The Indian banking system is at the beginning of a new era driven by mobile technology, but the widening of access to banking services brings with it security risks.
The Reserve Bank of India, a banking regulator which regulates Indian banks, announced guidelines in February for new companies to enter the banking sector.
Bank CIOs should revisit their architecture and security mechanisms as the mobile phenomenon will only increase with time
Manish Bahl, Forrester
As a result of the increased competition this brings, new banks, as well as existing banks, are clamoring to attract customers through technological innovations such as big data investments and mobile banking apps.
Mobile banking, in particular, is seen as the answer to opening up banking to the masses, with hundreds of millions of people using mobile phones.
Data protection a high priority
With a sudden increase in mobile banking expected, data security is a top priority.
To this end, one of the country’s largest private banks, HDFC, has adopted two-factor authentication of image and phrase verification, in addition to SSL encryption.
“Similar to internet banking, mobile banking transactions also go through different levels of online security checks before a transaction is fulfilled. This includes one-time password and question/answers, for example,” said Harish Shetty, vice-president of IT at HDFC Bank.
“Banking organizations need to develop outside-in approach to mobility, instead of inside-out, as it will help them invest in mobility more holistically, rather than as a one-off investment," said Manish Bahl, country manager at Forrester in India.
"Bank CIOs should revisit their architecture and security mechanisms as the mobile phenomenon will only increase with time," he added.
More on IT in Indian banks
Shetty said demand from consumers is high. “Immediately after each launch, we noticed huge numbers of downloads, without even a single marketing message being sent out. This showed us there is a huge latent demand for mobile banking apps.
“Our mobile banking user base has tripled since the launch of our first mobile app, and we expect it to triple again by the end of this year."
According to Mukeshkumar Jain, CIO at ICICI Bank, banks can influence the behavior of their customers by delivering products and services on mobile devices based on their online behavior, user sentiment, and even physical movement patterns to improve their engagement with their customers.
Our mobile banking user base has tripled since the launch of our first mobile app
Harish Shetty, HDFC Bank
“Mobile banking is all set for explosive growth in India and we expect the spending from banks on mobile-related services to grow by more than 25% in 2013, said Forrester's Bahl.
“Banks have to invest in mobile banking just to stay relevant to their customers, as customer retention, new revenues and brand differentiation are at stake. Mobile is increasingly becoming a hub of the relationships between banks and their customers,” he added.
Jain said sustained growth would come from non-metro, semi-urban locations, along with rural areas, but technology will be a key differentiator and facilitator in tapping the huge potential of these unbanked areas.
“We have already launched low-cost branches and with technology solutions we should be able to provide banking transactions at a reasonable price to rural areas,” said Jain.