Digital Next @ HDFC Bank
Munish Mittal, CIO & Group Head-IT, HDFC Bank, shares details of the digital strategies adopted by the bank in an exclusive interaction
HDFC Bank has seen transactions through digital channels rise from around 50% of the total four years ago to as much as 84% of the total as of today and against average of 5 million customers adopting the digital then, there are today average of over 20 million customers engaging digitally with the bank.
Explaining this transformation, Munish Mittal, CIO & Group Head-IT of the bank, says: “About 4 years ago, we obviously had a comprehensive internet banking. Then came ‘chutki mein loan’, and Mobile App gradually became the preferred ‘on-the-go banking’ vehicle with ‘bank aap ki muthi
mein’. The journey continued with DAP, our digital application platform for loan and card products, followed by UPI, IMPS and digital payments. All these formats have impacted our digital transaction processes and transactions through these
Munish Mittal, CIO & Group Head-IT, HDFC Bank, shares details of the digital strategies adopted by the bank in an exclusive interaction:
channels have risen manifold,” says he, adding: “Obviously, this has led to a sharp reduction in the costs of transactions and thereby increased efficiency and productivity, which in turn has improved the bottom line. A branch transaction today costs from `100 to `500 depending on the ‘type of transaction’. Using DAP and the Smart Account Opening App, opening an account can be just a fraction of this cost and mind you there is minimal manual intervention like KYC check.”
DIGITAL FROM THE START
He maintains that HDFC Bank has been a digital bank right from the start. “We were the first in the country to introduce centralized core banking, centralized ATM switch, debit cards and if you fast forward, we are the largest issuer of credit cards. In the last 5 years, we have made significant progress in attempts to make payments and banking more digital,” says he.
He cites the example of the bank’s latest flagship product in the digital domain -
‘chutki mein loan’ - and points out that it facilitates sanctioning of a loan in about 10 seconds or less.
He explains: “We have ‘baked the entire innovation processes around creditworthiness and propensity to ‘pay or default’ to provide credit for personal loans, two-wheeler loans or to upgrade a credit card. This product is available to our existing customers; it is mainly intended to provide convenience. This also gives the ability to our customers to ‘Pay Later’. The customer comes to our website and he is presented with the offer. Once he selects the offer, the amount and puts in the tenure and clicks submit, he gets the loan.”
Mittal is confident that with the digital
revolution happening in the last 5 years, the digital should create the ability to generate an attention span and then lead it to an engagement with the customer, which will finally create advocacy among the customers. If the customer has got a good experience, then he will share the experience with other customers, says he.
“Among the many initiatives in the last 5 years, we have one such initiative through HDFC Bank‘s SmartBuy. Using SmartBuy, a customer can use his HDFC Bank debit or credit cards to shop and then receive bargains and discounts. This way, we brought the market place to the customers. The distribution commission is passed on to the customers. They can today do ‘compare & shop’, make travel bookings, etc using HDFC Bank card. We pass all the benefits to the customers and this helps them maximize benefits,” says he.
THE INTERNAL DIGITAL
He stressed that digital is not for just those outside the bank. The bank has heavily focused on the internal digital or assisted digital for it to be profitable and useful.
“We have created a Smart Account Opening app for our personal bankers, our relationship managers, our direct sales agents, etc. In 3 or 4 clicks on this digital account opening app, the required forms are filled in, validation of KYC is done, and the account is opened. We have opened about 100,000 accounts through this platform just in the month of August 2018. We are looking at 250,000 to 500,000 accounts to be opened this way per month in the near future. Similarly, using our DAP, customers can apply for auto loans, personal loans, etc as well as apply for a credit card online. The other notable offering is our PayZapp app, which is a complete payment solution, giving you the power to pay in just one click. Using this, customers can do taxi booking, pay utility bills, do mobile/DTH recharge, compare and shop at online marts and book movie tickets,” says Mittal.
Mittal elaborates on the technologies that the bank would adopt in future. He prefers to divide these into two:
“The first is ‘hygiene technologies’. Here, we are talking about scale. We do over a billion and half transactions in a month, out of which ~85% are digital. These have to be persisted in a system of records and availability of information means a lot to us. We are therefore investing heavily in building the next generation of scale such as infrastructure scale, cloud scale, internet scale, infinite scale. We have begun our journey of agile with adoption of DevOps and technologies like Dockers and Kubernetes to build infinite scale. Similarly, elasticity is required to expand and collapse depending on workloads and seasonality. The period from Janmashtami to Diwali is the highest consumption period for consumer durables, auto loans, etc. Handling this would require a scale up from 2500 to 5000 to 10,000 transactions per second. And this would need adoption of technologies like cloud, Dockers, Kubernetes, etc. We are rewriting our applications to be cloud native.
“The second is ‘availability’. At HDFC Bank, we are all obsessed with availability. Illustratively, we have invested on running our RTGS application in Active-Active mode from across 2 data centers. We have about 18% RTGS volume across the country. As much as roughly 36% of the country’s daily money settlement payments processing passes though HDFC Bank and another bank. We need to be highly available. We have worked with IFTAS/ IDRBT and reengineered the RTGS system. For core banking, we have a 3-way DR between the primary site, the DR site and the near site. We are investing a lot in our DR/BCP practice to ensure zero data loss for core banking - perhaps the only Indian bank today running zero RPO on Core banking from DR/BCP perspective.”
