Expanding Dena Banks reach with IT
M V Nair, Chairman & Managing Director, Dena Bank,
talks about how he has adopted a two-pronged IT strategy to expand their nation-wide
reach. by Anil Patrick R
sector banks are still not perceived to be as technologically advanced as private
sector banks. Is this perception accurate?
When private banks got the permission to operate during the mid-1990s, they
came equipped with complete IT capabilities and centralised operations. These
banks specialised in technology that was current at the time. Thus, they picked
up the best of clients within a short span of three to four years.
In the meantime, public sector banks lost money due to their slow adoption of
IT. It was only four to five years later that public sector banks started responding
to the competition. However, the good thing is that these banks closed the gap
in the next four to five years. Today, many public sector banks are at par with
Is IT significant for Dena Bank?
A look at national demographics reveals that 54 percent of the Indian population
is below 25 and IT-savvy. They are more comfortable with the use of Internet
and ATMs. If Dena Bank has to get business from this segment, we have to orient
ourselves in the required manner.
The importance of IT is related to the business reality. By international IT
adoption standards, we as a bank have not kept pace with the competition. However,
after analysing our needs, we started our efforts to keep pace with the technology
thats needed. The objective has been to help Dena Bank provide value-added
products which can be made possible with the use of technology.
Where did your technology initiatives begin?
Dena Bank was the first Indian bank to get the benefit of
a World Bank line of credit six years back.
Despite having a robust network, we had not developed value-added products.
We started work last year towards achieving this so that our customers can select
from and use a larger number of value-added products.
Can you describe some of these products?
Firstly, we have facilities such as Internet banking, multi-city cheques, and
bill payment. One of our recent products is the prepaid mobile top-up through
ATMs or SMS, and the post-paid bill payment using ATMs.
It is also important to keep on expanding our reach. We have made significant
progress as far as this is concerned.
How have you gone about expanding the reach of your network?
Once the optimum level of utilisation takes place, the
cost of an ATM transaction is reduced to almost one-eighth that of a traditional
branch transaction. If it is through the Internet, the cost is even lower
We have adopted two strategies for expanding our reach. The
first is extending our own network. This includes interconnecting branches,
ATMs and other offices. At present, we have 200 ATMs and about 75 centres. We
plan to increase this to about 300 ATMs by year-end.
The second strategy is through tie-ups so that we are available everywhere for
our customers. The first tie-up was with the Visa network. Then we joined hands
with the CashTree group of banks. Next was our alliance with Corporation Bank
for using its ATMs. We have also tied up with Euronet for using their backbone,
which adds 4,000 ATMs to our network. Thus, we are providing our customers access
to over 14,000 ATMs.
The advantage is that if our customer uses Dena Banks ATM, he doesnt
have to pay anything. Each town has at least one ATM. In case he is using another
ATM, there is a marginal price to be paid, but the important thing is that the
reach is there.
What is the next step?
700 branches are connected to our network, Denanet,
through leased lines.
The only thing that we have to do is connect them using a core banking
system so that the banks data is centralised
At present, 700 branches are connected to our networkwhich
we call Denanetthrough leased lines. There is strong networking available,
and all the branches are computerised. The only thing that we have to do is
connect them using a core banking system so that the banks data is centralised.
We have just started work on this initiative. We have advertised for a consultant
and we will finalise one soon. Then we will go through the selection process.
Our plan is to put the top 200 branches into the core system in the first phase.
This should take about 12 months to complete, and will include activities such
as tweaking the system and training people.
We plan to roll out the first batch by the end of fiscal 2005. Once the core
banking solution is in place, scaling it up will be easier so the rest of the
branches will be integrated faster.
Do you have any figures on how the introduction of IT for
different channels has reduced the cost of operations?
Im not at liberty to discuss the figures right now, but I can give a basic
idea of how technology can reduce costs. Firstly, by shifting customers to alternate
channels, staff requirements come down.
According to general studies made in the industry, once the optimum level of
utilisation takes place, the cost of an ATM transaction is reduced to almost
one-eighth that of a traditional branch transaction. If it is through the Internet,
the cost is even lower. By and large, technology has reduced costs substantially.
In fact, the future will be through mobile banking and it will further trim
What will happen is that investment in marketing will go up. This is not something
that public sector banks have done much of. So we move from branch-level investments
to market-level spending.
When developing a banking product, technology has to be
re-aligned. Does technology help bring a product to market in a shorter time?
There are two aspects to this. The first is innovation. If a product is innovative,
it will take time to reach the market. However, if the bank is a follower, time
to market is quicker since copying a product is easier and faster.
Copying a competitors product is easy. The real game is the ability to
sell, and this is something that most banks are unable to do. Although the product
can be copied, the ability to sell to the customer is more crucial. Many public
sector banks are unable to do this.
How can technology help when marketing a product?
This is where technology and business strategy should go together. If that doesnt
happen, the technology team will just develop without any useful result. The
final success lies in bringing these two together.
What has been your experience in bringing technology and
business teams together?
Right now our main challenge is to bring the business, technology and HR groups
together to operate in a co-ordinated effort. I feel this is the biggest challenge
for any CEO. He should see to it that this integrated effort takes place and
that the customer benefits.
Are there any difficulties that you face while doing this?
It is not difficult, but it certainly is a challenge. However, this is what
we are supposed to do. It is about gearing up the organisation in the way you
think it should be, and that is the best challenge to have.