Chennai-headquartered Equitas Small Finance Bank is focusing on building its digital capabilities and is working to create a super app in the next 15 months as it doubles down on its customer acquisition growth plans across channels.
In an interaction with Moneycontrol, Murali Vaidyanathan, the bank’s Senior President and Country Head for branch banking – liabilities, products & wealth said that the bank is in advanced stages to develop three separate apps as the first step towards its super app plans.
“It will be an app for the merchant ecosystem, where they can link their current accounts and use it for payments. The second will be an insurtech app, which will serve as a marketplace for our customers. The third will be for retail in-house customers, as well as those acquired through partnerships,” he said.
In 15 months, the bank plans to converge these three apps into a single super app, Vaidyanathan said. The lender is also stepping up the use of digital means to source new liabilities customers, i.e. current accounts and savings accounts (CASA), and for loan origination starting with vehicle financing.
Value of transactions through digital channels accounts for only 10 percent, and branch banking makes up the rest. Out of the 10 percent, fintech partnerships and in-house digital transactions contribute 5 percent each.
In terms of the quantum, the bank saw a 55 percent year-on-year (YoY) growth in CASA deposits in the first quarter of FY23, the results for which it reported on July 28. The quantum of CASA deposits stood at Rs 10,548 crore with a CASA ratio of 52 percent.
“We want to double our CASA book in the next six months. We are creating an ecosystem of virtual relationship managers etc which we believe will start showing results soon,” Vaidyanathan said.
In November 2021, the small finance bank had joined hands with India’s largest private bank HDFC Bank for a co-branded credit card, marking the Equitas’ foray into the space. By March 2024, Vaidyanathan said, the bank is hoping to start issuing credit cards independently as well.
The bank recently said it crossed Rs 1,000 crore in Non-Residential External (NRE) deposits, i.e. accounts opened by Non-Resident Indians (NRIs). By December 2023, it expects to double the book to Rs 2,000 crore. The bank plans to achieve the growth by expanding focus to NRIs beyond the Middle East, with a focus on the United States, Canada and United Kingdom.
Expanding fintech partnerships
The bank has partnerships with neobanking platforms Niyo and Freo for current accounts and savings accounts (CASA). The tie-up with Freo was announced on June 21, and the bank has plans to add more fintech partners in the coming months.
Vaidyanathan said that besides Niyo and Freo, Equitas Small Finance Bank is in talks to close two more partnerships for liability customer sourcing.
Additionally, the bank will also add fintech partners for growing the distribution of prepaid cards. As of July 30, the bank has issued over 25,000 virtual prepaid cards.
“Prepaid is a very key segment for us. We may not launch co-branded prepaid cards with fintechs after the recent clarification by the Reserve Bank of India (RBI). But we will have tie-ups under the aggregator and distributor model,” he added.
Some of its upcoming partnerships include fintech infrastructure company Neokred, B2B2C fintech player BankIT and prepaid card services provider Paymint.
Fintech tie-ups help the bank to gain access to pan-India customers without the heavy investment of setting up a vast branch network. Neobanking platforms like Niyo, Freo, Jupiter, Fi etc. provide a tech layer above banks, with the core proposition of enhancing customer experience for banking.
As of June 30, the bank has opened 15.5 lakh accounts with Niyo with a CASA balance of over Rs 438 crore. Under the partnership with Freo, over 9,000 accounts had been opened between June 21 and June 30, the bank said. It also has a partnership for fixed deposits with mutual fund and stock investment platform Groww.
For Q1 FY23, the bank reported a profit after tax (PAT) of 97 crore, a jump of over eight times as compared to the same quarter of FY22. Gross non-performing assets (GNPA) ratio improved to 3.95 percent as compared to 4.06 percent in Q4 of FY22.