Why HDFC Bank is India’s first ‘Make in India’ catalyst

By encouraging a huge number of Indian startups and providing the right mentorship, direction and support, the bank has played a pivotal role in the growth of the Indian financial software ecosystem

HDFC Bank customers are able to get a personal loan disbursed into their accounts within 10 seconds. Or while chatting on Facebook Messenger, they are able to pay bills; thanks to the chatbot. The two examples not only highlight the focus on customer delight by HDFC Bank, but also the importance of leveraging technology and platforms. This leverage is possible as the bank, since its inception, has engaged with Indian technology companies in its quest to offer a range of products and services.

“The bank’s focus on tapping indigenous technology is in line with ‘The Make in India’ initiative by the government. This has been the thought driving the bank for more than two decades and continues to be a guiding principle for us,” says Munish Mittal, Group Head – IT and CIO, HDFC Bank. While the bank uses the best-in-class international softwares, especially at infrastructure layer or for platforms like ATM switch, it has always encouraged Indian software development companies, Indian System Integrators and Indian vendors, adds Mittal.

Digital focus
Right since its inception, HDFC Bank has endeavoured to adopt technology and digital platforms to offer convenience and experience to its customers. In 2014, the bank launched the “Bank Aapki Muththi Mein” campaign from the banks of river Ganges in Varanasi. This campaign marked the beginning of a concerted effort to offer products and services across digital platforms. Since then, a slew of offerings riding on the cutting edge of technology has been introduced by the bank. From Missed Call banking to all encompassing DigiPOS, 10 Seconds personal loan to Digital Loan against Shares, from chatbots to Humanoids, from Chillr to PayZapp wallet; all of them involve working with vendors and partners to tap the cutting edge of various technologies. This, says Mittal, has given the bank the edge over competition.

“In order to accomplish this, it is crucial to have solution providers that bring out innovative products and solutions, thereby creating a significant play field for the startup ecosystem, whose business models are primarily dependent on innovations,” comments Mittal.

The journey from inception
In the early days, HDFC Bank signed up with Citicorp Information Technology (CITIL) for retail banking implementation with a new software. This was Mittal’s first project in the bank. “This software evolved into a retail core banking software over a period of 10 years, primary due to our work with CITIL. Then Citi became independent, resulting in I-Flex, which was later acquired by Oracle to become OFSS. In the period from January 1995 to 1999, we worked with an Indian company which later became Servion to create a telephony application. When we first offered computer telephony application in 1996, we created the entire solution from the scratch; following this, we created a computer telephony middleware called RapCTI, a response application platform for state-of-the-art call centre application,” recollects Mittal, who joined the bank in 1996.

Similarly in 1996, the bank signed up with the then called Tandem for the non-stop platform, and ACI for the Base 24 software for ATM switches. Many entities back then didn’t even have a name of their own.

“Nagaraj Maylandla from the present company FSS and Ramesh Mengawade from Opus came together and said that they can help us implement Base 24, thereby giving birth to two system integration and software services companies – FSS and Opus. Both of these companies created their own software platforms including card management and reconciliation system by FSS, which was first developed for us. Opus created a real-time brokerage platform which we originally used, before migrating to TCS. In 2003-2004, when we signed up with TCS, we were their second client for a realtime online stock broking for HDFC Securities,” informs Mittal.

Another instance is that of Chennai-based Odyssey Technologies. HDFC Bank signed up with it in 2000, when it started corporate internet banking. The bank created a private certificate solution with Odyssey. Mittal recalls that until 2006-2007, HDFC Bank was probably the largest private certificate issuing entity in the country. Then came registered certificate authorities and so on.

He says, “We created the entire server-to-server authentication, private digital certificate solution, non-repudiation – right from the year 2000, we continued to work with Odyssey. Similarly, for instance, the retail lending platform didn’t exist back then. We signed up with Nucleus between 1999 and 2000, when we were setting up our retail lending practice with Hyundai launching a small car in India as an opener of Auto Loan market in India. When the first Hyundai car was launched in the country, we started our auto loan business, and we were the first client for Nucleus. We incubated the company, which then emerged as the most widespread retail lending platform across banks and NBFCs.”

