Banks Need to Shift Focus on High-Tech
EghtesadOnline: A recent study estimates that information technology investment barely accounts for 1.73% of Iranian banks' annual spending. This is while a sharper focus on the key sector can and will boost profitability of lenders.
Electronic Banking magazine, in its last issue published the results of a study on the IT share in the books of Iranian and foreign lenders. It said the current investments in tech-related services in Iran should multiply four times to get closer to the global average.
Censuring the old and inefficient practices of large Iranian banks, the report said boosting investment in IT and electronic banking services is inescapable.
Given the high cost of electronic services for banks in Iran, most lenders have outsourced IT-related operations to selected companies offering e-banking solutions. Informatics Services Corporate, Tusan Company, Datin and Behsazan Mellat are the leaders in the field.
"Banking solution providers’ collective income in the last fiscal year was 85 trillion rials ($338.6 million) -- almost unchanged over the past five years.”
The study said bankers could and should cut spending in other sectors and boost the quality of services by shifting their focus on long-term investments.
"It is estimated that raising investment in tech-based solutions by four times would create 10,000-14,000 direct and indirect jobs.”
Laggards
Academia, economic experts and the people have regularly complained that the banking industry is a laggard and has failed to keep up with the times namely in the high-tech area. However, lenders have randomly resorted to some new methods in order not be left behind.
Bankers need to be cognizant of the fact that innovation has delivered for the industries in all spheres and the key banking sector can afford not to do likewise at its own peril. Central banks in most countries have created the conditions for banks to embrace innovation with the help of fintechs.
Financial policy and decision makers in Tehran have said that they welcome the role of fintechs in the domestic banking industry. The CBI has drafted a policy framework that indeed recognizes the role and significance of fintechs.
Based on the framework outlining the manner of cooperation of fintechs with banks, the CBI will not directly involve itself in the process of authorizing innovative financial services and will only be a facilitator.
Fintechs will be linked to the financial industry through financial institutions. Risks will be subject to partnership contracts between the stakeholders. Financial institutions can benefit from [fintechs’] high potential, innovate, attract new customers and boost sales.