Transcript
Speaker: Hi, I'm Venkatesh, founder of Maverick Systems, an IT services company focused on the banking and financial services segment.
Speaker: PV, welcome to the Founder Thesis podcast. I am um looking forward to learning about banking tech from you.
Speaker: ah Before we start our main conversation, Can I ask you for like a reverse pitch on why are you qualified to talk about banking tech?
Speaker: Just take me through a little bit of your journey, what you've built at Maverick ah for context. See, actually, even before we started Maverick, I had been part of a consulting firm which catered to the banking industry in Asia.
Speaker: and And we did lot of strategy exercises for the large banks in India, like the State Bank of India, the Kanara Bank.
Speaker: And then we also did for global banks for the Pan-Asian expansion. And then when we set up this Maverick systems, we wanted to see where we could focus on And we focused on the banking and financial services segment essentially because telecom and banking financial services are two major verticals which have a considerable spend on technology and rely on technology as the backbone.
Speaker: At Maverick, we are now celebrating our Silver's Jubilee. We have been 25 years focused exclusively on the banking and financial services segment, and I've been catering to
Speaker: the global banks, the regional leaders, as well as the challenger banks. I particularly mention challenger banks for the reason that they are more than fintechs, they are banks.
Speaker: And they might have less regulation, nevertheless they are bank.
Speaker: And across the board, whether it is in UK, whether it is in Middle East, these challenger banks have come and disrupted the industry significantly.
Speaker: If you look at what used to be part of the street banks have moved to the challenger banks. Similarly, you also see that the regional banks, irrespective of whether they are in Asia or in Europe, they have been acquiring other banks in order to consolidate that position and move on.
Speaker: and some of them nationally, some of them across the regions. And therefore, there is a gradual ascension from being a national leader to a regional player, to a global player.
Speaker: And those aspirations still remain ah across the geographies.
Speaker: We have been tracking the growth of banks, and how they evolved over a period of time. And we have been supporting all the technology initiatives.
Speaker: In fact, we are probably consistently are focused on the transformation parts of banks. Therefore, we have been part of the journey of how banks have transmitted from where they are to where they are today.
Speaker: and And therefore, I really think that given this trajectory, ah we could convey the narrative on how banking has evolved over a period of time.
Speaker: But let me tell you, actually, that if you were to cover that growth, it would span about 70 years, 70 odd years. Because it really started in the middle of 80s and it is continuing now.
Speaker: Whereas my journey with Maverick is for 25 years. and prior to that in consulting for about 15 years, that would still leave a gap of 35 years.
Speaker: But I've lived through part of it. I've learned from the past. And that is the reason why I'm saying that probably i could make a good narrative on that.
Speaker: Okay, interesting. ah When you were consulting, was that IT consulting ah during your 15 years of consulting? was management consulting.
Speaker: We did across certain segments. One of them was to do with the government and another was to do with the financial services itself. And I was part of both the government and the financial services verticals within that management consulting part.
Speaker: Okay, and understood. ah So, what is, first of all, what is a bank? ah let's Let's start with like a very basic definition. And then we can talk about how banks have evolved in the 35 years that you've spent in the sector.
Speaker: See, let me go through some definition of banking. If you actually see a simpler definition of banking, it says accepting deposits for the purpose of lending or investments.
Speaker: So banks essentially started on the retail side, enabling individuals to deposit and also to seek loans from them for their various ah journey, whether it is for buying a vehicle or buying a house or buying a vacation home, whatever would that be.
Speaker: But banks also evolved to support the commerce or the business side. And therefore you will have the second strand. And what applies to the individuals applies to the institutional segment as well.
Speaker: They do deposit and allow bank to manage the treasury for them. And they also seek lending from them in order for their own business growth.
Speaker: So in effect, Banks are at one part the custodian for your money, at another part they are the financial provider for your growth, whether it is personal or institutional.
Speaker: That would be a very simplistic definition, but I really think that is good enough for someone to appreciate what a bank is. And how has ah the banking ah technology or the way banks operate evolved since you started consulting for them and to where we are today? You spoke about multiple epochs in that evolution and multiple factors contributing to it. Can you take me through that?
Speaker: See, if you were to understand how banking and the related part of technologies have grown over time, I see three different axes in that.
Speaker: The first axis is about the telecom segment, how they have grown over a period of time, and not only in terms of how they have enabled communication, moving from voice to data, but also the set of devices which have come associated with those.
Speaker: The second part of it is both on the retail and the institutional side, what has been the critical drivers for the banks to grow.
Speaker: Now, banks actually reflect how people and economies have grown over a period of time. but Because essentially, as I told you before, at one side they are the custodian of your wealth, at another side they are the custodian financial provider for your growth. If people have grown, economies have grown over a period of time, they have been substantially helped by banks.
Speaker: And the third part of it is the technologies which have evolved. Banks have been one of those verticals alongside telecom, which have adapted those technologies into seeing how they could serve their customers better.
Speaker: And they've always relied on. See, if you really look at from being a supportive part, technology being a supportive part, it has moved as a prime driver.
Speaker: And what you see between an established street bank and a challenger bank, in the case of challenger bank, the fundamental business and operating models have been changed using technology as the force.
Speaker: Whereas if you really really look at a conventional street bank, people actually were the drivers. Talent was the drivers.
Speaker: So challenger banks actually inverted that position and that is how it had been. To me, these are the three principal axes which had been the drivers for the banking industry to evolve to what it is today from where it was probably 70 years ago.
Speaker: what is i mean What is the manifestation in terms of how the banks actually operate, how they do their processes, ah how they compete with each other as a result of these three axes which you spoke about? And you know are there like distinct epochs?
Speaker: see Let me take the if the first part about the banking itself. Probably we could start there, then we could move down to the other two segments, other two axes.
Speaker: Like I mentioned before, banks are there to fuel the growth of the individuals as well as the institutions. Let me take one of those transects.
Speaker: And this is applicable across the globe. It is not specific to any particular geography.
Speaker: If you have looked at la the the developed market of today, whether it is Europe or US, saw considerable growth between 1950 and 1970. That means
Speaker: people became wealthy and therefore they wanted not the usual banking services like deposits or lending but to manage their wealth.
Speaker: And then If you've looked at, it was in middle of 1960s that the capital market evolved. That you had stock exchanges where you could trade.
Speaker: And therefore, the banks became the medium through which people could actually manage their wealth. And portfolio of assets started emerging. If you have looked at before,
Speaker: People had cash, they had gold or bullion, and then real estate. These were the traditional set of assets. From those traditional set of assets, people started having faith that there is an institution where they could invest in equities.
Speaker: Then the bond market got evolved. And therefore, people started diversifying their asset classes from equities to bonds.
Speaker: In order to help people who do not have sufficient wealth but wanting to be part of it, the mutual fund industry came, which actually unitized the values much better and still affording them the diversity is concerned.
Speaker: Then the alternate assets market grew. What we mean by the alternate assets market is that private equity, that the companies which are not listed in the pre-listing phase, which are showing some growth, some investors started having interest into promoting them because they knew that they would hit a growth path and they would come.
Speaker: And then the venture capital and the private equity players emerged. So people who were not satisfied, but who wanted much better return and are willing to take a greater risk appetite, moved on to the private equity and venture capital funds.
Speaker: And through them got into these unlisted or private set of companies.