In the years 2000 and 2001, when Mittal was setting up storage based replication for the first time in the country for Disaster Recovery and Business Continuity Plan (DRBCP), today’s Hitachi Data Systems was a small-scale company, just starting its operations in India. “Storage replication process started in the entire banking space after we initiated it. Similarly, we created a platform for application de-duplication with SAS Institute. SAS didn’t have the application, but we created it with SAS India, which was later sold to multiple organisations,” informs Mittal.

Between 2009 and 2011, HDFC Bank migrated from SAS to Hyderabad-based company Posidex, given its continued commitment towards Indian software companies. HDFC Bank also signed up with CRMNext, which is widely recognised as a huge success story, in 2008 on a rental basis; whereas, in 2010, Mittal converted that into an enterprise agreement. Following this, other banks such as ICICI and SBI also associated themselves with CRMNext.

Another example is that of AugmentIQ startup; HDFC worked with AugmentIQ and later L&T Infotech acquired it. In addition to these, HDFC Bank has worked with multiple other startups.

HDFC has recently signed up with Indian startup Bugclipper, and Resultex for AI based smart campaign management for customers. Another interesting story is of HDFC Bank’s association with an Indian company called ZingHR; the company has been processing the bank’s payroll for 20 years now. HDFC continued to invest in them for personal and administration reimbursement; and is now also working with them on salary app and other initiatives. “From domestic to international class vendors, from infrastructure to business application software companies, we have encouraged working on the ‘Make in India’ vision,” comments Mittal.

Strategy and support
In the journey to create a partnership ecosystem with technology companies, startups and fin-techs, there are many a milestones. One such is the Digital Innovation Summit. Now in its third year, the summit has enabled HDFC Bank to harness the potential of the startup and fin-tech ecosystem and forge a mutually beneficial partnership. Similarly, under ‘Industry Academia’, the bank has joined hands with leading education institutions like IIT Bombay, IIT Roorkee and IIM Ahmedabad to name a few. Under this initiative, the bank will advise and mentor startups and fin-techs that operate from these educational institutions.

“The symbiotic relationship ensures that the Bank has access to cutting edge solutions, which it can customise, co-develop and evolve over a period of usage. For the partner, it’s an opportunity to deploy its offerings to a client with a huge base,” says Mittal.

Explaining how the organisation bets on the right startup, Mittal states, “For example, when we signed with ACI Worldwide in 1994, we observed that there was no Indian company in this space. We also wanted the best-in-class; hence, from a risk-reward perspective, we chose the company due to its robustness and time-proven software, rather than asking someone to develop it for us. Later, Opus developed Electra Switch, which was then implemented by a large public sector bank, but the product couldn’t scale. Wherever we have best-in-class international solution, we will go with it. However, if there is an Indian alternative, we consider that as well.”

HDFC Bank’s strategy doesn’t include using only software solutions and products from startups. In another instance, HDFC Bank worked with I-Flex for its data warehouse. “We believe in starting small, learning from Indian softwares, scaling it up; and if it stops scaling, we then look for alternatives including ones available from overseas,” he adds.

Mittal feels that measuring the success of its associated startups is primarily subjective. The only measurement of HDFC Bank being an anchor client for them, is the fact that many of these companies have emerged as big players today – such as FSS, CRMNext, Nucleus, Hitachi.

Partners in journey
Sequretek, together with HDFC Bank, looked at the various dimensions of problems, and had a series of interactions in terms of the current needs and the ways to cater to them. This has given Sequretek a chance to pilot, alongside implementation – HDFC Bank has provided mentorship to the company in a lot of ways, believes Pankit Desai, Founder and CEO, Sequretek.
He says, “Mentorship and Intellectual Properties are crucial for the startup ecosystem and there’s a lot that needs to be done; and HDFC Bank has been playing an active role in this area. The willingness to take risks is the only way a startup will find success, and HDFC Bank has been very supportive. We need more organisations like this which don’t just buy your products, but work with you in your journey. The presence of institutions like HDFC bank is very significant in promoting the Make in India efforts and driving the startup ecosystem. Startups work with risks and it need a lot of management air to be covered. This is where the culture of organizations like HDFC Bank makes a difference, which has a track record for working with startups and promoting the Make in India initiative of the government.”

