HDFC Bank aiming to onboard 2 crore merchants in the next three years: top official

Representative image.

HDFC Bank, the country’s largest private sector lender, aims to bring two crore merchants on to its digital banking platform over the next three years, Parag Rao, group head - payments, consumer finance, technology and digital marketing, told Moneycontrol on Thursday (October 6).

Payment processors use the term ‘merchant’ to refer to their customers. Customers, or merchants, are businesses that accept credit card payments from their clients in-person, online, or over the phone via the reported

“We ride on our existing strengths as a merchant acquirer. We are already the market leader in the merchant acquiring space, with 50 percent plus share of card acceptance volumes,” Rao told Moneycontrol in an exclusive interview. “…We are three million plus (over 30 lakh) merchants today. In the next three years, we expect to be a 20 million (2 crore) player.”

Rao was talking on the sidelines of HDFC Bank’s launch of SmartHub Vyapar Merchant app, which facilitates instant, digital and paperless merchant on-boarding for the bank’s customers. The app has been developed by HDFC Bank in partnership with Mintoak Innovations, a merchant SaaS (software as a service) platform.

Also read: Fintech Files | Part-2: In the world of digital payments, UPI is the king

Banks and fintech: Collaboration or confrontation?

Rao said that the era of partnerships between banks and fintechs is here. He elaborated that fintechs have brought to the industry an “agile, nimble” way of looking at products. These players, according to Rao, adopt an inward-looking approach of products keeping in mind customer interests and experiences.

“Now, with the kind of recent developments happening, we do believe this is an era of partnerships between large institutions like ours and the fintech community,” said Rao. “I think this will only help bring the best of both worlds to the table so that we can co-create products and bring significant value to customers.”

HDFC Bank is among the first banks to have formed partnerships with fintechs to offer products and solutions. In August last year, the bank had partnered with fintech platform Paytm to accelerate its digital footprint in semi-urban and rural India.

Rao added that he believes “very strongly” in the partnership philosophy and that the bank is open to more partnerships with fintech players.

HDFC-HDFC Bank merger impact 

Another opportunity for HDFC Bank to scale up digital banking is the merger with mortgage lender HDFC, said Rao.

The merger was announced in April, when HDFC's board had cleared the amalgamation of its wholly-owned subsidiaries HDFC Investments Ltd and HDFC Holdings Ltd with HDFC Bank. The proposed merger has received a thumbs-up from the stock exchanges and the Competition Commission of India.

“The merger is about two very large institutions, with two large customer bases, coming together. We have seen that there is a little overlap in customers, but by far there will be two unique sets of customers coming in,” Rao said.

“It only increases the opportunity to offer a whole suite of banking products and services. It will be a very important step in the growth of the HDFC Bank franchise in the coming years,” he added.

Also read: RuPay credit cards on UPI: Small merchants not to be charged for transactions up to Rs 2,000

Tokenisation impact 

Speaking about the assessment of the Card on File Tokenisation (CoFT) process, Rao said that customer migration has been happening “pretty smoothly.” He added that the banking industry has been working on this for the last few months, ensuring there is no inconvenience to customers.

CoFT refers to the process of replacing card details with a ‘token’, which will be unique for every debit or credit card and merchant platform. The process is aimed at making card transactions more secure as card data is not stored on merchant platforms and hence cannot be accessed through a breach for frauds.

According to the Reserve Bank of India’s norms, payment aggregators (PAs), payment gateways (PGs), and merchants cannot store the card credentials of customers in their databases after September 30.

Moneycontrol had reported on September 28 that banks, payment providers, and merchants had been preparing for potential disruptions after the September 30 deadline as tokenisation has not yet been tested on a large number of payments. Additionally, because of the timing of the new deadline — right in the middle of the festive season — merchants have been scrambling to adopt the new payment method to prevent disruptions and loss of sales.

On Thursday, Rao said that the banking industry has seen a “significant ramp-up” in tokenised transactions across sectors. This is likely to continue, he added.​