'Our focus is to build a platform for small ticket lending' - ICICI Bank CTDO Madhivanan Balakrishnan

Back in 2015, private-sector lender ICICI Bank was looking at innovative approaches to make banking seamless. The answer? Social networks where it launched its ‘ICICIbankpay’ that allowed users to pay their bills, and open accounts with use of hashtags on Twitter.

Today, the agenda remains the same - of ‘Reimagine Banking’ - but the approach is a little different, and ICICI Bank is increasingly cognisant of the challenges and competition which the fintech sector is bringing to traditional banking.

Its new ideology focuses on a fresh perspective and leans on building internally, which allows ICICI Bank to enable newer business models and be present in multiple ecosystems. One such initiative has been the ICICI Innovation Labs.

With a two-pronged approach of partnership as well as in-house innovation, Madhivanan Balakrishnan, Chief Technology and Digital Officer, ICICI Bank in a conversation with YourStory speaks about the new initiatives and how they have changed the rudder for innovation and growth.

YS: How is innovation and IT perceived in a large player like ICICI Bank?

Madhivanan Balakrishnan: We are looking at a dual architecture which includes under-the-bank and change-the-bank models. In the latter, we are focussed on building on our existing capabilities and dramatically enhancing our efficiencies.

With newer players entering the banking space, there was a strong need to create a change model. We came up with a new perspective which is a departure from the way we operate but it will co-exist with out original model. The original model runs on a buy or procure model. For the first time, we have initiated the process by saying ‘How can we build things ourselves’?

And for that, instead of reorienting our existing IT teams, we created a new business unit called the ‘ICICI Innovation Lab’ around four months ago. It is a 25-member team led by four technology experts whom we call ‘mini-CTOs’. This team will build internal platforms with a scalable modular framework, facilitating lending, liability sourcing and all components.

YS: What is the kind of talent you are seeking for this? Any particular areas of expertise?

MB: We seek people with a strong development mindset that have a great understanding of design principle and know agile ways of building. As we are running a lot of prototypes and minimum viable products (MVP) are coming into place, the strategy is yielding returns.

YS: What are the used cases you are looking to build for through the lab? 

MB: The first challenge we are solving is a modular platform for small ticket consumer lending. My existing systems today are very conducive from a sustainability perspective to give a loan size of let’s say more than one lakh rupees. That is where the economics works out.

Let’s say tomorrow I want to tie up with an ecommerce player - this platform should respond really fast and customers should be able to purchase products seamlessly. This involves a loan origination system, loan management system, first level Artificial Intelligence etc, which the Innovation Center teams will build on the Cloud, interacting with the Bank APIs.

Further, this platform will be product agnostic. Tomorrow, if we want to do SME lending or supply chain financing, it will be able to perform those functions too.

However, we are also open to building this capability through even partnerships and procurement.

On the corporate side, we believe there is a gap for marketplaces such as debt indication or commercial paper origination. So, how do we create an open marketplace where ICICI Bank may not necessarily be a lender but could be an aggregator and bring transparency in pricing.

One more area which is pure tech is a UPI switch. Today, we are dependent on existing switches, which have their own pluses and minuses. Now, how do I create a switch that will give me the flexibility and take advantage of UPI 1.0 or 2.0 and give me the ability to seamlessly integrate with these wallet players without exposing all my APIs outright.

All this will start as tech initiatives with business models weaved around them.

YS: What will be some of the key responsibilities for the team at the Innovation Lab?

MB: The Innovation Labs will build newer things from a technology perspective, and also have a strong business model approach in terms of how you bring lending cost down, innovate on the existing Aadhaar infrastructure, or explore newer data sets. The team’s KRA is to build new business models for the bank and have the ability to intervene in the ecosystem in the fastest possible way.

The team also looks to dramatically enhance the experience of our customers, not necessarily from an improvement of existing processes, but taking a completely new approach to solving a query or taking the payment experience to a different level.

YS: What do you look for in startups while partnering with them?

MB: Our approach has been to work with the fintechs that have already established concepts and if we find them relevant, either partner or invest in them. We have a Rs 100 crore fund for that.

On the partnership side, we see only two things – working proof of concept and how unique they are. We have demo days that we run once a quarter, which are theme based and range from KYC to digital lending. When we do these, the assumption is that not all of this innovation will happen within a bank. But there are few bright people who have built a product but can’t take forward after a certain level.

Depending on the need, we either partner with them and use them as a procure model, or we invest in them.

For me the partnership model is a discovery model of things which a banker might not originate and somebody has taken that idea to a certain level.

If someone wants to build a unique model and they are not able to scale it up and if I can take it to my 25 million unique customers, I’ve to protect myself so I take equity. I become dependent on that solution.

We have invested in companies like Fingpay which lets merchants accept payments through biometric payments, and also invested in Bengaluru-based Arteria Technologies, which offers supply chain solution on cloud and payments.

So, these are the way we pick up opportunities, which the bank might not do itself but gives us a good position to be a part of an existing ecosystem and thereby give us adjacent markets in our products.

We have invested in close to six startups and partnered with 14-16 others. We also have an incubation-based model of demo day where startups work for six months with us and understand our processes.

YS: Could you elaborate on the Rs 100 crore fund for startups?

MB: We have a Rs 100 crore fund and started this six to seven months back and have started seeing traction. We have already deployed close to Rs 40 crore and have a reasonably good pipeline across lending, digital KYC, Artificial Intelligence. The way things are looking, we should be able to exhaust this fund by December-end.

YS: What are the other technology opportunities which ICICI Bank is looking at? 

MB: Artificial Intelligence is an interesting area we are actively looking at, as we look to move from chatbots to voice assistants. But AI on the robotic process automation front and chatbot side is becoming a little mundane.

Moving AI from text to voice is one keen challenge. India is reasonably comfortable with texting and opening it to speech will take it to a completely different level. The second sphere is taking AI in Robotic Process Automation (RPA) to even more complex decision making, where both data quality and rules and process are equally ambiguous.

YS: What is ICICI looking at in terms of technology for financial inclusion and building for the next billon? 

MB: On the inclusion side, there is still work to be done. We have an application called ‘Mera iMobile’ where language has been the story. Voice being a big thing applies for this application. And if that happens the scale of transactions definitely go up. Rural areas are still driven through feature phones and we have used Unstructured Supplementary Service Data (USSD) as a template through some telecom players.

However, these are not technologies which will hit the grassroot directly. That we will continue to do with our 500-600 villages, while combining innovation from the labs.