Axis Bank aims to convert its mobile app into a fully digital bank

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Axis Bank, a leading private sector lender in India, is making a strategic shift towards becoming a fully digital bank, with its mobile application “Axis Open” playing a central role in this transformation. This digital-first approach is driven by the potential for higher yields and improved fee income, as evidenced by a CLSA report indicating that loans generated through the app garner up to 150 basis points (bps) higher yields than conventional loans.

Additionally, non-core banking cross-sale products generate about 50 bps higher fees due to lower customer negotiation power, reduced costs, and more personalized offerings.

Performance of App

With over 13 million monthly users and a proven track record of originating loans and deposits worth over Rs 10,000 crore each, Axis Open has established itself as a powerful digital banking platform. The bank is continuously enhancing customer engagement by introducing hyper-personalized offers and building high engagement features within the app.

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As CLSA highlights, Axis Bank is also leveraging Cloud and generative AI to offer differentiated services to partners at scale and is focused on developing in-house products to gain a competitive edge. The bank’s rich data repository of over 3,000 data points on more than 40 million customers empowers it to generate insights, provide personalized offers, and improve customer engagement. Furthermore, the bank is utilizing alternate data to enhance its underwriting process.

Recognizing the importance of retail deposits for loan growth, Axis Bank has placed a strong emphasis on deposit growth. Between March 2022 and September 2023, the bank’s lendable deposits have grown at a remarkable 34%, while non-lendable wholesale deposits have declined by 17%. This growth is attributed to the bank’s efforts to reduce the premium on interest rates for term deposits compared to large-bank peers. Additionally, the bank is expanding its branch network, ramping up its wealth management clients and corporate salary accounts, and developing customized products for various depositor segments.

Axis Bank’s commitment to rural and semi-urban expansion is evident through its “Bharat banking branches” initiative, with 2,372 branches spanning 700 districts. This focus has resulted in strong growth across various segments, including a 36% increase in MFI, a 32% rise in Gold loans, and a 57% growth in Bharat enterprise loans.

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Despite the Reserve Bank of India’s (RBI) circular on higher risk weights for unsecured consumer credit loans, Axis Bank remains confident in its ability to maintain an 18% return on equity (ROE) and reiterates that it does not require additional equity. The bank’s capital adequacy ratio stands at 17.84%, with a common equity tier-I (CET-1) ratio of 14.56%.

The integration of Citi Bank India’s consumer credit portfolio has progressed smoothly, with employee attrition lower than initially anticipated. Axis Bank’s wealth management franchise has emerged as the third-largest in the country, with overall assets under management (AUM) reaching Rs 4.5 trillion as of September 2023.

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