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API is the fulcrum of partnership strategy

Ashutosh Singh is engaging with fintech companies to create a set of low latency APIs

Ashutosh Singh, Interim CEO & Chief Business Officer at NSDL Payments Bank, discusses the bank’s strategy to carve a business niche and differentiate its services:

Babu Nair: How are you using technology differently to redefine customer experience?

Ashutosh Singh: Our business strategy revolves around B2B, and we are not looking to set up our distribution outlets. Our business partners are the first set of our customers. To attract business partners, we are focusing on the areas of tech solutions, both indigenously developed and those developed by working with the technology service providers. Technology solutions give a lot of confidence to our business partners in terms of scalability and availability; it also provides delight to them.

On the product side, we are doing things to attract customers. For example, we have launched a virtual card, and we are trying to differentiate ourselves in terms of solutions and go-to-market timelines. We are in rhythm with our business partners, and we meet and support our partners depending upon the stage of the partnership.

We provide a modular solution of 15 days, 30 days and 45 days. The bank operates on the direct-to-consumer side through our flagship product NSDL JIFFY. There some USPs that we have built on our mobile app, and our bank’s customer onboarding journey takes just 6 minutes and after that the customers can do all the regular bank work.

There is no validation happening about the name on the beneficiary side and there is a need of controlling these frauds for which the account opening journey should be strict. We are trying to build a whole set of safeguards around transaction monitoring in terms of value and velocity.

From the payments bank perspective, is there any interesting product coming in the near future?

If you come out with an innovative offering, the market will get attracted to your product and services. The idea is to identify some trends and build the products around it. When it comes to payment solutions, India is few years ahead of the other economies around the world, including the advanced economies of the west. It has mainly achieved this on the back of the 2 population-scale innovations – Aadhar and UPI.

Between 2013 and 2018, out of every 2 bank accounts that have opened in the world, one was from India. There is a rise in the UPI transactions. There are 1 billion transactions in the first 15 days of October 2020. It will continue to hold its place in the B2B space. Contactless payment is going to come out as a strong trend, whether it is in-store scanning, QR codes or the use of contactless cards. In the future, there will be tokenized payments, for which you do not have to take out the card from your pockets.

The POS machine solution is going to be another big trend, and it will take the payment acceptance infrastructure from 5 million to 30 million in the next couple of years. The regulator must focus on the offline trends with some regulatory intervention it can become an important area. IoT and experience-based purchases are some of the other fancy trends.

What opportunities does your bank see in the new normal?

It is a challenging period medically and financially; the current situation is worst for life and livelihood. The essence of this crisis was beautifully captured by Helen Clark, former Prime Minister of New Zealand. According to her: “economies can be recovered, but the dead cannot.” We have launched our flagship product NSDL Jiffy in January. We got the positive effect of the lockdown, the account opening journey has worked smoothly for us, the customers can open the bank account in 5-7 minutes. We were beneficiaries of this shift in consumer behavior. Our numbers have grown in February and March and we have maintained this growth. It has given us a lot of confidence and has energized the whole team. We have utilized the last 6 months very productively, we have rolled out a lot of new products in financial inclusion, domestic money transfer and micro-ATM domains.

The bank launched its flagship product NSDL Jiffy in January

What kind of engagements with the fintech companies are you looking for in the future?

The traditional definition of fintech is: “Anyone who has built his solution around the technology in the space of financial services is called as fintech.” Most of the fintech companies that we are working with are helping in the financial inclusion, prepaid card and payment solutions. We have engagements with fintech companies, where we are trying to make a set of available low latency APIs; for example, we have a set of 30 APIs for account opening, as set of 10 APIs for GBTS. It all depends on the business interests of our partners. We can provide a whole stack of 200 APIs where our customers can do account opening and which can offer solutions on the payment side like prepaid, POS, recharges and bill payments. Our bank can also provide solutions within the capital market side. The partners and customers can pick and choose the solutions as per their requirements.

We are working with a couple of neo banks and fintech companies and trying to make the API stack amazingly simple to understand and document – it will be highly scalable for people with low latencies. We are roping in experts from the industry in the API management space.

What are the challenges and opportunities on the revenue side for NSDL Bank?

We have 3 business areas. The first one is building a strong franchise. For that we are focusing on the digital. The second area is tie-ups with DPs and brokers in the capital market space; and the third is tie-ups with VC networks. Payments banks have started to dominate the financial inclusion space, whether it is a domestic money transfer or micro ATM or Aadhar enabled payment services. We are also looking for payment gateway, POS machine and prepaid to meet the needs of the retail consumers and wholesales business. There are cross-selling opportunities in insurance, mutual fund products and in capital market.

