Recommendation for setting up an urban branch

VADODARA, GUJARAT

Vadodara, formerly called Baroda, is a city in Gujurat, a state in western India has an
approximate population of two (2) million (as per the 2011 census) with an almost equal
male and female composition. The same is growing at a recorded rate of approximately
fourteen (14) percent annually. It is also known for an approximate eighty (80) percent
average literacy which is high as per the country standards.

The state of Gujarat has an inherent advantage for Multinational Business houses as has
been observed during the Vibrant Gujarat Summits held over time to time (Ref.:
https://vibrantgujarat.com/). The same also is seen in the fact that almost all the Public
Sector and Private Sector banks in India have a presence in the city some of them being
State Bank of India Ltd., Punjab National Bank Ltd., Bank of Baroda Ltd., ICICI Bank
Ltd, HDFC Bank Ltd., YES Bank Ltd., AXIS Bank Ltd. etc.

Conservative reports record the Gross Domestic Product of Vadodara to be around US$
eighteen (18) billion estimated to be growing at an consistent rate of approximately ten
(10) percent which makes it an attractive destination for starting up a new branch. Also to
be noted is the fact that the Gross Domestic Product of the State of Gujarat as estimated is
approximately US$ 130 Bn which in itself makes a strong case for any bank to set up its
debut branches here.

Recommendation for setting up a rural branch

ANKALESHWAR, GUJARAT

Ankleshwar is a city in Gujarat, which is located at a distance of about ten kilometres

from Bharuch. The town is known for its industrial township called GIDC (Gujarat
Industrial Development Corporation). Ankleshwar has an office of the ONGC (Oil and
Natural Gas Corporation Limited). Ankleshwar has over 1500 chemical plants, producing
products such as pesticides, pharmaceuticals, chemicals and paints. GIDC has started
organising Trade fair and Industrial expo occasionally to attract large number of
industries all over from India. It also helps to get customers on large basis.

Ankaleshwar has an approximate population of around one and a half lacs (as per the
2011 census) with an almost equal male and female composition. It is also known for an
approximate eighty (80) percent average literacy which is high as per the country
standards. The city has a presence of leading Public Sector and Private Sector banks in
India some of them being State Bank of India Ltd., Punjab National Bank Ltd., Bank of
Baroda Ltd., ICICI Bank Ltd, YES Bank Ltd., etc. It also has some Co Operative Banks
like Cosmos Co Operative Bank Ltd. and Unnati Co Operative Bank Ltd. operating in the
city.

The already existing vibrant financial sector of Gujarat along with the high literacy rate
and the appetite for digital bank usage of the inhabitants of the above two cities and the
volume of business being transacted in these two cities alone makes a good case for their
recommendation for the opening of the debut branches.

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 Recommendation on Growth Strategy

The last few years have witnessed a transition of banking from a predominantly
transactional business to a customer-centric one. Self believes that digital platforms will
impact the entire ecosystem of the banking industry by redefining the type of interactions
while necessitating new innovative internal processes and employee skills to support
these interactions. Digital platforms provide a unique opportunity to interact with
customers on a regular basis in a more personalised manner. Unlike other traditional
channels of communication and service delivery which cater to broader customer
segments, digital channels are generally consumed individually, thus increasing the scope
for tailored customer experiences. Digital is also transforming the internal operations of
banking brought on by increased data access and real-time transmission and automation
capabilities.

