Pay banks no threat; e-credit, selfie a/cs bonus: Fed Bank

Speaking on the competition payments banks may give to normal banks, Shyam Srinivasan MD & CEO at Federal Bank said focus on scalability and visibility going forward is necessary although there is no reason to feel threatened. He admits payment banks are likely to change dynamics of banking.Meanwhile, he is very excited about the launch of selfie-account, which would be a convenient method for banking and urges customers to avail the facility.Talking about the bank's e-credit facility, he said it meant for the existing customers and audiences so far have been captive. But going forward, the bank plans to open it to new-to-bank customers through online capability for wider base.With regards to stress accounts, he said currently there are no issues The one which was under stress has already been recognised, he said. Below is the transcript of Shyam Srinivasan’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18. Sonia: I remember we had spoken to you last post your numbers and you were indicating that there was one corporate account in the metal sector that slipped and that caused your asset quality t worsen this quarter. We have actually seen the situation in the metal industry worsen substantially in the last couple of weeks because of the situation in China. Do you think your metal loans could be under further stress in the quarters to come? A: I thought we were going to discuss our digital strategy. I do not see any issue on any of the accounts that we hold right now. The one that was under stress, like I mentioned last time, we have already recognised it. So, I do not foresee any issues on any of the other relationships we have. Without getting any client specific, we have no other exposure that bothers me.Latha: We did want to speak to you about your digital experiments and forays. It is just that the China factor and the way in which the stocks have moved is so overwhelming that we had to ask you that as well. What about the digital presence itself. How would you look at the payment bank competition. We had one of our guests actually praising your wallet and the speed at with which he could open his savings account and as well your other digital products. Do you think you will be able to face the payment bank competition? How do you look at this entire phenomenon? A: I flip the question, can the payment banks face what we have? Latha: All of us are Paytm customers or we use the app. I am not saying that we have taken out money from our savings accounts in a great way, we only pay for the taxi and for Foodpanda from Paytm. So it is not that we are spending a lot, but clearly we are. A: That is the core of what we embarked maybe over two years ago. The first of the digital products was an electronic pass-book, where  you could get your pass-book updated on your mobile instantly. Then came the wallet product which is called scan and pay, which s exactly what most of our friends in the payments industry would do that is mobile to mobile payments and it is entirely QR code based. And one of the guests who spoke to you a couple of days ago, you said praised our product, which is the account opening. So, whether it is an area of transaction record keeping, newer account opening or payments, we have been sort of pioneers with offering. Yes, I admit that the scale and visibility can be higher but that is the journey we are on. So, in terms of the capabilities, I do not fear or do not worry that we will be any far behind. In terms of scaling it up, making it more visible and making it more consumer usage is our journey. And therefore, I would say the next 12-18 months will be focused on that and we will certainly be up with speed on that. In specific to the product, which I am personally very excited is the launch of 'selfie account' -- it is not a fad but it is a convenience. If you attempt opening it and I urge all of you to actually open one, it takes you no more than three to four minutes with just three simple steps. Aadhar card, pan number and a photograph of yourself and you are home with an account which is an operational account. Sonia: I wanted to ask you about this Fed-E-Credit, your digital loan facility that you started. I am very interested to know about the numbers, how much will digital loans or online loans eat out of the market pie of traditional loans. What could the percentage growth be in the next one to two years? A: The big question here is the E-Credit in specific is a product to existing customers of the bank. So, the audience is captive. What we are seeking to do is make it a convenience that it becomes for new to bank also. So, in passage of time, as we open new to market or new to bank through an online capability, then the space becomes quite enormous and therefore you are competing for share from anybody. What has driven this whole thing is two things. One is of course the fact that you could do automated scoring and the second is a civil record that is online and with Aadhar or some other online know your customer (KYC) capability, you have overcome many burdens and therefore online verification of client, direct bureau check, direct Aadhar or pan card verification with your score running, you are almost ready for an instant loan or an instant account opening. Volume can be any number. For now, it is restricted to our own portfolio of clients based on track based lending.Latha: Just to come back to the payment bank issue. Many of your clients will be Bharti cellphone users, would be Idea cellphone owners and with Aditya Birla Nuvo gets a banking license, Airtel gets a banking licence. It is just too tempting, too easy on your phone to download that app and probably open an account over there. do you see your float getting challenged or do you think this is going to be a complimentary product, you really do not have to worry about your current and savings accounts share?A: I would be lying if I tell you that these are trivial issues or are not going to change the face of the industry. It certainly will, but what I think passage of time will distinguish those who are able to keep up on both sides. You must remember that for the telecom or the payments company to become an effective bank, they have to upgrade many skills. Otherwise you would not have 80 banks with varying degrees of capabilities even now going through challenges. Latha: They are only meant to pay. Bharti will not pose any other challenge to you and all that we can do is we can make a myriad payments through them. We cannot take loans from them.A: If you look at it through the lens of the customer, you are looking at it from one dimension. Profit models of institutions do not ever work on one linear mechanism. Very soon, somebody will come up and disintegrate the whole process by pricing. So, somebody will argue that cross sell is crucial. You must understand, these all are very evolutionary. I do not think it can be one 30-day event; you are talking of 5-15 years. For example if you look at the telecom space, in the last 20 years one can see what all has happened. I recall 5-6 years ago, the mobile phone was yet not used as it is today, and so you could visualise 10 years from now. So, I would not rush to saying that these are one-offs which will change the face of the banking industry overnight but it will certainly be a process which will start influencing how both sides work. You can see some high action. You as a customer, you as a reporter will have a field day. Sonia: But, I guess there are concerns coming from as well because now lesser and lesser people are going to a branch. So, there is a fear that branches would in five to ten years perhaps just evaporate and brick and mortar banks may not be able to coexist with digital banking because of the kind of technology upgrade. Is that a fear that is over stated?A: I think so. You must understand, unfortunately or fortunately, India is not Parel or Mumbai or Dadar or Bandra. It is so layered, just as there is a very high end digitally friendly customer sitting in wherever we normally operate from, there are people who are in the far-flung areas who are yet under reached, under served, under supported. So, the scale of how it migrates and I suspect the whole theme of inclusion is why this whole emergence of payment banks and the Jan Dhan and other events. So, in our next foreseeable to 10 odd years, they will all coexist. The weightage may differ. The more urban, very busy, metro-centric person may not ever visit a branch. But even today, Federal headquarters we have customers thronging branches and queuing up in the morning and that has not changed. I suspect it will continue for probably another 5-7 years. So, I think it will coexist.