AI, ML ARE PRIORITIES
The bank will also invest in artificial intelligence and machine learning technologies, says Mittal. He details the plan: “Like RTGS and NEFT, we are a very high scale volume player in clearing. In fact, in clearing, the volume is stagnant, but still we are amongst the largest clearing processing players. We have introduced ML for signature verification with 50% success in automated processing. We recently put another application for optimizing our offers to achieve real time offers to our credit card customers. My dream is to create a work load diagnostic enterprise level machine learning API implementation at our data center, which is adaptable and capable of using hybrid cloud technology in public cloud at a future date.”
He reveals that many of these technologies are not commercial grade and are in the early maturity stage or some even in the incubation stage. “For example, our Eva is a flagship product in artificial intelligence and machine learning. Eva is capable of answering customer requests, it can solve customer problems. Very soon, it will allow redemption of loyalty points for credit cards. It will help in hot listing lost debit cards of customers; it will carry out transactions using conversation banking. Ultimately, Eva will do banking transactions for customers. I am of the view that AI requires significant learning and there are numerous challenges in the learning period as well as time is required to bring about this learning. EVA will be a lifelong student.
The engine needs to be trained, one needs to know what the customer wants, natural language processing needs to be accurate and understand what the customer intended,” says he.
The second area for him is ‘around technologies’ which need an ecosystem to develop and grow. Blockchain is an example. He points out that there are lot of challenges in creating a trusted multi-node blockchain network. There are questions like is it fast? is it commercially viable? is it just about a distributed database? can a core banking ledger be converted into blockchain? can we create it? are the core banking software vendors ready?
Does he think the bank’s ecosystem is ready? How is he transferring talent to use that ecosystem?
Mittal responds: “In the past, we have appointed network administrator and database administrators. Then, we graduated to have a system administrator, security administrators, etc. For a public cloud, I need a cloud administrator. Without a cloud administrator it is difficult for the CIO to adopt public cloud. The cloud skills are not easily available in the market. We are rewriting applications to make these cloud-native. Legacy applications are not private cloud ready by default. We are doing on the ground pilots and we are learning from these. Therefore, these cloud administration and cloud administrator skills will gradually build up with these learnings on the ground through a series of private cloud and containerization pilots”.
He emphasizes that a cloud administrator is DBA, a systems administrator, a network administrator and security administrator - all rolled into one. Where does this exist in our present eco system, he asks.
Mittal avers that HDFC Bank is a Platform to ‘Pay, Save, Borrow, Invest, Shop & have Fun too’.
He also sounds futuristic: “In our attempt to create an engagement between the bank and our customers, illustratively, the fun part comes from ‘augmented reality’ and conversational banking. Our ‘OnChat’ in FB Messenger is an example of the fun factor. We believe that the customer should get happy and entertained using our mobile and online banking facilities. EVA is a lot of fun to interact with. With Arya in our Securities & Brokerage subsidiary, our customers are buying mutual funds online. The customer should be able to watch a movie in our app. Such an approach will help the bank take on competition from technology platform companies as well.”
But, then how can the bank ensure that it stays ahead?
“The platform approach has created a competitive advantage for us,” explains Mittal. “Our attempt is to create a user experience across the aspects of convenience and simplification, choice of device, choice of place, time and location, which the customer uses for all the banking needs. So, we will attempt to offer both the opportunities to our customers - whether they want to pay now or pay later, whether they want to choose mobile phone or come to our branch or go to an ATM. It is the omni-channel experience, a simple user interface, an intuitive one. Eventually, if we can get to a segment of one and make ourselves relevant using digital technologies, I think we can create an engagement with our customers and the customer will bank with us for sure.”
Mittal underscores that the ‘fun’ part. “For example, when you see a luxury car on the road and if you point your HDFC Bank ‘VahanGyan’ mobile app to the car, you will get details of the features of the car and dealer location. You can as well book a test drive. As the next steps, we as a bank should be able to say when you would be able afford it, and you can set a goal around it to save enough or avail ‘chutki mein loan’, in simple fun filled steps. Similarly, someday creating an engagement and expanding the one-stop shop model, we would like our customers to buy their music, movie and TV subscription on the app and consume there itself. No doubt, all the facilities on the app would require a robust and fast telecom infrastructure,” says he.
IMPORTANCE OF TELECOM
He says one of the top items in his wish list is to have a reasonable fast high-speed broadband network. While India has come a long way in the space of telecom infrastructure, there are lot more affordable and innovative data plans, new participants and healthy competition, the basic question is whether the networks are fast and reliable enough. “I am not very sure,” he says, maintaining: “We still have challenges about OTP on SMS not getting delivered. At times, I wonder whether we even have a 3G, which is omnipresent and omni-pervasive? The strongest wish I have is about a robust high-speed mobile broadband. I wish 5G could come faster. Without high-speed mobile broadband, we cannot leverage 300 million smartphones in the hands of customers and stream a favorite video or music or deal with augmented reality in the frontend. Today, to deal with the lack of high speed mobile data network, industry is creating lite apps alongside mainstream apps, which is double the cost. Lite app is obviously without many features and functionalities.”
Munish Mittal avers thatHDFC Bank is a platform today to ‘Pay, Save, Borrow, Invest, Shop & have Fun too’ for the customers and technology only has helped in creating such a platform
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