Growth Sub Strategy 1:

INNOVATIVE CUSTOMER ACQUISITION & ENGAGEMENT

Digital channels provide banks with a unique opportunity to deliver highly customised
propositions and services to their potential and existing customers at relatively lower
costs. While these channels provide access to larger public social platforms, the inherent
nature of the platform makes communications through these channels individual and
intimate. Users are able to experience services on their own terms, controlling the
context, mode and length of exposure to the product or service. Given the singular mode
of interaction and negligible delivery cost, banks can deliver heavily tailored solutions
rather than having to build broad customer segment based propositions. The Bank should
be able to leverage this facet along with the goldmine of data that digital provides, in
order to study and understand customers. Analytics and data-mining on these information
assets are expected to enable banks to design and provide solutions as per individual
needs. Thus, new digital platforms with underlying analytical support will be extensively
used by the bank to redefine the acquisition and engagement strategy for gaining
competitive advantage over the counterparts. The industry is expected to soon see new
methods of engagement which will get the customer hooked in a much shorter span of
time providing highly tailored experiences with appropriate information content and
hence the sub strategy.

Growth Sub Strategy 2:

DATA DRIVEN INNOVATION ACROSS ALL INDUSTRY FACETS

Digital brings with it the unique opportunity to capture enormous volumes of data in a
faster and more efficient manner. The challenge however is to be able to draw timely
insights from this data. The Bank need to ensure that their data set-up and technology
architecture are optimally designed to meet the volume, velocity and variety of data at
their disposal. The focus will be on leveraging big data technologies along with in-
memory analytics to be able to utilise data to draw insights in real time and act on these
insights speedily. The organisation should start designing its organisation structure in
order to facilitate analytics-backed decision-making so as to capture the market
intelligently and quickly.

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With the growing adoption and use of mobile banking, the financial services industry is
building new functionality and selling models that can enhance the consumer experience.
The Bank moving beyond a miniturized online banking app, should develop new ways to
leverage advanced analytics, mobility and location-aware technology that can provide
real-time solutions where and when the consumer is in most need.

Growth Sub Strategy 3:

REGULATION CONVERGENCE & EMPHASIS ON DATA MANAGEMENT

Multiple regulations, both global as well as regional, have forced banks to look at
increasing their resilience around data management. Regulators are moving from
standardised reports based supervision to seeking access to granular underlying data for
assessment of the banks risk positions. The expanding ambit of regulatory initiatives
such as anti-money laundering, automated data flow, Basel norms, Foreign Account Tax
Compliance Act, etc have a common underlying theme of providing accurate and reliable
data in a timely manner. Data governance and management will acquire the centre stage
of information strategy formulation for the facilitation of both internal as well as external
regulatory information needs with appropriate standards of data quality. Standardised
regulatory tools in the industry supported by a strong data governance structure will
become a norm in the industry.

Growth Sub Strategy 4:

SECURITY FRAMEWORKS FOR COMBATING FRAUD & CYBER SECURITY

Information, digital transactions and smart devices continue to proliferate at an

extraordinary rate. This also opens up potential loopholes that can be exploited for
various kinds of fraud. While incidents in some areas can be troubling, others can destroy
key elements of your business and in turn the brand. When looking beyond enterprise
boundaries, there is a need to protect what matters most and ensure investment is
allocated correctly. Cyber risk management in the business ecosystem is a complex issue,
requiring board and managers to engage sophisticated techniques, and for new skills and
capabilities to be embedded in the people. Businesses that seize the digital advantage
must be confident that they are able to manage cyber security risk. Those that are able to
build trust with customers and other stakeholders for their digital strategies will be
successful. That is, trust that data and transactions will be safe, that identity and privacy
issues have been dealt with and trust that systems and processes will be available when
needed.

Growth Sub Strategy 5:

SOLUTIONS IN THE PAYMENTS SPACE

With the proliferation of mobile-based services and the reducing median price of smart
phones, the payment industry is on an exponential growth trajectory, further aided by
policy, frameworks and guidelines being formalised by the regulator. Innovative and
disruptive solutions have made this volume-intensive and low-margin industry a lucrative
one.

