India’s financial sector banks on IDRBT for security, BFSI News, ET BFSI

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With emerging technologies changing the way we bank, cyber security has emerged as a key area of concern. Prof D Janakiram, director of Hyderabad-based Institute for Development and Research in Banking Technology (IDRBT) this year, speaks to Swati Rathor about the threats facing our banking systems and the work IDRBT is doing to beef up their security.

How can banks strengthen security infrastructure?

Banks have to be ahead of the hacker so, we are trying to create a change in the mindset of people managing these entities. For instance, many banks are innovating on AI/ML products by getting data from social media, where it is easy to manipulate data that leads to models being fed with wrong data. Hence, the whole system can be compromised. So, data integrity as well as security becomes a very critical part of the AI/ML system and that is an active research we are pursuing. The second thing we are trying to look at is how to reduce the impact of cyberattacks. For instance, if the digital transactions are on mobile platforms, one can use geo-fencing to reduce the chances of such attacks. Apart from this, cyber drills that we conduct regularly help banks spot vulnerabilities in their systems. We also have a threat intelligence platform that gathers information across banks and multiple sources and shares it with banks.

Which technologies will impact the financial inclusion mandate in future?

Technologies like 5G are likely to provide many opportunities as they will boost the number of internet users. When you add somebody to the financial system, that person would expect more facilities such as access to credit. Now, if you want to make credit accessible, one of the key things is the profile of the person, which means we collect data. Here the usage of the AI/ML models to be able to provide both, risk models as well as prediction models, will become necessary.

What new research areas is IDRBT focusing on?

We are focusing on next-generation digital financial infrastructure. The pandemic has made it imperative that we should have a next-generation video KYC platform. Currently there are many pain points for customers as every bank and financial services entity is trying to do its own video KYC. So, we are looking at a new platform, where, if the customer does a video KYC once, it will be available for other entities to verify. We would like to make this platform a part of the India Stack so that there is a quality enhancement in terms of the digital identity platforms.

But what about new age skills in the banking sector?

IDRBT is focusing on creating a cyber security skilled workforce because it is an extremely critical need. Besides, in the financial sector, skills pertaining to AI/ML and Cloud are also very important and we are working on that along with skilling on the 5G front.



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Axis Bank selects AWS to accelerate digital transformation

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Private sector lender Axis Bank has selected Amazon Web Services (AWS) to accelerate its digital transformation programme.

“As part of a multi-year agreement, Axis Bank will draw on the breadth and depth of AWS services, including containers, database, and compute, to build a portfolio of new digital financial services to bring advanced banking experiences to customers, including online accounts that can be opened in under six minutes and instant digital payments, helping the bank increase customer satisfaction by 35 per cent and lower costs by 24 per cent,” AWS, an Amazon.com company, said in a statement on Tuesday.

Axis Bank has deployed over 25 mission-critical applications on AWS, including a Buy Now Pay Later product and a new loan management system to support it, Account Aggregator, Video-Know Your Customer, and WhatsApp banking.

Are Indian banks ready to make the ‘digital-first’ transition?

Axis Bank also plans to migrate 70 per cent of its on-premises data centre infrastructure in the next 24 months to further reduce cost, improve agility, and improve customer experience.

Migration to cloud

Subrat Mohanty, Group Executive, Axis Bank, said, “We believe AWS will enhance our agility and resilience to manage two key features that define our digital business — rapid scale and high velocity. We aim to transition 70 per cent of our infrastructure and applications on the cloud.”

Axis Bank has set up a cloud centre of excellence to accelerate its cloud migration and set the digital foundation for innovating new services. At present, 15 per cent of the bank’s applications are already on the cloud.

Axis Bank Q4 net jumps to ₹2,677 cr

“Cloud is transforming the financial industry and we are delighted to help Axis Bank build and grow a suite of digital banking services that evolve with technology changes, introduce new payment modes, and support evolving consumer and business needs in India,” said Puneet Chandok, President, Commercial Business, AWS India and South Asia, AISPL.

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Credit Suisse to hire 1,000 techies in India

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This is part of its vision to establish India as a centre for technology innovation across the bank globally. The hires will comprise developers and engineers who have capabilities in emerging technologies such as cybersecurity, data analytics, cloud, API development, Machine Learning and Artificial Intelligence that are anchored in Agile and DevOps delivery methods, to support the bank’s digital aspirations.

This is a continuation of Credit Suisse’s India growth strategy that has seen the bank hire 2,000 IT employees in the last three years. Credit Suisse’s goal is to leverage the large pool of skilled technology talent available in India, to further enhance its in-house core capabilities. India now accounts for nearly 25 per cent of the bank’s global IT staff, the largest footprint of any Credit Suisse location globally.

Also read: Credit Suisse offers ₹7.5-cr additional aid to Concern India Foundation, GiveIndia

John Burns, Head – India IT and Senior Franchise Officer, Pune, said: “This year’s hiring plan highlights our continued commitment to India, particularly to Maharashtra, and supports Credit Suisse’s vision to establish our operations here as a global technological hub. To support the growth of our IT presence in India, we believe empowering our employees to lead global delivery and drive innovative solutions enhances value-creation and productivity for the bank globally.”

Prashant Bhatnagar, Global Head of Experienced Recruiting for Technology, said: “As we continue to build our footprint in India, we want to attract the best IT talent to join our vibrant community of professionals. We provide our employees with a dynamic environment that fosters skills development and knowledge-sharing, and we provide opportunities for engineers and developers to be at the forefront of technology and innovation.”

