How products are structured around technology will be the differentiator: Paresh Sukthankar, HDFC Bank

Essentially going beyond the basic product, understanding the customer’s needs is important. Also, the larger part of anything that is retail is the sheer execution. The banks must make sure, the customers are using the products. The execution part of technology is sometimes underestimated. An edited excerpt from Financial Express’ interview with Paresh Sukthankar, Deputy MD, HDFC Bank. The overall interview revolves around how HDFC Bank has grown its corporate book smartly at a time when market growth has been subdued. Read the Full Interview here.

Shobhana Subramanian

Given that you have the digital edge, will new customers be drawn to private sector banks?

You’re right, when it comes to new customers, coming into the banking fold, aspirational, from a convenience perspective, will they get drawn to banks which offer these new services? Absolutely. Since you have a larger number of private sector banks that are strong on technology that shift which is taking place may accelerate. Certainly for some customer profiles. That is a reality. Some public sector banks may get share, like SBI and some others, because they do have the full range. Will there be a slightly faster shift if public sector banks don’t respond? I think that is certainly the case.

Therefore, technology and digital is equally a threat and an opportunity depending on where you are. Those banks that are not gearing up and not giving customers a choice, forget not acquiring customers at the same pace, they will lose some of their best customers because customers will move to where there is greater convenience.

For players who are making that transition, relationships are becoming stickier. When people ask, what about the threat from independent wallets, well, they have their strengths but from a limited perspective.

How fast is digital technology changing the way banks work?

The change in the way customers interact with banks has happened over a period of time. In the last year or so, the number of transactions enabled on the mobile has gone up significantly.The part we now call digital is about how the customer is dealing seamlessly across channels. From a bank’s point of view, if you look at the lifecycle of a customer, even before you have sold her a product you have a database telling about the customer. It’s a different customer experience altogether and that’s the power of digital—rather than transacting via an ATM or via net banking on a stand-alone basis, it’s across all channels.

Given that IT is accessible to all banks, what will be the differentiator?

It’s a question of how each player structures the product around technology; essentially going beyond the basic product, understanding the customer’s needs. Also, the larger part of anything that is retail is the sheer execution. For a large number of customers you need to get them to use it. The execution part of technology is sometimes underestimated.

In this digital era what is the role of branches?

It’s true that in Europe, branches have been rationalised. But everyone now accepts it’s not one or the other, but an Omni channel. Also, it’s hard to say what kind of ratio—of branches to customers—we should have. For new customer acquisition, the branch is important not necessarily because you’re originating everything there but because the customer will not start a relationship without one. So, if I go to a new city, and don’t have a branch but I say the bank has ten ATMs, the customer won’t be happy. He would say I need to go somewhere to bang the table, if I need to.

Where is HDFC Bank adding branches?

If you look at the branches, we have added last year and this year it’s roughly 50:50 between those in semi-urban and rural areas and branches in urban metropolitan centres. And if about 55% of our branches are semi-urban and rural, it means their disbursements would be 25%. Although the ticket sizes may be smaller and the overall revenue potential smaller — given the market potential —the costs are also lower. So from a profitability point of view, or time to break-even or a cost to income ratio point of view, they would be as good as those in an urban location.