A Tragedy of Digital Banking — With Apologies to Comedy of Errors

HDFC Bank is India’s largest private bank by assets and 5th largest in the world by valuation. A bank built the old-fashioned way — serve customers close to where they are; work hard; be aggressive; expand quickly.

All this is fine and has delivered fabulous returns to shareholders, early employees. But the “old-fashioned” culture is now becoming a noose as the bank seems to flounder on digital transformation and digital culture adoption. Here is a recent personal case study that exemplifies the lack of cohesive digital assets, tools, processes and basic management responsibility training to serve customers in today’s banking context. My hope is that some senior executives will take note of this and do something about it. It will help customers and the bank grow imo.

A Current A/c For NewCo

Register a NewCo with MCA portal and you will start getting a series of emails offering services from GST filing, accounting, tax advisory, HR services, website services, Audit and compliances threats and savior services etc? How do these folks “scrub” or “purchase” the data is well known mystery. But that is not the main story.

One of the emails offering services to NewCo was HDFC Bank with their zonal product leader sharing details of their “Startup Current Account” and pitching for consideration of the NewCo business. Wow! I thought. This is smart from HDFC Bank. How wrong I was.

Step 1: The Old-Fashioned “Forms” and “Ways”

Opening a current a/c with HDFC bank requires the old paper forms, signatures at multiple places, some with company stamp, some without; physical passport size photos and copies of all NewCo docs — PAN, CIN, MOA/AOA in physical form.

“Why is HDFC so far behind when our govt itself has issued all these docs in electronic form” — I asked the HDFC agent who was helping. He was helpless to answer.

“Why do you need a physical passport photograph when the passport office itself takes a digital picture at the time of issuing passport”? Again, helplessness.

The form preparation and verification (all forms have to be signed in presence of the bank agent) took a good 3 days (one for the agent to schedule a visit and not show up and 2 to complete the paperwork).

Step 2: Bank Anywhere The Old-fashioned Way

We are living in the IndiaStack era where Aadhaar, UPI, DigiLocker and a set of APIs have moved payments, KYC and documentation to a new vision. Street vendors are using UPI powered QR codes to accept cashless payments; bank branch visits have reduced so much with net banking that many banks are considering turning their branch locations to cafes & meeting places.

Assuming that with all these advanced technologies and regulations in place, NewCo submitted all the documents in Delhi but requested the bank a/c be created at a remote city (place of business). To a “digital transformation” specialist, this should be as easy as “selecting a drop down for branch” while creating the account.

However, the “old-fashioned” culture cocks its nose at such arm-chair digital transformation experts such as me and shows us our true place in reality. Nope, the good-old-forms must be sent to the remote branch. And mind you — digital scans done by the Delhi branch and sent over secure email by the Delhi branch won’t work. Good old-fashioned culture demands good old-fashioned trusted physical courier only. And yes, it takes another 3–5 days but there is no hurry, is there? Banking after all is serious business.

Step 3: The “Old-Fashioned” Auditor and Keeper of Culture

So, my NewCo physical forms reached the remote branch after 5 days and I waited another 2 days to get an advice on the account opening status. Of course, old-fashioned culture did not have any notification systems built in so unless the customer called and made proper inquiry, why should the bank keep them informed?

And bad luck! The remote branch manager, bless his concerns for propriety and preservation of old-fashioned culture, promptly discovered that the form package sent by the Delhi branch was missing a key “additional” document and this needed to be filled, signed and couriered again for the process to move further. The Delhi based “agent”, assured me that the new form was sent by the remote branch manager via email and the same would be shared with me promptly. I thought e-emails are delivered in minutes today and reminded the friendly agent of this feature but clearly old-fashioned cultures do not operate unless the email has matured for atleast 24 hours I learnt :-).

24 hours pass and I don’t hear anything from the agent. I decided to visit the Delhi branch and speak with the local branch manager. Maybe he would be a bit more empathetic towards digital platform and the use of the same to serve customers better. To my chagrin, I was informed that the branch manager was completely unaware of the developments of my case, since the branch only opens 3–4 accounts daily and these are regular operational matters. So much for dashboards, workflows and efficiency / productivity enhancements I have been working on for 25+ years. Good old-fashioned culture always prevails. As a former CEO would always say at the end of every strategy meeting — “we can discuss whatever new strategies we want to, but dhanda to waise hi hoga (how business gets done won’t change)”! No wonder, his team stopped giving him any suggestions after a few months of this approach and he would complain about them being disengaged. But I digress.

Anyway, the local branch manager informed me that the keeper of old-fashioned ways, the remove branch manager had labelled the forms used by the poor, ignorant Delhi branch as “outdated” account opening form which he could not accept. A new form must be filled out, signed and dispatched the old-fashioned way for the conscientious branch manager to do the needful. The poor ignorant Delhi branch had been using the same forms every day without any trouble, but the remote BM would hear nothing of it- his processing team could not accept the old forms as the “system” would reject any “upload”.

