How robust data centres infrastructure enabled digital banking for millions during the pandemic

Jul 22, 2020
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The Indian banking customer was not just locked in at home during the COVID-19 pandemic; she was also locked out of her bank branch! Suddenly the idea of visiting a branch, standing a in a queue, signing a form or talking to a teller became out of the question. The COVID-19 pandemic impacted the banking and financial services sector by accelerating the drive towards safer, contactless payments. It was the data centre back-end and the robust technologies in place that enabled the plethora of UPI, wallet and digital payments to proceed smoothly, bringing relief to millions in this time of great uncertainty.


Pre-Pandemic: Building the Data Centre Backbone for Banking


Well before COVID-19, banks had begun the digitalization journey - with state-of-the-art data centres being the backbone of operations. As per ET and IBA estimates, while 90% of banking customer transactions originated from a branch-visit, more than 50% customers indicated their willingness to conduct routine transactions online. With mobile and internet banking being widely adopted, banks had already adopted a hybrid physical and digital approach. As online banking users in India reach 150 million in 2020 from 45 million in 2017 (Boston Consulting Group Study), banks were well on their way to moving workloads to cloud running on scalable data-centre infrastructure. All of these advancements were put to test when the pandemic changed the basic assumptions of banking transactions.


Shifting Customer Behaviours towards Digital Touch-Less Banking


If there was any doubt about the future of digital payments, customer behaviour during the pandemic laid them to rest. The spread of COVID-19 further accelerated digital transformation for the banking sector. During the nation-wide lockdown, customers stayed away from bank-branches to avoid crowds and practice social distancing. As a Gartner study indicates, consumer preference and rapid shift to digital channels will gather momentum in the medium term –by 2020 customers will manage 85% of their relationships with banks without interacting with a human.


Just as customers did, banks too had to scale-down non-essential operations. Bank-branches either closed temporarily or operated under reduced hours as employees continued to work from home. To ensure employee safety, banks moved to a distributed workforce – all digital banking channels are being kept open with technology running out of data centres.


The Critical Technology Edge in the New Banking Normal


The new normal makes data centres crucial as they power mission-critical facilities for banks. The data centre market is poised to expand with the higher penetration of ecommerce, digital payments, data-driven business models and the push for data localization. The data centre market is growing at 25% CAGR and expected to reach US$5 billion by 2023. Capacity usage has surged by 30-35% during the COVID-19 induced lockdown. It is now essential for banks to migrate to the infrastructure-of-the-future focusing on digital channels and connectivity. Suddenly, the need for data centres is not a future-proofing of a slow move towards digitalization – it is now crucial to keep banks functional and strengthen digital engagement with customers.


Banks are turning to digital and contactless facilities as their employees gear up to service clients in a post-COVID world. Banks are strengthening technology infrastructure for remote employee access through VPNs, security tokens, SSOs and zero-trust network access. Digital workflows are being adopted for services such as account-opening and KYC-verification. In recent weeks, lenders such as Kotak Mahindra and RBL have launched contactless services. India’s largest lender, SBI, has sanctioned 10 lakh loans entirely digitally through the Yono-platform. More than 40,000 Axis bank employees are developing leads while working remotely resulting in 50% growth in account-openings via digital channels. Banks are rolling out secure video-conferencing facilities for customers to communicate with relationship managers as an alternative to in-person meetings. Data centres are a key pillar of achieving these emerging digital banking needs as they help centralize, automate, and deliver the flow of data and information in a secure manner anytime, anywhere, on any device. This next-gen infrastructure is laying the foundation for a 24/7 digital bank that makes branch banking simple, effortless, and convenient for customers.


The Rise and Rise of Digital Payments in the Pandemic


Post COVID-19, fear of infection from currency is driving a flight from cash leading to higher digital payments. Safe, secure, affordable retail-payments are being promoted through Unified Payments Interfaces (UPI). 94% SMEs accept payment through credit/ debit cards while 78% of them have digital-wallet readiness. As zero-touch banking practices become the norm, technology run out of data centres will become increasingly critical. Hyperconverged data centres are the way of the future for banks looking to achieve true agility, speed, and efficiency. Banks could look at up to 61% lower overheads from maintenance, power & facilities cost-savings and reduced unplanned outages. A digital bank’s need for faster product deployment, quick response to market-shifts, rapid data-asset monetization, unified operations and on-demand computing scalability requires a modern data centre that is software-defined, virtualized, automated, standardized and extensible – operating across private, public and hybrid clouds. Built on a consistent architecture and operational model for infrastructure and application delivery, modern data centres support virtually any workload – from traditional enterprise applications to modern container-based micro-services.


Going Digital to Remain Relevant in Post-COVID India


Post COVID-19 period will see a shift in the Indian consumers growing preference for digital and contactless payments, renewed emphasis on savings and investment to create a household capital cushion for uncertain times, and increased interest in health and life insurance to manage future unforeseen financial shocks. In the new banking environment that is emerging, cloud-services adoption and digitalization are getting turbo-charged as banks overhaul their digital infrastructure and capabilities. Data centres will be essential for Indian banking and fintech to emerge more resilient and primed for growth with innovation leading the way. Data centres must expand their capacities to deliver workloads within India and focus on back-up/ disaster recovery services as these are emerging areas of opportunity.