Developments in the field of Information Technology (IT) strongly support the growth and inclusiveness of the banking sector, thereby facilitating inclusive economic growth. IT not only enhances the competitive efficiency of the banking sector by strengthening back-end administrative processes, it also improves the front-end operations and helps in bringing down transaction costs for the customers.
Major technological developments in banking sector:
- Adoption of Core Banking Solutions (CBS)
- Mobile Banking
- Real Time Gross Settlement (RTGS) System
- Cheque Truncation System (CTS) & Financial Inclusion (FI)
Core Banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Nowadays, most banks use core banking applications to support their operations where CORE stands for "centralized online real-time environment". This basically means that all the bank's branches access applications from centralized datacenters. This means that the deposits made are reflected immediately on the bank's servers and the customer can withdraw the deposited money from any of the bank's branches throughout the world. These applications now also have the capability to address the needs of corporate customers, providing a comprehensive banking solution. A few decades ago it used to take at least a day for a transaction to reflect in the account because each branch had their local servers, and the data from the server in each branch was sent in a batch to the servers in the datacenter only at the end of the day (EoD). Normal core banking functions will include deposit accounts, loans, mortgages and payments. Banks make these services available across multiple channels like ATMs, Internet banking, and branches.
Core banking solutions powered by the advancement in technology, especially Internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as core banking solutions. Here, computer software performs core operations of banking like recording of transactions, passbook maintenance, interest calculations on loans and deposits, customer records, balance of payments and withdrawal. This software is installed at different branches of bank and then interconnected by means of communication lines like telephones, satellite, internet etc. It allows the user (customers) to operate accounts from any branch if it has installed core banking solutions. This new platform has changed the way banks are working.
Cheque Truncation System (CTS) or Image-based Clearing System (ICS), in India, is a project undertaken by the RBI, for faster clearing of cheques. CTS is basically an online image-based cheque clearing system where cheque images and magnetic ink character recognition data are captured at the collecting bank branch and transmitted electronically.
Truncation means, stopping the flow of the physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated at some point en route to the drawee branch and an electronic image of the cheque is sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.
Cheque truncation would eliminate the need to move the physical instruments across branches, except in exceptional circumstances. This would result in effective reduction in the time required for payment of cheques, the associated cost of transit and delays in processing, etc., thus speeding up the process of collection or realization of cheques.
Financial inclusion, which advances universal access to appropriate and affordable financial services, is crucial to inclusive growth. Financial infrastructure underpins financial inclusion, lowering the risks and costs of providing financial services to low income individuals and micro and small enterprises. Payments systems facilitate business transactions, government payments, remittances, and innovative retail (including mobile) payments, and bring safety and efficiency to a financial system.
More than half of the world's poor are unbanked and have limited or no access to financial services such as savings, loans, credit, insurance, or payments. This constrains their ability to cope with unexpected expenditures, take advantage of economic and educational opportunities, participate in business transactions, and send and receive remittances. Poor households and women are especially disadvantaged. No citizen should be excluded from economic opportunity, and financial inclusion is an effective instrument to bridge this gap.
Benefits of Financial Inclusion:
- access at a reasonable cost for all households to a full range of financial services, including savings or deposit services, payment and transfer services, credit and insurance;
- sound and safe institutions governed by clear regulation and industry performance standards;
- financial and institutional sustainability, to ensure continuity and certainty of investment; and
- competition to ensure choice and affordability for clients.
Alackrity helps realize this vision of next-gen banking for some of the major banks by credibly designing, installing & maintaining state-of-the-art IT ecosystem.
South Canara District Central Co-operative Bank - Implementation of entire IT ecosystem i.e., state-of-the-art data center establishment, disaster recovery center, wide area infrastructure for core banking solution across 52 branches, financial inclusion & cheque truncation system and mobile banks for remote locations.
Karnataka State Co-Operative Apex Bank- Implementation of entire IT ecosystem i.e, state-of-the-art data center establishment and wide area infrastructure for core banking solution across 40 branches.