Other things being equal, you cannot build up a retail business with multi-geography locations if your IT setup is not in place. You need to monitor the business, security, frauds, and cover the risks of lending against gold. The least you can have is robust hardware which is scalable.
- Shome Sengupta, managing director and CEO, Fedbank Financial Services
When non-banking financial organization Fedbank Financial Services launched its loan operations in September 2010, the first product to be rolled out was gold loans, offered across 100 outlets in India. Today, when a customer walks into Fedbank’s offices, several loan-related processes need to be carried out efficiently and quickly – from the completion of know your customer (KYC) formalities, to accepting and evaluating the gold, booking it on the system, storing it, and handing over the money to the customer – within minutes. “The need for efficient server hardware was felt, as turnaround time needs to be ten minutes for the customer, that’s the USP of the business. Banks take three hours to do the same work,” says Shome Sengupta, Fedbank’s managing director and CEO.
In early 2011, Fedbank wished to register fast growth in order to match up to the competition in the market. Hence it felt the need to implement suitable server hardware solutions that would be able to keep pace.
Fedbank started operations within a month of the pilot project in Tamil Nadu, with 35 functional branches. “We started with southern states for gold loans, as it is popular, and the per capita ownership of gold is twice that in other Indian states,” says Sengupta.
Fedbank executes 300 loans per day. The vision of the company is to set up 1,200 branches all over India within three years, increasing the volumes to 5,000 loans per day. “The average ticket size today is Rs 70,000; it will drop to Rs 35,000, as smaller retail customers walk in. Other players like Muthoot Finance and Manappuram Finance have average ticket sizes as low as Rs 30,000. As we spread to the interiors, customers will increase, ticket size will fall and work load will increase, for which we need a scalable server hardware system,” says Sengupta.
To meet its scalability requirements, Fedbank chose IBM’s Power Systems server hardware after doing a market review, studying IBM surveys and evaluating the company’s past vendor support. “We evaluated HP, Oracle and Dell. We chose IBM because of high performance levels and minimum downtime issues,” says Aditya Nabar, who heads the IT function at Fedbank Financial Services.
Fedbank has already set up branches at small towns in southern India. These locations are connected via Airtel broadband services, with encrypted lines for data security. The multiprotocol label switching network in use ensures a bandwidth of 512 Kbps per branch. Fedbank intends to launch its car loan and property loan offerings in September 2011. Hence, Fedbank took the call for efficient and scalable server hardware system to ensure consistently quick service to customers regardless of the pace of growth. One of the software packages implemented is Nucleus Software’s FinnOne Suite, which includes a loan management module.
Making the right choice
According to Nabar, IBM applications and FinnOne work only on the AIX platform. “We selected five IBM physical boxes (p6, p520) as a mandate. These servers have Intel Xeon processors, with 4 GB RAM and terabytes of memory, which includes user acceptance testing (UAT), application and the database server.”
Customization was performed in terms of functional business inputs, as the applications, systems and servers were new. These applications are currently hosted by IBM, but Fedbank has recently selected Sify for data center hosting of IBM physical boxes and applications.
New business challenges
Fedbank’s main implementation issue was hardware sizing. At this stage, Fedbank planned the hardware based on a three-year requirement. “We realized IBM server hardware is a steady platform to overcome challenges and achieve our requirement,” says Nabar.
The hosting of applications depends on the bandwidth offered by its vendors. The applications are hosted from a shared environment, and Fedbank faces latency issues. “When we move to the Sify data center located in Airoli near Mumbai, this issue will be sorted out,” says Nabar. Meanwhile, Fedbank has signed a care pact with IBM that ensures a six-hour turnaround time to replace any malfunctioning physical hardware element.
Managing for the future
Elaborating on Fedbank’s IT team, Nabar says, “We have a small IT team to manage the applications, man the centralized helpdesk, and monitor performance levels. We also have regional IT managers for our multiple locations.”
The IBM Power Systems server hardware is managed by IBM in collaboration with Fedbank’s team. Fedbank’s IT team works along with Sify for database management; with Nucleus for FinnOne; and, with Credit M for the gold loan applications.
With the robust server hardware system in place, Fedbank targets revenues of Rs 1,500 crore (Rs 15 billion) this year, growing to a level of Rs 10,000 crore (Rs 100 billion) in 10 years. Other IT initiatives in the pipeline include CRM, a secure bandwidth connectivity setup, and disaster recovery.