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You can't increase adoption by launching more digital banking products: DBS Bank's Sengupta

When Shantanu Sengupta, managing director and head of consumer banking at DBS Bank India, stepped into his role in 2015, the retail banking landscape was changing fast with technology developments being the driver both in payments and lending businesses. Since then, DBS Bank has launched Digibank app, through which one can open a bank account on phone after the Know Your Customer (KYC) process. This year, the bank will target lending by providing digital credit to its customers, and also launching credit cards. The bank has already launched mutual funds on its digital platform and plans to offer insurance as well. Sengupta spoke to Mint about his plans for DBS Bank in India for 2018. Edited excerpts:

You took charge in 2015. What has changed since then and what is your outlook for this year?

When I joined, the bank was at a stage where we were thinking of launching a digital bank. Lots of banks offer a digital platform but it doesn't necessarily mean being completely digital. In the mean time, IndiaStack came in, which the government had built, and was in sync with what we wanted. (IndiaStack is a system that has five programmes: Aadhaar, e-KYC, e-signature, Digital Locker and Unified Payments Interface (UPI). Financial services companies can use this platform to access information about customers.)

In 2015, we had a limited presence in the country on the retail side of the business. We were thinking if we could build a solution where a customer didn't have to talk to the bank. Then, in April 2016 we launched our DigiBank product. The concept of banking itself had changed to being on the go. By then, a large part of the population had started using smartphones. At that time, this was a new concept and we knew it would take time to catch up. We started with banking and payments solutions. While we were doing this, the payments landscape was changing even faster in India. Initially, there were IMPS, RTGS and NEFT (Immediate Payment Service, Real Time Gross Settlement, and National Electronic Funds Transfer). Gradually, UPI came in and there was scepticism about how long it will take to grow. We integrated UPI in the second quarter of 2017 and QR code in the first quarter of calender year 2017.

We believe that you can't increase adoption simply by launching more products.

After UPI and QR code were launched, what kind of transactions did you see?

We launched UPI in May 2017. We wanted to build the UPI infrastructure within the bank app; most banks have built a separate app for UPI. In terms of UPI, we have done over 6 million transactions so far, we can do much more. Many non-bank fintech (firms) are offering UPI. As that happens, you will see a rise.

The average transaction on UPI for our customers is Rs2,000-3,000. But it is too early to call it a trend. It is not a trend that we see going forward because in the past 2-3 months, there has been an increase.

In case of QR code, the reason why the adoption rate is not as per what we anticipated is that the acceptance of QR code has not been that high. You have to build both sides of infrastructure. The government is promoting QR code. I think it will pick up. Charges are coming down.

How many customers was the bank able to get through the mobile-only banking product? Have you made any changes since the launch of your mobile-only bank app?

Though there is 100% tele density, the infrastructure is not good. Sometimes you don't get connection and there are blind spots. Hence, after we launched the mobile banking app, we later provided internet banking (also) for this product. We built phase 1, which is a basic internet bank account to access your money and make payments. In the next phase, you can make investments through the platform and add payees. We have got close to 2 million customers and have just crossed 500,000 savings account holders. We started with an e-wallet and then moved to savings account. Recently, RBI (Reserve Bank of India) has allowed banks to use Aadhaar for OTP-based eKYC, which we launched 2 months ago. It is a limited savings account.

Opening a savings account is just the first leg. Have you been able to cross-sell products to the 2 million customers who came in through the mobile-only bank app?

When it comes to the demography of customers, 80% are below the age of 30, and are male. All of them have PAN (Permanent Account Number), Aadhaar and smartphones. Most are salaried and in the top three markets-Mumbai, Delhi and Pune. For these customers, we have launched mutual funds, and the process is paperless. By the first quarter of calendar year 2018, we plan to launch digital loans.

We are also using the data that we have. As banks we have not done a good job in terms of using data adequately.

Next is bancassurance. We have three partners-Tata AIA Life Insurance Co. Ltd, Aditya Birla Sun Life Insurance Co. Ltd and Aviva Life Insurance Co. India Ltd. We have built an open architecture where the system throws an option based on customer's search choices. We have taken out mis-selling from the whole equation. We plan to offer health, general and life insurance. This should happen by the second or third quarter of 2018, since it is a bit complex.

Will you offer small-credit unsecured loans?

Looking at the profile of our customers, it is not going to be a very small amount-Rs5 lakh being the maximum amount. The minimum would be Rs1 lakh. It would be an instant loan. Loans will be integrated and it would be a pre-approved loan. To provide credit we will be looking at a combination of both traditional data such as Cibil score and alternate data such as payment transaction data. Towards the last quarter of 2018, we will offer credit cards. Currently, we don't have unsecured loans.

Coming to mutual funds, how many fund houses have you tied up with? Will you give advice as well?

We already have 12 fund houses and we are expanding further. We want to be selective and we don't want to confuse customers. We also want to focus on our partners' abilities to provide products online. We are not into the advisory business; we are purely distributors. We are not expecting big-ticket transactions. The target customers are young and we want to create discipline around savings. In terms of choice of partners, we looked at the top partners and the ability to create digital platforms. We are assuming that the customers who are on our platform know the basics of mutual funds. We only have equity, balanced and debt funds and we encourage SIPs. Since the bank customer has KYC, it becomes seemless to provide mutual funds.

When you launched the mobile banking app, the focus was on bots. Isn't that just a fancier version of a search engine?

Bot as an industry is evolving. You have to work with the bot to make it intelligent. In the past 2 years we have been making it more knowledgeable to respond to the queries. Over the past 12 months, we have worked on it. The bot can now handle a large part of the basic transactions. Well, has it reached where we want it to be? No, not yet. We want to take the bot to the next level where it can engage with customers. Today it responds to the customers. We want to make it more engaging. It is more than a search engine but not a complete virtual assistant. It can execute transactions for you but it is not intelligent enough to take decisions yet. Hopefully, in the next 1 year, you should see it become far more efficient.