The launch of 811, India’s first downloadable digital banking ecosystem, has enabled Kotak Mahindra Bank to increase its share of wallet in India’s highly competitive banking space
It is a sign of Kotak Mahindra Bank’s digital strengths that is helping the bank deliver stellar results. In its recent results for Q1FY19, the bank declared that mobile banking transactions crossed one crore in volume and Rs 10,000 crore in value; 89 per cent of recurring deposits were sourced digitally while 67 per cent of fixed deposits were sourced digitally. The bank is also close to doubling its customer base – in March 2017, the bank had estimated that it would double its customer base from eight million to 16 million by September 2018. In the quarter ended June 2018, the customer base moved from eight million at the end of March 2017 to 14.5 million. As the bank accelerates its digital strategy, Aruna Rao, Group CTO, Kotak Mahindra Bank, shares why 811 is a game changer for the bank.
In a recent media interaction, Uday Kotak said, “My science fiction view of banking is that you will see a complete blurring of financial services and technology, and banks of the future will have to work at a quarter of their current cost models.” What’s your view?
I think the picture that Uday Kotak has painted has already started to play out. We see several technology firms offering financial services and banks are offering a full range of cutting edge banking products and services on their mobile and net banking platforms. Kotak’s mobile banking app is also an ideal lifestyle app for e-commerce transactions on Flipkart, PVR, Goibibo, Shopclues, IRCTC, etc.
In addition, new age digital products are conceived and designed by multi-skilled teams who understand banking as well as technology.
This transformation puts the focus on the needs of the customer and expectations from banks is high. Innovation and enhancing the customer experience is the primary focus. At the same time, cost reduction will accrue from automation and digitisation. More automation of operational processes through robotics, better customer engagement mechanisms such as biometrics rather than paper-based authentication, natural language processing (NLP) based chatbots to respond to simple customer queries will dramatically improve customer experience and also lead to a reduction in cost. In other words, leveraging technology for improved customer experience while at the same time, decreasing costs.
For example, at Kotak, the launch of 811, India’s first downloadable digital banking ecosystem with biometric-led KYC verification, has resulted in a paperless, real-time banking experience for customers, reduced the turnaround time for opening a bank account from a few days to a few minutes, has reduced the cost of customer acquisition and has increased the productivity of our field force.
There is an explosion of new technologies from analytics, Natural Language Processing (NLP), to cloud. The real critical success factor for each of these technologies will be how they are applied and leveraged to deliver tangible business value.
How do you see the role of Digital post DeMo? Kotak Mahindra Bank’s launch of 811 is one of the best examples of the use of digital in the post demonetisation period.
The name ‘811’ is derived from the date when demonetisation was announced – November 8. Born out of the Government of India’s vision of a Digital New India, 811 has been designed around the idea of simplicity and ease of use. It offers a completely digital and paperless account opening experience. It can be opened anywhere, anytime, within five minutes. Kotak was the first bank in India to integrate the Aadhaar-based OTP authentication process for account opening on mobile. Only Aadhaar and PAN numbers are required to open and operate 811.
811 offers a zero-balance digital bank account with zero charges for all digital transactions, where customers can earn up to six per cent interest per annum on their savings account balances. 811 has been embraced by Indians across the country and demonstrates the readiness of Indian customers to adopt digital banking.
The 811 facility is a unique story. It’s a truly born-in-the- cloud product. It was not just replicated out of an offering in the physical world. In the past, there were certain services available at branches, like RTGS, ordering cheque book, etc. This is automation of an existing process.
811 was never existing in the branches. It was born as a digital solution, designed by having domain experts in business, technology and regulation thinking together. This is because the product couldn’t have been ideated without all the pieces coming together.
The technical domain handled the eKYC facility available from the UIDAI. The customer can be validated by using an Aadhaar number. This also includes having the biometric verification functionalities added onto the product. Business thinking was required to figure out how can these capabilities be leveraged for the bank in terms of business innovation. Thereafter, the banking offering was explored as to what would be the minimum balance required, offering debit and credit card, interest paid, services offered around the product, etc. The product and the technical function sat together and explored how the product would take shape. All along, we also had to ensure compliance adherence. This includes regulations like minimum balance; if Aadhaar authentication is done, then a signature is not required.
