HDFC Bank targets 10-fold growth in the merchant segment in 3 years to 20 million. They started aiming merchants about 18 months ago with solutions on providing value-added services like creating a website for them, accepting payments, taking care of their stock, and lending based on cash flows, all through a single app.
The merchant relationships helps in generating fees as the services are charged sizably, in interest income for the lending, and also in saving account deposits as well as a low-cost current account. Having a large number of merchants will help the bank analytical department gather more intelligence and use suitable solutions. The sources said that they are focusing more on building the base and added that the merchant acquisition business is a part of the strategic pillar for the bank.
The bank has been making payments a lot easier. They have included an acceptance infrastructure for customers to pay a merchant and also for the merchant to pay a supplier. This also includes lending and having an account which are the basics of banking. The aim to serve the interests of merchants has been developing since digitization started at the merchants’ end and the government has also been urging the banks to serve this community better and make them part of the financial channels.
One important thing that could be noted is that these specific interest about what happens in the merchants’ space has been relatively high since the recent deals done by the Mukesh Ambani- led Reliance Retail and Jio platforms.
HDFC Bank processes 48% of the overall spending through cards and about a fourth of the UPI spends happening at the merchant ends. The merchant uses the app for various purposes such as launching promotional activities, buying and selling as well. They have the brand recall and a really strong physical network of branches which helps them to get the merchants as per a locality. When asked if they were competing with the financial technology firms the bank said that it is certainly more about the ecosystem play and the bank is partnering and supporting many of them who have done a lot of innovations. It is very early for using analytics but the bank has already approved loans to 5lakh of the merchants. The bank serves approximately to about 20lakh merchants currently.