HDFC Bank is known among Indian companies as an organisation which has steadily created value to the Indian economy, as well as its shareholders. Arun Jain, Chairman and Managing Director, Intellect Design, comments, “Consistent growth with steady bank practices is what is admirable. HDFC Bank are bankers and customers as well. As our customer, HDFC Bank provides challenges which helps us to build great products under Intellect. HDFC’s technology team is great proponent of understanding vendors and technology well, and encourage and mentor to make it world class. They have help build multiple fintech companies out of India. HDFC Bank has given priority to buy Indian technology in most of the situations. They have helped multiple startups to leapfrog the business.”

Softcell Technologies has been working with HDFC Bank on systems in the retail assets related products for over four years now. D Ventakesh, Director at Softcell Technologies, says, “They are an extraordinary customer to have. They are aggressively ambitious with goals – both in timeline and with lowering costs per transaction. The stand out characteristics of this bank are that they are loyal, very risk-averse, highly compliance driven and operate at a scale that dwarfs all else. Our success is mainly because they nurtured our relationship with a great level of understanding. It also helped that we had innovative products that the big names are not offering yet. We did have issues in the beginning when the software product broke several times. After the eighth major failure, they served us an ultimatum and somehow we turned the corner, they went live and we haven’t looked back since then. The loyalty they exhibited all through the time we have been a supplier to the bank has driven a level of fierce commitment at all levels in our team members and we pull together as one when the demands hit a high. Retail assets as a business is seasonal; long periods of lull followed by a four-month mad rush.”

The bank’s expectation, according to Ventakesh, is high and they are critical of all measures. They measure everything that can be measured and drive automation to achieve better measures every week, month and quarter. Investments in systems, tools and availability is also at an extreme. This is coupled with an army that measures and audits every step towards improvements and incessantly at that. To that extent mentorship is constant and continuous. “For the Make in India initiative, we need a dozen more institutions like HDFC Bank – to consume, to nurture and help the startup stay up,” he adds.

The recent launch of the HDFC Bank’s UPI on Chillr benefits customers of 44 banks who are able to conduct digital transactions seamlessly using the Chillr app. Started as India’s first multi-bank payment app, Chillr has been running on IMPS with 11 banks prior to this launch and has achieved a milestone of monthly transaction value of over ` 500 crore. With HDFC Bank UPI on Chillr app, the startup’s base has expanded three-fold as customers of over 33 more banks are able to use it, in addition to existing 11 banks.

Sony Joy, CEO, Chillr, comments, “Chillr started its operations in 2013 end. We had spoken to many banks in India prior to our interactions with HDFC Bank; however, we observed that HDFC Bank is among the few to support disruptive ideas and is capable of getting new ideas from the market. From a fin-tech perspective, we have been very lucky to have been associated with HDFC Bank and being able to work with them. The brand name of HDFC Bank itself is a success driver for us. Furthermore, their openness to look at new disruptive ideas and implement them has been a critical factor.”

The bank was also one of the first to create India’s first AI-based banking chatbot, Eva, which could answer millions of customer queries across multiple channels instantly. Eva can assimilate knowledge from thousands of sources and provide answers in simple language in less than 0.4 seconds. Created in association with Senseforth, a Bengaluru-based AI start-up, Eva can answer millions of customer queries across multiple channels instantly. Within the first few days of its launch, Eva answered over 1 lakh queries from thousands of customers from 17 countries across
the globe.

Another great example is the AI-based conversational platform on Facebook Messenger called ‘HDFC Bank OnChat’. The platform uses Natural Language Processing (NLP) to understand a user’s intent based on free text input. A user just needs to chat with HDFC Bank OnChat to do any transaction. The bank has developed the messaging bot with startup, Niki.ai. The bot also facilitates bill payments for utility, postpaid, prepaid mobile plans. Till date, more than 300,000 consumers have interacted with HFDC Bank OnChat and the value of transactions is close to Rs 2.5 crore.

Chennai-based Odyssey Technologies has been working with HDFC Bank for over a decade now, and attributes its success to its association with the bank. The bank chose Odyssey to replace a security product from Israel when it was facing support and network logistics issues. The options the bank had were several and prima facie, all of them excellent ones from established security companies compared to Odyssey which had less than three years of experience in a complicated domain like cryptography.

