Innovative bank first-to-market in India with Enterprise Payments Hub. By Nitin Sirohi, Principal Consultant, TCS Financial Solutions

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1 12interview payments AXIS Bank Innovative bank first-to-market in India with Enterprise Payments Hub By Nitin Sirohi, Principal Consultant, TCS Financial Solutions Established in 1994 with liberalization of the country s banking sector, Axis Bank is one of India s first new-generation private-sector banks. Since then, Axis Bank has become a next generation bank and the third-largest private sector bank in India, offering the entire spectrum of financial services to corporates, SMEs, agricultural and retail customers. India s payment systems have been evolving at a rapid pace since the passage of the Payment and Settlement Systems Act of The Reserve Bank of India (RBI) has issued periodic Vision Statements calling for increased financial inclusion with proactive movement toward expanding the scope, reach and reliability of modern payment and settlement systems. RBI s efforts have been supported by institutions such as the National Payment Corporation of India (NPCI) and the Mobile Payment Forum of India (MPFI), lending support to several structural and policy-level changes in the payment landscape for the banking industry.

2 Like so many other financial institutions coping with accelerated business growth, Axis Bank had accumulated or otherwise constructed numerous silo-based applications related to payments. By 2012, this situation led to mounting operational constraints, service limitations and cost drivers: l Several existing payment systems were reaching or exceeding their capacity limits. l Slow performance became a bottleneck due to soaring business volumes. l Given an extraordinary volume of payments, back-office staff was stretched thin due to manually-intensive processes such as reconciliations of payments sent via domestic payment and settlement systems. l Due to the large number of separate payment silos, visibility into intra-day cash positions at the central bank was delayed by over an hour, making it difficult for risk managers to monitor real-time liquidity. l Branch staff were unable to give their customers adequate levels of service with bulk payments processing. l IT maintenance had become highly complex due to rapid evolution in market payments standards and the advent of mobile banking. The bank s leadership recognized that the situation was untenable given evolving market conditions. Rapid economic growth was fueling demand for higher-quality, higher-capacity payment products and services, and customers were becoming increasingly aware about the alternatives in the financial services marketplace. In order to keep pace in this fast-moving marketplace expanding both in size and sophistication, Axis Bank had to take quick and decisive action to effectively deploy a modern infrastructure for everything related to its customers payments needs. BUILDING THE ENTERPRISE PAYMENTS HUB In response, and to its credit, the management team decided to build a centralized payment processing platform: an Enterprise Payments Hub (EPH) for the bank s entire payment operations. EPH had to provide a single platform for all payment products, delivering enhanced service levels to customers at high levels (>99.99%) of system availability. Furthermore, EPH was to operate separately from the core banking solution. This architectural approach ensured that the bank could accommodate new business requirements, new regulatory changes and the latest innovations in payments independently of the ongoing operations of its core banking solution. Furthermore, the separation also served to migrate the transaction processing workload away from the legacy core banking solution onto the high-capacity payments processing engine. 13

3 14payments Amit Sethi, President and CIO at Axis Bank strong collaboration EPH had to support: Axis Bank s EPH solution is a result of strong collaboration between Axis Bank and TCS, across leadership and operational teams. l All electronic payments: Electronic credit transfers, direct debits and bill payments through India s National Electronic Funds Transfer (NEFT), Electronic Clearing System (ECS) and Real Time Gross Settlement (RTGS) systems; plus, cross-border payments. l All physical payments: Cash and cheque transactions using image-based clearing for cheque truncation. l All channels for payment origination: Branches, internet, mobile, ATMs, POS, and correspondent banks. l All customer segments: Retail, corporate, co-operatives, trusts, governments, semi-government institutions and correspondent banks. l Extensive connectivity: Multiple protocols and data formats across a wide range of clearing and settlement systems. l ISO 20022: India had decided to adopt ISO for its RTGS and a new ACH. As a core architectural decision, EPH was built using services-oriented architecture (SOA). This decision made it tenable to integrate EPH with the existing core banking solution, as well as with various existing channel solutions, alerting tools, billing systems and reporting systems. In 2012, Axis Bank selected TCS BaNCS for Payments as the core technology supporting the entire EPH project. Axis Bank s EPH solution is a result of strong collaboration between Axis Bank and TCS, across leadership and operational teams, said Amit Sethi, President and CIO at Axis Bank. Together we were able to foster an environment for the teams to cocreate. The first phase of the EPH project began later that year, with the intention of deploying individual products and modules as they were completed. The first roll-out began in April 2013, and successive deployments are still underway at present. Axis Bank has already rolled out capabilities to support all electronic payments (NEFT, RTGS, ACH and ECS) based on the high-performing payments processing engine of TCS BaNCS. In addition, the bank has deployed the branch channel capabilities of TCS BaNCS, which now delivers robust and efficient payments capabilities across all of Axis Bank s branches in India. Axis Bank has also recently launched enhanced services for payments initiation, monitoring and reporting for business and corporate customers. These services rely upon close integration between the corporate channel solution and the payments processing engine of TCS BaNCS. At this stage in the project, Axis Bank had achieved many of the benefits envisioned at the outset of the project. The bank has reduced the number of silo payment applications, significantly increased STP, boosted throughput, achieved more efficient utilization of staff and reduced operational costs.

