Digital platforms helped banks source fresh business during the pandemic

During the COVID-19 pandemic, the country’s top banks sourced a substantial amount of fresh business, in terms of new deposit accounts and loans, through their digital channels. We have compiled data from four private banks— Kotak Mahindra Bank, Axis Bank, ICICI Bank and RBL Bank — and from State Bank of India to understand how their respective digital channels have aided their growth in the deposit and lending business.

Although several private and public sector banks that alluded to witnessing better sourcing through digital channels, but did not publish detailed statistics on the same. Here is a summary of our findings based on data disclosed in the respective investor presentations:

State Bank of India

SBI’s flagship mobile-banking app, YONO, has successfully helped the bank grow its deposit and lending business since its inception in November 2017. According to its recent investor presentation, the platform has 28.5 million registered users; 8.9 million new savings accounts have been opened through the app till date; 1.4 million were opened during Q2’21. Overall, SBI has generated a loan portfolio of ₹25,000 crore and a liability portfolio of ₹60,000 crore through YONO. As of June 2020, the app contributed ₹200 crore towards the banks’ quarterly profit. The bank estimates that YONO will add ₹1,000 crore to its profits for the current fiscal year.

Between April and September 2020:

• The bank added 10.4 million new users on YONO
• Disbursed loans worth ₹10,695 crore through the platform
• Cross-sold products through YONO’s e-marketplace worth ₹168 crore
• The bank has sourced over 1.46 credit cards for its subsidiary SBI Cards and Payments Services

“Today, I can say with confidence and pride that what we have created in terms of YONO platform, no other bank can match it. And we are serving across retail, Krishi, YONO business, global and corporate Internet banking, which has about 7 crore users,” said Rajnish Kumar, then the chairman of SBI, in an earnings call in July 2020. Kumar said that the bank is providing pre-approved personal loans, alongside gold loans, cross-selling insurance and other loans, at the rate of ₹100 crore every day. The bank will launch a YONO business platform in 6 months time, he said.

SBI plans to hive off YONO into a separate banking-as-a-service entity as a standalone platform and will share the underlying technology with other banks through a ‘plug and play’ model.

Kotak Mahindra Bank

“The way to get new customers in this new world are digital, physical or somebody else’s customers which we can get at some point of time. So all the 3 options are the way to get customers…The digital and technology world has given us an opportunity to look at very significantly expanding our footprints without expanding our branch network at the same speed, said Uday Kotak, managing director and chief executive officer, Kotak Mahindra Bank during an earnings call on October 26. Kotak says that going forward given the important of customer engagement and ownership in this digital world, the bank will make additional strategic shifts on the liabilities and assets side to build its customer franchise.

Between July and September 2020:

• Around 97% of recurring deposit accounts and 85% of fixed deposit accounts were opened digitally
• Around 32% of new personal loans and 86% of new credit cards were sourced digitally
• Around 53% of new mutual fund investors took place on the banks digital channels
• Around 93% of all new investment accounts were sourced through the banks’ net banking or mobile banking channel during the first half of this fiscal year

“We continue to see a surge in customers usage of digital channels with a preference for mobile in Q2 as well. We enabled new digital journeys to help customers transact with us across liabilities, assets, payment, protection and investment,” said Shanti Ekambaram, group president for consumer banking, Kotak Mahindra Bank during the earnings call.

The bank now enables retail or small-medium-enterprise customers to avail loans entirely digitally, which avoids paperwork and has launched a paperless process for home loans, tractor, commercial vehicle and infrastructure loans. It also launched a voice bot to aid in loan collections.

Axis Bank

“We continue to invest heavily and make progress our digital banking strategy. We are focused on select themes in our digital journey — to scale digital direct to customer products, enable our staff digitally and to build and scale digital channels. Currently, across the bank, we have 800-plus people fully dedicated to digital transformation,” said Amitabh Chaudhry, managing director and chief executive officer, Axis Bank during an earnings call on October 28.

Between April and September 2020:

• Around 73% of fresh fixed deposits and 72% of new savings accounts were opened digitally
• The bank sourced 58% of fresh personal loans through its digital channels that were disbursed in the first half of this fiscal year
• Around 52% of new credit cards it had issued came from its digital channels
• Further, around 48% of new mutual fund sales made during the first six months of this fiscal took place digitally

ICICI Bank

In its Q2’21 investor presentation, ICICI Bank said that round 90% of new savings account transactions took place on the banks’ digital channels. Between April and September 2020:

• Around 53% of new personal loans, 74% of new credit cards, 61% of fresh fixed deposits were sourced digitally
• Further, it was able to sell 38% of new term-life insurance policies and 55% of new mutual fund sales digitally
• In September 2020, around 35% of salary account customers and 31% of credit card customers were on-boarded through the bank’s video Know-Your-Customer platform

“Digital is core to our strategy of integrating across ecosystems, smooth onboarding and transactions, growth in liabilities and analytics for risk selection,” said Sandeep Bakshi, managing director and chief executive officer, ICICI Bank during an earnings call on October 31. The bank launched iStartup 2.0, its startup platform, to enable smoother opening of current accounts for new businesses, in addition to WhatsApp banking which helps customers open fixed deposits, pay utility bills and access trade finance easily, he said.

RBL Bank

While RBL Bank is a leader in the industry when it comes to providing application programming interfaces (API) to payment companies and fintech lenders, it has grown its payments business. As of September 2020, it had over 1.3 million merchants on the payments side, 2.2 million pre-paid instrument customers and payments acceptance devices across over 1.2 million customer service touch points. According to the banks’ investor presentations:

• During Q1FY21, around 58% of new savings accounts, and one of every three new term deposits, were opened digitally.
• As of September 2020, around 61% of all deposits were sourced digitally and 47% of current-account and savings-account were opened digitally

“The focus is much higher now on digital solutions enabling us to get sticky current account business along with transactional and off-balance sheet opportunities,” says Harjeet Toor, head of retail, inclusion and rural business, RBL Bank during an earnings call on October 28. The bank plans to build both its physical and digital infrastructure and is upgrading its technology platforms, which will push costs going forward, the banks’ management said.