how we can solve them. This year, we will focus on doing things to create scale. It will be about building the efficiencies that we will require as we build scale. We will focus on readying ourselves for the next level of growth, ensuring that our execution remains strong.
Q: What can government and industry do to further promote the SME sector?
It is my feeling that SMEs do not have enough of a voice. Companies that are making a lot of profit, that are financially healthy are the ones getting the STPI/SEZ type of facilities, whereas smaller companies cannot avail of those concessions because they need to be a of a certain size to even get an office. There is need for some financial restructuring of the ecosystem, of the taxation system, etc. to make it conducive for SMEs to take advantage of it. We also need other help. While markets such as US and Europe are well known, other regions, where there is a lot of opportunity are unknown and we are struggling here. There are a lot of gray areas when it comes to doing business in these countries. We don’t know for instance, the labour laws that exist between India and these nations. There is a need for a body that will help us understand and define these issues, so that we can focus more on our business, instead of figuring out how to do business in these geographies. We need someone to tell us how we can legally send people there, how we can get our money back, etc. Clarity around these issues will be really useful.