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The country’s largest private lender HDFC Bank is planning to facilitate a shift in its payments module from the existing core banking platform.
This would ensure minimal payments downtime, even if core banking is not available.
“This 15-month project will be followed by hollowing the customer-master modules from its existing core systems.
"It will ensure a single system of record for customers across various products,” said Sashidhar Jagdishan, managing director (MD) & chief executive officer (CEO), in the annual report for 2021-22.
The bank has partnered a new-age start-up to set up new core banking modules and the project will aid in setting up a fully-resilient active payments architecture, Jagdishan said in the report.
Jagdishan also stated that it was imperative for the lender to have a long-term vision on overhauling core banking and mobile experiences.
The CEO’s comments come in the wake of a series of technical glitches that plagued HDFC Bank over the last couple of years.
The issue had attracted action from the Reserve Bank of India (RBI).
In December 2020, the RBI had directed HDFC Bank to temporarily halt all digital launches as well as new sourcing of credit card customers, following various outages the bank faced due to technical glitches in the past two years.
HDFC Bank’s customers faced incidents of outages in internet banking, mobile banking, and payment utilities of the bank.
In August 2021, the regulator had partially lifted the ban by allowing the bank to issue new credit cards.
However, it had continued the embargo on its digital activities, planned under the Digital 2.0 programme.
Subsequently, in March 2022, all the restrictions were lifted.
Acknowledging the regulatory action, Jagdishan said in the annual report that HDFC Bank had created an ‘Enterprise Factory’.
Through this, the lender’s technology and digital teams would function in a new-age start-up like environment and co-create deep tech IP (Internet Protocol) capabilities.
Stating that this was a departure from the past where the bank’s technology IP was largely partner-owned, Jagdishan said as banks become more digital, they would need to “have in-house foundational technology capabilities to compete with neo-techs.”
To this end, the bank has set up a new centre in Bengaluru that is rewriting mobile and net-banking platforms.
The project has a time-frame of two years.
HDFC Bank will also roll out new features every three to four weeks in line with digital fintech companies, Jagdishan said.
Talking about plans under the Digital 2.0 initiative, Jagdishan said over the next few quarters, the bank would launch more products and services.
These include a new payments platform for merchants and a wealth platform. All the steps would be taken in partnership with new-age technology firms, he said.
He added, “We have made rapid strides in creating the foundation and enabling new digital assets over the last one year. The pace will only pick up from here.”
Merger optimism
According to Jagdishan, the merger between HDFC and HDFC Bank represents an opportunity that the lender cannot afford to miss.
In April, HDFC and HDFC Bank had announced the all-stock merger deal.
Only 2 per cent of HDFC Bank’s customers source home loans from the lender while 5 per cent do so from other institutions, he said.
The latter represents the size of HDFC Bank’s retail book, Jagdishan said. He added that home loan customers typically keep deposits worth 5 to 7 times that of other retail clients.
“...about 70 per cent of HDFC customers do not bank with us.
"All these give us an idea about the size of the opportunity,” he said.
With HDFC Bank being one of the largest consumer durables financiers in India, the lender can easily bundle such loans with home loans.
These actions would give a boost to margins, Jagdishan said.
He also said, “With the advantage of a lower cost of funds and the phenomenal distribution muscle that we have built, it is imperative that we seize this opportunity.”
Amid the renewed focus on digital banking, Jagdishan also emphasised the role of branch banking.
He called it the ‘fulcrum’ of customer relationships and a key deposit mobilisation engine.
HDFC Bank plans to double its network of 6,000 plus branches in the next three-five years by opening 1,500 to 2,000 branches every year.
The branches will be digital from a customer on-boarding and transaction/servicing perspective.
They would enable the bank to build the required liability franchise, he said.