Speaker: Over the period, the the capital market also became sophisticated. People started having derivatives. That means the markets moved from just being the cash market into the forward, the futures market.
Speaker: And people wanted to have an ability to either acquire or not acquire a stock based upon their performance in the future. So options came.
Speaker: And therefore the market got much more expanded and much more sophisticated with those instruments of concern.
Speaker: And that phase is still on. Today we speak about the digital assets. Now one part of the digital assets is still to do with money.
Speaker: And central banks participating in central bank digital currency is one of them. But that is largely for an operational or a transactional purposes in order to ensure a faster, clearer, smoother settlement of transactions between the financial institutions across the globe.
Speaker: But stable coins, which are based upon or anchored around a current currency is again a trading instrument people can participate
Speaker: Then cryptos have come, various forms of cryptos have emerged, and there are a different set of markets for cryptos.
Speaker: At another side, always antics and
Speaker: arts were part of the portfolio of the wealthy.
Speaker: Now you have NFTs,
Speaker: which unitizes what was available earlier only for the ultra-rich to the mass wealth segment.
Speaker: Now you also have another concept called tokenization. which brings to a non-tradable asset, that is for equities you can go into traded equities, you can go to mutual funds.
Speaker: What would you do with the other non-tradable instruments? and whether it is real estate, whether it is untraded equities, tokenization actually does the unitization in a similar form like that of mutual fund and therefore makes it accessible to the most wealthy people.
Speaker: This is on the personal side. Now, if you similarly look at
Speaker: Institutions want to grow nationally and then regionally and globally.
Speaker: And when commerce became
Speaker: important and also possible to do across the border, a cross-border trade grew in the 70s and 80s.
Speaker: banks in order to support them, if they had supported an institution which was in their home country, which is getting into other countries, they started moving into those countries to support them.
Speaker: So slowly they followed where those institutions were moving to see how they could support them. And wherever they had moved in, they did not stop from only supporting their home home country institutions, but also found certain institutions worthy to be supported within those countries where they are placed.
Speaker: With these markets evolving, what I've also seen, if you've looked at some 30 years ago, we had The Deutsche, the New York Stock Exchange, the London Stock Exchange, and the Nikkei Stock Exchange in Japan as the four principal centers.
Speaker: Then in Asia, Hong Kong and Singapore emerged as two other centers.
Speaker: Then you had the Middle Eastern exchanges emerging, Saudi, UAE, And India, of course, also participated that.
Speaker: But more importantly, what happened was
Speaker: the equities of a company could be in their home country, listed in their home country. They could also be listed in another country.
Speaker: And some of those securities, which are not listed in their home countries, would be listed in another country.
Speaker: So people went wherever they could raise their capital for the best valuation.
Speaker: On top of it, exchanges themselves struck bilateral and multilateral arrangement, permitting them to trade in their own country.
Speaker: For example, Saudi Arabia today, most of the Saudi Arabian people trade on Saudi Arabia on scripts which are listed in London, New York, Deutsche, or Nikkie stock exchanges.
Speaker: and And therefore, global trade was the principal driver on the institutional side. And today, if you really look at global trade forms anywhere between 40 60% of any country's economy
Speaker: That clearly shows that the global trade is so on and they need support in both the countries. And you are not only going to deal in your home currency, but you are also going to deal in cross-currencies.
Speaker: Now, in short, this has been the journey for banks, both on the retail and institutional side, actually. ah And the other two axes, so you said you'll start with the banking axis.
Speaker: Okay, now I will move on to the telecom side before coming to the technology side.
Speaker: If you really look at, till about 90s,
Speaker: telecom was all about voice.
Speaker: And three things become important in that, and we will see that. And the footprint was very, very limited to developed countries.
Speaker: In the developing and underdeveloped countries, the footprint of telecom was extremely low. It was in the, at best in the teens, 10 to 17 kind of a range, or 18 kind of a range.
Speaker: an eighteen kind of a age
Speaker: Even in India, it was sub-15% till about ninety So ah that's how it was in majority of the other developing and underdeveloped countries.
Speaker: Then, actually, it is the 3G. And you could see the shift in the treaty 95% was voice and 5% was data in first generation and second generation. And in the third generation, it just inverted 95% data and 5% voice.
Speaker: So the third and fourth generations made a big impact in terms of ability to have cross border communication other than through voice.
Speaker: other than through voice. And it substantially helped both the individuals as well as the institutions in having an exchange with their counterparties across the globe.
Speaker: Now, alongside came the products. And I'm sure, you know, 20 or in, say, on see in ninety s Majority of the world had only paging instrument in addition to the phone.
Speaker: You had a fixed line, and if the fixed line in addition to that, then you have the pager, which could have a text message being exchanged. And it has a limitation in terms of the characters that could be carried in your text messaging.
Speaker: Then the mobiles are right. And the mobiles have also followed the footprint of the telecom movement from but the third generation.
Speaker: It was no longer a mobile meant for her voice and exchange of mails. It became an instrument
Speaker: where you could do multiple things.
Speaker: More importantly, it carried not only text but images, graphics, video.
Speaker: And therefore, the mode of communication also underwent a change alongside that.
Speaker: The first thing is you could do all of that in the device. You could transmit that to whoever you want in the multiple parties. And therefore,
Speaker: it not only allowed a personal or institutional communication mode, but it also allowed it to be exchanged with whoever the chosen counterparty is going to be.
Speaker: If it, mobiles were for the individuals, you also had voice over internet protocol emerging.
Speaker: which made on the business side an ability to not only communicate, have meaningful individual and group discussions. And you would have seen from the third generation where it was largely for a voice communication involving groups of people, it moved quickly into video communications and graphic communications. And therefore, it could actually carry that more.
Speaker: If internet enabled did you people to move into the digital front, this third generation and fourth generation and the fifth generation of telecom shift
Speaker: actually enabled you to have low latency. If you have seen in the third generation, it did carry data, but it had a latency factor.
Speaker: the spectrum availability across the board increased. With that spectrum availability, it also went deeper. Today, mobile penetration will be upwards of 70%, whether it is developed, developing, or underdeveloped country, whereas fixed phone never reached that scale anywhere other than the developed part.
Speaker: So the penetration was high, mobile capability was high, and therefore it actually made that the institutional instrument capability was equally high to carry not only voice, text, graphic, and video.
Speaker: That entirely changed the dynamics of how and the modes by which you could communicate with your constituents.
Speaker: And the good part is you could do for a substantial coverage of people. Today, if you really look at, if the global population is upwards of 7 billion, then you have as it's 5 billion plus mobile phones in the world.
Speaker: There could be people who might be owning more than one, but that substantially says that the kind of coverage that it has penetrated into.
Speaker: So this is the the telecom evolution over a period of time.
Speaker: I'll move to the technology side.
Speaker: And then probably we will step into how the convergence of all the three may, the world sit up and take notice of where the banking is today.
Speaker: If you look at the technology side, I will not go too far back because
Speaker: the 60s and 70s till about the 90s, you had large computing capabilities, but it is in a fixed location.
Speaker: An ability to transmit anything between or across the border was limited. One, telecom community connectivity was not there.
Speaker: And the computing ability to connect a network was also very limited. If you have looked at early 90s is when the networking protocol came in computing.
Speaker: And therefore you had network systems within a premises or within an exchange. It was largely local area networks.
