Parveen Bansal and Stephen Timewell spoke with K V Kamath, ICICI Bank’s managing director and CEO, to gain insight into the bank’s burgeoning customer numbers and pioneering projects.From only 100,000 customers three years ago to more than 5.5 million customers today, ICICI Bank has grown to become the second largest bank in India by Tier One capital and total assets. So what is the secret of the success of this bank and its phenomenal growth in customer numbers?

While the acquisition of the Bank of Madura in 2001 and the merger of parent company ICICI with ICICI Bank has helped, the strong leadership of the bank has clearly been the underlying reason for its prosperity

Headed by K V Kamath, managing director and CEO of ICICI Bank, ICICI Group has undergone various strategic initiatives and structural changes that were instrumental to expanding services to retail customers, and creating the first universal bank in India.

ICICI Bank promptly changed its strategy and product offering, recognising the changing demands of the growing middle class segment in India. Mr Kamath says: “With a per capita income averaging around $500, the market for retail banking products continues to grow steadily in India. Historically, this value has proven to be an inflexion point at which the retail aspirations of the population begin to grow and become more sustainable.”

Pulling power

Without a big enough customer base to which it could cross-sell profitably, customer acquisition was the first challenge for the bank. Three years ago, the retail financing space was dominated by the foreign banks – namely Citibank, GE Capital and a few others. “As there were already other banks offering these services our main aim was to enter the market and do things differently,” says Mr Kamath.

Since it only had around 50 branches to start with, ICICI Bank decided it could not rely on the branch as its only distribution network. The branch was to become a secondary channel for most customers. To compete and grow presence, the bank decided to build an extensive ATM network, installing them at branches, on the street and at the offices of large corporates for which it provided payroll services. Today, it has the largest ATM network in India with 1700 installed across the country.

Leading the way

“We had to consider alternative distribution strategies. Also, four years ago, around the days of the dotcom boom, we noticed a change in expectations of customer interaction,” says Mr Kamath. In 1997, the bank became the first to introduce online banking in India, as part of a multi-channel delivery strategy. Starting with just 5000 online customers, it now serves about 2.5 million people online.

The bank boasts one of the largest call centres in India with around 1800 seats. Meanwhile, through the acquisition of Bank of Madura, ICICI Bank has grown their branch network to around 540 branches.

Direct approach

Recognising the inconvenience of visiting a branch in the highly populated and traffic congested cities like Mumbai and Delhi, ICICI Bank decided to use direct agents to sell its mortgages. Supported by the call centre, which would identify prospects and initiate dialogue, the direct sales agent could arrange a convenient time to visit and discuss the product with the prospective client.

Mr Kamath says: “This allowed for personal preferences to be catered for. For example, couples could invite the agent to meet them at home after dinner when both husband and wife are present.” A similar sales model was used to sell other products, such as credit cards and personal loans.

To sell its automobile and two-wheeler loans, ICICI Bank teamed up with the manufacturers and dealers – so that it became the preferred financier at each level – from the customer to the dealer to the manufacturer. During the fiscal year 2002, it increased its lead in the automobile loans market, expanding its distribution network to 145 cities and towns across India.

Mr Kamath explains: “The key drivers for growth were the strength of our corporate relationships with leading automobile manufacturers, strong distribution capability and customer service focus.”

By installing self-service machines and maybe a one-man enquiry point at the large corporates, the bank has provided a convenient service for the employees. “These clients make good cross-selling prospects as they are a relatively risk-averse segment,” says Mr Kamath Keeping in line with the idea of offering convenient, anytime, anywhere banking, ICICI Bank has pioneered the idea of unstaffed branches in India. Its e-lobbies are its answer to expanding its branch network while still controlling costs. Using leading edge technology, the self-service banking centres allow customers to pay bills, withdraw money, video-conference with a customer service executive, carry out online broking and make other such transactions, without needing a cashier. The e-lobbies also offers Braille and voice-enabled ATMs for visually impaired customers. At some locations, the e-lobbies also display artwork by upcoming artists, acting as an art gallery.

Transaction transfer

Four years ago, most transactions would have gone through the bank branch. Today bank branch transactions account for less than 30% of all transactions; 52% are completed using the self-service machines; 12% go via call centres; and the rest are completed through the internet. As at other banks, the cost of the branch transaction is highest at 50 rupees ($1.09), at the ATM it costs 12 rupees and through the internet just 2 rupees.

Mr Kamath says: “Of the 5.5 million customer base today, around 50% have registered for internet access. While not all are currently actively using the channel, this is a clear indication of their intention to do so.”

By eliminating the need for customers to call at branches, the bank was able to establish a centralised back office processing function. “This relieves the branches and call centre agents of processing work and gives them more time for sales and customer service,” says Mr Kamath. The performance of the centralised processing unit, as well as the greater organisation, is tightly controlled using various quality control methods, such as six-sigma.

“By centralising, we have achieved significant economies and also are able to get a single view of the customer. Our biggest challenge is to support fast growth in business without compromising in quality and cost efficiency,” says Mr Kamath.

While the number of transactions at ICICI Bank grew by 400% last year, there was only a marginal increase in the number of staff. Indeed, few banks could claim such efficiency and quality control for their processing operations.

IT strategy

“Technology has been the key behind the success of our bank,” says Mr Kamath. The bank’s IT infrastructure is based on open-platforms. “We want to keep the bank away from legacy systems,” he says.

“CEOs often find themselves held hostage by the tyranny of legacy systems and the silo architecture. With vendors not willing to take responsibility for systems failure, many CEOs often find themselves between a rock and a hard place. Therefore, the strategy has been to use open systems and technology.”

Using current technology as an enabler, ICICI Bank has experienced a growth rate of more than 180%. The IT operations of the bank are supported by a separate, majority-owned company called ICICI-Infotech. According to Mr Kamath, internal IT departments are a sub-optimal solution. Operating as a separate company, ICICI-Infotech is able to deliver objective service and solutions for ICICI Bank to develop an efficient and effective IT infrastructure.

“Without the right technology infrastructure to support us, there is no way we would have grown,” he says. The bank is in the process of integrating the branches and ATMs acquired with Bank of Madura.

Having acquired a reasonable customer base, the opportunity to cross-sell is much bigger now: 60% of credit cards issued will be the result of cross-selling, and 65% of the business will have resulted from cross-selling. With the retail market growing at 35%-40% and the economy growing at more than 6%, the demand for retail banking is significant.

Today, ICICI Bank commands 40% of the market share of the retail assets market in India.

Local and global

Using technology as the enabler, the bank is pursuing the micro-banking market in rural India, mostly utilising partnerships with multi-national and local agricultural companies. It has also taken the first steps towards creating a global presence by opening representative offices in the UK, US, Canada and China, a joint marketing deal with a bank in Dubai and an off-shore branch in Singapore. It proposes to establish the first overseas subsidiary in the UK.

The foreign offices mainly facilitate remittance services to a large population of non-resident Indians. “The opportunity is large, remittances into India total up to about $20bn annually,” says Mr Kamath. “We are offering a fully audited remittance trail, a highly attractive offering, as many payments are to relatives in villages and snail-mail is not as reliable.”

ICICI Bank’s chief is clearly focused on the technical ability of the bank and understands how best to leverage the infrastructure to offer new products and services – meeting the changing demands of the customer.


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