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HDFC Bank: Getting ready for disruption

  • This exclusive excerpt from a new book tells the story of HDFC Bank’s digital journey
  • Author Tamal Bandyopadhyay recounts how the bank disrupted itself to protect its turf

Aditya Puri, managing director of HDFC Bank.
Aditya Puri, managing director of HDFC Bank. (Reuters)

After an 18-hour flight back, Aditya Puri (the managing director of HDFC Bank) went straight to his office to hold a meeting as he wanted to “kick everyone’s ass" and prepare them for disruption.

Around 20 people—senior management and business heads—were in the boardroom on the sixth floor of HDFC Bank’s headquarters in central Mumbai, Bank House. A bleary-eyed, jet-lagged Aditya said there were four kinds of fintech companies responsible for disruptions in the financial services space—loan dotcom companies processing loan approvals at the speed of light; payment companies such as Alipay and ApplePay; wealth advisories using mathematical algorithms to advise customers based on their risk profiles; and finally, the payment wallets.

Aditya said that all the hype over fintech or tech companies taking over the business could be true but they would still have to ride on top of a banking network. If a bank owned the network, how could a third party viably sell OTT products on that network? The network, merchant and customer belonged to the bank. Could somebody take away their business by merely promising a good payment experience? He also believed that HDFC Bank had all the elements and the right technology in place and should rapidly transform itself into a digital bank....

Aditya’s message was clear: Why don’t we disrupt ourselves, instead of allowing a third party to do that? He told the group heads that they would have to look at changes, absorb them and strategize on their businesses.

He was clinical in his approach, asking everyone to set a date for conceptualization and implementation of action plans. No one should be living in a cocoon, he said, with typical Punjabi bluntness....

Missed Call Banking

The focus was to understand customer behaviour and come up with innovative ideas. By November 2013, the team came up with their first product—‘missed call banking’.

The focus of the bank at that time was on the rural markets where customers were not using internet banking, mobile banking or apps. Analysing their behaviour, it was found that much like people around the world, rural customers want to just reassure themselves that their money is safe in the bank; for this purpose, the customers keep on checking their balance every now and then.

Checking the balance is a global phenomenon. Bankers across the world try to simplify the process. This was the first item on the team’s agenda.

They introduced a series of services that could be invoked by calling a toll-free number. 1800 270 3333: Checking the balance. A text message would be sent with the balance. There were other numbers for the rest of the services.

The service, initially meant for the rural population, was soon offered to all. Though it was not new or technologically advanced (it required a simple interface for the registered number to connect to the bank and retrieve the balance) and had already been introduced by a few government-owned banks, HDFC Bank was the first to implement it at such a scale.

It was an effective marketing tool for inducing customers to open accounts. Branch staff prepared stickers and pasted them on the back of customers’ handsets so they could remember the number. Almost one million people started using it within three months of introduction.

The team initially didn’t want to call it ‘missed call banking’. After much research, they had come up with ‘toll free mobile banking’ but found it too long. It was never officially named but the informal name stuck. About 4 million people use ‘missed call banking’ every month.

HDFC Bank 2.0—From Dawn to Digital: By Tamal Bandyopadhyay; Jaico Publishing House; 452 pages;  <span class='webrupee'>₹</span>499.
HDFC Bank 2.0—From Dawn to Digital: By Tamal Bandyopadhyay; Jaico Publishing House; 452 pages; 499.

Bank Aapki Mutthi Mein

Aditya wanted a digital strategy rather than just introducing digital products and services. Being a life cycle bank, it wanted to start early with customers through a careful onboarding process, get them to start using products and services, build capabilities around intelligent marketing analytics and then, over a period of time, do much of their banking with it.

The meeting after Aditya’s Silicon Valley trip was a turning point, which Nitin (Chugh, Country Head, Digital Banking) calls the ‘Muhurtam’. Once he and Corporate Communications Chief, Neeraj Jha, were in Aditya’s cabin discussing a possible tagline for the digital bank. While they all agreed that digital banking would empower the customers, Aditya liked a line in the press release, ‘Bank Aapki Mutthi Mein’. One of Nitin’s team members had used the term ‘Go Digital’ as the subject of an email. They combined the two and found the tagline—‘Go Digital: Bank Aapki Mutthi Mein’.

The campaign was launched in Varanasi. Perhaps, because it was Prime Minister Narendra Modi’s constituency. Nitin said it has been an old market for the bank and also a melting pot for all segments of customers, including traders and weavers. There were six branches in Varanasi and all of them had high transaction volumes. At the annual dinner in December at his Lonavala bungalow, Aditya announced that Nitin would go to Varanasi on 16 December 2014, to launch the digital bank.

Nitin bought an iPhone 6 to display the applications at the first-ever press conference that he would address on a boat on the Ganges. It was to be followed by another meet with the media at the Gateway Hotel Ganges.

He was nervous but Aditya, who was in Delhi at that time, sought to put him at ease over the phone. Nitin, the Corporate Communications team, a local branch manager and the media boarded the boat, which was decked up with helium balloons that were to be released at the time of the launch. There were also a few customers, representing different segments of business and trade.

Nitin was supposed to hold the placard with the tagline and then the balloons were to be released. Everything went as per the schedule and he started speaking in a mix of Hindi and English, when one of the housekeeping staff on the boat used a lighter to free a bunch of helium balloons that hadn’t got released along with the others. There was a minor explosion, leading to mild panic when it seemed that the boat was on fire.

Back at the hotel, Nitin made his presentation and demonstrated the services on his new iPhone. The launch received some attention from the national media but, for the local papers, it was a big hit.

In retrospect, Nitin feels the minor explosion at the launch was a good omen. From 44% of overall transactions in March 2013, digital transactions grew to 55% in March 2014, 63% in March 2015, 71% in March 2016, 80% in March 2017 and 85% in March 2018. HDFC Bank has successfully transformed itself into a digital bank—transactions via phone banking have been reduced to 1%, while the share of branch banking is at 8% and Automated Teller Machine (ATM) transactions are at 6%.

Excerpted from HDFC Bank 2.0: From Dawn To Digital with permission from Jaico Publishing House. Available for pre-order online and across book stores from 10 July.

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