MUMBAI : Private lender Federal Bank plans to partner with fintech companies to grow its business. This, the bank believes, will help in improving its reach without setting up new branches. In an interview, chief executive Shyam Srinivasan, who got a three-year extension of his term in July, said he does not plan to grow the recently launched credit card business in a hurry but target about 250,000 issuances a year. Edited excerpts:
With the Reserve Bank of India (RBI) approving your three-year term, what changes do you want to see in the bank?
We have been working very hard to be the most admired bank, and you do not become that by growing the fastest or giving the maximum amount of credit. In that context, we will push ourselves. We will be a bank that is respected and trusted by key stakeholders. In that context, there is a lot of work to be done. It is a changing world and getting even more digital. Our efforts have to be dialled up...It requires us to work with fintechs where technology and the speed of work have to be very different. It gives you access to a different profile of clients, and if you are getting people digitally, chances are you are getting a lot more data. The capability to use that data meaningfully has to be remarkable.
In such partnerships, how do you ensure the safety of customer data?
There are two things here. One is the security of data, and the other is access to it. If we are using fintech partners, the client is interfacing with them, and the data ownership depends on the agreement we have with each fintech partner. In some instances, the client will sit on our database, and we will have access rights; in some, even if they are on our database, the originator will have more access rights. Data security is a given, whoever originates the customer. So far as access goes, it is a commercial agreement between the originator and us. In some, we may have joint rights; in some, we may have no rights; in others, we may have rights after a period of time, among others.
How many credit cards are you looking to issue in the next couple of years??
I am not looking to build some 2.5 million cards in no time. We will grow in a phased manner. The bank has over 10 million customers and if we issue cards to 250,000 customers from my existing base every year, we are doing quite well. We will step that up further and we will do selectively new-to-bank customers based on some filters. The cards business makes money if customers are revolving, otherwise it is free credit for customers. So, the two elements are fee income and the revolve rate. If 60-65% of the outstanding balance is revolved, you are doing good. Anything more can tend to be riskier, and anything less means it is not a profitable portfolio.
