With the advent of Information Technology: Future of banking in Sri Lanka

With the internet and globalization, the world continues to get smaller, flatter and smarter, which creates enormous opportunity for banking institutions to increase their footprints - beyond their regional footholds. At the same time, powerful technologies have become more affordable and accessible.

Future: IT adoption among licensed local banks in Sri Lanka

As commercial banks in Sri Lanka are fast evolving to be more IT-savvy, they recognize the added advantage of Information Technology backing to propagate growth. Recent studies claim that IT markedly increases profitability and consumer retention through a robust IT infrastructure.

Evidently, IT-related services such as internet banking and credit/ debit card banking systems have brought in competitive advantage to banks in Sri Lanka, drawing in more customer confidence. Almost all the banks in Sri Lanka provide ATM services, tele-banking and money transfer to customers.

Importance of IT in the banking segment is fast gaining recognition in the country.

The banking sector in Sri Lanka, which comprises Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs), dominates the financial system and accounted for 53 percent of the total assets of the financial system as at end 2010. Therefore, efficiency and productivity of the banking industry is an important requirement for the development of the sector as a whole. After over 30 years of inward-looking economic policies and financial repression, the economic policy reforms package which was introduced in 1977 paved the way for structural transformation of the overall economy.

Studies say that a Sri Lankan banking customer considers stability, reliability, accessibility, convenience, service factor, costs, security, and the consistent brand image of the bank while selecting their banking partner. IT adoption in the segment is causing customers to raise their expectations for a higher standard in customer delivery models and systems.

Strategic use of IT plays a pivotal role in retaining the existing customer base and attracting new customers.

Globally, earlier this year, IBM surveyed more than 2,000 leaders from medium enterprises around the world to find out how their business priorities are influencing their IT investments. In 2009, a similar survey showed that most medium enterprises were focused on cost and efficiency.

The worldwide study "Inside the Midmarket: A 2011 Perspective," reveals that while these firms, across industries, are still concerned about cost and efficiency, an overwhelming majority are now thinking about how to use technology to help them grow, connect with customers and innovate.

In fact, of the 318 banking firms that participated in the survey, more than 75% cited increasing employee productivity, improving customer service and reducing costs as their top business priorities for investment over the next 12-18 months.

Connecting with customers

Almost two-thirds of banking institutions across Asia are investing in analytics for customer relationship management. And 69% are looking to information management. Business analytics and predictive technologies were once reserved for big companies with big budgets. These capabilities now are easy to use, appropriately priced and a significant priority. Midsize banking firms recognize their potential for collecting, aggregating and transforming data into insightful and actionable intelligence. This will lead them to make their branches more effective in order to operate and serve their customers better, while being able to provide a differentiated customer experience, as well.

Maximizing efficiencies

Over the past several years, the need for a highly flexible, resilient, and efficient IT infrastructure, coupled with continued cost pressures, has intensified. Simply put, flexible and efficient IT systems are vital in today's smarter planet. Among the banking firms surveyed, cloud computing (73%), virtualization (70%) and software as a service (67%) emerged as the top IT focus areas globally. These companies are looking at using these new technologies to take advantage of a shared infrastructure to improve efficiencies, lower costs, and improve scalability.

What midsize banking firms need to do

To support their shift in strategic focus and to advance their new business priorities, the survey found that two-thirds of midsize banking firms are seeking a consultative, rather than purely transactional, relationship with their primary IT provider.

The recently released Global Chief Marketing Officer (CMO) study findings by IBM, which had participation from Sri Lankan Banks also, revealed that CMOs see four challenges as pervasive, universal game-changers: the data explosion, social media, proliferation of channels and devices and shifting consumer demographics. This makes more relevant the recent trends of how CMOs across industries are moving towards mining new digital data sources to discover what individuals, customers and citizens want. The banks are now seen to be seriously considering investment in technologies and advanced analytics to get a better grasp of how individual customers behave in order to foster lasting relationships, capture value and measure results.

The internet and globalization have continued to shrink, flatten and make the world smarter, creating tremendous opportunity. Medium enterprises are turning their attention to driving innovation and building stronger customer relationships.

In the process, these companies are finding new ways to use information and technology to be smarter about how they work, where they invest, and the way they interact with their customers.

In many ways, technology has moved from a back office function to a driver of growth and value. For some, this transition is a steady journey. For others, the right alignment of IT and strategy is creating breakthrough change and business transformation.