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Invisible banking? No way, says SBI

State Bank of India built its own “superapp”, which it says has grown total revenues by 40% in two years.



Sonny George, SBI Yono

For many consumer banks going through digital transformation, the future is one of “invisibility” or, worse, becoming “dumb pipes”, serving transactions and products behind some big tech or consumer group’s digital front door.

State Bank of India, not ready to go gently into that good night, went the other way, and now says it has created its own “superapp” that is rapidly becoming the leading source of the bank’s profitability.

A superapp is a mobile app that becomes a user’s go-to place, just as social messaging and gaming app WeChat has become ubiquitous in the lives of most Chinese people.

The conventional wisdom in financial services, from DBS to Citibank, is that banks, insurers or asset managers can’t match the consumer-focused tech, iteration and service focus of well-funded internet companies. They have turned to open banking models to join ecosystems that bring customers – at the risk of losing the power of their brand, and of surrendering customer data to their partners.

Sonny George, Mumbai-based chief general manager for digital transformation at SBI, says the bank turned the tables: “We are the superapp in India,” George told DigFinat a digital-banking conference in Shenzhen organized by SZ&W Group.

You only need one

As banks go, SBI is about as conventional as they come: government owned, over 200 years of history, and a vast network of 22,500 branches (second most in the world after Agricultural Bank of China). But George disputes the idea that SBI is hopelessly crusty: the only way an institution can survive so long is through constant renewal, he says.

A brainstorming session a few years ago led to the idea of what became its Yono app. Yono stands for “you only need one”, which encapsulate the ambition behind the app. Built by IBM, it launched in 2018 and after two years has broken even; since its debut SBI has seen its total revenues increase by 40%, George says.

We are the superapp

Sonny George, SBI Yono

SBI Yono has been able to keep its brand front and center but works with over a hundred partners, from e-commerce companies like Amazon to automakers like Ford or food, clothing, and travel partners. 

“It’s a banking app but there’s not much banking on it,” George said. Users can do the normal bank stuff with Yono – transfers, deposits, payments; plus purchase advanced products like funds, brokerage, insurance, and credit cards. But most people’s activity is focused on its retail shopping store. “You don’t have to go anywhere else,” George said. “It’s one app to take care of everything in life.”

Made in India

Some things have made this story difficult to replicate in other markets. In particular, Yono has leveraged the “India stack”, the government’s digital infrastructure that includes identity database Aadhaar and a unified payments rail.

It also launched in an environment where there is not a dominant superapp (like AliPay and WeChat Pay in China, or Grab in Singapore, or Go-Jek in Indonesia). And India’s vast population provides ample data to feed SBI Yono’s algorithms.

But George says the bank could have relied on other sources of information to support Yono if Aadhaar didn’t’ exist, such as government passport or driver-license authorities. Also, despite the India stack, the Reserve Bank of India still requires an in-branch wet signature to open a new bank account. Indeed, the bank branch network played as big a role in marketing Yono, by feeding existing customers to use it.

Digital = lucrative

This is another important point. SBI Yono’s customer base is smaller than the bank’s total user base. George says the bank expects to reach 150 million users of Yono by September 2020, out of SBI’s total customer base of about 450 million.

But the Yono group is far more lucrative. George didn’t provide precise figures but suggested that Yono is on track to eclipse SBI’s traditional business in terms of profitability.

Why? Because mobile-savvy customers are already more likely to be wealthier than the average SBI customer (as a state bank with many branches, SBI must cater to all segments of Indian society). Although Yono generates new customers, many of its users are fed into it via branch salespeople. In other words, these customers are known to SBI.

Yono gets a better set of customers

Sonny George, SBI Yono

By applying artificial intelligence and big data analytics – based on user behavior on the app – Yono pre-selects those for a given financial offer.

SBI Yono already knows its customers; it uses behavioral data to get to know them even better; and its risk management is superior to a branch manager’s paper- and hunch-based process.

Moreover it offers more than just simple lending products: users can use the app for mortgages, investment products and other sophisticated offers.

Cream of the crop

The net interest margin (NIM) on Yono users is high, from 3% to 5%. The non-performing loan rate is low, around 0.5% for unsecured consumer loans, versus NPLs of 3% or more in branch banking (and higher for SME loans).

These favorable statistics get compounded because, by targeting mobile natives, SBI Yono ends up with these desirable customers using it more than a traditional brick-and-mortar account.

George says Yono’s balances are on average four times higher than what these customers put on deposit with SBI’s traditional bank. “Yono gets a better set of customers,” he said.

This again goes against a lot of thinking today among banks who view digital or virtual banks as repositories for the underbanked, or for small clients that traditional banks regard as too marginally expensive to bother with.

“It’s about capturing the customer lifecycle value,” George said. “Every bank needs to do this to remain relevant.”

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