Now why would India’s largest bank by assets have outdated forms across its branches in this digital age where all forms and latest versions are available online? And why would they have multiple processing teams by zones when a central processing station for digital movement of forms and applications was adopted by a leading foreign bank 30 years ago showing the way banking could accelerate its footprint using technology to the hilt? Good questions for digital transformation students but clearly old-fashioned banks and leaders don’t ask uncomfortable questions. After all, we all must live, survive and thrive in the same culture together.

The Delhi BM tried his best to inform the remote BM that he himself had the authority to approve the exception, could opt for approval from the zonal leadership and move ahead without any problems as all the Delhi branches were using the same forms. But “keepers of the old ways” are a tribe-by-themselves. He would not budge.

After a lot of 3-way calls, cajoling, reminders that the two HDFC bank branches have to work things out for the benefit of the customer without the customer taking sides on who is wrong, the remote branch manager agreed to move ahead on the condition that a new set of forms be signed, in the presence of the local BM, scanned and sent with an assurance that the physical form would also be sent over by courier at the earliest. He was making a huge exception for the customer benefit, he reminded us. We went away from the branch thinking that all was behind us now and the account was nearly in sight.

Step 4: Caught Unaware By the New Ways

I called the branch the next day wishfully. Hoping for good news. But know what? After overcoming the “outdated” form hurdle, which the remote BM could have done by himself, without the drama, he now reported that an account under the name of NewCo was already registered and a second account could not be opened. Clearly. The remote BM further raised the concern that the customer was trying to dupe the bank by maliciously trying to open a current account and move their business to the bank.

How could a current a/c exist in the name of NewCo and that too without any paperwork? Without any application? Without all those stamps and signatures? A little bit of investigative work revealed that the MCA site offers an option to choose a preferred bank while registering a NewCo.

Now the smart digital savvy folks at HDFC bank have provided APIs to open an account (reserve an a/c number) to the MCA folks but they forgot to add notifications to the NewCo directors that such an account has already been created and offer the steps to make this account operational with perhaps an eKYC / self-serve option. And in the true tradition of old-fashioned banking, they forgot to advise their army of branch managers that this is the “New Way”. So no one in the bank knows about the new way and the customers are in the dark till they run up against the “system” which throws a spanner for carefully constructed forms and old-ways. Why banks don’t hire product managers — this topic needs a full 2-day conference imo.

The silver lining? Now that there is an existing account with the bank, all it needs is KYC to be made operative. Should be simple. After all, the KYC information has already been provided in the old-fashioned forms. But that would cut short this story, wouldn’t it!

Step 5: New Ways. New Challenges.

The account that has been opened thru the MCA portal is a “Startup Current Account” and to be activated, this needs a DPIIT certificate. I wonder if all NewCo are really startups or want to be one. And true to badly designed digital products, there are no workarounds. The “system” cannot proceed without a DPIIT number. Period. No thought given to the fact that a NewCo, just incorporated will need time to get registered and get the DPIIT recognition.

“Just change the startup current account to regular current ac”, I suggested. I don’t really care about a startup current account much. But by now, the keeper of the old-ways has flashed a message pointing out victoriously to 21 errors that the Delhi team has made on the forms submitted that he could use to prevent processing of the form. He was so happy to make this claim and show down his Delhi branch colleagues as nincompoops, while he gloated on his accomplishment. It was as if he did not want NewCo business and would do everything to deny NewCo a current account with his branch. He would win and show the Delhi team who was a “real” banker.

Epilogue

By now, it had been nearly 30 days since NewCo contacted HDFC bank for a current account and 25days since all the formalities were completed in Delhi. Newco decided to abandon its engagement with HDFC and take its business elsewhere.

ps — the DPIIT registration via national single window system (nsws.in) is another story of digital tragedy. Even though all information on NewCo is smartly picked up by the application, it requires another PAN verification, this time with DSC (digital signature certificate) but the DSC used to register a NewCo wont work for NSWS portal. So back to submitting more forms to get this done!!

pps — NewCo finally has a bank account but the story of its experience with another “leading” bank deserves a separate blog too. It seems that the corporate account opening processes at Indian banks is broken and any smart bank would look at using this as a disruption of competition. Are they looking?

Appendix — A better current account opening product

What should be the brief a good product manager must give to the IT team at HDFC Bank?

1. Build a notification system that informs the Directors of the NewCo using the email / phone details from MCA site when a placeholder account is created. Share all the information about the documentation / pre-requisites to complete the formalities.

2. Build a pre-flight check before any documentation is created using the NewCo credentials, director credentials and identify all critical areas to generate the shortest path to account opening.

3. Build a self-serve tool to verify director credentials using PAN verification API; Aadhaar verification API; An upload mechanism for signed /stamped documents; a verification system for the documentation using IDP technologies etc

4. Build a workflow for approval that starts with customer notification -> eKYC -> Doc verification and submits a record for managers to review / approve. Once reviewed, it unlocks the account and sends onboarding information; netbanking information to the customer.

5. The entire process should not take more than 30 minutes on self-serve basis. And the authorization should be possible to do within 1-working day.

6. From NewCo incorporation to a functional current account in 2 days and business gets started for both the bank and the customer.

Any bankers interested in this “product” can reach out to me for advisory help.