Banking on the ‘cool’ customer

The government wants public sector banks in that race too. Finance Minister Nirmala Sitharaman has urged state-owned lenders to get “cool”: to know young customers, understand what they expect and speak their language.

The stakes are high. India’s Gen Z cohort, close to 400 million strong, accounts for more than 40% of the country’s consumption, a pool worth about Rs 200 lakh crore. For now, most of these young customers use banks mainly for payments. But as they grow older, they will borrow, and eventually save. The lender that wins them early could keep them for decades.

What they want is clear enough. “They want fintech-like simplicity,” says Ratan Kumar Kesh, ED and COO, Bandhan Bank.

Delivering that means rethinking how banks look, talk and reward. Earlier this year, Federal Bank refreshed its brand identity to appeal to a younger, digitally empowered audience. “The visual system was made more vibrant, youthful and adaptable to digital channels,” says MVS Murthy, chief marketing officer, Federal Bank. The bank followed up with a campaign, Rishta Aap Se Hai, Sirf App Se Nahi. “The campaign was designed both to reinforce existing relationships and enhance relevance among younger customers,” Murthy said.

IndusInd Bank has retuned its messaging too, and that includes where it shows up. “We’re working with the new realities,” Sheran Mehra, chief marketing officer, IndusInd Bank, told FE. Rather than sponsoring cricket tournaments, the bank is looking at fitness-and-sports events such as Hyrox, whose runs and races are drawing young people in large numbers.

From Google to ChatGPT

The route to the customer is changing as well. According to Mehra, the era of starting with a search engine seems to be over. “Everyone now starts with ChatGPT,” she said, adding that customers now use AI platforms to discover products. “We are working with ChatGPT to get closer to the younger customers.” IndusInd is advertising its credit cards on the platform.

Winning a young customer is only the first step. Keeping them engaged is harder. Axis Bank is using AI, analytics and data to build experiences that go beyond transactions, says Sameer Shetty, Group Head – Digital Business and Transformation & Strategic Programmes. “We have introduced several capabilities that align closely with the expectations of digitally native customers,” Shetty told FE.

Rewards have to feel relevant too. IndusInd, for instance, lets cardholders redeem points for running shoes or a gym subscription. “Spending insights, financial health assessments, goal tracking and personalised nudges resonate strongly with Gen Z,” Shetty says. Axis Bank’s personal finance platform, My Money, gives customers an overview of their finances along with personalised recommendations.

Catch them young

Most young customers are not yet profitable for banks, since they save little and bank mainly to pay. Lenders are betting on the long game anyway. “What is becoming increasingly important is to win customer loyalty early in the day. We want customers to get familiar and become comfortable with the app,” Mehra said.

Bandhan Bank is building a separate youth app within its mBandhan 2.0 app. “They want frictionless payments and also short-term liquidity,” says Kesh. The bank is also using the Salesforce platform to give customers faster, more intuitive access to credit products.

Young customers are dipping into the markets as well. “They want to learn how to invest through very small ticket bets in shares or mutual funds,” Kesh said. But he cautions that Gen Z can be very value-conscious when it comes to large financial commitments.

That may be the real test for lenders. Winning a download is easy. Earning the first loan, and the savings that come later, will take more than a cool campaign.

Tomorrow: Wealth managers