4 Benefits have included: l Improved governance: A comprehensive set of payments-related workflows and processes has been developed in a single library, with high levels of reuse and built-in risk mitigation features. l Improved Straight-Through Processing (STP): All transactions can be subject to common validation features and risk management practices, irrespective of source. l Reduced processing costs: Changes related to compliance and to the convergence of payment types can be implemented in a single workflow repository. l Reduced legacy costs: By consolidating onto a single payment hub, the bank has been able to eliminate several silo payment applications, yielding significant savings on hardware, licenses and interfaces. l Higher visibility of data: The ability to capture consistent information about all payment types, all channels and all customer types has made it much easier to apply the latest thinking in data analytics. Bank analysts can now generate important insights from the data, leading to smarter customer segmentation, faster product development and new revenue opportunities. l Improved branch service: Bank branches now support bulk payments initiation with rapid confirmation and response times. Given process improvements that have cut payments processing times by more than half, personnel at the branch have become more productive in other areas of customer service. l Better liquidity management: Risk managers now have access to liquidity dashboards having a significantly lessened lag time. Liquidity views now consolidate enterprise-wide positions within 15 minutes, enabling the bank to optimize its cash positions at central bank accounts. l Faster time-to-market: Axis Bank has developed several innovative payments products using EPH s powerful payment processing and payment status reporting functions. For example, Axis Bank has gone to market with a flexible Virtual Account Customer Payments product that enables corporates and certain banks to receive payments using a virtual identifier through all payments channels. l Higher volumes: From 2013 to 2014, Axis Bank has seen a growth of approximately 33 percent in NEFT (ACH) volumes, with EPH delivering seamless scalability. EPH has already passed a peak of more than two million payments in a day. The bank has reduced the number of silo payment applications, significantly increased STP, boosted throughput, achieved more efficient utilization of staff and reduced operational costs. 157

5 16payments AXIS AT THE APEX At the apex of all of these benefits, the development of EPH has already helped Axis Bank win new business and earn higher levels of customer satisfaction. The enterprise payment hub has enabled us to provide cutting-edge features to our clients in the domestic payments space, said Shishir Mankad, Head of Products & Solutions for Transaction Banking at Axis Bank. We are able to empower our sales teams to design and deliver highly customized solutions across corporate, government, financial institutions and SME segments. Moreover, with our increased ability to handle volumes, we are able to acquire and execute customer transactions until much closer to the cut-off timings, and this is a very powerful element of our service proposition. In July 2013, Axis Bank was appointed by India s Pension Fund Regulatory Development Authority (PFRDA) to act as one of its Point-of-Presence service providers for contributors to India s pension funds and to participating corporates. In November 2013, Axis Bank acted as the financial services entity in a transformative e-transfer initiative taking place in three districts in the southeastern Indian state of Andhra Pradesh. Through the initiative, farmers bank accounts are credited within 72 hours of procurement, with notifications delivered by mobile phone. For the farmers, this service represents a tremendous improvement over previous payment methods both in terms of speed and convenience. AT A GLANCE Company Axis Bank Headquarters Mumbai, India Business Challenge To build a centralized payment processing platform for the bank s entire payment operations Solution Enterprise Payment Hub (EPH) built with the payments processing engine of TCS BaNCS for Payments, in conjunction with the customer channel solution of TCS BaNCS Fast Facts l Axis Bank is the third-largest private sector bank in India, with 2,589 branches and 12,355 ATMs across the country. l Axis Bank has overseas operations with branches in Singapore, Hong Kong, Dubai International Financial Centre, Colombo and Shanghai; and representative offices in Dubai and Abu Dhabi. l With its Shanghai branch, Axis Bank became the first Indian private-sector bank to establish a branch in China. The second phase of the EPH project commenced in April 2015, and is expected to be complete by end of year Deliverables in this phase are expected to include support for image-based cheque truncation at the branch, cheque printing and demand draft printing; as well as business services such as positive pay, corporate bill payments and international payments, all made available through a TCS BaNCS solution for customer channels that delivers EPH capabilities through applications that work seamlessly across Internet and mobile. The EPH solution is integrated with TCS BaNCS payments processing engine, branch channel, and corporate service channels. It provides best-in-class availability and scalability, enabling our teams to operate with high efficiency and allowing them to focus on new products and services for our customers, said Sethi from Axis Bank. Within a year, the platform has successfully scaled to support payments transaction volume growth of more than 30 percent. With modern technology and best of standards like ISO and SOA at the core, EPH platform is a key enabler of our continued growth in the digital world. With EPH built upon the foundation of TCS BaNCS, Axis Bank now has the payment capabilities it needs to meet the needs of a fast-growing marketplace, exceeding the expectations of its customers. n