Half of digital transformation over, cost-to-income ratios on tech spends plateaued: HDFC Bank
HDFC Bank has completed over half of the digital transformation work it had undertaken over two years ago and is past the peak on tech spends as a percentage of the income, a senior executive said on Tuesday. It can be noted that concerns on the digital front had led to an unprecedented penal action on the largest private sector lender from the RBI, including a complete ban on launching new digital initiatives and also an embargo on selling new credit cards around two years ago.The bank's country head for payments, consumer finance, technology and digital marketing, Parag Rao told reporters that between 50-60 per cent of the journey on the digital transformation is over.
From a costs perspective, such a journey entails an upfront spending after which the returns start accruing in once the solutions start delivering, he said speaking on the sidelines of a bank event and added that after the bump on the cost-to-income ratio because of higher spends, the ratio has plateaued now.
"I think we are plateauing out (on cost-to-income)...At an aggregate level, we are clearly seeing a plateauing of costs already," Rao said, stressing that the work has been undertaken without shutting down operations and the normal banking activities continuing.
Its chief information officer Ramesh Lakshminarayan said since about 2018, there was an explosion of the transactions which the legacy systems in the banking world were not able to handle.
He said the bank, which has over 2,500 people working in its backoffice tech operations in the financial capital, has undertaken an approach where it formed 'garages' of smaller teams aggregating over 200 people in all who work in different locations like Bengaluru, Pune and Chennai to develop relevant solutions.
All the new solutions are cloud-native which can be scaled easily when required and do not require heavy investments in the backend like datacenters, he said.
A senior official said the lender's tech teams are looking at coming out with solutions for small businesses, transforming mobile banking and an improved payments suite, but declined to spell out more details.
Rao said the merger with its parent HDFC will "multiply" the opportunities accruing from the digital solutions for the lender across all streams of business.
"We will get a good set of customers who have a housing loan for more than 10 years, they are well-underwritten so it's an opportunity on multiple fronts. It's an opportunity for more assets, it's an opportunity for liability accounts, it's also an opportunity for payments because all of them," he said.
The bank on Thursday launched an app christened 'Smarthub Vyapar' aimed at merchants after testing phase for over a year. The aim is to be a one-stop merchant solution for banking and business needs of the merchant, Rao said.
The app offers 25 services and transactions for the merchants and Rao said in the beta phase itself, it has had 11 lakh merchants use it with increases in overall throughputs on cross-sell of loans, value transacted etc. The lender aims to make the new app as the largest app used by merchants in the country in three years, he added.
HDFC Bank, which serves around 32 lakh merchants at present, is on track to achieve its medium-term goal of taking the overall merchant base to 2 crore courtesy all the initiatives, he said.
It can be noted that in September 2020, a bank source had said that it targets to increase the overall number of merchants to 2 crore in three years.
The bank is extending current account-related loan facilities through the newly launched app at present and will also include vehicle loans, gold loans, loans against property and loans against security eventually.
The new app is based on the pillars of offering payments, banking, lending and other value added services to the merchants, Rao said.
This story originally appeared on: India Times - Author:Tax Cognition
