HDFC Bank to shift payments from core banking, ensure minimal downtime





The country’s largest private lender, HDFC Bank, plans to facilitate a shift in its payment module from its existing core banking platform. This would guarantee minimal payment downtime even if core banking is not available.

“This 15-month project will be followed by the hollowing out of the customer master modules from the existing core systems. It will provide a single system of registration for customers for different products,” said Sashidhar Jagdishan, managing director (MD) & chief executive officer (CEO), in the 2021-22 annual report.

The bank has partnered with a new-age start-up to establish new core banking modules and the project will help establish a fully resilient active payment architecture, Jagdishan said in the report.

Jagdishan also stated that it was imperative for the lender to take a long-term view on overhauling core banking and mobile experiences.

The CEO’s comments come in the wake of a series of technical issues that have plagued HDFC Bank in recent years. The issue had attracted action from the Reserve Bank of India (RBI).

In December 2020, the RBI had ordered HDFC Bank to temporarily suspend all digital launches and new sourcing from credit card customers, following several outages the bank had faced due to technical issues over the past two years.

HDFC Bank’s customers were confronted with disruptions in the bank’s internet banking, mobile banking and payment tools.

By 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, all restrictions were lifted in March 2022.

Jagdishan acknowledged the regulatory action and said in the annual report that HDFC Bank had created an ‘Enterprise Factory’. This would allow the lender’s technology and digital teams to function in a new-age start-up-like environment and co-create deep-tech Internet Protocol (IP) capabilities.

Jagdishan said this was a departure from the past where the bank’s technology IP was largely in the hands of partners, Jagdishan said that as banks become more digital, they “should have in-house fundamental technology capabilities to compete with neo- tech.”


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To that end, the bank has set up a new center in Bengaluru which is re-developing mobile and internet banking. The project has a duration of two years. HDFC Bank will also roll out new features every three to four weeks in agreement with digital fintech companies, Jagdishan said.

Speaking of plans under the Digital 2.0 initiative, Jagdishan said the bank would launch more products and services in the coming quarters. These include a new merchant payment platform and an equity platform. All steps would be taken in conjunction with new technology companies, he said.

He added: “We have made rapid progress over the past year in building the foundation and enabling new digital assets. The pace will only pick up from here.”


Fusion Optimism

According to Jagdishan, the merger between HDFC and HDFC Bank represents an opportunity not to be missed by the lender.

In April, HDFC and HDFC Bank had announced the all-stock merger agreement.

Only 2 percent of HDFC Bank’s customers buy mortgages from the lender, while 5 percent 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 hold deposits worth 5 to 7 times that of other retail customers.

“…about 70 percent of HDFC customers do not bank with us. All of these give us an idea about the magnitude of the opportunity,” he said.

As HDFC Bank is one of the largest financiers of consumer durables in India, the lender can easily bundle such loans with home loans. These actions would boost margins, Jagdishan said.

He also said: “With the benefit of lower fund costs and the phenomenal distribution power we have built, it is imperative that we seize this opportunity.”

Amid the renewed focus on digital banking, Jagdishan also emphasized the role of branch banking. He referred to it as the “foothold” of customer relationships and an engine for mobilizing key deposits.

HDFC Bank plans to double its network of more than 6,000 branches in the next three to five years by opening 1,500 to 2,000 branches annually. The branches will be digital from a customer on-boarding and transaction/service perspective. They would allow the bank to build up the required liability franchise, he said.


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