Private banks allow transactions using social media accounts
The country’s new-age private sector banks, which have seen steady growth in online transactions led by a surge in the number of Internet users, are now seeking to tap the growing reach of social media.
It followed its larger peer ICICI Bank Ltd, which in September 2013 launched a Facebook-based application that allows customers to transfer funds, among other things, using the social networking site.
The reach of social networking is widening as Internet usage spreads. As of 31 December, Facebook had 93 million users in India who accessed the world’s largest social networking site at least once a month, and 31 million mobile users who visited the site daily, Facebook Inc. said in December.
Twitter had 33 million users in India as of March 2013, according to the Internet and Mobile Association of India (IAMAI).
According to a 7 November report by IAMAI and IMRB International, a research and consulting firm, as of June 2013, India had 190 million Internet users, of which 130 million are from urban India and a majority of whom have a presence on Facebook and Twitter.
Kotak Mahindra’s new product is targeted at young Internet users who frequent social networking sites, said K.V.S Manian, president of consumer banking at the bank. Kotak Mahindra estimates that it will open 30% to 40% of new current and savings accounts through social media “in the next three to five years”, Manian said.
Currently the bank opens 7% of its new accounts through the traditional online channel, which it expects to double to 15% in the next one year, Manian added.
To be sure, online banking transactions, even outside of social media, have posted steady growth.
According to the Reserve Bank of India, 955,000 transactions online were reported as of November 2013, a rise of 24% since November 2012.
Of these, 728,000 transactions were with private sector banks, a 13% increase from a year earlier.
In its presentation to investors after the quarter ended December 2013, HDFC Bank said transactions using the Internet now constitute 44% of the bank’s total transactions, up from just 3% in 2001.
Nitin Chugh, head of digital banking at HDFC Bank, said customers are increasingly seeking personal loans and buying life and general insurance products online.
“There are some products that have a huge demand on the Internet. For example, 15% of our personal loans are given online, though only 5% of all loan products are done through the Internet. People are moving from just checking deals online to actually buying them. We expect to sell 20 to 25% of our retail loans and insurance online in the next one to one-and-a-half years,” Chugh said.
ICICI Bank refused to give the percentage of its customers using digital channels. In an email reply to queries from Mint, Abonty Banerjee, general manager and head of digital channels at ICICI Bank, said channels including the Internet, mobile phones and Facebook “have been adopted by a significant portion of our customers”.
“These channels put together have the highest share of interaction across our banking channels,” Banerjee said.
In October 2013, Axis Bank launched a mobile phone application and has seen 10% of its customers using it in the last six months, a spokesman said in an email response.
“Overall 35% of the bank’s customers are using digital channels for their banking needs and financial transactions. We expect increasing adoption of digital channels by customers and around 10% of the accounts opened at the bank will be through digital channels,” the spokesman said.
Bankers say transactions on the Internet, including those done via social networking sites, are secure, but not everyone is convinced.
Vijay Mukhi, an independent Internet security expert, says nothing on the Internet is “foolproof”, and more so when people use their mobile phones for banking services.
“We know much more about computer security than mobile security right now. Mobile phones can easily get lost and people who use mobile phones are a much different lot and are more aware of security than those who use computers,” Mukhi said.
He says banks’ interest in launching applications using social networking sites is a “bubble”.
“I am personally not comfortable using Facebook to transact my banking accounts. I would rather go on the website. Banks are just following the herd and want to be on Facebook because everyone else is on it,” Mukhi said.
Not all banks are convinced about the security of transactions using social networking sites. HDFC Bank, for example, does not allow its customers to manage their accounts on such sites.
“We are not yet absolutely confident that it is secure for customers to share their financial information on these media. The recent instances of security breaches have happened because customers are gullible online. These channels are currently only used for updates, offers, quizzes or games. However, we are constantly evaluating our options,” Chugh of HDFC Bank said.
But one reason banks are pushing customers to transact online is because it helps them cut costs. “Transaction cost on digital channels are one-tenth of branches,” said ICICI Bank’s Banerjee.
Chugh said the costs are 25% to 30% lower. “We are just following people online but it does have advantages like cost saving for banks because there is no paperwork and overhead costs like sending a courier or using man hours also can be avoided,” Chugh said.