In an era of digitization, existing business models are being disrupted by technology upstarts. To catch up, traditional players have to either match the speed of these disruptors, or take the help of technology startups to improve their competitiveness. However, if you are a bank like HDFC Bank, you not only innovate yourself, but also try to create a new ecosystem by engaging with startups By Abhishek Raval
HDFC Bank’s founder CEO, Aditya Puri’s several visits to the silicon valley and meeting with multiple startups has inspired the bank to accelerate its digital initiatives. Since Puri’s visit in 2014, the bank has changed gears and has launched several digital initiatives. The bank recently launched a Digital Innovation Summit and invited Fintech startups to showcase their technology solutions. It’s a win-win for both the bank and the startup community. The bank gets access to some of the best disruptive technologies in the market and for the startups, they get access to commercialise and promote their innovations.In a first-of-its-kind event in the BFSI space in the country, the summit received more than 100 entries from startups all over India. 30 start-ups were shortlisted to make presentation to the jury comprising senior management from digital banking, branch banking, marketing, IT, e-commerce and cards. The shortlisted startups were from diverse domains: payments, mobile innovation, analytics, cloud and compliance. HDFC Bank, announced five winners of the Digital Innovation Summit. The winners are from artificial intelligence, marketing, quality assurance, and payments (both mobile and biometric) domains.
These start-ups get a chance to deploy their products in the Bank, post further evaluation on technical, business, security, and compliance parameters. The winners are:
These startups presented their ideas to the jury on March 3-4, 2016, in Mumbai and were evaluated on parameters such as Uniqueness and innovation, Business Potential, Usability and Scalability, and compatibility with HDFC Bank’s business and technology platforms.
Identifying customer needs with unique strategy
The bank is rolling out digitization across the whole spectrum – be it the lending side, the payments side, the transaction banking side, deposit side, branch automation side or using the existing channels like ATMs to communicate with the customers.
While a majority of innovations will come from inside the bank, the bank understands the importance of looking at problems from a fresh perspective – a view that startups can provide with their innovative solutions. “We are looking to digitize the entire bank and we have done most of it already. Anything new that fits into the overall blueprint that we have, which is to make the whole offering to the customer, which is already relationship-based, if we can make it richer, more comprehensive and simpler, we will consider it,” says Nitin Chugh, Senior VP and Head of Digital Banking, HDFC Bank. Chugh’s statement explains the strategic view of HDFC Bank and its objective of tying up with startups.
Take for instance, a startup such as Net Vigil Software (one of the shortlisted Fintech startups selected by the bank). This startup provides a ‘safetopay’ payment option which facilitates an offline payment mechanism. In rural India, where network connectivity is relatively poor, this innovation can greatly benefit rural consumers. Further, this idea is relevant in terms of inclusion because the offline payment functionality brings the customer and the merchant in the banking ambit. This also works out to HDFC Bank’s advantage as the bank’s focus recently has been rural India.
About 60% or 65% of India still lives in semi-urban and rural and 54% of the bank’s distribution network and branches are in these regions. Aditya Puri in one of his earlier interactions with Financial Express had said, “There’s also money to be made from doing business in semi-urban and rural areas. In a span of four or five years, more than a third of the bank’s business will come from these areas.” By partnering with startups such as Net Vigil Software, the bank can further realise the potential in the rural areas and also help achieve the bank’s objective to digitise the bank for customer convenience and extending the access of the banking products and services on the digital channel.
The initiative of partnering with the Fintech startups is a part of the bank’s strategic focus on customer convenience, access and delight, using technology as an enabler. Says Ravi Narayanan, Country Head -Branch Banking & Retail Trade FX Business, HDFC Bank, “The purpose of digitization is to further the cause of financial inclusion and extend the involvement of the existing customers with the bank. Digitization also enables administrative and transactional convenience, which the customer is looking for.”
With the proliferation of a mobile phone, tablets etc, the geographies have blurred, which is the reason why the bank has decided to go rural. “Today, if we say that 56-58% of our branch distribution is in the rural country market what we call as bharat, we are completely agnostic to where the customer is because I am having the complete custodianship of that relationship. Then comes the customer journey and convenience,” says Narayanan.
Tagnpin, one of the winners of the Innovation summit is a good example of how the bank extends the customer engagement by giving timely and moment of truth offers. For example, a customer standing in line at a checkout counter in a retail chain gets an instant offer, if he has shopped over a prescribed limit. The customer gets an instant SMS from HDFC bank. It informs the customer about the nearest shop, where the bank has an offer. This is the capability which has come onto the mobile. This is called personalisation. “The behavioral, financial and transactional analytics is all coming together because of the availability of technology,” states Narayanan.
Similarly, Senseforth Technologies has developed an Artificial Intelligence enabled technology to chat with the customers (acting as a customer service associate) and understand its intent by doing sentimental analysis. The technology also updates the changes made to the customer details during chat sessions with the backend systems. This technology may prove to be extremely useful to HDFC Bank, for resolving customer queries quickly and doing timely updation of customer records. Another startup, Bugclipper technologies, enables a bank’s customers to report bugs, while Tapits Technologies, has a biometric payment system that claims to complete a payment transaction in approximately 7 seconds.
As one can see, the objective is to digitize every part of the value chain. “We look at ourselves as a custodian of the customer relationship. The moment I say that we are custodians, it means that I would like to take care of the financial needs of the customer’s family at any point of time. When he thinks money, he should think HDFC Bank. That’s the bottomline behind business thought process behind any effort that we make,” states Narayanan. The constant focus has been to adopt solutions which can improve customer responsiveness in a big way.