Largest Indian Bank Deftly Scales Its Embedded Platform

Until the end of this decade, Asia is expected to account for half of global consumption growth, presenting a $10 trillion opportunity. Half of upper-middle income households are expected in Asia, with one in every two consumer transactions likely to be generated from the region. The consumer markets are changing with new growth avenues for financial services players. While in Y2K, 15% of Asia’s population constituted the consuming class, by 2030, 70% of Asia’s total population may be part of the consuming class. Digital ecosystems are mushrooming across Asia with highly integrated super apps that offer a one-stop-shop for a range of services. Although super apps emerged in China, Asian economies including India, Indonesia, Japan, South Korea, and Vietnam now have leading super app players.

While super apps are forging relationships with an increasing sweep of customers, financial services players are forming partnerships with ecosystem orchestrators. Embedded finance is enabling them to join new digital ecosystems, reigniting business in products ranging from payments to insurance and lending.

Banks are leveraging such platforms to become more active in ecosystems. An example is India’s leading private sector bank, ICICI Bank, which introduced embedded basic banking services on WhatsApp and scaled up to a million users in a mere three months from launch. Banks and insurance companies with sufficient appetite are creating and orchestrating their own ecosystems, too. India’s largest state owned bank, State Bank of India (SBI) built YONO (acronym for “You Only Need One”), an app with more than 100 partner-provided and its own products, dramatically amplifying customer engagement.

Few expected the banking behemoth to take a lead in rolling out a super app. However, in a mere three years, YONO notched up impressive numbers – 37 million registrations, $3 billion in loans, 80000 daily card-less transactions and leads for its $1.5 billion home and car loans. Its valuation is purportedly more than the parent’s current market cap. Though there has been no formal valuation, the number has been derived on the basis of lending book, banking transactions, profitability and potential. Many fintechs are being valued at much higher valuations despite much smaller loan books and far fewer payment transactions.

One of the key elements of YONO’s valuation is a pre-approved personal loan segment that is attracting thousands of leads and applications on a daily basis. Its unique selling proposition is the bank’s huge customer base with historical data of savings and spends based on which it offers pre-approved loans.

In terms of volume, agricultural loans to farming community constitute 50% of total loans of large banks like SBI. It is operationally daunting to cater manually to this segment owing to last-mile hurdles, making digitizing the loan journey an imperative. Yono Krishi section of its app targets farmers, enabling them to open savings accounts, access farm loans, check commodity prices in real time and perform online transactions for buying inputs like seeds and pesticides. On average, about 22,000 farm loans are reportedly disbursed daily, pan-India, by SBI digitally. Apart from credit products, farmers have ready access to an online marketplace to buy and rent agricultural inputs and equipment with doorstep delivery services, customized farming advisory, investment, life and crop insurance products, upgrade to scientific farming practices, and much more.

Many experts opine that YONO cannot be compared with new-age players. The argument goes that fintechs are targeting under-served customers and creating unique value propositions. Fintech customers are ‘new to credit or insurance’ micro-entrepreneurs such as tea stall owners or cobblers. The loans are approved based on cash flows with much smaller ticket sizes. The thinking also is that fintechs are run by entrepreneurs who are constantly thinking about innovations and making transactions seamless. The YONO story thus far is turning around such conventional wisdom.

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