Public sector banks will have to step up investments in technologies, such as data warehousing and business intelligence over three to five years to stay competitive, as needs of the consumers change and regulatory compliance increases, according to a study by Zinnov.
The market-expansion advisory firm said information technology (IT) spending of public sector banks is in the range of one to three per cent of its revenues, as against five to 10 per cent in the case of private banks.
These banks generally have smaller IT departments, with a headcount of 100 to 200. Their private counterparts have medium to large departments, with a strength of up to 1,200.
Most public sector banks (PSBs) will adopt mobile banking in two to three years, but have not planned for adoption of customer relationship management (CRM) and business intelligence (BI).
"Very few PSBs have plans for adoption of CRM and business intelligence in the near future. In contrast, private banks are progressive in their adoption of emerging technologies. They have adopted or are implementing CRM and mobile banking, while there are plans for adoption of BI in the next two to three years," the study said.
According to Zinnov, state-owned banks have an increasingly younger consumer base, which is mobile and prefers virtual and convenient banking. The increased consumer demands and expectations are translating into enhanced customer experience through multiple channels like web and mobile.
The regulations and compliance norms — like Basel-II and -III, financial inclusion drive of RBI and IFRS convergence — will also drive PSBs to adopt new technologies.
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Some technological priorities at PSBs include data warehousing, BI and CRM.
The IT landscape in banks has evolved since adoption of core banking solutions, aimed at automation of systems. The question of 'whether to adopt technology' has now transitioned to 'what new technologies to embrace', to achieve differentiation.
Add to this the financial inclusion initiative, high on the agenda of the Reserve Bank of India, which aims to bring financial services to remote parts of the country.