In this way, 811 was born out of the collective effort of the technical infrastructure in the form of UIDAI; the regulatory framework and thinking from the business product manager. 811 was launched in March 2017, and we have reached about 14.5 million accounts recently. This includes accounts opened through 811 and through other means. The majority of the credit to the jump in the number of accounts opened goes to 811. Cross selling is what the focus will be on and the bank will continue to acquire and get in more opportunities for cross selling. The bank is finding reasonable traction both in the digital and physical world.
How do you see the role of various emerging technologies?
There is an explosion of new technologies, from analytics, NLP, to cloud. The real critical success factor for each of these technologies will be how they are applied and leveraged to deliver tangible business value. In India, the India Stack technologies provide a whole range of infrastructure and facilities, using biometrics, QR codes, etc. For instance, Aadhaar-based authentication facilitates digital account opening; Bharat QR Code provides a means of making payments on the mobile device without the need for cash or plastic (credit cards or debit cards). Banks and other financial institutions will continue to develop new customer solutions by building on this infrastructure.
Also, as “data is the new oil”, technologies that can store, analyse and predict from data will make interactions with customers more targeted, richer and more meaningful. Big data platforms to store data, Machine Language (ML) and AI will be used to custom design offers and solutions for individual customers.
How do you balance the Bi-Modal IT approach, to continue with keeping-the lights-on initiatives, while not missing out on the emerging technologies?
The main focus needs to be in terms of understanding new technologies and having the foresight to build skills in advance for those areas. In terms of processes applied to the traditional product processors and the new technologies, for development and deployment, techniques such as DevOps can be applied equally to the traditional keeping-the-lights-on initiatives.
For managing costs and showing RoI in the annual IT balance sheet, what’s your approach?
In any technology budget, there are two components. First, the cost for “Running the Bank”, i.e. keeping-the-lights-on related expenses. The prime objective here is to continually decrease the per-unit costs for these expenses. In any growing business, there will be an increase in networks, desktops, servers, etc, so the overall goal is to manage the absolute costs by making the processes more efficient so that the cost per unit is decreased.
That will leave a larger share for the discretionary “Change the Bank” projects. These are the technology investments to transform business models, provide competitive advantage and customer delight.
What’s your strategy to partner with startups?
Start-ups tend to have a fresh point of view, they have new ideas and tend to be more agile. Our strategy is to partner with them on ideas and solutions and then industrialise them for scale. Banks have to consider a number of other aspects such as cybersecurity, availability, compliance with regulations, etc, which need to be built around the basic solution from startups.
What’s your approach for reviewing; how do you analyse employee performance?
Different people respond differently to different degrees of structure and supervision. Some people excel in an autonomous environment with a high degree of freedom to try out new ideas while others are more productive when given specific directions. So I tailor my style of working and interaction to each team member’s strengths and needs.
Which factors are affecting banks globally?
It is essential that one makes time to understand the local and global landscape. I usually attend a set of forums that cover these topics in-depth. I also attend global meets and conferences of financial services organisations which provide valuable insights on new trends in technology, regulation, digital adoption, etc.
Any management gurus, invited by the bank on a regular basis?
We have a constant stream of inputs from external experts. This includes technology consultants, process efficiency gurus and design thinking guides. As a group, we also believe in not restricting such interactions to experts from our domain only. We have also found that people from different walks of life, be it sports or education, provide
real insights that are equally applicable to banks and financial institutions. So we often invite such speakers to come and inspire us.
What’s your advice to budding CIOs / CTOs?
The strategy is about doing the right things, and also about doing things right. So there needs to be a constant and equal focus on prioritising the right innovations and then ensuring the rigour of executing them well. Success comes from balancing both well.
What’s the role of technology in multiple functions?
The bank has introduced collaboration technologies across the group for the employees to interact across functions. Skype is available to all employees. A mobile app has been launched for the field staff, which will have updated information about products, interest rates, regulations etc. The staff person can query the chatbot on the NAV of a particular fund or performance of mutual funds, etc. It becomes easy to have information handy. Analytics and datawarehouse plays a big role in compliance reporting. The area of fraud risk management can also be improved upon and enabled by heavy intervention of technology to decipher patterns on incorrect usage on ATM, mobile banking, savings account etc. The debits and credits using an ATM, mobile apps and other mediums can be correlated for suspicious transactions.
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