Over the years, Credit Suisse India IT has successfully delivered new technology capability to the bank while maintaining a strong focus on system stability and security while maximising operational efficiency. The hiring ambitions for 2021 will play a critical role in delivering the bank to its clients, ensuring a digitisation-ready architecture, a robust platform, adoption of IT best practices and technologies, and an empowered engineering workforce.

Also read: Credit Suisse says it faces a ‘significant loss’

John Burns added: “The pandemic has accelerated the use of digital solutions across many areas. We have effectively employed collaboration tools to enable seamless external and internal communication to support teamwork and effective delivery.”

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‘PSD2 & open banking to reshuffle Europe’s banking & financial sector’, BFSI News, ET BFSI

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European Union’s Payment Service Directive 2 (PSD2) has gone into full implementation in this year and European Banking Authority (EBA) has asked National Competent Authorities (NCAs) to take necessary steps for its compliance and implementation. PSD2 norms are aimed towards making Europe into a single payment market and from there on improve customer experience and protection, boost innovation and competition and development of new payment methods and e-commerce.

Further it will bring out new models of business across the financial ecosystem in the form of open banking and leveraging of Application Programming Interface (APIs).

Sam Theodore, Senior Consultant at Scope Group in the ‘The Wide Angle’ report says, “PSD2 is arguably Europe’s most important piece of non-prudential financial regulation for decades.”

These norms are directly challenging the traditional bank-customer value chain (which asymmetrically benefits the bank) as it allows the transfer of customer financial data ownership from banks to their businesses and individual clients through Open APIs. The report adds, “Customers can then freely choose between their existing bank or third-party providers (TPPs) – other banks or authorised non-banks – to carry out their payment instructions. TPPs’ access to accounts (XS2A) occurs solely with customers’ prior agreement, which in effect puts them, not their banks, in the driver’s seat.”

This essentially leads to the implementation of PSD2 norms in play with European Bank’s revenues related to payments and account services. The report cites a McKinsey report which estimates that these revenues are no less than 35% of total bank revenues as compared to 51% from lending and 14% from other products.

Sam says that market participants shall start looking at how European banks adjust to the post PSD2 environment. Further, not only awareness of the top management with respect to PSD2 but also how compliant the bank is with these norms and focus on specific strategy and planning to implement with cloud-based platforms, big data management, use of artificial intelligence and robotics.

Sam adds, “There is often a degree of inertia in how the market investigates new aspects of relevance, which is why those banks with a clear vision of where they want to position themselves in the open-finance world and how to get there should bring up the topic themselves on analyst calls and meetings to try to educate their analysts and investors. For everyone’s benefit.”

Clouds & Platforms

The EU has seen a 79% growth of third party service providers and players including big techs from 237 in 2019 and 410 licensed players in 2020. This growth is fueled by a desire to tap an open market enabled by PSD2 and the rush for digital services due to the Covid-19 pandemic disruptions.

European banks are exploring “build, buy or partner” avenues for the new world at a different pace but for the same goals. One common central element in all of these is migrating activities and operations to cloud native platforms. Top cloud providers have actively partnered with top names amongst European banks and fintechs partnering with incumbent banks to build open APIs.

There are also concerns around viability of smaller players. The report cites the example of the recently launched European Cloud User Coalition (ECUC) with the aim of broadening and facilitating cloud usage by a larger number of peers in various European countries.

The report cites it as a systemic weakness by saying, “the absence of viable European cloud providers to compete against the US and Chinese giants. Both EU governments and banks have all the interest in the world to address this weakness in the not-too-distant future.”

Implementation Challenges

PSD2 Implementation was scheduled back in September 2019 but concerns with data security led to EBA putting out a paper through Regulatory Technical Standards (RTS) on strong consumer authentication (SCA) protocols.

The SCA protocol mandates at least two of three categories from “What you know” (your password or PIN), “what you own” (your device like smartphone or tokens) and “what you are” (biometrics like face recognition or fingerprint).

The idea is now towards moving to biometrics over static passwords or SMSs which are more prone to cyberattacks. The report says, “Cyber-security firm Kaspersky recorded a tripling of distributed denial-of-service (DDoS) attacks over the 12-month period ending in mid-last year.”

As the ecosystem wasn’t prepared for the September 2019 deadline, the compliance was further pushed to January 2021 and a few supplementary months have been added till September 2021 to ease the SCA implementation pressure on pandemic affected smaller merchants.

The report said, “Another initial problem with implementation was the fact that PSD2 did not specify a specific standard format across the EU for setting up open APIs. There were several competing standards, although now those adopted by the so-called Berlin Group (a coalition of EU banks) seem to be prevailing, suggesting smoother sailing ahead.”

Banks have also planned for a review and focus on lessons learned in recent years around security enhancements and looking at better standardisation for APIs across EU.

The report said, “One inherent challenge for regulators involved in these areas is keeping up with the fast advances in technology and rapidly changing industry standards.”

Open Banking in the UK has advanced with more than 2.1 million active open banking users in the UK, as the API call volume increased to six billion in 2020 from only 67 million in 2018.

Citing this growth in the UK, the report states, “There is every reason to believe that open banking will end up being adopted by an increasingly large share of businesses and individuals. This clearly raises the stakes for financial institutions still on the sidelines.”



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