A veteran banker, with a successful career spanning over 30 years at State Bank of India. Amara earlier served as the Chief General Manager, SBI Bhopal Circle, as the manager of two important states, Madhya Pradesh and Chhattisgarh. Ruchin heads the Boston Consulting Group (BCG)’s Financial Institutions, Insurance, People & Organization, and Operations Practices. As Amara rationalizes, it’s a dynamic environment, with the threat of substitutes, threat of new players and expectant new regulations, he speaks to Ruchin on the spending habits of Gen Z, SBI’s plans to capture Tier 2, Tier 3 and Tier 4 customer base, as they extrapolate the future of the industry.
Ruchin: Given that the pandemic has disrupted several industries, what are the changes noticed in the credit card industry?
Rama Mohan: There is no doubt that the pandemic has impacted consumer behaviour to quite a degree with the rise in digital payments, and it is visible with the rise in the online spends to 53.8% as of December 2021, a rise by two percentage points compared to the year before. This trend will follow through post the pandemic, as people prefer seamless and convenient experience of online spending. Another contributing factor to this trend during the pandemic has been the convenience offered by ecommerce firms, as a rise in online spending came from Tier 2 cities as well.
“This is a truly relevant question that has emerged from different stakeholders. We are often asked about the coexistence of emerging fintech with the traditional financial players”
Ruchin: There is a definite rise in digital payments apart from credit cards such as UPI, debit cards, internet, IMPs, RTGs and all others. Evidently, large companies have captured the market with customers facing applications and that has been a big trend towards acquiring customers. As tech giants like Google and Amazon attract more consumers for utilizing their apps, banks that are viewed as a back-end utility function. How does this impact on the banking industry, specifically on credit cards?
Rama Mohan: This is a truly relevant question that has emerged from different stakeholders. We are often asked on the coexistence of emerging fintech with the traditional financial players. As a customer centric organization, we have always stayed in tune with the dynamic needs of the customer and provide innovative solutions by leveraging technology. As a traditional player, we have already welcomed partnering with fintechs to enable payments via Google Pay or Samsung Pay, where the credit card can be linked as a payment method. As a banking institution, we intend to push towards a digital economy and derive the advantages of technology to provide better services for customers.
“Gen Z, they have rarely seen a physical world and have similar expectations from the digital world. They don’t have a strong brand association, for instance an SBI, they are largely comfortable with the digital world with brands like Amazon and Uber, and don’t see the differentiation between these brands”
Ruchin: Historically, big cities have been at the top of the funnel, per the expression, for credit card offerings. With increased digitization, can small cities expect a difference in terms of credit card offerings, perhaps in their consumer journey, in the coming years?
Rama Mohan: A valid question, as we already see tremendous competition in Tier 1 cities in the credit card segment. No doubt, we find a larger base of new customers in Tier 2, Tier 3, and even Tier 4 cities. Yet, we have a long way to go to tap into the entire 43 crore-odd customer base of the bank. We intend to leverage the enormous customer base of our parent bank, which we can tap into via the large network and deliver our service offerings to those who need it via pre-approved programs and other attractive schemes. Again, ecommerce firms have enabled fostering the digital trend of spending online, along with the government for promoting a digital infrastructure and regulations enabling security.
Ruchin, since you deal with several players in various industries, how do they view Gen Z, in terms of attracting them with product offerings, unique business models and even engaging with them?
Ruchin: According to me, Gen Z is quite different from the older generations in a lot of ways, in different aspects. They don’t have a strong brand association, for instance an SBI, they are largely comfortable with the digital world with brands like Amazon and Uber, and don’t see the differentiation between these brands. They have rarely seen a physical world and have similar expectations from the digital world. Brand positioning, increased service offerings and further engagement with the customers is perhaps the reason why FinTechs succeed.
Rama Mohan: Yes, Gen Z would be attracted to increased mobile applications and frictionless, seamless, and customized solutions rather than a segmented approach. We need to change our approach, sourcing and technology to tap into this market.