We are actively working with our business partners; it is a luxury enjoyed by new entrants like us. I can get my entire team – compliance, technology and business – together in one call along with the core team of our business partners. We are working together, doing weekly meetings and calls to solve the issues and, we can scale it very rapidly.

From the technology side, we are essentially trying to provide things to our business partners. We are providing them a stack that is highly scalable, available and has exceptionally low latency. We are trying to make a process, whether it is the onboarding process of the agent or the onboarding process of his customers. These processes are efficient and effort-free, in compliance with the regulatory requirements. Our business partners also feel delighted, and their achieving scale becomes easier. We need to focus on creating relevant products. We pick up the feedback from our business partners and do the production as per the requirement of the market.

What evolution do you see in the mobile app? How are you engaging with youngsters?

When it comes to banking, we are operating in a very saturated market, where almost every household has a bank account. What do you do to differentiate yourself from the other banks? What do you do to crack your business strategy? It becomes imperative for new entrants like us, who have complete authority, to differentiate ourselves. There are certain advantages drawn from our group companies, and so we have made a lot of solutions which are capital markets orientated – it is the one area in which we stand out from the other banks. Because other banks do not have deep expertise in the resource pool, we have solutions on the capital market size side for the retail consumers. In the last 6 months, we have signed up for 40-plus mandates and it is a focus area for us.

In a saturated market, it is important to know your business model, and your product proportion. We are focused and heavily invested in the capital market and it is beginning to bear fruit in terms of partnerships that we are striking up today. 75% of our customers’ age is below 30, it shows our products are popular among the younger generation. They are liking our journey and our interface and they are exploring various products on our mobile banking app. We have made a very truthful experience on our mobile banking app, and the numbers bear it out. We are trying to introduce concepts of savings, investing, and insurance for youngsters. Our whole concept of better expense management is around behavioural economics, and we are trying to bring elements of gamification, which help to engage with the youthful population.

Who are your main partners?

We get the strength from our parent company, and we are working with all the big names in the market. We have partners like banking correspondents, program managers for prepaid cards, aggregators for payment gateway, and brokers for capital markets. We have signed 40-plus mandates, and we have created a lot of capital market products, which most of the other banks were struggling to create, as they do not have a deep understanding of the capital market space.

Do NSDL and NSDL Payments Bank use common infrastructure?

Today, 90% of the country’s assets are managed by NSDL, and our parent company has mastery of security, and we are big beneficiaries of it. We are using the deep expertise of NSDL. There were a whole lot of consultations and discussions carried out with our parent company. On the infra side, we have a shared database, but in that database also, we have separate instances. Mostly, we are dipping on the expertise through mutual discussion and consultation. In the area of software and hardware, there are shared interests – it helps us drive cost efficiencies and economies of scale. We consult our group companies before making any decision. We have adopted a mixed strategy in-house and outsource. We have deep expertise in developing the products on our own. For the universal products, we are looping with the technology service providers.

Is the rural market your main market? Or it is a focus area of your bank?

One of the licensing conditions for the payments banks is to compulsory have a 25% presence in the unbanked rural centers. Payments banks have done a good work in terms of reaching out to these unbanked areas. Every year, we submit an application to the RBI in which we must share the details about the number of the centers we have opened pan India. We are planning to have 25,000 outlets in the next 10-12 months.

We need to create an urge among rural customers for insurance products and get them into a habit of small savings through some investments. We are doing these as a CSR initiative.

What are your targets for the financial year 2021? Where you have reached now?

Our bank had set up targets in February 2020 for FY21 before the lockdown started. We have achieved 75% of those numbers in terms of client acquisition and in other businesses. By the end of FY21, we expect to have a very satisfactory year across all the business lines. We have done well in saving account through the digital channel, prepaid card, and micro-ATM. There is still work required on the payment gateway side.

What is your view on the New Umbrella Entities plan floated by RBI?

RBI has invited applications for the New Umbrella Entities, or NUEs. RBI wants to grant license to NUEs to empower the retail payment system in the country, thereby creating competition to NPCI.

We think that more the competition, the better it is for NSDL Payments Bank. The new umbrella organizations need to be innovative; they should make products that are quite different from what already exists in the market, and that will be the real differentiator. The government, regulator, and umbrella organizations must focus on the offline payment space. The network is a challenge in rural areas, so there is a need of a solution for it.

Umbrella organizations must identify the product market gaps in terms of expanding the user base. There is still a set of 150 million customers who are using UPI apps to move money around. How you take these numbers to 500 million – that is the question on which umbrella organizations should focus. Pradhan Mantri Jan Dhan Yojana (PMJDY) can be an enabler of the offline payment. If you want to initiate a gigantic step towards cashless transactions, then you must bring people from hinterland into the mainstream.

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