The Future of Digital Banking with Kotak Mahindra Bank

Hello, fellow Olio enthusiasts! 👋

Welcome to the 24th edition of Weekly Olio - your weekly dose of giggles, wisdom, and a sprinkle of intrigue with our tantalizing thought piece (yes, we're talking about Publisher's Parmesan here). 🤭

A big shoutout to all of you for the fantastic support and feedback. Let's keep the momentum going in the days and weeks ahead! 😊

Today’s Publisher’s Parmesan is in collaboration with Anupam Gupta covering his conversation with Deepak Sharma (President & Chief Digital Officer, Kotak Mahindra Bank), where they talk about the rise of digital banking and UPI in India.

They discuss the various advantages of Digital Banking, and also touch upon the rising digital banking frauds in India. From credit card approvals to loans, Deepak shares how digital banking is transforming the way banking services are rendered.

As a matter of introduction, Anupam is a chartered accountant, author, and podcast host. He worked for two decades as a research analyst/ consultant in institutional equities with leading brokerages. Since 2017, he is hosting Paisa Vaisa (via IVM Podcasts), a free-to-air personal finance podcast available on all podcasting platforms.

Exciting, right? 👏

Will come to that, but let’s first start with the curation.

Oh, and before you continue, it's time for some sponsor spotlight! Don't worry, it's not clickbait, it's just our way of 'feeling the ad-vantage'. So, do click, and help us keep the lights on and the puns rolling! 😀

This edition of Weekly Olio is brought to you by Growth Daily.

Master growth marketing for free every morning

Do you want the insights, trends, and breaking news powering 40,000+ companies' growth?

Well, more than 40,000 world-class CEOs, Founders, & Marketers start their day with the most impactful growth marketing news, tips, tools, trends, and insights by simply reading Growth Daily for 5 minutes every morning!

The best part? It's completely free to sign-up!

Subscribe here to become a better growth marketer!

Want to showcase your org in a similar way? Hit the reply button and let’s chat ✌

The Quote󠀢 💭

The Tweet 🐦

As the world continues to urbanize, there is a long-term increasing demand for more efficient and convenient transportation. The Boring Company has a technological edge within the industry, access to capital, and a technically proficient, experienced team. It is positioned to become a category creator for privatized underground transit, similar to how SpaceX was a category creator for privatized space travel.

The Infographic 💹

When it comes to EV production and sales, Chinese companies are a beast. While traditional automakers are trying hard to catch-up, the EV production field is currently led by two EV-only upstarts - BYD and Tesla.

The Short Read 📝

Packy McCormick, one man show - by Mercury

The writer and investor talks about one-person trillion-dollar organizations, burnout, and optimism.

Packy McCormick has proposed the idea that within the next 20 years, it is possible for a solo creator to build a trillion-dollar organization by creatively combining powerful APIs or plugging into a DAO. This would be a remarkable achievement, as only five companies are currently valued at $1T: Amazon, Alphabet, Microsoft, Saudi Aramco, and Apple.

The Long Read 📜

Inside Google's Plan to Kill the Cookie - by Gizmodo

Google is attempting to rewrite the rules of the internet with Privacy Sandbox. It certainly demonstrates Google’s supremacy. Gizmodo’s interview with Privacy Sandbox leader Victor Wong is a first-time look at the philosophy behind a move that’s going to change the digital world.

It's a fun interview because Privacy Sandbox is 1) a way to improve consumer privacy, and 2) a way to increase Google's relative and absolute data advantage in order to sell more ads at higher margins.

Both parties to the interview know this, and they also know which parts can't be said out loud. Fundamentally, the problem with online privacy is that the vast majority of people love everything about getting their privacy violated—the customization, the ad-subsidized services, continuous improvements in accessibility, spam detection, etc.—except for the part where it entails companies collecting data on everything about them all the time.

Publisher’s Parmesan 🧀

The Future of Digital Banking with Kotak Mahindra Bank

Disclaimer: This content was originally published by Anupam as a podcast, edited and republished as an article here with the author’s permission.

Are physical bank branches still relevant? Or the future of banking is fully digital? Read what Deepak mentioned to Anupam on this front.

Anupam: Deepak, you've been in Kotak for a very long period of time. And you're a career banker. Walk us through the various things you did and the consumer learnings that you've had in general, because you've seen this evolve over a very long period of time.

Deepak: I think that's a great journey that I had at Kotak because before we started on our digital journey way back in 2013, I was involved in building and running certain businesses in Kotak. I had set up our priority banking, which is what is called privilege, and then our NRI banking and offshore business.

My journey into digital started more from a business and consumer lens. So whenever I looked at digital, I was always asking about this one question, what problem are we solving for consumers and how does it help us build our business?

And digital for us became a way to find new avenues of growth. So we did a lot of stuff. Some of them, obviously, the big ones, like 811 or Cherry or our mobile app are the standout ones. But we also experimented with a lot of things which not necessarily became big.

In fact, way back in 2013, we were globally the first bank to launch banking on Twitter. We had launched even a campaign called hashtag banking. It was a very cool thing. But then we realized that there were not too many users who were on Twitter doing financial service.

We were also the first one to launch banking using social media, called Jifi. We did something which is non bank account based payments. Much before UPI came to India, we launched KP. So, having done a lot of those experiments, one thing we realized is that innovation is important, but getting scale out of what you do is even more important.

