The coronavirus outbreak and the recent regulatory changes in the digitised know your customer (KYC) norms can dramatically alter banking in India, changing the way banks acquire new customers.
The viral outbreak had fast-tracked the digitisation drive and the Reserve Bank of India’s video KYC guidelines not only made it quicker to open new accounts but it worked out cheaper as well, bankers said.
“Digital customer acquisition will help us concentrate physical meetings only for select account holders and this way our cost of operations will reduce and geographical reach will also go up,” said Surinder Chawla, head of retail liabilities and wealth management at RBL Bank.
If the cost of acquiring a customer through the physical channel was around Rs 2,000, the same for digital would be around Rs 200, he said.
Another new-age private sector lender Kotak Mahindra Bank, which disrupted the financial services industry with its 811 digital banking product, has been a major proponent of digital customer acquisition.
Virat Diwanji, who heads retail liabilities and branch banking at the Mumbai-based lender, said the digital push would continue but the branch network would not lose relevance.
“We have halted our branch expansion plans till September this year because of COVID-19 but going forward, we will continue to push on branches since consumers need them for some select use cases like complex investment products, assisted services and others,” he said.
COVID-19 is the respiratory illness caused by the coronavirus.
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Customer visits for basic savings account services have been dwindling for sometime and Kotak, too, has been seeing it across its network.
Most bank visits these days were driven by current account or business-account holders and the trend would continue since small-business owners preferred branch relationships over complete digital interactions, he said.
Kotak has seen fewer customer visiting branches for basic savings products following the outbreak. Most of the visits to the bank these days were driven by current account or business account holders and the trend would continue since small-business owners preferred branch relationships over complete digital interactions, he said.
“We have to take some judicious calls on our branch-network expansion plans,” he said.
Rationalisation of branch size and the staff was something that banks were undertaking even before the outbreak, a senior banker said.
The branches in the metro are now half their size--from 2,500 square feet on an average to 1,200 square feet. Now, they could become 500 to 600 square feet, he said, not wishing to be named.
Diwanji said Kotak was trying to make its branches 24x7 by installing cash-deposit machines, teller machines and passbook printers among others, replicating the digital banking experience for walk-in customers.
Cost is an important factor that makes digital an important property for banks.
Wriju Ray, the cofounder of IDfy that offers video KYC services to banks, said to get a customer’s details, a bank would spend Rs 30 for the technology platform and another Rs 30 possibly on the person manning it at the backend.
“Video KYC is half the cost compared to any other journey and now with technology, the entire process can be made into a seamless flow for the customer,” said Ray.
The quality of customers acquire digitally is a point of concern among bankers.
Some think that the digitally acquired customers tend to use it as a secondary account and hardly maintain balance.
RBL Bank’s Chawla said they had been acquiring customers digitally for quite some time but the bulk of the CASA (current account and savings accounts) deposits were coming through branches. Typically, digital accounts had a lower balance, he said.
“Going forward, we can concentrate on acquiring customers digitally but once he or she starts using the account actively, we can depute a relationship manager to engage with the customer better and if needed, go ahead with physical meetings,” Chawla said. This would increase the efficiency of the acquisition of new customers, he added.
Digital accounts did have a lower balance but were used more frequently, Diwanji said.
Jitendra Gupta, who founded a neo-banking platform called Jupiter, said he was confident that banks would be able to acquire high-quality customers through online channels.
“Customers are asking for digital onboarding more given the pandemic has made physical meetings difficult. Banks have got no choice but to adopt the same,” Gupta said.With the Reserve Bank introducing video KYC guidelines, which were the need of the hour, it would help banks get new business, he added.