Paving the way with digitisation and a customer-first approach

Five years after the merger with Capital First, IDFC FIRST Bank is edging closer to becoming the ‘megabank of the future’ – in no small part boosted by digitisation coupled with an unwavering ‘customer-first’ philosophy

Credit: Sohel Patel 

IDFC FIRST Bank has been at the forefront of a technological revolution in banking. India’s journey into digitisation has been extraordinary, making digital currency accessible to millions, and IDFC FIRST has been fundamental in embracing, operating, and disseminating this technology. Launched in 2022, India’s Central Bank Digital Currency (CBDC) is currently available through select banks including IDFC FIRST and was piloted in Mumbai and Delhi under the guidance and control of the Reserve Bank of India. The CBDC is not a token or a bitcoin; it is the digital rupee, a unit of legal tender that holds the same value as the physical coins and banknotes that share its name, and which crucially represents a liability on the central bank’s balance sheet. In other words, it doesn’t just resemble money; it is money. Using some components based on blockchain technology, the CBDC was initially limited to the settlement of secondary market transactions and made the inter-bank market more efficient upon launch. But government collaboration with trusted banks like IDFC FIRST led to multiple benefits, creating a means by which many millions of previously unbanked people in India could store, save, and transact money via smartphone. This has not only enabled IDFC FIRST bank to uphold its core value of putting the customer first, but it has also firmly placed the bank at the cutting edge of digitisation across the country and the international industry.

Enhancing the customer experience
The bank’s customer first approach brings about a raft of benefits – digital and otherwise. We were the first universal bank to offer monthly interest credit on savings as well as credit cards with free lifetime reward points, zero interest on cash withdrawal at ATMs, and low APR. To give an idea of numbers, IDFC FIRST Bank has a balance sheet of Rs. 2,399,416,596 crores, serving customers across the entire expanse of the country via more than 800 branches, 250+ asset service centres, 900+ ATMs, and over 500 rural business correspondent centres.

It is only through technology that high levels of financial inclusion can be achieved

At IDFC FIRST Bank, we like to see things through the prism of our three core philosophies: guided by ethics, powered by technology, and being a force for good in society. We keep a close eye on emerging technologies that cater to the evolving needs of our customers – new and loyal alike. To us, staying on top of market trends is essential, and our investment in best-in-class technologies has helped us to develop customised solutions.

Digital technologies, especially payments, have transformed consumer habits. What the customer needs determines our business strategy. We aspire to provide the best user experience and put the customer at the centre of all journeys, including payments. The customer has multiple choices so it is important to constantly innovate on product features, UI and UX. It is also important to create trust in every single transaction and address disputes and reversals in a timely manner to ensure continued engagement, loyalty, and trust.

Working at the pioneering edge of financial inclusion in a country as vast and complex as India means that we must also place ourselves at the cutting edge of technology. It is only through technology that high levels of financial inclusion can be achieved, especially in a country where the journey towards a cashless society began in 2016.

Disrupting for a smarter future
So how do we go about adopting digital tools whilst also remaining true to our ‘customer-first’ mantra? The answer lies in constantly looking at and investing in the latest technologies with a view to helping our customers navigate financial transactions in a swift and secure manner.

Broadening access to the widest possible range of customers is key to our success. For example, we have recently collaborated with ToneTag – a global leader in voice technology. This allows us to provide soundwave-based contactless payments for the acceptance of CBDC by merchants. We are proud to be one of only four banks allowing customers to participate via a digital wallet – an exceptionally handy feature.

In a more geographically specific example, in the city of Kochi, in Kerala, we have partnered with technology start-up Anantham Online to facilitate the digital payment and collection of parking fees for customers using the Kochi Metro system – an important transport network connecting road, rail, and waterways in that city. Again, through our innovative use of technology, we have provided our customers with an improved experience for their daily transactions. This fact also applies where there is a large diaspora of Indian professionals and students living abroad – in countries like Singapore and the UK, to mention two. The successful establishment of Unified Payment Interfaces (UPI) through international protocols and interoperability will enable money transfers to and from bank accounts held in India by non-resident Indians.

Online safety is also a priority for most customers. At IDFC FIRST Bank, we always strive to make the banking sector safer and more user-friendly. A priority is to tackle the untapped market, which is still very significant. As previously stated, it’s imperative to find solutions and business models that effectively reach out to them. Each payment instrument holds a sweet spot. A lot of innovation can be applied to offline payments – an area on the up – spanning feature phone payments, cross-border payments, and the like.

One such example is our recent participation in a pilot project for offline payments involving a digital payment system designed by Swedish company Crunchfish, with which we signed a digital cash commercial agreement. Being part of this Reserve Bank of India (RBI) supervised project puts us at the vanguard of India’s banking sector revolution, and the potential rewards – both at a societal and a financial level – are significant, because the solution to the issue of offline payments will open up the customer base, provided we can smooth the path to inter-bank interoperability. And this is why we will continue to invest in these areas.

Defining the customer journey
Digital technology, particularly for payments, has transformed consumer habits, boosting efficiency beyond anyone’s imagination. As our business strategy is guided by our customers’ needs, we aspire to provide the best user experience possible, putting the customer at the centre of all journeys, with regards to payments and beyond. Adopting cutting-edge technology the way we do is not always plain sailing; it’s important to instil trust in every single transaction, cutting no corners. If a dispute arises, it must be addressed and resolved in a timely manner to ensure continued engagement, loyalty, and trust, particularly in the digital age when news of poor – or exceptionally good – services travels fast, far, and wide.

Our investment in best-in-class technologies has helped us to develop customised solutions

Like all banks, IDFC FIRST Bank has to contend with the shifting sands of government-implemented frameworks. For example, the November 2016 announcement by Prime Minister Narendra Modi banning the use of 500 and 1,000 rupee notes caused huge disruption – effectively making 86 percent of the country’s bank notes illegal tender. But this move also created many opportunities, as vast numbers of people were suddenly forced to find alternative methods of payment. It is therefore the responsibility of any bank stepping into this landscape to equip its existing customers with the tools to navigate complex financial terrains, and to reach out to empower swathes of new customers with the promise and delivery of future resilience and inclusivity, through the provision of accessible digital banking platforms.

As for the growth of the bank, our profit trajectory is strong. The bank has guided for ROE to reach between 13 and 15 percent by the exit quarter of FY25. We are confident in reaching this comfortably by the target date, despite setbacks including legacy corporate income reversal and, of course, the far-reaching impact of Covid-19. Our predicted ROE will be made reality in part thanks to our tech-centric approach and eagerness to try new innovation, touching the lives of millions of Indians in a positive way.

Combined, our customer-first philosophy and forward-thinking attitude will help us grow into a world-class, technology-led bank with a climbing ROE.