Why Kotak 811 could be a major game-changer in retail banking…

When the Kotak group announced a press conference on March 29th the street was rife with expectations that the bank may make a big-bang merger / acquisition announcement. There were already names being thrown around like Axis Bank, M&M Finance, Shriram Transport Finance and Bharat Financial Inclusion as likely candidates where Kotak may be interested. However, the actual press conference announced something much more benign. Kotak 811, which is the new digital banking platform of Kotak Bank, was launched with much fanfare with the intent of doubling the client base of Kotak Bank within 18 months. So what exactly is so unique about a digital banking platform? It may be less about the product and more about the timing and positioning of the product. Here are reasons why Kotak 811 could be a game changer for Kotak Bank…

10 key reasons why Kotak 811 could be a game-changer in retail banking…

  1. The Kotak 811 is intended as a zero-balance and a zero-charges account. One of the major objections that customers have had with banking in the past few years has been the cost of maintaining and running a bank account. Kotak 811 makes the account entirely charge free as long as operating the accounting is restricted to the digital platform only. This almost removes any mental resistance or entry barrier to individuals planning to open a bank account.
  1. The Kotak 811 actually brings down the cost of client acquisition for Kotak Bank. The key to retail banking lies in expanding the footprint rapidly with minimal cost. The digital platform is the best bet today to acquire clients rapidly with minimal cost. It is also in sync with the bank’s ambitious targets to double its customer base in a span of 18 months. Remember, the bank had already doubled its customer base when it had acquired ING Vysya Bank in 2015.
  1. If there were any doubts over the retail appetite for plain vanilla banking, then one only has to look at the response to the government’s Jan Dhan campaign. The indication was that there is a huge pent-up appetite for basic banking services at a very low cost. Already SBI and other PSU banks have complained about the huge cost that they have had to incur for opening and operating Jan Dhan accounts, running to hundreds of crores. Kotak 811 offers an alternative.
  1. India may be standing on the threshold of a major explosion in usage of data. Thanks largely to the disruption caused by Reliance Jio, data usage has not only expanded but has also become substantially more affordable. This disruption has forced other telecom players to either consolidate or even offer data at low rates. Kotak 811 could benefit substantially from cheap data which could really make data accessible in metros and non-metros.
  1. The other trend that Kotak 811 plans to capitalize on is the shift to mobile, both as a means of access to data, a means of communication and as a platform for transaction. With mobile hardware prices falling sharply in the last few years and the support of data at low prices, mobile transactions will only expand rapidly in the coming days. This puts the Kotak 811 product in the perfect position to benefit from this growing dependence on mobile apps, since Kotak 811 itself is entirely app-based.
  1. One of the big challenges to seamless banking was always the authentication part. Today it is possible to fully authenticate your identity with the help of your PAN card and your Aadhar Card. In fact, the Aadhar with an all-India base of nearly 110 crore Indian citizens, has emerged as the fulcrum of Aadhar-based authentication. This enables genuine online authentication even in cases where detailed background verification is required.
  1. Banking is shifting from being a pure push-business to a pull-cum-push business. The days when your sales people were required to go knocking to customers are gone. In fact, for a rapid expansion of your customer base, that is not even feasible. The answer lies in solutions like this app-based Kotak 811 which entirely translates the banking experience into an end-to-end online experience.
  1. At the end of the day, what will actually attract customers in the banking sector is the low cost and ease of operating. That is largely addressed by 811. The zero charges and the zero balance requirements will be a great attraction for the market that Kotak Bank is trying to address. This is a highly price-sensitive market and expects the best possible service at the lowest possible price. This product may be an answer to that need.
  1. More importantly, 811 may give Kotak to bide its time, get its act together in integrating ING Vysya fully into Kotak including the cultural and HR issues. The 811 account offers a simple way of expanding its client base; and of course the actual potential of this method could be huge. With a strong retail base to complement its corporate franchise, Kotak will be in a position to further add to its market value giving it greater leverage in its acquisition plans.
  1. On a lighter note, the significance of the name 811 cannot be lost. It represents the date on which Mr. Modi announced the demonetization. The launch has also timed just after the resounding BJP victory in the UP elections. The outcome of the UP elections was testimony that the public at large were in favour of demonetization. Kotak 811 has positioned itself in the right place and the right time to ride that trend.

So, for those analysts and media persons who were disappointed that there were no big bang announcements from Kotak, this may be much bigger than they imagine. If executed well, Kotak 811 has the potential to substantially redefine the future of retail banking in India.

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