HDFC Bank begins voyage to discover startup talent

Late October last year, when Sashidhar Jagdishan took over as CEO and Managing Director of HDFC Bank from Aditya Puri, stabilising its digital ship was the foremost task at hand.

With a market capitalisation of Rs 8.28 lakh-crore, HDFC Bank is far ahead of its private and public sector peers like ICICI Bank and State Bank of India that are valued at Rs 4.38 lakh-crore and Rs 3.75 lakh-crore respectively.

However, HDFC Bank’s digital voyage has been rough, marked by frequent outages and flak from regulator Reserve Bank of India (RBI). India's central bank recently issued an embargo on new digital product launches from HDFC Bank, and put a pause on onboarding new credit-card customers until the lender's IT issues are resolved.

Jagdishan is a veteran at HDFC Bank. He joined the bank in 1996, and witnessed its fascinating growth to become the country’s most valued bank. As CEO, he unveiled organisational changes by launching ‘Project Future-Ready’ to power the bank’s next wave of growth.

Recasting technology in the bank

Under the programme, HDFC Bank has reorganised itself for technology and digital functions to be the backbone for its business verticals and delivery channels. "We are creating engines of growth with top-tier talent backed by technology and digital transformation to capitalise on opportunities that will accrue in time,” Jagdishan said in late April.

Among the major changes in portfolios of senior executives, Parag Rao, Group Head of Payments Business, got the additional responsibility to drive the technology transformation and digital agenda.

On June 22, HDFC Bank went a step ahead in its digital transformation journey by announcing the setting up of a 'digital factory' and an 'enterprise factory' to roll-out new digital products and services, and augment the bank’s information technology infrastructure.

The digital and enterprise factories will focus on innovations based on APIs (application programming interface), data and cloud. HDFC Bank aims to hire up to 500 recruits in the next two years to boost its capability in data analytics, artificial intelligence, machine learning, design thinking, cloud, and DevOps.

Since the rejig at the end of April, Rao's new role sees him as HDFC Bank’s Group Head for payments, consumer finance, digital banking and IT. He wants the digital and enterprise factories at HDFC Bank to ‘run’ the bank, while ‘building’ it for the future. “We are poised to capitalise on opportunities that higher digital adoption will bring in across India,” Rao said in a statement on June 22.

Embracing the startup community

In the bank’s annual report for FY2021, Jagdishan has emphasised that HDFC Bank’s growth engines will be fully supported by the renewed focus and vigour on technology and digital investments. “While we strengthen our enterprise technology factory to keep our systems always ‘ON’, available and secure, we are creating a new digital factory,” Jagdishan noted.

The mandate of the new digital factory is to foster innovations in the product and consumer experience domain by building on its own, or collaborating with new age fin-tech and big-tech companies, Jagdishan added.

HDFC Bank has taken a major step by going the organic way to shelter versatile digital and technology talent in-house, rather than depending on external solution providers and troubleshooters it used to scout for at periodic hackathons since 2018.

“They are opening up to newer innovations in a large way and working on a whole lot of new-age tech innovations from security as well as banking standpoints,” says a fintech startup-founder who has been working with HDFC Bank for over four years.

In separate stock exchange filings on April 19 and June 22, HDFC Bank disclosed that, together with its stock broking subsidiary HDFC Securities, it is picking sub-8 percent stake each in Pune-based Virtuoso Infotech and Bengaluru-based Borderless Softtech.

Virtuoso Infotech is an IT company, which has end-to-end developed the Bank’s myAPPS solution. "This acquisition will strengthen Virtuoso's vision to become a more reliable technology partner for Indian enterprises, and the bank's objective to digitise under-served and under-penetrated segments," HDFC Bank told stock exchanges in April.

HDFC Bank announced that its Borderless Softtech stake-purchase will most likely conclude at the end of July 2021. Incorporated in October last year, Borderless Softtech is the fully-owned subsidiary of Borderless Investing Inc, which manages the backend tech infrastructure platform that facilitates global fractional investing in US listed stocks, funds and exchange traded funds (ETFs).

HDFC Bank is focusing less on vendor-based relationships, where extracting the vested interest was always a difficult proposition. As the vendor was in charge of delivering something, it delivered on that, and walked out of the picture.

“But, in today’s day and age, for a product to be successful, there needs to be a two-way interest from both the parties,” says the fintech startup-founder. “It is a transformational change, and at the end of the day, you have to be a fintech player in the equation, rather than the traditional financial services player.”

HDFC Bank is moving away from the classic vendor-model, and creating an in-house captive unit. If Jagdishan's move pays off, HDFC Bank will be nimbler to embrace innovations and deploy it at scale.