And that's when we decided not to do a lot of things and not copy what others are doing in the market. And a lot of our at-scale innovation, like, we were the first ones to do banking on WhatsApp or probably launch a video-based KYC or the whole Aadhaar-led account opening. I think many of those innovations helped us leapfrog and build digital at scale.

Anupam: That’s fascinating to hear Deepak! Now, if I may ask, at Kotak, what would be the few digital products that you're really proud of?

Deepak: I think Kotak continues to be one of the most successful banking apps. We started that ten years back. But now we have about 5% of the banking market share through our app, even though our deposit share is about 2%.

Digital for us was always a way to acquire and engage customers. But due to KYC restrictions, we could not do a full digital experience. Post demonetization, as the regulation changed, I think thanks to Aadhaar and India stack, we could onboard customers in less than three minutes.

And that's how 811 was born. And then the second wave of change happened during COVID when regulators allowed the full video KYC as a substitute for in-person field verification.

And post that actually you have a journey which is fully digital. You don't need to come into the physical world at all, right from the time you install an app to set up your account and then start doing transactions.

So today I can proudly say that our full experience is digital. Unless you need a physical debit card or a chequebook. But that's not something you must need to bank. But yes, there are customers who still prefer that.

Anupam: Yeah. Let's go through some of the most common products to see how digital has actually improved things. And when you think about that, when you say the word digital, there's just this UPI thing because it's been such a big success. I think we are in the 6th or 7th year of that. It started in 2016, if I remember correctly. What's your take on how things stand today as far as the whole digital experience in banking is concerned and what do you think lies ahead?

Deepak: I think we have been at a very, very fortunate place. Especially with the kind of development we have seen in the last five, or six years. While UPI stands out because it's now the largest digital payment ecosystem anywhere in the world.

But I think we must realize that it all started with Aadhaar. That was, I think, the first of our building blocks. The identity stack. And then the Aadhaar-enabled payment system for last mile payment and subsidy, Bharat Bill Payment System, which aggregated a lot of billing that we do. And then again, I think a lot of other stacks, like a FASTag - it's a bit of a payment for vehicles. Vehicles have their own identity. Or what we are seeing now, the data stack through account aggregator and open credit network, the GSTN piece, which again has allowed data to be leveraged for access to credit.

So I would say everything that we are seeing as a part of our India stack today, it all has some linkage to financial services or banks. And banks like us are taking advantage of the same. If I can find access to data that is available digitally or identity or payment, how can we build a lot more on top of it?

When UPI started, it started more as a person-to-person. It later included merchants. Now you can go and even apply for IPO through UPI or set up a subscription or even link your credit cards.

I think the Western world always was financially rich and now they were getting data. One of the key challenges that we face in India is that a lot of people still don't have access to credit because of the traditional credit underwriting model, the risk and bureau scores.

But how do you get into the credit fold? I think an account aggregator helps every consumer to demonstrate the data of transactions of their behaviour, and what they are doing, and that becomes one of the levers on which financial institutions can start underwriting.

It also gives customers greater control of their own financial data largely starting with financial but hopefully the health data. A lot of your other data, like taxation data, you can literally move your data where you want and find what is the best deal or offer or service you can get.

And then this becomes the building block of the data privacy architecture where you're saying that the consumer is the owner of the data and every institution is the custodian of the data with fiduciary responsibility.

In terms of physical branches, you don't need that. I don't know when was the last time you went to a branch on going there, probably once in three months even. I don't know how often I go there, but I still see crowds there.

Anupam: Okay. At least a part of Bombay where I stay and there are still a lot of people that use the branch. The branch is still relevant. What's going to happen there? Do you think that we can reduce the crowds even further or branches will always stay? What do you think?

Deepak: This is an interesting question and keeps getting asked year after year. So, today, for example, at Kotak, 98% of all our retail transactions are done digitally but 2% are outside.

Having said that, branches are still relevant. But what has happened is we have not added that many branches compared to our growth in customer base. So, if I was serving probably 3000 customers per branch today, my operating ratio between a branch to the customer is about 15,000 to 20,000. That means I can grow disproportionately my ability to serve customers without necessarily adding those many branches.

But especially for current account customers, business customers, and customers where still cash is in circulation and cash is needed, I think for them, branches are still a very, very important part of their banking infrastructure.

Also, customers who continue to choose a locker or probably customers who are senior citizens, those who are not very, very comfortable doing a lot of things digitally. They choose to come and visit a branch.

So the branch density may not grow, but I think branches will continue to stay and find their own relevance. But we'll end up acquiring and serving more and more customers digitally. That's also the reality.

Can't get enough of this conversation? Us neither! Check out the full episode below to satisfy your craving for more insights and ideas (directly jump to 12:15 to continue ahead). 😃 

Wanna know what else we are reading? 🙃

Crushed Content - The free email newsletter 'business' gurus don't want you to read

We scour the web for valuable tools, tactics and trends, so you don't have to. Sales, marketing, tech, strategy and more—all in a weekly email—sent to 27,000+ readers

That’s all for this week. If you enjoyed this edition, we’d really appreciate if you shared it with a friend, family member or colleague.

We know you really want to share this edition’s link. 😛 Well, we will make it easy for you. Just click on the bubble below.

We’ll be back in your inbox 2 PM IST next Wednesday. Till then, have a productive week!

Peeyush and Mohit

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organisation, committee or other group or individual.