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With the advent of regulations around payment banks, etc players such as telecom firms,
payment solution providers, retail chains and banks alike have all jumped on the payment
bandwagon. Dematerialisation and digitisation of plastic cards will force banks to re-
invent and innovate. Ease of making payment is the new customer demand which will see
a departure from traditional encrypted password-based payments to biometric security-
based payments. Wearable payment solutions will also see an upsurge which will have
minimal turnaround time for payment. The industry will see an evolution driven by the
need to adapt to advances in mobile technology and the demand for seamless payment
solutions.

Growth Sub Strategy 6:

INNOVATIONS FROM NON-CONVENTIONAL FINANCIAL PLAYERS

The financial services sector is facing the omnipresent risk of disruptive innovation. The
groundbreaking redefinition of the payments space, explosion of technology driven
wealth management or strong emergence of online peer-to-peer lending solutions are all
breaching the areas which were formerly banking strongholds. Non-bank attackers,
ranging from large telecommunications companies to small and nimble technology
players, are defining the standards for digital banking. Generally, these non-bankers have
a small role in the overall ecosystem of the banking industry and therefore have far lesser
overheads while innovating for new solutions. Therefore, they have a high pace of
innovation and pose a unique question to banks to innovate at lightning speed while
meeting regulatory norms. Non-banks focus primarily on the small value-added offering
while remaining in isolation of the rest of the ecosystem making them innovative and
agile at the same time. They are also targeting key areas such as payments and small-term
lending which account for nearly eighty (80) percent of daily customer interactions.
Therefore, the bank will have to look out for these non-banking players and quickly
define the new definition of the digital bank focussing primarily on customer-centric
alliances to build trust and hold on to the customer base.

For Example. BHIM (Bharat Interface for Money) is a Mobile App developed
by National Payments Corporation of India (NPCI), based on the Unified Payment
Interface (UPI). This UPI app supports all Indian banks which use that platform, which is
built over the Immediate Payment Service infrastructure and allows the user to instantly
transfer money between the bank accounts of any two parties. It can be used on all mobile
devices. UPI is a system that powers multiple bank accounts into a single mobile
application (of any participating bank), merging several banking features, seamless fund
routing & merchant payments into one hood. It also caters to the Peer to Peer collect
request which can be scheduled and paid as per requirement and convenience.

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 Recommendation on Expansion Strategy

Allow individuals to access a wallet at first and then open a savings deposit account
with the bank.

Whilst a justification to open two branches has been furnished above in this note as a sub
strategy of expansion it may be suggested (after appropriate pilot testing) to launch in one
go a country wide mobile-only bank which shall aim to garner customers and a deposit
base over the next few years.

As a strategy the digital banking application may allow individuals India wide to access a
wallet at first and then open a savings deposit account with the bank. The balance in the
account may earn an interest per annum. It is suggested to focus outside the banks
conventional affluent banking base and hope to be a mass consumer banker through this
product.

The India wide launch of the digital banking platform is justified in the light of the rush
for digital dominance which comes even as a dozen around payments banks are preparing
to launch their operations. These banks already have created, hired or partners for
infrastructure and technology to provide digital banking from day one which in the case
of the bank in discussion also shall be the model.

Among the most popular digital channels is the use of the smart phone for transactions
which self shall suggest in this case also owing to the massive surge in transactions on
mobile phones in India in recent months (even large value transactions being concluded
on smart phones by corporate clients besides an increase in retail transactions).

Meanwhile, the Bank may continue to expand its branch network continuing from initial
branch openings in Vadodara and Ankleshwar to service corporate clients and small and
medium enterprises. The bank shall heavily leverage its digital platform to build a retail
loan book which shall be used eventually in an appropriate fashion.

As a philosophy the new bank should largely focus on partially tapped segment such as
individuals who do not visit a branch as a target for their digital banking. It is a classic
disruptor strategy for India wide branch and digital banking expansion. The Bank will go
after segments which are un/under-served in one go India wide which is the segment that
does not visit branches and because they dont visit branches they expect a superior
experience; if this is not catered to by the bank, this is what the aggressively moving
competitors will focus on.

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