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Banking lessons to learn from Formula One championship

Banking lessons to learn from Formula One championship

Banking lessons to learn from Formula One championship
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By CNBCTV18.com Contributor Aug 31, 2021 9:43 AM IST (Updated)

As a banking professional, one can draw multiple similarities between the indian banking sector and Formula One championship – especially when it comes to focusing on size, technology, efficiency and teamwork in both sectors.

As a banking professional, one can draw multiple similarities between the indian banking sector and Formula One championship – especially when it comes to focusing on size, technology, efficiency and teamwork in both sectors.

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Fast speed, steep turns, team dynamics, pit strategies and checkered flag… The Formula One season is poised for exciting developments in 2021. For the uninitiated, Formula One is the gold standard of single-seat auto racing – the big arena – comprising of 10 teams with two drivers each. Each team not only competes for best driver rankings, but also for constructor’s championship (F1 team rankings). FIA or Fédération Internationale de l'Automobile is the regulatory authority and all drivers and teams operate with a license and set of rules to compete in 23 races annually around the world.
Earlier every constructor (F1 Team) needed to make their own engine and chassis to compete; but since 1981, the regulation requires constructors to just have their own chassis. This has opened doors for a newer breed of racing teams to enter the exclusive club of high-speed doyens. The spectrum of teams is extremely wide – comprising of well-established automakers such as Ferrari, Mercedes, Renault and Maclaren at one end; and new-age players like Red Bull, Haas and Williams who are not hardcore automobile manufacturers, but compete among the leaders in the F1 division on the other end.
Likewise, the highly regulated banking system in India comprises very vintaged large players and very young players – often competing for customers, the share of the business and technological excellence. The regulations ensure the playing field is leveled in terms of generic products, interest rates and freedom to operate across the country. However, size commands visibility and in turn offers a significant advantage.
In F1 too, size offers huge advantage. However, what one may lack in size is often compensated through agility and innovation. Sample this, Mercedes team has more than 1600 members while Williams or Haas would have a tenth of members. Similarly, in terms of total spends, top tier teams account for at least three times the budgets of the smaller teams. Interestingly despite the size disadvantage, some smaller and younger players perform extraordinarily. One such team was Force One India – which in 2019 was bought over by billionaire Lawrence Stroll and presently competes as Aston Martin team. This team in its new avatar, was ranked among top 5 in constructors’ championship in 2020.
Similarly, in the banking landscape, new players are competing with the established players and therefore, focusing on own strengths of technology, collaboration as well as niche customer segments often ignored by the larger banks. The quest is not about opening the largest branch network but a mix of branch and digital offerings. The core focus is on developing an ecosystem which is efficient, affordable and accessible for millions of underbanked Indians.
In their quest to dominate, the engine and drivers account for largest budget spends for the F1 teams. Technology sits at the core of the focus – with each part being built, fitted and tested to withstand the asphalt, weather, risks and turns across novel race courses. While the specifications are broadly regulated by FIA, each constructor makes modifications to ensure a customized and smooth handling experience for the team’s drivers. Beyond the brake, acceleration, torque and aerodynamics; various strategies involving pitstop, tyre changes, team order, undercut, etc. – all to extract the best possible results from the engine, drivers and the crew during the races and earn points.
In Indian Banking, the dominance of technology is being capitalized upon by both the leaders and the new entrants – in a very contrasting manner. While larger banks are grappling with legacy systems and the urgency to overhaul them; the new-age players are looking at the on-demand model to build technology platforms that are faster to implement, efficient to operate, secure and scalable for the future. The rise of Lego banking is a step towards this end goal.
At the end, the focus on F1, has been on the teams – comprising of agile and passionate individuals with a penchant for perfection and a hunger to win. While the drivers are usually the face of the teams – steering the machine through the circuits to breach the finish line; it indeed takes a team to direct, instruct, maintain, tweak and operate the winning machines.
Sample this, the average time for tyre change in the past three decades has been cut by 90 percent – from average 25 seconds to 2.4 seconds presently. This was not only made possible by evolving technology but through teamwork and training. Each race is succeeded by a feedback session among the drivers, the operators and engineering teams – to ensure transparent communication, which further leads to improved performance in the next race.
Two of the most dominant teams in the recent decade have been Mercedes and Red Bull – representing contrasting strategies, engine designs and driver profiles – thereby proving there is always a space for two contrasting players in any course or sector. With Indian Banking poised well at the starting pole in 2021, there are exciting times ahead for diverse players – sans size to take the pole, provided what one lacks in size is compensated through agility, technology, teamwork and efficiency.
The author, Neeraj Sinha, is the Head - Retail & Consumer Bank at SBM Bank (India). The views expressed are personal.
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