Speaker: Wide area networks were yet to emerge. Then the wide area network emerged. Then you had the internet, which made possible tocha connect to systems across two different countries.
Speaker: Now, with the emergence of those networking protocols, it became much easier to optimize and use the computing power and also to transmit information across geographies.
Speaker: So all your offshoring things started only in 2000 after these foundational components came into being.
Speaker: What it also led to was
Speaker: computing was more technical and less understood by people who have not been trained in those.
Speaker: Digital e evolution in the early part of the 2000 actually created friendly systems where users can relate to.
Speaker: Otherwise people were resorting to computing only as something which automates and delivers the results, but they were not having the kind of the user interface which would excite somebody to look into that.
Speaker: We spoke about mobile equally Who would have thought from desktop we would have moved to laptop and there would be and increased the capacity in laptop over a period of time to support the full range which the telecom supports from voice, from computing to voice to audio to video and the graphics.
Speaker: So
Speaker: Internet networking enabled interconnected systems across the globe and people thought that there is possibility to move the computing part elsewhere, both with regard to having the technology modernization or upgrade enhancements to be done and also do the processing from another country by having connectivity to their own platforms.
Speaker: Digital technologies actually made it extremely user friendly to pick begin with. and therefore you had, with that internet developing, web front-ends.
Speaker: It has still not moved to mobile. It is only towards that fourth generation when it emerged that it moved to mobile. Initially, it was largely the web applications which got created, which was much easier, intuitive for people to actually get into and use. So it got pushed from your...
Speaker: being operated by the bank's staff to the consumers.
Speaker: You might call it as a self-service concept, but the self-service concept emerged with the web applications being developed and went further as it moved towards the mobile.
Speaker: COVID came and it accelerated everything.
Speaker: But like networking, I also need to mention that the cloud infrastructure, which came in there and which the banks and the regulators were very wary about, while the rest of the verticals started adopting the cloud or adapting to the cloud,
Speaker: got accelerated when the COVID came because people realized that in order to serve and and to have an existential relevance, banks need to find methods by which to engage digitally with their customers.
Speaker: And the regulators started realizing things are not so bad with cloud, and cloud platforms also have incorporated substantive security mechanisms in them by then.
Speaker: and It further got accelerated because of those.
Speaker: It is another dimension that what AI can bring into the table right now, but I will reserve it as another piece and I would not go with this because it deserves some attention, exclusive attention, so I'll reserve it towards the end.
Speaker: ah Tell me about the ah how all of these play together in terms of changing the operating system of banks, how they how the technology that helps banks to run, how that has evolved.
Speaker: See, if you were to go or travel down that path, Akshay, as I told you,
Speaker: the the evolution of telecom
Speaker: and the evolution of technologies, how did banks started assimilating them in the first place? What it meant for the banks?
Speaker: We will look at it from two angles. One, with regard to their own engagement with customers, how did it change, how the dynamics changed? And second, the way they are organized themselves, how did that undergo change?
Speaker: In the first part, how did their engagement with customers change? Certainly, the digital technologies and the mobile tech emerging, banks found that they really need to move to mobile as quickly as possible to stay relevant with them.
Speaker: But two other forces really pushed them hard. One of them was See, demography across the board has changed.
Speaker: You have aging population in Europe, very young population in Asia, and a relatively moderate population in the North America region, okay?
Speaker: And a relatively young population in Africa. Now, that is the reason why you see so much of successful digital stories in Asia than in other parts.
Speaker: The young people are digital natives or mobile natives and very quickly they are going to turn into AI natives and therefore banks have to serve for the future and they need to have those customer segments with them. They willy-nilly have to be in tandem with those groups.
Speaker: Already the shift is visible on the wealth side. The wealth has moved towards the Asia, growing wet the The actual a composition of wealth is still with the developed countries, but the growing part of the wealth is with the Asian countries.
Speaker: And therefore, you see that the wealth management funds coming down here. Now, how did the customer interface change? One, the demographics changed and therefore the banks were forced to change ah in line with what the demographic demanded for them to retain their customer.
Speaker: The second part of it, technologies emerged, which made it possible. Models started emerging. How would you segment your customer?
Speaker: how would you actually create customized messages for your customers? and dave And you had the computing power to support for those. And therefore, you also had in an enabling technology which made it possible for you to do that.
Speaker: And there is a third force which has been taken by the regulators. See UK.
Speaker: If you see, for some reason, u s has been a laggard in this.
Speaker: And even within Europe, UK has taken the lead, followed by Singapore, Australia, and now the Middle East market, Saudi Arabia and UAE are emerging as centers. I'm leaving out India a little bit here because it requires a very different one.
Speaker: Now, the regulators started having innovation forums within them, started promoting fintechs and challenging the banks because you really needed an external pressure in order for them because otherwise they were happy with the set of customers that they are having and the customers are much less safe. So, if if if you really look at the, one created those innovation centers to spawn fintechs and support them and bring them into and push harder on the established banks to mend and change their ways in how they will deploy technology for their customers.
Speaker: On another side,
Speaker: let us stay with the same set of countries which added innovation hubs as part of the regulator. They had created centers to give voice for the consumers.
Speaker: consumer redressal forums and regulations came in and especially in a place like UK they started leaving penalties if you don't respond to your customer on time.
Speaker: Now, therefore, the kind of practices that you adopt have to change in line with those.
Speaker: And the third part is
Speaker: consumers started demanding service equivalent to what they have seen in fintechs, if not from technology firms. And you really had technology firms coming into the financial services space, even though it is not the core of your banking process.
Speaker: We entered either payments, or they entered into com e-commerce segment, but giving the customer what they should expect from any other service provider, whether it is on and
Speaker: commerce side or on the banking side, with the result that the banks were forced to make those changes on the customer experience side. While these forces were there, they were enabling technologies that were there in order to make it possible.
Speaker: And the fintechs really created how those technologies could be adapted to provide a service similar to that of a technology company. So you had lot of banks acquiring these fintechs in order to improve if they cannot change themselves.
Speaker: See, this is on the customer experience side. How did that bank change internally in in with regard to these forces?
Speaker: Three things.
Speaker: Like I said before, younger population were in Asia. That is where wealth is growing. That is why you now see
Speaker: whichever the bank which is in wealth or in the capital market side moving towards Asia.
Speaker: And actually having a localization program attuned to this demographic group which they wanted to cater to.
Speaker: The second part of it is
Speaker: talent is available largely in Asia than anybody anywhere else. When I say talent, both the technology related talent and the operations related talent, significant numbers are available in Asia than in any other part of the world. That is the working population because you can't go to an aging population and have that served.
Speaker: And the third part of it is
Speaker: People wanted
Speaker: new products. They also wanted service. And service to a very great degree on a self-service basis. Even today, if you really look at other than the retail part or the wealth part, they want models which they could attempt to themselves.
Speaker: Sandboxes which they could use themselves. And therefore, banks have to move in line and make changes relating to them. So, with regard to the talent, with regard to the markets, and with regard to what the pressures were coming, the banks were making internal adjustments in order to be in line with that.
Speaker: You know, how has the core job of a banker changed? Traditionally, the core job of a banker was risk management, right? Because banks would make money by lending and the the interest margin, the net interest margin between cost of funds from depositors and what they earn by lending out.
