Banks boost tech spend as super app space gains momentum in India

ICICI, Axis Bank now spend 8-9% of total operating expenses on technology

As the super app space continues to gain momentum in India, with conglomerates like the Tatas, Reliance and Adani planning to launch them, Indian banks are also bracing themselves for the challenge posed by these firms by increasing their spending on technology.

A 'super app' is an application that allows users to access a number of services under one platform.

ICICI Bank – the second-largest private sector bank in the country – saw a 20 per cent year-on-year (YoY) increase in its non-employee expenses to Rs 4,590 crore in the October-December period, mainly due to expenses in its retail business and technology-related expenses. The expenses incurred on technology were 8.4 per cent of the bank’s total operating expenses in the first three quarters of the current financial year (FY22).

“One trend that became evident from the earnings of October-December period for banks is that they have beefed up their tech-related expenses anticipating competition from super apps,” Asutosh Mishra, head of research (institutional equity), Ashika Stock Broking.

“We have seen spending go up substantially, particularly for the private sector banks. They are spending mostly on technology,” he added.  

Another private sector lender Axis Bank saw 30 per cent YoY growth in non-staff expenses in the same period to Rs 4,392 crore. Axis Bank said that its technology spends will be 7.8-8 per cent of its total expenses.

“The bank has continued its focus on execution of key transformation initiatives while building greater resilience in our technology stack. We have made significant investments in technology, digital & multiple business transformation initiatives, which has set us on the right trajectory to deliver on our GPS [growth, profitability and sustainability] strategy,” said Avinash Raghavendra, Executive vice-president & Head-Information Technology, Axis Bank.

He added that Axis Bank’s tech spends have grown 40% YoY, with a focus on initiatives built on Cloud, automation, adoption of new technology and resilience. “In terms of YoY growth or budget distribution, some areas like Cloud and automation have seen an upside owing to focused adoption and higher budget allocation as compared to previous years,” Raghavendra told Business Standard.

A number of firms have launched or are lining up launches of their super apps. TataNeu, the super app developed by the Tata Group, is expected to be launched in the next few months. It will allow users to perform a variety of transactions across financial services, e-commerce, fashion and lifestyle.

Conglomerates including Reliance and Adani Group are also preparing to launch similar platforms to take on established players like Amazon and Paytm in that segment.

“Almost all the major private sector banks have increased their spending on technology, which constitutes the non-employee expenses of the bank. And this trend is going to continue for the next few quarters as they look to move to an all-cloud infrastructure, increase their tie-up with fintechs, streamline their digital offerings, and so on,” said Suresh Ganapathy, Associate Director, Macquarie Capital.