B Robert Raja, Chairman and Managing Director, Odyssey Technologies, states, “We have been working with the bank for a decade and a half. I can safely say without exaggeration that our relationship with the bank has been the cornerstone of our success as a software product company. The HDFC Bank team had this amazing capacity to pick technologies and more importantly, the people with the technology. We have made it a point to showcase every one of our efforts to the bank, and to be sure, they have turned down a number of our ideas, but never a blunt ‘no’. Always accompanied by invaluable insight into the space which helped us to do the necessary course-corrections.”

Odyssey has successfully built a suite of cryptography and security related software products which have stood their own in the market in the teeth of competition from international majors. With the exception of a couple of smaller products, these have been either actively mentored by HDFC Bank or at least inspired by them. Many of these products are used by a large number of financial institutions in the country as well as the global banks operating in India.

“We get enormous guidance and encouragement (and some sharp, essentially valid, criticism) along the way but the IP always was with us and other respective vendors. They seem to have an instinctive understanding of what is important to the bank and they just get it. Similarly, the respect a vendor gets from the bank is only dependent on the value he can deliver. They never care whether you are representing a trillion dollar multinational or a boutique software company in Chennai. This gives the smaller company the confidence and the pride to move ahead. I know of several innovative ideas from a number of able contemporaries which withered and died without proper nurture. Each of them could have bloomed into a lot of IPs and revenues if only they were as fortunate as us and a few others. There are a number of IT companies which owe their current prosperity and standing entirely to the mentoring by HDFC Bank in their formative years,” says Raja.

Sharing his thoughts on the role of institutions such as HDFC Bank in encouraging technology companies and startups based in India, Raja says, “They just want the best technology/solution at the most competitive price and they just know the fastest way to get it. It just happens to be the best way to nurture an ecosystem. I like to think of it as pure market capitalism in action.”

Indian over global
As one of the largest private sector lenders in India, HDFC Bank is massive in terms of scale and reach. This pursuit for innovation by HDFC Bank aligns with the Make in India mission. For instance, the bank chose an Indian vendor like Drishti Soft to take up an ambitious project of automating its credit card collection process. This creates an ecosystem of mentors and innovators that favors the overall economy of a nation.

Bishal Lachhiramka, CEO, Ameyo, comments, “The business landscape has changed tremendously. This has encouraged large enterprises with massive infrastructure, intricate processes and huge customer base to collaborate with startup innovators with acumen for technology. Ameyo’s journey with HDFC bank has been one of learning and positive influences. It is quite impressive that an institution of its size and proportion could take significant decisions quickly and engage with the internal stakeholders in a goal-oriented and focused way. Their style of working has impacted our own processes and allowed us to break our own benchmark every time. In addition to that, an association with a large bank of repute has other perks. It has brought a brand value to Ameyo. We have made a mark in the BFSI segment and earned the trust of other financial institutions as well.”

Under HDFC’s mentorship, Ameyo has created the largest captive contact centre performing credit card collection. The solution has robust capabilities like rule-based customer bucketization and refine customer module, Artificial Intelligence (AI) to improve coverage ratio. With Ameyo’s solution, HDFC bank collection department was able to achieve an increase of 50 per cent customer outreach and 95 per cent coverage of delinquent customers. These results have also impacted the bank’s internal benchmarking and assessment process.

Another firm, Posidex Technologies, takes pride in its relationship with the bank which has metamorphosed from a vendor to being referred as a valuable partner. The bank is at the forefront of deploying cutting edge solutions and the privilege of associating with them in this endeavor has forced Posidex to continuously challenge itself and come out with more applied innovation. The success of executing challenging use cases have given Posidex confidence to drive its own growth.

Bhavani Shanker Chitoor, CEO, Posidex Technologies, says, “We received an unparalleled support, guidance and encouragement from all the stakeholders, be it technology or business or operations, right from walking us through the business requirements, deployment and support. The approach of the bank is very practical and highly process driven.”

Mobile strategy
ACL Mobile’s experience of working with HDFC Bank has been exemplary. ACL was a start up in 2003-04 when HDFC selected it as technology partner for communicating with their customers via SMS. ACL had a modest start with sending around 100,000 messages a month across five telecom networks.

