Axis Bank's innovation lab, Thought Factory, in Bangalore is working closely with the bank's business teams and the start-up community to drive cutting edge innovation through collaboration. Set up in June last year, close to a dozen young engineers have been asked to work on blockchain, artificial intelligence, mobility and cloud technologies, to make banking easier for the customer. "Digital experiences and technology are changing very fast. You have the option of building (expertise) on your own or use the route of collaboration," says Rajiv Anand, Group Executive and Head of Retail, Banking, Axis Bank.
These new technologies are all set to disrupt many of the banking functions - credit, deposits, wealth management, customer service, mobile payments and cyber security. Going by the trend, globally, the third largest private bank in India has created an institutional framework for innovation to achieve the next level of growth. Axis Mobile, a digital wallet, for instance, has doubled its user base to 2.4 million in 2015/16, and witnessed transaction volumes of 8 million amounting to Rs 7,500 crore. The bank has also launched several digital and mobile services, including the option to open savings accounts on the go. Last fiscal year, it also launched INSTA Personal Loan facility, where eligible customers could get pre-approved loans credited to their accounts instantly through ATMs, Axis Mobile App and Internet banking platforms.
A busy 2015/16 in terms of innovations has earned Axis Bank the 'Best Digital Bank' award in the country. In fact, the bank is among the top three large banks in terms of financial performance. It has scored very high on parameters such as cost-to-income ratio, capital adequacy, return on assets and return on capital employed. The bank is at the top in terms of its fee income contribution to total income (13.76 per cent), followed by HDFC Bank (12.18 per cent) and ICICI Bank (11.30 per cent).
"We are working on a chatbot solution, which uses artificial intelligence. This is an area which is expected to expand very rapidly because anything that is repetitive in nature will come under robotics software," says Anand, adding that the services will soon be ready to roll.
Globally, Royal Bank of Scotland is trying out a virtual chatbot, Luvo. Back home, ICICI Bank has already come out with software robotics and claims there are over 200 robots performing over 10 lakh transactions per day. By the end of the fiscal year, ICICI plans to deploy 500 such robots to help automate 20 per cent of its total transactions. HDFC Bank, too, is in an advanced stage to roll out its robotic offering.
Axis Bank has about 3,000 branches and 12,743 ATMs. "The rate of growth of people will be faster in the front end than the back end. Even if transactions double, the people at the back end will not double. Therefore, you have to use technology and keep killing costs," says Anand. The bank currently has one of the lowest cost-to-income ratio at 0.39. "The bank's retail advances is at 41 per cent of its total advances. As the retail advances grow, the cost-to-income ratio will also move northwards," says a public sector banker.
Anand is also upbeat with the introduction of the Unified Payment Interface (UPI), with Axis Bank witnessing 1.6 million downloads so far. "As a banking system, there are one million transactions a day on UPI. It will only grow big in the days to come," he says. Similarly, Bharat Bill Payment System will also provide a level-playing field to all banks, including those who were lagging in technology. "Customer experience, speed and convenience are going to make a difference and will determine which bank's app the customer is going to use in an interoperable environment," he adds.
Demonetisation has also come as a shot in the arm for many digitally-advanced banks. The average daily debit card transaction volumes of Axis have more than doubled post demonetisation. "We are seeing a fundamental shift in debit card usage from pure ATM withdrawal to shopping," says Anand. While the POS network is still limited in India, Axis Bank is very active in acquiring merchants. "Our transactions at POS machines have also more than doubled post the currency ban," he adds.
Meanwhile, Anand feels the most important thing in digital banking is cyber security. "You have to have the capabilities to detect and respond very quickly," he says. Axis Bank will surely bank on Thought Factory to play an active role in guiding it to stay ahead of hackers. ~