6-7% of overall annual expenses are on tech related aspects, says HDFC Bank

Country's largest private sector lender HDFC Bank spends 6-7 per cent of its overall expenses on technology-related aspects every year, a senior official said on Tuesday.

Parag Rao, HDFC Bank head for payments and consumer finance, said the bank has been investing in digital capabilities amid "cloudification", where tasks are moved to the cloud.

The comments come amid greater regulatory scrutiny on the technology front.

"We spend about 6-7 per cent of our overall expenses on technology," he told reporters here on the sidelines of a digital credit card launch of the bank.

He explained that the spends go up initially when the capital expenditure is higher and then go down gradually.

About 50 per cent of the spend is on employees, while the rest is on remaining aspects like hardware, software and keeping the network operational, he said.

It can be noted that HDFC Bank was the first major lender to be slapped with business restrictions like a pause on issuing new credit cards and also launching new online products over two years ago.

It had to work around on the systems before the restrictions were completely lifted.

Asked about the Reserve Bank's recent move to allow customers to choose between card networks, Rao said he does not see any business any impact from it.

At an industry level, lenders are discussing a slew of other aspects with the regulator at present as it feels that there are a few aspects on which some clarity can be provided, he said.

He also declined to comment when asked if the card switching rule was introduced to curb the dominance of Visa in the market.

Meanwhile, the bank launched a digital credit card wherein a digital native youngster can get herself a card within two minutes by filling up details online.

Rao said the cost of acquisition per customer for the digital card christened 'Pixel' will be 50 per cent less than the costs associated with a physical card.

The bank is throwing in a slew of benefits like cashbacks of up to 5 per cent while shopping on select brands and the minimum fee for the base variant of the card is Rs 250.

At present, the card is launched in partnership with Visa, Rao said, adding that the bank will launch a similar offering with other networks in a couple of months.

The bank's Payzapp, which has 10 million registered customers at present, will serve as the go-to app for the digital card to start with but efforts are on to introduce it on other platforms as well, he said.

Underscoring the need to widen the credit card user base, Visa's newly appointed Country Manager Sandeep Ghosh said there are only 100 million credit cards in India, much lower than 400 million in Brazil, which is smaller in size and population.