Despite a relatively small branch network,
Indian private sector lender Yes Bank has created quite a splash
since its launch five years ago due to its technology-focused
service proposition. Despite a fall in retail banking profits, the
bank is continuing to invest in a tech-driven business model,
reports Douglas
Blakey.
Buoyed by a more than 50 percent increase in net earnings in the
year to 31 March 2009, a period in which its branch network doubled
from 60 to 117 units, Yes Bank is now aiming to repeat the trick
with plans to increase branch numbers to 250 outlets by the end of
next year.
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While the bulk of its early success has come
from corporate banking, the bank is now looking to grow its
loss-making retail unit, which in the fiscal year just ended
accounted for only 4.6 percent of the bank’s revenue (see
results below).
Launched back in September 2004 by two
ex-Rabobank executives – the Dutch cooperative has been a major
investor in the bank since it was founded and has a 20 percent
stake – Yes Bank has been among India’s most innovative private
sector players with a number of firsts.
At the outset, it sought to differentiate
itself from established private sector rivals such as ICICI and
HDFC with its self-styled Knowledge Banking model, employing
industry experts in its chosen business segments such as the food
and agri sectors as well as telecoms, media, IT, infrastructure and
logistics.
It has also blazed a trail for its outsourced
IT model and has argued a key differentiator for Yes Bank has been
its use of best-in-class technology.
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By GlobalDataAnd it is this innovative use of technology
within its growing branch network which Yes Bank believes can now
help it to punch above its weight in the crowded Indian retail
market place (see State Bank of India steams ahead).
In addition to raising branch numbers, Yes
Bank is pinning its retail hopes on a prototype ‘Bank Branch of the
Future’ launched in New Delhi in March, and which, if successful,
will form the basis for future branch openings.
The branch features a pioneering use of Radio
Frequency Identification Device (RFID) – a first in the Indian
market, says Yes Bank – offering personal customer identification
at the branch and which it hopes will enhance the customer
experience.
Driving the branch expansion is Ravi Shankar,
group executive vice-president and country head, direct banking and
cash management. Shankar says the system has been implemented by
inserting an RFID microchip into customers’ debit cards, which
transmits customer information to relationship managers whenever
the customer enters the branch.
“The new branch aims to transform retail
branches from mere transaction outlets to ‘service-oriented
advisory centres’,” Shankar said in an interview with
RBI.
“This shifts the focus from
providing vanilla transactions to high-end, value-added services
through the innovative use of technology and futuristic branch
design.”
Shankar says the new branch, spread across
10,000 square feet, showcases cutting-edge technologies the bank
hopes to roll out across its network, such as an automated teller,
touch-screen internet kiosks, speech-enabled voice recognition
phone banking, Wi-Fi connectivity and a knowledge café, while the
Yes Lounge is designed to offer privacy and comfort.
“A combination of these services brings to
life the concept of lounge banking, thereby creating a paradigm
shift in traditional desk banking,” he added.
“One of our unique strengths and
differentiating features is a service-oriented approach and this
whole shift from desk to lounge banking and personalised service
offered through RFID is in itself a key competitive advantage which
will reap dividends in future.”
But even with the expanded network, Yes is
running to stand still when compared to the country’s largest
private sector players, with both HDFC and ICICI engaged in their
own branch expansion plans taking their respective networks up
towards 2,000 outlets.
Shankar believes the RFID experience will
require six-to-12 months of customer behaviour study before the
bank can commit to a nationwide roll-out; meantime it is closely
monitoring customer feedback. To date, the response has been
positive, according to Shankar.
|
Performance |
|||
|
Yes Bank – earnings fundamentals, |
|||
|
FY09 |
FY08 |
% change |
|
|
Net-interest income (INRbn) |
20.00 |
13.05 |
34.7 |
|
Other income (INRbn) |
4.35 |
3.60 |
20.8 |
|
Total income (INRbn) |
24.38 |
16.65 |
46.4 |
|
Profit before tax (INRbn) |
4.65 |
3.06 |
51.9 |
|
Net profit (INRbn) |
3.03 |
2.00 |
51.5 |
|
Net NPA of gross |
0.68 |
0.11 |
57bps |
|
Cost-income ratio (%) |
44.2 |
49.4 |
-520 bps |
|
Source: Yes Bank |
|||
Branches just one part of the drive
Branch investment is, however, only
one part of the Yes Bank retail drive. Its ‘Next Gen Retail Banking
Services’ multi-channel strategy incorporates branch, internet,
phone, mobile and self-service channels, and Shankar said recent
retail innovations can each help Yes Bank gain a competitive
advantage:
• The first bank in India to create
a Wi-Fi banking network;
• The first bank in the country to
offer single PIN access to all delivery channels;
• The first to offer two-factor
authentication; where customers need to include a second
transaction password, this is sent as an instant SMS to their
mobile phone to complete a fund transfer;
• The first to offer an online
account aggregation service to customers, ‘Money Monitor’. Rolled
out in association with US technology partner Yodlee, customers can
access, and receive alerts of all their financial information,
including online banking, bill pay, brokerage, loans, credit cards,
insurance, fixed deposits and reward points information, from both
Yes and other financial institutions, via a single user interface;
and
• YES Touch phone banking. Launched
in 2008, the service integrates voice, email, chat and video in
partnership with tech partners Cisco, Scansoft (for
speech-recognition) and Servion Global for system integration and
implementation.