Speaker: Today, what is the core role of a banker? If you ask me, Akshay, ah she Whether technology firms or fintechs can ever take over a bank, they can never.
Speaker: Two things which the banks perform where they have the skill, it is not easy for anybody else to actually pick that up.
Speaker: Banks have been used to managing a large balance sheet. that and Most of them today are universal banks in certain way.
Speaker: What is meant by Universal Bank is they are not only into the retail, they are into that corporate in terms of deposits and lending. They also are on the capital market side where they do anywhere from brokerage to custody to their investment banking and merchant banking activities.
Speaker: So a broad portfolio of services the banks provide. And People have realized that in certain pockets they could do better.
Speaker: Now, take a technology company like the GP or Apple Pay. They really need to have a banker as a supporting platform for them to execute that.
Speaker: It is not only because it is regulated, but because that infrastructure to create and manage is very unique and it requires pedigree of people who have been there before who could do that.
Speaker: And that is the reason why all of them need the backbone of a bank. Now, will the customer interface part be taken over by somebody else?
Speaker: Quite possibly, quite possibly. The creation of the products, whether it will be taken over by somebody else, quite possibly. but the black But the back function of the bank will it still continue to be with the banking industry is concerned. That is at one part.
Speaker: See, when you said risk, there are two parts of it. Not only in risk, but also regulatory compliance. See, you have seen how much telecom companies have struggled to comply with KYCs.
Speaker: because it has not been in their line of things. It would have been easier for them to align with the bank to have got it done much easier than to build that infrastructure. And even today, telecom companies are across the globe are nowhere near the efficiency of the banks in with regard to this function.
Speaker: and onboarding by a bank, especially retail onboarding, has come down over a period of time. It has never been the same with telecom, with a much lesser regulation. If it had been a tighter regulation, you know where it would be.
Speaker: Now, the lapses are also equally high. In the case of telecom, you couldn't find such lapses within the banking segment is concerned. See, that essentially means in terms of managing a very strict and cumbersome regulatory regime, banks are well-tuned to do and manage and handle them.
Speaker: The second part of it is with regard to the risk is concern. Let me tell you something.
Speaker: How many people do you think will trust their money with somebody else
Speaker: which are not regulated.
Speaker: Why has it taken so much of time for crypto to get recognized and accepted? And why it is getting accepted only when a regulator backs it? It definitely shows that people are very discerning to know that a system of a regulation and a person capable of, institution capable of adhering to the regulation is a primary requirement for them to place the trust on.
Speaker: you You follow? A few could be gamblers, but a substantive people will not go to a place where they could risk their asset unless and until these two are in place.
Speaker: So I really think because of this, the banks will continue to remain. And i also know that they have learned a lot of lessons over this period of time, especially with the fintechs coming in and with the innovation hubs being promoted by the regulators.
Speaker: Some portion of the product themselves they will do, but many, they will actually go and have third-party products and they will become a distribution and back office processing then the friend-facing part.
Speaker: And most likely it is it would move that way if you ask me, Akshay. ah yeah Okay. Tell me something. Why did the US create Visa, MasterCard, India created UPI, and China created Alipay?
Speaker: Like all of these are payment rails in a way, but they're very different in characteristics. So... See, Ashay, thank you for asking me this question.
Speaker: Okay? Why I say that is, do you know which is the most context-share spot in any part of the world? No. On the consumer side, it is on the card side.
Speaker: If you take UK every year,
Speaker: the court settlement providers, whether it is MasterCard, Visa, JCP, Tandas,
Speaker: are asked to pay substantive amounts because they have overcharged the consumer. Okay? And it has been so not only in UK, but also in the US.
Speaker: Okay? And in the rest of the parts, it is not at the same dimension as these two economies. So we will leave that out for the time being.
Speaker: It is not that it is not there, but not at the same scale as these two economies.
Speaker: What you had asked for, I will answer in three different ways, actually. The first is this contentious part. And that is because of the way it is structured.
Speaker: Because credit card loans are the ones which are the highest rate of interest, carry the highest rate of interest in the retail segment, okay?
Speaker: In an economy, we take for example, most of the developed economies, where the inflation rate just before well the post-COVID era used to be close to 2%, okay?
Speaker: okay Now, therefore, the interest rates were well within that bank. Even there, the interest rates on credit card were 20% plus.
Speaker: And not only in terms of that interest rate, but you also had the fees, charges, charges.
Speaker: I'm sure you must have at one point of time paid the admission fee for a card, renewal fees, and late payment fees, and so on and so forth.
Speaker: And because there is a disproportional rate of interest that makes the first and reason for for people to look into and become issues a check.
Speaker: The second part of it is not only the consumers pay, the merchants also pay. Correct? And margins are coming down, retail margins are coming down across the board.
Speaker: And you could observe one trend.
Speaker: Take any matured industry stock across the board, they will not be making more than 5% of the revenue as the pre-tax income.
Speaker: it will be in that 5-7%. Other than technology companies, I don't count them as matured as the other segment, whether it is automotive, retail, healthcare, you take any of them, utilities, it will all be in that range.
Speaker: And it is across the globe. It is not necessarily within a country or a region.
Speaker: Now compare that with this.
Speaker: So,
Speaker: Definitely, if the merchants are asked to pay 1% to 2% fees, when their margins are really squeezed, and especially the small merchants, then it becomes difficult one, correct?
Speaker: Right. And now you definitely have, like how we have launched that UPI, and how Apple Pay, Google Pay started on moving.
Speaker: Now, you have an alternate methods to the cards, which are much more efficient and much less expensive. And second, most national governments have actually realized for any international transaction which goes to their network or any domestic transaction which could not be handled within a given response time goes to the network, they need to pay a charge.
Speaker: And the charge irrespective of the value of the transaction is quite high. It used to be $25 for every transaction that most of the network. Whereas the actual transaction itself will be some 200 rupees or 500 rupees, much less than that value.
Speaker: So most national governments have realized, why can't I set up that infrastructure? infrastructure And for your information, India was the first to do. And among the Middle East countries, Buman was the next to follow.
Speaker: Now other countries are following suit. Because India has shown them that it is possible to create an infrastructure that no transaction goes to the network. And second, why would we have a network? Why not we have our own for domestic transaction is 90% of our car transactions. So only 10% are global foreign transactions. Why would I not have...
Speaker: Correct, rupee. Why would I not have a network within the country? It makes absolute sense, but it requires some courage to stand up and say that I'm not going to lose and I'm going to make it happen.
Speaker: Now, penetration of rupee is not the same as that of the other networks, but it will evolve and come as most bands started adopting them. The primary card issuers have just about started adopting them in India,
Speaker: If more people adopt, it will will actually move that way. To answer your other question, no this is the reason you are asking why have some people set up their own national networks? It is because of this.
Speaker: It is not due to pride. It is due to commerce. Why would I have to pay for And therefore, why can't I serve and do things efficiently? But UPI is not just a network, right? UPI is a completely different beast.
Speaker: And how is it that India ended up pioneering UPI and not... to That's a different story. But anyway, I will try to make it very short, Akshay.
Speaker: Do you know that we had about 350 check collection centers in India in the ninety s
Speaker: That's where like a physical check would go and it would be scanned and... No, different parts of the country. There were collection centers which will have to go to one unified center in Mumbai.
