Aditya Birla Capital plans to add 30 million customers in three years, via its ABCD app, CEO Vishakha Mulye had said at the launch of the app last month adding the channel would help acquire customers digitally at scale. This might sound somewhat underwhelming. Given how business has picked up momentum in the last couple of years, one would have expected a bolder target for the D2C omni-channel platform. After all, ABCL is no newcomer and boasts a customer base of nearly 40 million.
But while there is a large opportunity in the credit insurance markets, the competition is also keen. Both banks and Non-Banking Financial Companies (NBFCs) are upping their game; SBI has a Yono2.0 and Jio Financial Services threatens to be a formidable rival. Bajaj Finance, which has been a stupendous success,
continues on its strong run. On a big base of 69 million customers, the lender added 14.5 million new customers last year taking the total to 83.6 million. Besides, a host of Fintechs are playing in promising niches.
The ABCL top team would be cognisant of the environment as it would be of the tight regulations for digital operations. And the ABCD app would certainly give the business a boost. As Shachindra Nath, MD at UGRO Capital, observes, an app is important as it helps lenders acquire customers fast and because the data can be useful to analyse customer behaviour. ABCL, which will become an operating NBFC once Aditya Birla Finance Limited (ABFL) is merged into it—has already spent `100 crore developing it.
The question is how much faster ABCL which today has 6 million customers, can grow. Analysts point out that ABFL—the NBFC arm — grew its loan portfolio at a three-year cagr (FY20-23) of 20% — driven by the retail and SME segments, which grew at a cagr of 32%. This is creditable given the period overlapped with the pandemic. However, when seen from a longer term perspective, the growth has been less exciting; at just under `1 trillion, the ABFL book is way smaller than Bajaj Finance’s which is more than twice as big. The growth at Aditya Birla Housing was anaemic until FY22 but has accelerated in the last two years.
The somewhat slower pace is attributed by industry experts to the absence of a USP. “ABFL didn’t build expertise in any specific area which they should have,” said the CEO of an NBFC. In contrast, Bajaj Finance built a franchise in the retail space –the consumer durables loans for example. The slower momentum at ABFL was surprising given the lender enjoys a competitive cost of funds thanks to its parentage and an AAA credit rating. However, the app could change this. As Suresh Ganapathy of Macquarie Research, points out, the ABG (Aditya Birla Group) ecosystem itself is a good hunting ground because it currently contributes less than 10% of the total disbursements.
Like Bajaj Finance, ABCL too must invest heavily in the digital platform and use data to grow the clientele. As UGRO’s Nath says, Bajaj has mastered the art of cross-selling in consumer finance. That should not be hard for ABCL to do because industry insiders say the technology platform is a reasonably good one. Today the digital ecosystem accounts for 32% of ABFL’s originations. “This is not generally recognised but that’s one reason they were able to integrate so well with PayTm,” says a banker. He points out that going by the strength of technology platform, the app too is likely to be well-designed.
That is important. As Peshotan Kapadia, Managing Director and Partner, Boston Consulting Group, observes, “For any lender, the experience on the app is typically benchmarked not just with banking apps but all apps in general”. Kapadia adds that the app experience needs to be backed by assisted services. Gen AI, he is convinced, can change the experience and the payback for players can be very good.
It won’t be smooth sailing though. Kunal Pande, National Co-Head – Digital Risk Security and Governance, KPMG India, points out that while it is always cheaper to access customers via the digital route this is true only if the entire process is accomplished digitally. “Even if a couple of the steps need to be completed physically, the cost would go up,” Pande explains.
BCG’s Kapadia points out that while it may be relatively simple to attract users initially with a use case, it’s harder to get them to keep coming back. “It has to be a combination of good core use cases, including payments and also offers and hooks,” he says.
As is known, some apps have thrived on offering rewards but there is the risk of losing customers when the incentives stop coming. The choice of customer cohorts is also critical. Experts point out that all lenders today—banks, NBFCs — must cater for young customers even if this doesn’t yield much money in the initial years. As KPMG’s Pande points out, while the credit market in India is large and growing, a player would need to choose the product segment carefully. “No lender can afford to ignore the young customers even though it may not be a profitable proposition in the initial stages,” he says.
Even as it digitises operations further, ABCL is building on-the-ground reach. ABFL’s branch network has grown very rapidly to over 1,400 branches. With the launch of ABCD the omni- channel network will be a strong one. Strong enough to push ABCL to a new growth trajectory.
