Unshackled, HDFC Bank goes big on digital to regain lustre

The bank is now expected to gain market share across most products where it had slipped in the past 12 months and enhance its mobile app besides other apps, such as Payzapp and Smartbuy platforms. The bank is also expected to launch a digital credit card soon.

“One immediate change over the next couple of months will be the relaunch of PayZapp 2.0 on a completely new platform,” said Parag Rao, country head-payments, HDFC Bank in an interview with ET Now. “Our aim is to be among the top three payment apps in the country. PayZapp will also be a significant engine for new customer acquisition using the payments route.”

HDFC Bank, with a market capitalisation just shy of ₹8 lakh crore, was instrumental in driving the Bank Nifty to gains in excess of 2% on Monday. HDFC Bank has the highest weighting in Bank Nifty. The stock, which ranks third on the leader-board of India’s biggest companies by value, surged 3.3% on the Nifty and was the econd-best performer after Infosys.

Last Saturday, the Reserve Bank of India (RBI) lifted all restrictions on HDFC Bank’s digital business generating activities. The relief comes 15 months after the curbs were imposed. HDFC Bank, which issues more than 200,000 credit cards a month, was directed by the RBI in December 2020 to stop issuing fresh cards until it had sorted out its tech problems.

The bank also couldn’t launch any new digital initiatives. In August, the RBI had partially lifted restrictions imposed on HDFC Bank, allowing the lender to resume issuing credit cards,

“While the digital 2.0 ban itself was not significantly affecting HDFC Bank’s ability to acquire new customers or enhance their digital offerings, it stopped their ability to do digital ecosystem banking,” said Suresh Ganapathy, associate director, Macquarie Capital. “By lifting the ban, RBI is sending a signal that we are fine with the bank’s IT system and capabilities.”

The bank has highlighted that it has set down medium and long-term goals. In the short run, the bank is focusing on critical services like payments, cards and customer experience.

The bank also plans to triple its IT outlay.

HDFC Bank’s IT spends at 7-8% of overall operating expenses is in line with most of its peers. CEO Sashidhar Jagdishan had said last April that the bank was heavily investing in IT infrastructure that would help it to bear the potential load for the next five years.

“After removal of the ban on new credit card sourcing, we have seen aggression from the bank to regain its market share and lost momentum,” said Nitin Aggarwal, senior analyst, Motilal Oswal. “We now expect these efforts to gain further momentum as the bank intensifies its focus to market digital initiatives to its potential and existing customers.”

The private lender has witnessed a healthy pick-up in retail loans recently, which expanded at an average of 5% QoQ over the past two quarters. Analysts expect retail growth to remain healthy, fueled by continued recovery in unsecured products, home loans and LAP.