Speaker: Okay. So 350 collection points need to go into that place. And in one brilliant move, two things happened. as i As I told you, when the telecom network grew,
Speaker: they connected these 350 centers. And second, I'm sure you must have heard of check truncation, where they digitize the check.
Speaker: I've just heard that term. I don't know what it means. Yes. Check truncation is nothing but where a check, a digital copy or ah image is being taken, where those details are available for you. Because anyway, that is what is being used for your processing of the manual instrument, Akshanik.
Speaker: So by networking these 350 centers and the check truncation being implemented across, it became possible for you to do, but there was another development.
Speaker: We also moved, at that point in time, we had a,
Speaker: we moved towards a real-time settlement system. Which RTGS? Correct, Gross Settlement System. Real-time Gross Settlement System.
Speaker: With the result of that, it became possible that everybody has to move into this. And it was in 2000 that we actually moved to that RTGS along with the network development and the check-clinication.
Speaker: And therefore, we were able to do. Now, that is one part of the story, Akshay. but Another part of it, with the mobile penetration being what it is, the government thought, why can't I enable mobile as an instrument and therefore enable payments to move across?
Speaker: I believe at that point in time, many people in the non-metros did not have bank account with them.
Speaker: If you really look at UPI, it came for transfer between two mobile numbers rather than two bank accounts.
Speaker: Okay, then subsequently it got attached to a bank account.
Speaker: I really think that that move where we thought, okay, mobile penetration is more than the bank account penetration or the bank branches being in those locations.
Speaker: How could I use what is available in order to make people's ability to receive and pay for their services better?
Speaker: The offshoots of that was very different, but this is the principle idea. And originally it was created for making transfers, that is the subsidies and transfers.
Speaker: Later it got used for other commercial transaction as well because it has become an enabler. Interesting. So you think the financial inclusion goal led to UPI being created?
Speaker: Absolutely. Absolutely. Absolutely. How could I? i See, not only financial inclusion, but whatever that you will call as the grant of support which the government has to give for the poor, how would I do that without any intermediary and in the most efficient manner?
Speaker: cash transfers which needs to be done and therefore they've figured this out and naturally if you make those transfers they must be in a position to use that's why valets came initially before even moving towards your bank accounts and therefore making it possible for you to do okay okay interesting interesting now actually I will just spend a little time on that what AI would mean to banks.
Speaker: And I will make it short, but but I will tell you the pillars that people need to look into in order to harness or make the best use of AI.
Speaker: See, the fundamentals of banks across the globe has not changed. The fundamentals of banks have not undergone change across the globe. They are people who deal with the wealthy set of documents.
Speaker: Okay? Some of them which they have customized, some of them are not so customized for the same simple reason that banking over a time have become complicated.
Speaker: While it is not so much present in retail, in corporate lending,
Speaker: Instead of the borrower, the lending can move from one bank to another bank.
Speaker: For a portfolio gets acquired by another bank. But the terms of that arrangement with the borrower still remains. It is not the acquirer bank's usual terms. It is the ah previous lender's usual. So banking has become complicated by having these kind of structures in place.
Speaker: So they deal with documents across the board. Now, how do you process those documents in a way that is is meaningful? Extract the required information.
Speaker: um yeah I want to ah latch on to something you said previously about one broad trend over many decades in banking of unitization. what What do you mean by that? And can you explain with some examples?
Speaker: See, take the case of shares. And those performing shares values rise. And therefore, it doesn't become possible for smaller investors to participate in them.
Speaker: Then the mutual funds came. Essentially mutual funds will invest in those shares and they will have units which are within the range of the smaller or retail customers to subscribe to.
Speaker: The same concept came in through tokenizations.
Speaker: While the mutual funds dealt with the listed or traded stocks,
Speaker: the tokenization became available for non-traded asset classes.
Speaker: For example, real estate is not a tradable asset. So, unitization came in for real estate, both residential as well as commercial real estate.
Speaker: REIT or era Real Estate Investment Trust came in to hold buildings where people can subscribe to smaller investors can participate in in a commercial complex which is large and which is doing well.
Speaker: Now the same benefits are getting extended, the same tokenization principles are getting extended for the digital assets are concerned, whether it is NFT or whether it is crypto or stable coins, any of them.
Speaker: What essentially means is there is a drive towards making the entire set of asset classes which was available to the ultra rich, available to the smaller investors too or retail investors too.
Speaker: And it may not be the same medium, but the impact or the effect is the same. That's what I was offer referring to as the unitization where the values are being made smaller so that it can attract the retail investors into those asset classes.
Speaker: So though I also observed that the opposite is happening. um Companies are staying private longer, like the say a fintech like Stripe. ah two, three decades back, there's no way Stripe would have still been an an unlisted business, right? A company of that size.
Speaker: um Or in corporate debt, ah I don't think debentures are the main way in which ah companies are raising funds. It's more of private credit. And so private credit is, again, inaccessible to retail investors.
Speaker: Why do you say that? ah Let me put it this way.
Speaker: Let me take that first part of your question Akshay in terms of even now you have unicorns which are private which has not become tradable.
Speaker: Now there are certain platforms which are available for even the pre IPO related stocks
Speaker: which allows retail investors to participate in them. You have two different platforms. One of those platforms is for the ultra rich or a large deal platform.
Speaker: There are also retail platforms which have emerged, which makes it possible for red retail investors to participate in those unlisted securities, which are prime for IPO sooner or later.
Speaker: Second, some of the private equity funds themselves are creating those platforms in order to attract retail customers to participate in their portfolio companies.
Speaker: It is not so widely prevalent. It is with a few people who have actually taken the lead to establish those.
Speaker: Nevertheless, there is a broad movement towards making retail investors participate in a wide variety of assets, which was before available only for the ultra rich.
Speaker: See, please you ah the first part of the question which you are asking in terms of unicorns still remaining private. There is a vested interest in private equity firms to look for higher targets.
Speaker: Earlier, if you have looked at five years ago, becoming a unicorn was a target. Now people are looking at 10 billion as the threshold value where they will get to the IPO and sooner because who would have thought the traded stock will be in 1 trillion in market capitalization.
Speaker: Today, from Apple, which crossed the threshold today, we have five at least corporations in that one trillion market cap.
Speaker: And therefore, the ambitions and the values are also soaring across the way. Whoever is showing growth, can I postpone that and actually get to a larger threshold?
Speaker: Okay. Okay. Got it. Like, essentially, you're saying like the people who hold equity in these... ah private companies, startups, unicorns, they don't want to book the profit yet.
Speaker: There is more upside. So they are holding on. Okay, got it. So and now, the you know ah I'm exploring this dichotomy. On the one side, you said unitization is a secular trend.
Speaker: On the other side, you were also s skeptical of crypto. Isn't crypto another form of unitization? Or let me not say crypto, blockchain, DeFi, decentralized finance. Isn't that unitization?
Speaker: See, yeah let's deal with the first part. I'm not skeptical about crypto. I was only indicating that it is getting recognition only when the regulators have started backing them.
Speaker: There is a risk attached to that class of assets. See, anything which does not follow a regulatory regime is a very risky part. And you really don't know when the retail investors are participating.
Speaker: where it would end and it will fall upon the financial regulator to see how it can be brought within the regulations if you cannot govern them or the government takes the initiative that it is not a permissible activity that could be promoted to a wide section of consumers to participate in without some checks and balances being instituted in them including the governance part.
