Federal Bank’s digital channels now account for 86% of the total transactions and the lender has a market share of 17.50% in personal inward remittance business in 2020. Nilufer Mullanfiroze, country head for deposits, cards & unsecured lending (retail business) of Federal Bank, tells Rajesh Ravi about consumer behaviour during the pandemic and the use of technology. Excerpts:
Have you seen a paradigm shift in behaviour of customers during the pandemic?
Earlier online transactions, using mobile banking, net banking, were ‘nice to do’ activities from a customer perspective. It was more due to the fact that customers were habituated in a certain manner with regards to their banking habits. The pandemic moved the needle from ‘nice to do’ towards ‘need to do’ during lockdown to keep social distance, avoid usage of cash, etc. Hence the pandemic has definitely changed consumer behaviour.
CASA of many banks have seen an increase during the pandemic. Are the customers saving more and is this a temporary phenomenon?
I believe it is a little of both, i.e. “saving more” as well as “spending less”. With regards to ‘spending less’ discretionary spends like movies, restaurant-dining, etc, as well as pent-up demand, refurbishing homes, etc, will come back as the economy truly opens up. We are hence focusing on consumer finance loans, where customers can buy washing machines, dishwashers, etc, which did see a unprecedented increase in demand during lockdown. Suddenly these moved from ‘luxury items’ to ‘day-to-day need items’ as many families relied on doing all chores themselves during the pandemic. With limited day-to-day spends avenues, there has been an automatic ‘saving more’ that has happened as well.
Could you tell us how the bank has become the preferred bank for NRI remittance?
The pandemic has necessitated being digital, from a consumer side rather than the traditional walk-in model. It was a habit based on consumer’s muscle-memory, more than anything else. Till around 12 months back, app-based inward remittance was more a PUSH model from banks and exchange-houses; the shift, led by pandemic, is now likely to become a habit for customers. Again, since the bank had the digital capabilities in place, even as the volumes scaled, we didn’t have to do much from an infrastructure perspective nor did we need to throw more people for processing, as it was fully automated already.
What is the status of the credit card and the partnership with Fiserv?
The bank’s credit card should be launched soon. We have a large existing customer base, which we plan to tap first and complete the product-suite of offerings to our existing customer base. Our active debitcard base itself is 80 lakh plus and we are the 5th largest private sector bank with regards to debit-spends. Fiserv is a robust platform for credit-card management, not only in India but globally. Hence, post evaluating other possible platforms, we decided to go with them.
What about the demand for personal loans from the consumers ?
The contours of loans has changed to some extent. Earlier, the customer had to take a personal loan and then use the same to say purchase a mobile, fridge, holiday-package, etc. With consumer finance, the customer can now simply swipe his debit card and create a loan to buy many of the consumer durables, both in-store and on large on-line platforms. This is truly taking the loan to the place-of-consumption. Various fintechs, POS-providers and online companies have invested in this form of lending under the umbrella BNPL, lazy-pay, Debit-Card-EMI, Credit-card-EMI, etc. Banks like ours, who have the full digital stack, with no need of any paper and hence can give these loans in less than 60 seconds, will benefit from the demand of end-used based personal loans.
Could you tell us the long-term plan of the bank given the fact that technology is disrupting the conventional models?
The bank has been investing in technology for many years now. What is now visible is the culmination of all the various enhancements and system-upgrades, etc. Federal Bank now has a comprehensive stack of APIs, which can be consumed by various vendors and partners. Since the bank has long believed in ‘distribution heavy, branch light’, we have used the method of partnerships to grow our businesses rather than feet-on-street (FOS model). Technology has always been the backbone for Banking, it is now getting its due share of appreciation, by being the face-of-banking, in general. Hence, banks which have invested in technology will reap the fruits of it.