YES Touch is a source of evident pride to
Shankar and he says his is the only bank to have implemented a
speech-enabled contact centre in the Asia region.
“Our customers can access their accounts 24/7
while the system, built on the Nuance platform, allows them to have
a seamless service experience when calling from their mobile, so
they can seek their desired menu instead of navigating a menu
presented by the bank,” Shankar said.
He added: “The service has seen very high
adoption, with over 60 percent of customer contacts being handled
by our automated services within three months of launch. The
service has helped us optimise the call centre workforce while
delivering a clearly superior service experience.”
Yes Bank also offers a mobile person-to-person
payments service in partnership with another leading US technology
partner, Obopay, on a universal mobile platform compatible with
SMS, GPRS and WAP systems.
Customers are able to transfer up to INR5,000
($101) per transaction, while the recipient can then withdraw cash
received via such transfers from over 35,000 ATMs across India.
Marketing innovation
Since opening its first branch, Yes Bank has
also tried to stand out from the crowd with an imaginative
marketing strategy, which kicked off with the choice of the bank’s
name. The idea behind the brand was to develop a service culture
with the innate ability to say ‘Yes’ – and has since extended to
the bank’s choice of customer giveaways.
According to Shankar: “The brand has been
built on a truly differentiated platform and is distinct from any
other financial services brand in India.
“The aim being to establish the brand as a
‘Financial Trust-mark’ with brand values: positive, customer
oriented, unique, simple and international.”
He added that the brand had six pillars:
knowledge, trust, transparency, technology, responsible banking and
human capital.
Yes Bank has ramped up its marketing activity
with an integrated campaign incorporating print, display, online
and TV.
“We launched a major TV campaign to announce
our arrival as a significant player in retail banking, the primary
focus being the growth, progress and robustness of the Yes
franchise,” explained Shankar.
The Yes Money Plant
At the heart of the ads is the Yes
Money Plant. Since its launch, Yes Bank has eschewed traditional
bank giveaways such as pens or sweets and in their place has given
away more than 20,000 Money Plants, designed to embody growth and
prosperity.
The symbol is represented on all bank
stationery, cheque books and branch collaterals while all branches
have a symbolic Money Plant pillar at their centre.
“It is the central theme of our customer
promise and reflects a symbiotic relationship with our customers –
the bank partners in their growth, while the customer gains by
leveraging the bank’s financial expertise,” concluded Shankar.
Profits up for Yes Bank… but retail
banking loss widens
In the year to 31 March, net earnings at Yes
Bank grew by 52 percent to INR3.04 billion ($61.7 million) compared
to INR2 billion in the year ago period, boosted by an increase in
net interest income of more than 54 percent.
And in a series of results which beat analyst
expectations, the bank managed to improve its net interest margin
by 20 basis points to 2.9 percent; other highlights included a
successful reduction of its cost-income ratio by more than 500
basis points to 44.2 percent.
On the retail side, highlights were harder to
discern. Losses widened from INR544 million in fiscal 2008 to
INR709 million while the retail units’ share of bank revenue fell:
from 6.8 percent a year ago to 4.6 percent.
With a CASA (current accounts and savings
account) deposits base of only INR12 billion, 9 percent of total
deposits, Yes Bank lags behind its principal private sector
rivals.
Nevertheless it is aiming to grow its CASA
ratio to around 14 to 15 percent by the end of the year and to 25
per cent of the deposit base by 2012.
Achieving such a target, inevitably boosted by
its expanding network, is not regarded by analysts as
unrealistic.
Yes Bank can also take heart from
the relative strength of its asset quality. While its gross
non-performing assets as a proportion of gross advances soared from
0.11 percent a year ago to 0.68 percent, the latter figure was
considerably better than HDFC’s 1.91 percent and a fraction of
ICICI’s 4.3 percent.