Speaker: The second part when it actually relates to the distributed ledger technology is concerned. It is catching up whenever that multi-party is involved and it is not something which is for unitization.
Speaker: It is to make sure the
Speaker: the the wherever there could be a single source of truth, especially when it involves bilateral or multilateral practice across the borders or for high value transactions are concerned, it is preferable to move towards that more.
Speaker: And you seen that in the investment banking side, because the stakes are higher, because the deal sizes are bigger and it normally involves more than a bilateral party that is involved in that, the DLT has become some stable platform to be relied upon.
Speaker: What's an example of this investment banking using DLT? Exactly. See, there are two types of things which the investment bankers do.
Speaker: One is the traded stock. Another is the over-the-counter stocks. over the counter, especially with regard to that over the counter derivatives are concerned, it involves multiple parties in that kind of a structure.
Speaker: And therefore, those were large agreements which people used to work that out and subsequently maintain to say that because rights are transferable.
Speaker: The participant can transfer those rights to maintain who has transferred to whom, where it is maintained, and there needs to be a single source of truth. And that is moving into a DMP platform. What's the meaning of over-the-counter?
Speaker: Over-the-counter is which is not being traded on the exchange. It is a private transaction within a group of people. That is called over-the-counter related securities.
Speaker: So, DLT is something which can resolve substantially the multi-party related contractual arrangements under monitoring being in a single place rather than being sought out to the whoever is the prime a participant who governs them.
Speaker: So it makes it much more easier, transparent and referable.
Speaker: in that sense. ah You are using the terminology DLT and not like say blockchain, DeFi. Is that because of the DLT term is more popular in the banking sector? Because in general parlance, people generally would say blockchain or DeFi.
Speaker: See, whether you... Blockchain and DLT are the same. Same thing. Okay. okay got it interchangeably sometimes as blockchains of things as a distributed legit technology but so like uh you know you can do things on d5 like say a house can be unitized right ah you You can have an NFT of a house which is then unitized and people can have a whatever few basis points ownership of that house and so on and so forth.
Speaker: like the I believe there was an effort to put the original US Constitution document ah on an NFT so that people can have fractional ownership of that.
Speaker: ah so So these are all like broad moves towards unitization only, right? Okay, actually it com combines two things. One is assets are getting unitized for larger retail participation.
Speaker: Second, there is an underlying technology which enables the retail investors to have visibility towards who are the other participants, what their rights are and whether They still, ah their ownership and their status that they could have certain.
Speaker: So, in unitization, in some respects are supported by DLT in order to create the transparency in the entire value chain.
Speaker: Some cases, it is not backed by DLT, but nevertheless, it is unitized.
Speaker: got it the question i'm getting to is um is the future bankless is the future d5 where increasingly there are tech companies who are running the finance rails uh for example today for cross-border payment ah you can skip the banking system altogether uh you can use stable coins uh and not have to use swift at all um So do you think that DeFi is significant challenge to banks or ah do you think that banks will adopt DeFi technologies and they will continue to be the the the gatekeepers for financial services and transactions?
Speaker: what What is your take? See, actually, if you actually see, there are two sets of participants, if not more. One is an underlying technology provider. ah Let me take a step back and set that context and see if both of us are alike.
Speaker: See, you have the market infrastructure that is the exchanges where you could trade, correct? They are independent of banks that are market infrastructure firms, which provide the technology for retailers or institutions to trade in certain instruments which are registered with that market infrastructure and it has a governance in it.
Speaker: Now, if you look at who are the people who are involved in that, substantially it is the universal banks which constitutes both on the buy side as well as on the sales side in that market infrastructure today.
Speaker: no What has happened is that market infrastructure which was limited to stocks and bonds and in some cases relating to the derivatives whether it is futures, options and swaps relating to them whether it is for currency, credit rate or equities.
Speaker: Other classes of assets have come and the new market infrastructures have come. For digital assets like you said for Either it is a stable coin or it is a crypto or an NFT.
Speaker: You have different set of market infrastructures which have come. Till this point in time, banks were not allowed to participate in them substantially because of their regulatory restrictions.
Speaker: And slowly some pockets have started relaxing, permitting for banks to participate in those. And that is the reason why it was substantially retail investors led.
Speaker: And believe me, the movement, this regulation regulators start accepting the digital assets as a safe and permissible instruments or asset classes for the financial institutions to deal with.
Speaker: Sooner or later, retail investors will be replaced by institutional investors coming through the banks. So while the market infrastructure is different, the other participant who originate either the buyer or the sales side will move towards the financial institutions without a doubt.
Speaker: What's a universal bank? I told you, see, how things grew both from a personal side as well as from an institutional side. personal side as wealth improved people wanted some wealth management, they wanted new asset classes, diversified asset classes, they had diversified asset classes across markets and therefore from a simple deposits and loans it moved towards asset classes being managed either by the funds which the like the mutual funds which the banks manage or
Speaker: managing the funds on behalf of their customers ah across those markets. So the banks grew in that fashion for the retail investors. Similarly, institutional funds, people wanted to raise capital and those raising capital need not be the credit line.
Speaker: They wanted to get into the secondary and the primary market in order to list And therefore, merchant bankers came into being and those merchant bankers facilitated those transactions are concerned.
Speaker: Now, given all this, so banking evolved from catering to deposits and lending to managing the assets, to managing the funds, to managing the listing into those primary markets and managing the secondary market related transactions too.
Speaker: So it grew. That is called Universal Banking, a bank which provides the entire width of the services aligned with the financial instruments called Universal Banking.
Speaker: Okay, so when you say banks are both on buy side and sell side with these market institutions, so it it means like, for example, if Swiggy wants to raise money from the public market, a bank will be there, a merchant bank who's responsible for running that process for Swiggy and selling that.
Speaker: Similarly, people who are buying Swiggy shares, there will be mutual funds among those buyers. So again, the universal banks are on both sides, the buy side and the sell side. okay Okay, got it So essentially what you're saying is that even in ah crypto, it will become similar that there will be crypto funds which is holding crypto. so you will Fund management firms will include crypto also as an asset class.
Speaker: Today you have equities, bonds and to some very limited degree on the government securities being traded in and included there.
Speaker: It will include start including digital assets, whether it is crypto, stable coins, NFTs and things like that. Is blockchain
Speaker: like a legitimate investment? ah Sorry, not blockchain. Let me rephrase the question. Is Bitcoin a legitimate investment? When you buy a company stock, that company is producing and selling something and making money, there's a revenue source.
Speaker: You're buying a share of that revenue source. But is that the case with bitcoin I will put it a little differently actually. yes Is Bitcoin accepted by the regulators?
Speaker: I would say no. not right Not yet. Not yet. But you have a large fund backing them up and and because of that,
Speaker: people believe that the regulators will see it into that sooner or later. So that is that is how it is. That is how it is at this point in time. So essentially, it's ah it's like a community decision.
Speaker: Like everyone feels that Bitcoin has value. Therefore, Bitcoin has value. See, i let me put it this way. I'm not sure how many of them have completely understood what is regulated, what is not regulated. There is always room for speculation. If you look at speculations, it's in another domain.
Speaker: completely and like your are asset classes getting diversified, speculative platforms are also getting diversified. Earlier, you had only this horse racing as the speculative platforms, then came lotteries and slowly from lotteries, it moved in the digital way.
