Previous online transactions, using mobile banking, online banking, were “fun to do” activities from the customer’s point of view.
The Federal Bank’s digital channels now account for 86% of total transactions and the lender has a 17.50% market share in the personal remittances industry in 2020. Nilufer Mullanfiroze, National Head of Deposits, Cards and Federal Bank unsecured (retail) loans, tells Rajesh Ravi about consumer behavior during the pandemic and the use of technology. Excerpts:
Have you seen a paradigm shift in customer behavior during the pandemic?
Previous online transactions, using mobile banking, online banking, were “fun to do” activities from the customer’s point of view. Rather, it was due to the fact that customers were somewhat used to their banking habits. The pandemic has shifted the needle from ‘nice to do’ to ‘to do’ during the lockdown to maintain social distancing, avoid the use of cash, and so on. Therefore, the pandemic has definitely changed the behavior of consumers.
CASA many banks experienced an increase during the pandemic. Are customers saving more and is this a temporary phenomenon?
I think it’s a bit of both, “save more” and “spend less”. When it comes to “spend less” discretionary spending like movies, restaurants etc. as well as pent-up demand, home renovations etc. will come back as the economy truly opens up. So our focus is on consumer credit, where customers can buy washing machines, dishwashers, etc., which saw an unprecedented surge in demand during the lockdown. Suddenly these have shifted from “luxury items” to “daily necessities” as many families relied on all the chores themselves during the pandemic. With limited daily spending possibilities, there was an automatic “extra savings” that also occurred.
Could you tell us how the bank became the preferred bank for NRI transfers?
The pandemic has needed to be digital, on the consumer side rather than the traditional walk-in model. It was a habit based on the consumer’s muscle memory more than anything else. Until about 12 months ago, app-based remittances were more of a PUSH model of banks and bureau de change; the change, driven by the pandemic, is now likely to become a habit for customers. Again, since the bank had the digital capabilities in place, even as the volumes shifted, we didn’t need to do much from an infrastructure perspective and we didn’t need to send more people for processing, as it was already fully automated.
What is the status of the bank card and the partnership with Fiserv?
The bank’s credit card is expected to be launched soon. We have a large existing customer base, which we plan to tap first and complement the product line of offerings for our existing customer base. Our active debit card base itself is over 80 lakh and we are the 5th largest private sector bank when it comes to debit spending. Fiserv is a robust platform for managing credit cards not only in India but globally. Therefore, after evaluating other possible platforms, we decided to follow them.
What about consumer demand for personal loans?
The contours of loans have changed somewhat. Previously, the customer had to take out a personal loan and then use the same to purchase a cell phone, refrigerator, vacation package, etc. With consumer credit, the customer can now simply swipe their debit card and create a loan to purchase many durable consumer goods, both in-store and on major online platforms. It really means carrying the loan to the place of consumption. Various fintechs, point of sale providers and online companies have invested in this form of loan under the umbrella of BNPL, lazy-pay, Debit-Card-EMI, Credit-card-EMI, etc. Banks like ours, which have the full digital stack, without the need for paper and can therefore grant these loans in less than 60 seconds, will benefit from the demand for personal loans based on end use.
Can you tell us about the bank’s long-term plan given that technology is disrupting conventional models?
The bank has been investing in technology for many years now. What is now visible is the culmination of all the various system improvements and upgrades etc. The Federal Bank now has a full stack of APIs, which can be used by various vendors and partners. Since the bank has long believed in “heavy distribution, light branch”, we have used the partnership method to develop our business rather than standing on the street (FOS model). Technology has always been the backbone of banking, now it gets its share of appreciation, being the face of banking, in general. Thus, banks that have invested in technology will reap the rewards.
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