What happens when young customers today want to bank ? How do they interact with the bank ? What are their requirements ? How demanding can they be ? On the other hand, how are banks coping with these new customers, how cost effective and competitive will they be ? And finally, what are the big threats and opportunities ahead ? Will technology help or can it be a barrier ? I put that question to someone who’s leading this battle in some ways and trying to win consumers hearts and minds, Uday S Kotak, founder of Kotak Bank.
Mr. Kotak, broadly let me start by asking how you understand and respond to what you think are the new customers or the young consumers of banks and banking today.
Govind, there are two parts of this. On the one hand is the bank itself and the mindset of the bank. The mindset of the traditional bank is oh, we are supposed to be safe, secure. We are regulated; we have the right to do whatever. This mindset is a big challenge in the fast changing digital technology world.
And we have to be clear that our core is the consumer and banking is a platform where while we manage risks, we have to ensure that we are able to serve the customers in the real world in the way she/he is used to in this world. And it is a very big challenge for the bank to make that mindset transformation from being a bank to being a customer focused and convenience services company.
On the other hand, what we are finding is very interesting dichotomy of behaviours within consumers. Young consumers who have not really faced the risk of losing money are far more comfortable with what gives them the greatest short term consumer experience in terms of dealing with the money. As you have older consumers, they are still more cautious and careful for their money.
So, how do us in this digital age, from a security point of view make sure that irrespective of what the expectation of the consumer is, we are first and foremost of all are secure. At the same time, we need to meet needs of the new consumers at the speed and convenience which she/he is expecting.
So, in some ways are you saying it’s easy to win the trust, because trust is the foundation of banking business, of young consumers today compared to older consumers?
The new consumer today who has not gone through the cycle of having his/her money lost is more comfortable trusting and we need to ensure that we are meeting the speed at which the customer is expecting us to be. And protecting him/her from the risks of putting or investing money badly. So we have a much greater responsibility ensuring consumer experience and at the same time keeping security in mind and the security angle very often, new consumer is not necessarily valuing enough.
And what seems in some way a contradiction, on the other hand you also have a situation where a lot of financial services companies and sectors are facing bad news for various reasons. Is this affecting the brand equity of financial system in general as viewed by new consumer or may be in your mind or existing consumers ?
I think consumers are not at the point where they have seen the shocks of losing their money specially the younger consumers. So, I don’t think the system has created that kind of a shock and I hope it does not. I am a believer that we do not have a systemic risk at this point of time if we handle the system well.
Yes, there is volatility, there are challenges, this a classic 10 year cycle India goes through 1998, 2008, 2018 but I do not think it is systemic. Having said that, I think it is important for consumer to understand that convenience and security are both important, and you have to modulate your priorities in between these two.
And how do you deliver that as a proposition. How do you make that promise of that delivery ?
The first is we are very clear, security is not negotiable. Anything which would increase the risk for our customers, we would rather not do i. The classic issue is about convenience is that reminds me of the famous hotel story. For long time, hotels did not have security, you need not have to go through being checked and frisked because that was very upsetting from customer experience point but finally today we all have come to live with a security check whether it’s your car or individually.
When you are getting into a five-star hotel, or any hotel of certain significance, we have adjusted ourselves to the reality of having a balance between convenience and safety. I think that is the lesson which we need to keep in mind for educating and basically making the new consumers understand that convenience cannot be at the cost of safety or security.
What are your own inspirations when it comes to finding these new consumers in today’s India, locking on to them and holding them which is I am sure every bank wants to do?
The moment of truth was 8th Nov’2016 when overnight, the world changed and in India. We came out with this new product called 811 and we realized the risk of being extinct is much higher than what we thought. Therefore the best time you really get cracking is when you fear something. And it’s that fear and belief that the world is changing much faster than what we were ready for and that has made us move at great speed in the whole area of digital and our technology journey.
But, at the back of my mind there is also this thing as I mentioned earlier, when I sleep at night I want the bank to be alive next morning. So, that is something we are very focused on, digital and technology at the speed of change but safety at all costs.
And when you look at it , like in next couple of years, I literally mean in the next 1 or 2 years, what are going to be Kotak Bank’s key priorities in building customer base, ensuring the safety and security and how does the brand in itself change or not change in response to this ?
See, the good thing about any technology or digital journey is it makes it easy for all. I said recently we need to dramatically reduce the cost of technology which banks are paying. Whether it’s global or domestic providers, we need a 90-95% drop in cost because that’s what digital costs. For us, to be able to give superior customer experience at a much lower cost point is the key for our future. And getting both together will enable us to free up our highways to much greater scale.
It’s a classic thing about SMS versus WhatsApp. For SMS you have to pay and WhatsApp came and finally everyone moved on to it. We have to be clear, be careful about customer segmentation because the convenient product at a low or nominal price point is valuable for all segments of customers. Therefore, focus on customer experience; focus on dramatically lower price point for that customer to be able to get that service and protect his/her money.
So, this challenge of reducing 95% costs, so is anyone taking it up ?
That's what I have said. Let’s start working on cutting the cost at 95%.
And you feel that’s possible that’s why you are putting that out.
One thing that digital has taught us it is cheaper, faster and safer. That’s the future.
And last question. Technology encompasses many spaces like you are related to Small and Medium Enterprises, large companies and of course the smaller consumers, the newer consumers that we have spoken of. How do you see technology playing out in terms of extracting data, understanding mid to large size customers met ?
See, I can be a significant, profound and dramatic tool in the area of planning. But what we have to be careful in this AI syndrome is also the fact that it is based on certain data and assumptions.
Be very careful with assumptions because when things go wrong and models don’t work finally we have to collect the money. So constantly challenge the models, challenge assumptions even as you go down the path of AI.
In effect you are saying that it’s opportunity versus reality. While there is an opportunity, the reality is something we should not be racing ahead.
Absolutely, we should keep on having huge mindset, challenging the assumptions even as you implement AI. You have to implement AI because that’s something which will make it better for you, to make it faster and cheaper for customers but constantly challenges are options.
Is there a bank product or service that’s your inspiration, not yours in term of let’s say building or creating something similar globally.
The question which comes into my mind if Google or Facebook decided to get into banking, banks are in trouble and we have to be able to imagine how we think about our ecosystem as not just banking but a customer play with risk management which is expected from levels since institutions.
And that goes back .Perfected as the first point you did. Thank you very much for speaking with us.
Uday S Kotak: Thank you very much.