Speaker: Correct? There are lot of games which support you to be on the speculative mode. And one of these has also become crypto. you You follow? Now, it is in another parallel market and if you have looked at that part of the market doesn't come with the financial regulator.
Speaker: The speculation does not come within the financial regulator. It comes within the government per se. And government has been slow in whichever part of the world to regulate that speculative activities are concerned.
Speaker: Just because crypto as an underlying financial instrument are supposed to have an underlying financial instrument, people are asking the financial regulator to take ownership rather than let it be with the civilian government.
Speaker: That's about all I could say. Okay. Okay. Okay, so PV, how will AI impact banking? See, I will put it in this fashion, actually.
Speaker: Banking across the globe, irrespective of which part of the world it is, and which type of the financial institution it is, whether it is a retail bank, commercial bank, capital markets bank, whichever it is,
Speaker: They deal with, they have three different things which AI can enable. On one side, they deal with lot of documents. And those documents are when really voluminous.
Speaker: If you look at any corporate lending agreements, it will be 500, 600 pages in place. If you actually go into the any of the ah derivative instruments, over-the-counter instruments, that securitization will be about 500-600 pages in place. Multiparties are in place.
Speaker: Now, therefore, they deal with large volume, highly variegated set of documents which they deal with. And that is across their core functions as well as in terms of marketing, things like that.
Speaker: Second, irrespective of the size of the bank, they would have anywhere from 100 applications to thousands of applications in the landscape.
Speaker: And they have always lived with it being aggregated, data being aggregated from these platforms without an ability to go for details into those respective applications in place. It would have only the aggregated information available in the data store.
Speaker: Third, across their core functions, banks use models. Use models for your customer segmentation, use models for the risk, use models for their own credit decisioning and things like that.
Speaker: Now, in all the three core activities of theirs, AI can substantially come and help and Today, in a less than three years of phase, the Gen AIA platforms, whichever the Gen AIA platforms that you choose, have a greater ability to draw inferences from those documents.
Speaker: And you have also got associated technologies either through a chat or a video bots, making it possible for you to query anything outside of that from those documentations, which means In the core part of the operations where nearly 70% of their workforce are there today.
Speaker: If you look at the core functions of customer service, lending, regulatory, wealth, and their capital markets unit, it between the middle and back office, they will have anywhere 65 75% of their workforce and cost involved Now all of them deal with this and here AI can make it possible.
Speaker: Second, from those distributed application and the ability to go down to pick up the relevant information based on the need.
Speaker: See people did not build that entire pipeline earlier. one technology was not feasible. Second, you really don't know because the queries might come only for 10% of the entire data. So you don't know for how to create it only for the 10%.
Speaker: Whereas today with AI, you will be able to do the querying only for the 10%.
Speaker: So it has made distributed data or siloed systems no longer a limitation for the bank to look at how they can extract insights and and enable their decisions.
Speaker: Third, between ML to DL, there is deep learning models. to deep learning models okay The machine learning is the traditional statistical modeling purposes. It does not undergo a change.
Speaker: But there have been certain limitations both with regard to the quantum of data that it can deal with, as well as in terms of the number of years for reference period that it can take up.
Speaker: Because there is a computing power which was available before, which did not allow a very large set of data sets and for a large period to be processed efficiently in
Speaker: And you can't create multiple of those sensitivity analysis. They were creating, but with this limited set of facts that they were able to create those in place.
Speaker: And especially with a large set of data is concerned, people were going by their own references by identifying key factors, which could be the determining elements.
Speaker: Today, all of those can be done by AI by identifying the factors relevant for each one of them, comparing against the other models, comparing against time and giving you those insights.
Speaker: So in all the three funds, if you really look at AI can enable. Second, What is also an enabling factor is, this is not something which the bank has to take efforts to, because they already have it in some form.
Speaker: Most of the document is in the document management platform or in a file storage platform. So it is something which is available in their system, which they have been used to.
Speaker: They don't need to look for outside to gather that. Only thing is that They need to unitize that function and bring those relevant documents for being processed by AI.
Speaker: Second, irrespective of the technology, whether they have been in fourth generation or fifth generation technology platforms. It is possible for ai to actually have access to and draw those information from.
Speaker: That means across the generational platforms, AI will be able to pull the data and and create you those insights. And
Speaker: One of the other factors other than improving the quality of the modeling itself is that entire life cycle of the model from the time that the model definition is done, tested, improved upon, rolled out and monitored.
Speaker: were outside because you did not have a mechanism to actually do that. It was relied upon by the model owners that they said that I have actually gone through, there is some levels of scrutiny there, but the entire population is not kept in one place to know that what has been the experience of i gone through.
Speaker: Today you have in those orchestration platforms, AI orchestration platforms, an ability to manage that entire lifecycle model, draw inferences from and have all those models in one place for you to make a cross reference and understanding.
Speaker: So definitely, AI can make a substantive ah impact when they have to look at how their operating model can get changed, how their decision insights can get changed.
Speaker: And there are certain limitations where currently the available set of technology is yet to be proven, especially when you look for the voice to text kind of an environment.
Speaker: There are certain translation errors, there are certain ability for inferences, especially on the voice frame. While the inferences from text are substantially improved.
Speaker: So if you fix the translation part, you would be able to harness the best of the features of AI. But there are certain challenges with regard to fixing those translation part and Otherwise, we are in good shape with regard to the technology being proven.
Speaker: the methodologies for harnessing the levels of accuracy being proven, tools being available in order to orchestrate towards that levels of accuracy consistently with the set of governance that needs to be there, which was available current in the manual system can be replicated without any problem.
Speaker: So I really think that given this people have to look at which areas they will pick up, and therefore, how they will actually put together the the architecture for making the best use of AI to get to those targeted outcomes are concerned.
Speaker: OK. How is ah AI impacting IT services businesses? Like, you run an IT services business. um Do you see it like giving you the ability to do more with less people, like lower workforce costs?
Speaker: Do you see ah your clients doing more things in-house because AI tools, like say, wipe coding can also allow a company need to do software building in-house? Like like how do you see AI impacting IT services businesses?
Speaker: See, we see three... ah the trends being different to different segments of the people.
Speaker: One technology companies themselves are concerned.
Speaker: They are moving towards a AI native software development model. What I think about AI native software development model is you have as minimal a manual intervention as is necessary to ensure that the quality and integrity, reliability of the platform is being maintained.
Speaker: In a very good AI native model, you might have only a product owner, an architect, and the lead is capable of reviewing and and clearing those codes are concerned.
Speaker: Then you have software development companies or software ISVs independent software vendors are concerned. They are also moving towards the a native model.
Speaker: They have not completely moved in, but they are moving towards the native model. Then you have the broad set of... One, Rick, what's... Give me a name also. What's a technology company like Google and Microsoft? as Exactly. Google, the Microsoft, me Amazon, Facebook. you yeah And what's an ISV?
Speaker: Independent software vendors, people who create the software products are- Like Infosys? No, no. ah Like Infosys, that Finacl platform is concerned.
