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InterviewsJanuary 31 2011

CIO of India's HDFC Bank on the benefits of its new ATM network

India's HDFC Bank recently upgraded its ATM network. The bank's chief information officer, Anil Jaggia explains how it has increased transaction speeds, boosted sales and implemented SMS-based anti-fraud measures.
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CIO of India's HDFC Bank on the benefits of its new ATM networkAnil Jaggia, chief information officer, HDFC Bank

Keeping up with the technological demands posed by an ever-expanding customer base and rapid growth is a problem most banks would love to have. But achieving this while maintaining and improving customer standards creates substantial challenges, especially in a banking sector enjoying double-digit growth.

India continues to be blessed with a steadily increasing gross domestic product (GDP) – International Monetary Fund (IMF) estimates suggest it will stand at 8.75% for the 2010-11 financial year. As a result, the banking system is growing at a rate in excess of 20%, with some institutions expanding even faster. Mumbai-based HDFC Bank, for example, has grown about 30% a year for some time. But this enviable progression has placed considerable strain on its ATM and payments network, says its CIO, Anil Jaggia.

Alternative channels

Like many other emerging markets, the Indian banking sector is evolving rapidly, in many cases leapfrogging established markets. In India, the number of customers taking advantage of traditional banking practices is certainly declining, says Mr Jaggia. For example, the use of cheques as a payment medium is falling steadily in both value and volume terms. Similarly, only about 25% of HDFC's customer transactions now occur through traditional branch-based interactions.

As a consequence, the adoption of other channels – such as ATMs or internet and phone banking – has risen. HDFC's ATM network has been greatly improved in recent years to cope with increasing demand, and now processes 45% of HDFC's customer-initiated transactions, and 25% of its total transactions.

This is no small throughput; HDFC routinely averages upwards of 1 million ATM transactions a day, and, on peak dates, this figure can reach as high as 3 million.

With each ATM averaging at least 300 transactions a day, demand was beginning to outstrip supply, says Mr Jaggia. However, instead of simply deploying more ATMs, HDFC decided to streamline the process involved in withdrawing cash using technology provided by payments software provider ACI. The initiative, known as 'customer power', enables customers to set language preferences, receipt options and common transactions sizes and types. As a result, they can complete a transaction in four steps instead of the usual seven, saving as much as 40% of the time taken for each transaction.

"There was significant queuing at our 24-hour ATMs. Thinking about how to tackle it, we realised that most customers are creatures of habit and they typically do similar kinds of transactions – for example, withdrawing Rs5000 from the same account and taking a receipt," says Mr Jaggia. "Having made that observation, we thought about how we could make the transaction time faster." He adds that while a 40% saving in time may only amount to a few seconds per customer, it has a huge impact when taking into consideration the millions of ATM transactions that HDFC handles during peak periods.

HDFC also took advantage of ACI technology to create a comprehensive, targeted sales campaign across its direct banking channels (which include ATM, phone and internet banking). This has proven to be successful so far, and has generated upwards of Rs56.9m ($1.25m) for the bank. "We're looking for convergence across channels," says Mr Jaggia. "So a customer can approach us through the internet, ATM or phone and will always get the same sales campaign. If they respond, it will be updated across all channels too."

Mobile alerts

This convergence is also displayed in a comprehensive, SMS-based anti-fraud system deployed by the bank. HDFC now offers mobile SMS alerts; every time a customer draws cash from their account, they'll receive an SMS message confirming it almost immediately, allowing them to alert the bank if they are not responsible for the transaction.

This service also applies to fund transfers through internet banking, or credit and debit card transactions at the point of sale. It is not a unique concept in the Indian market, however, and Mr Jaggia credits it for broader reductions in fraud.

"There is tremendous and widespread use of alerts, and not just by HDFC Bank," he says. "It's key in reducing fraud – the fraud rates in India are relatively less than in other markets because of this. A customer will know straight away if a transaction takes place that isn't initiated by them, and can then react very quickly."

Career history

Anil Jaggia

2008 - appointed CIO at HDFC

2004 - appointed COO at Centurion Bank

1997 - joined Citibank in the US

1986 - joined Citibank in India

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