SMS has been an integral part of HDFC’s mobile strategy and is required for transactional, promotional and mission critical communication. In 2009, HDFC had a small requirement of an in-house messaging system of 100 TPS, which ACL developed for it more out of its long standing relationship with the bank, than a viable business case. This is ACL‘s centralised messaging technology platform, AXIOM was born and conceived in HDFC. Today, this system is one-of-its-kind in the world, which processes more than 500 million messages a month for HDFC and integrates with more than 50 internal processes and 20 departments of the bank.

Sanjay Goyal, CEO, ACL Mobile, informs, “Based on this success, 15 other large banks and financial institutions of India have already installed it and many other banks across the Middle East and South East Asia are considering the system. I believe it was HDFC’s ability to identify, trust and work with a promising start-up and founders over a long period of time to achieve together the results as they stand today. We have been continuous engaged with the bank for the last 15 years working closely with their business and technology teams. Together, we have created many innovations which have not only benefitted HDFC but have been adopted by other banks and financial institutions.”

HDFC Bank and ACL Mobile have effectively met changing market demands for the mutual benefit of both organisations and their customers. ACL today, is a successful company with over 500 enterprise customers; and delivers over 30 billion messages a year to over 450 million Indians. HDFC till date continues to be ACL‘s most important customer.

“Traditional banking systems in India have been largely driven by constraints such as elaborate procedures and compliances checks. In the recent years, future technologies such as blockchain, which used to be largely exploratory, is now seeing the development of actual use cases. Artificial intelligence (AI) and machine learning (ML) are also being implemented in critical banking use cases, moving beyond chatbots. With high adoption of messaging, HDFC bank permeates the ‘last mile’ touchpoints and boost financial inclusion across the country,” adds Goyal.

Nishant Singh, CEO and Director, CRM Next, describes HDFC Bank as a progressive customer and a true believer in technology companies. He comments, “HDFC looks at technologies ahead of time. When we started, CRM was completely new. HDFC Bank was the first to get our concept. The bank was a little skeptical in the beginning, but eventually understood its importance and supported us. The bank is very validated in its approach and has helped us grow and build confidence in us over the years.”

Growth stories
What is now established as the most widespread retail lending platform across banks and NBFCs, Nucleus Software was incubated by HDFC Bank. Dusad R Vishnu, Managing Director, Nucleus Software, states, “We have a relationship with HDFC Bank of more than two decades. It has been a win-win journey for both, HDFC and Nucleus. A key to this is that we were able to live upto their expectations and this has helped us immensely. This has also created our reputation among other large organisations and has built confidence in the market On the mentorship and support front, we have worked very closely with the bank and Munish Mittal has been a great support.”

Vishnu feels that only if all the large organisations in the country make it a point to adopt Indian solutions and products, the Make in India vision will receive huge boost. “There are many emerging startups with brilliant ideas. Large organisations should put forward their problems and let the startups to address them with their products and solutions.”

Makrand Padalkar, CFO, OFSS, comments, “We have been associated with HDFC Bank from Day 1, when we started in 1995. We have found that the bank is very innovative in its approach; they use use technology to process to a level which is at the top of the line. HDFC is among the top global banks and we have had a win-win journey with them. We have worked with HDFC in multiple areas such as analytics and core processing, making sure that the central operations are done in the most efficient way. We speak to hundreds of customers and HDFC is among our closest partners. HDFC Bank is the right role model for a lot of BFSI startups, because of its phenomenal ability to nurture and grow talent. However, many startups today lack robustness. Startups should focus on this, because the banking space requires top level of data security and system infrastructure.”

As the examples of these startups show, it requires only a few focused institutions and banks like HDFC Bank to take India’s startups to the next level. HDFC Bank has shown the way and if every major institution or organisation follows the bank’s example, expect many more Indian startups to shine more brightly on the global arena.

“Going forward, we will continue to encourage startups. While startups give us the benefit of looking at issues from a fresh perspective, we see ourselves as catalysts and facilitators of great ideas, and want to continue to encourage innovative thinking and technologies, which can help the bank maintain its leadership position,” concludes Mittal.