Speaker: There are other players- companies. Software products are concerned. Like Zoho or Fresh. Exactly. OK. SaaS businesses. Got it. OK. Outside of this technology, companies and independent ah software vendors are concerned, whether it is banks or whether it are other enterprises,
Speaker: They are finding it difficult to move towards an AI native platform, but they are looking at a AI enabled a software development option, which means There are yeah yeahi agents which assist a developer, AI agent which assist quality engineer, AI agents which assist a scrum master, AI agents which assist project manager, a program manager, that entire, see,
Speaker: Copilot is a tool. How you use the tool along with an agent matters. and And therefore, if I use an agent structure, I can move towards a ai native platform where only agents do the development, initial development.
Speaker: There is only a lead to review those codes generated by the AI tool is concerned. Whereas otherwise, I can embed an AI assistant to the current structure which you have, which is like a project manager or scrum master, the the lead and the developers and you attach it to them in order to facilitate their function.
Speaker: And if they have some challenges with regard to getting stuck with certain codes, AI assistant can actually scan through and give them options which they could adopt.
Speaker: and tell them similarly the quality engineer who's doing a static code analysis or acceptance criteria idea and analysis it can enable them and therefore it can so this is what we call as an AI enabled software development they are much more comfortable moving towards an AI enabled software development before moving to an AI native platform because Unless and until this is able to cross a threshold acceptance criteria in terms of quality, people would not, especially in a regulated industry in banking, will not be comfortable to move towards that thing.
Speaker: And it is very similar, it is not exclusive to software development, even in terms of the models which they are using, they have not moved towards an autonomous model.
Speaker: They are still with a super supervisory model. Essentially because they need to get that level of accuracy consistently before and explainability before they can actually move towards an autonomous model.
Speaker: Will they move towards an autonomous model? They will. But would they move towards an autonomous model today? They will not. So, it has to be each enterprise have to observe whether they are meeting those thresholds in order to give them the comfort to move towards that model.
Speaker: Same is the case with the software development if they see. But very clearly we are seeing very similar to when Agile methodology came in.
Speaker: People are accepting in few of those programs. AI enabled software development to test out whether it is working and if it is, then they will move towards a AI native.
Speaker: So while early adopters are the technology companies and the ISVs,
Speaker: banks and enterprises will move towards the AI native platform probably over the next three to four years. Because they have a higher bar to clear in terms of experience, accuracy.
Speaker: Okay, okay, okay, got it.
Speaker: You know, like you mentioned Finical, which is Infosys' product that they have created. uh have you created similar products within Maverick uh or are you more on services side we are a services firm actually but we have created certain accelerators which demonstrates uh how uh how people can architect and deliver an outcome and this includes both on the digital side as well as on the AI side, where we have created as a proof to tell people, here is an option, here is a proof that this is how it could be architected to get your results.
Speaker: and and And therefore, we do have those kind of accelerators, but we are not a platform or a ISV, so to say. Why not though?
Speaker: I think… It is a very different… it requires a very different approach because banking is a place, no? There are… they need more services because they… as I told you,
Speaker: any mid-sized bank will have 1000 plus products in their tech landscape. They need a services firm to integrate them, manage them, making sure that it it is the features are ah harnessed well in order to suit their purpose.
Speaker: So that They cannot rely only upon those software product companies. They need to rely on a services company, which has a deep domain understanding and an ability to know what those tools are performing, how those tools could be fully explored in order to meet certain objectives of theirs.
Speaker: Okay. What's the ARR for Maverick today? See, we are
Speaker: upwards of 75 million. Wow. And you're still privately held. Exactly. ah Any VC money? Still not a unicorn. I would say 75 million revenue could be valued at, i depends, you know, like valuation is in the eyes of the beholder.
Speaker: i Especially because this is unlisted. So, but ah do you have any VC investors also in this or this is all founders? employee all, all. we We have a friendly investor with us, but other otherwise it is.
Speaker: And how many years did it take you to hit? 25 years. 25 years. Wow. Amazing. Amazing. like ah Any ah lessons ah over a 25 year journey, ah you know, for people who are building businesses, like if you can.
Speaker: extract a few broad lessons which are universally applicable for entrepreneurs? Your belief is more important than anything else. Why I say that is when we started, we started as a testing company and we morphed into an IT services company.
Speaker: And we stayed within banking in all these 25 years and we would stay with it for the rest of our life too or a substantial part of our life too.
Speaker: When we started, neither focusing on a single vertical nor focusing on a service like testing were popular.
Speaker: But nevertheless, we knew until and unless you build a speciality, you will never be able to but to find your way in.
Speaker: Given that enough number of IT service firms have come from India, which are of a much larger size and already established. So you need to know where and how to create your differentiator that would stay with you for long.
Speaker: Second, when we started We have continued, you know, the four of us have continued from the day we started.
Speaker: Whether four people were necessary at that point of time, no. Did it become necessary during the journey? Yes. So always if you have instead of one or two members, a broad profile of people who can actually contribute to because When you are building that journey, you need plural minds to come in with their approaches for you to pick the right one and to move on and to make sure that you have less risk, much more ability to win.
Speaker: and and
Speaker: And the third part of it is making sure that you pick the right set of customers. rather than picking, if you place revenue over the quality of your customers and if you place numbers over the quality of the team that you are building in, then you are only aggregating problems from the beginning.
Speaker: It will blow up at some point in time. If there is enough quality of people inside, and good quality of customers outside, then your growth is given because you can only work on one dimension any given point in time.
Speaker: If the customers are good and they have enough ability to give you additional businesses, then you only need to work to make sure that in whichever area they have a challenge, you can work towards a solution and you have a captive revenue in place.
Speaker: In order to do that, you need to have a very stable team with you, which is of good quality for you to get there. So if you ask me, my top three picks would be this.
Speaker: Go with your beliefs, go with a team that is far more broad based with whom you can work. And go with good quality customers and your own team and building those teams.
Speaker: If you focus on those, the rest of the things will level evolve. You cannot put a timeline to that, but it will certainly be, you will be in a good foundation to actually get wherever you wish to get to.
Speaker: What is the trade-off between good quality customer and revenue? You said that prioritize good quality customers than revenue. So you mean to say that's a no? I will take another example to illustrate that.
Speaker: A lot of people who were also set up ah alongside us whom we knew, they went in for any customer who will give them the revenue to them.
Speaker: So they were across vertical. Not specializing in a sector. Exactly. Exactly. So with the result, what happened was they were always being compared with somebody else.
Speaker: It ah became a staffing company. It was not a services company which had certain unique qualities. And staffing business has a very low entry barrier. Anybody with whom you can manage some people and we can manage one or two connects can establish that.
Speaker: So constantly you will have competition from a class of enterprises, no which will only pull you down.
Speaker: So it will not allow you to to invest and build a certain differentiator for you. But many people think that if I get to the revenue point, then I will move towards that and build some services.
Speaker: Very few of them have actually executed that. So so the the reality is you are under constant revenue and cost pressure that you are not in a position to spend time to build your differentiator.
Speaker: It is better to find your differentiation right at the beginning. Are services businesses built on sales muscle or delivery muscle?
Speaker: See, the couple of things. If you have built ah sufficient quality of customers, it is delivery based. And that's how we were for 20 of the 25 years because we never had a sales team in place.
Speaker: But only in the last, we have decided that there needs to be a new client acquisition mechanism to generate more growth. And therefore, we need to put that in place. Otherwise, it is delivery impact and the delivery quality that enables growth for you.
Speaker: Okay. Fascinating. ah Thank you so much for your time, PB. It was a real pleasure. Thank you. Thank you, Ajay.
