With fintechs providing innovative solutions, they have increasingly turned to these players and outsource a lot of activities, especially customer services.
We are seeing an increase in the outsourcing of services to the banking and sector. Choudhary said the idea is to focus on the development and upgradation of their core banking solution in a manner that allows for easy integration.
With the increase in the use of technology in banking to provide seamless services, banks are working with a limited pool of tech providers, which may result in a concentration risk.
According to Choudhary, this may result in a concentration that may turn severe. I urge all banks and other industry participants to look at new options when it comes to adopting technology. Diversification is one of the easiest ways to mitigate this risk. He said it is important that we learn more about the evolving tech and become self-sufficient to reduce dependency and ensure effective handling of outsourcing.
While banks have made progress in embracing digitalisation, the process is happening in silos.
As a central bank, it is looking at tech solutions that can be implemented in a way to provide more access to tech to industry participants, which can enable them to achieve digitalization Choudhary said.
The pilot project is underway for end-to-end digitalization of Kisan Credit Cards KCC, in association with its innovation hub, by tapping into data sources such as digitized state government land records, UIDAI, credit information companies, agritech companies, etc.
The process involves the integration of banks with various internal systems to ensure that there is end to end loan processing at the level of banks. There is a need to change banks loan originating system in order to ensure seamless integration of different processes at any point in time, according to Choudhary.
The pilot of KCC is being carried out in two states and select districts of the country for new KCC loans with the help of Union Bank of India and Federal Bank. The central bank plans to expand this to other banks and states as well.
The platform for finance is working on an integrated public tech platform that can provide a standard set of tools and protocols that can represent the different components of a typical lending value chain and allow the ecosystem players to plug in lending into their current operations with banks and vice versa.
This platform will create a common language for all entities to communicate and replace costly bilateral tech integration with a single standard protocol, according to Choudhary. We may move to frictionless credit in all segments of loans, wherever rule-based lending is used.
He said that he hopes to develop a public tech platform.