Digital Initiatives

Online

Acquisition Payments Lending

Digital Adoption &

Analytics

Digital Transformati

on

Traditional Banks

Branch network

Large investments in physical assets

Legacy systems

Compliance, regulation

Structure built around product, P&L lines

Larger staff base

Slower pace of change

Traditional Bank ModelRevenue Pool for Banks Range (approx)

NII 80% – 75%

Non-NII 20% – 25%

Fees 14% – 16%

Transaction Charges 2% – 4%

Others 4% – 5%

3

The world is witnessing a massive shift in financial services

Enablers

• Traditional financial services are witnessing significant disruption

• Increased customer comfort with technology driven models

• Reduced Barriers to Entry

The new normal

• Rapid Unbundling of services

• Democratization of information and services

• Uber-ification of the customer experience

• Dramatic Increase in speed

Banks follow a top-down approach while disruptions are focused bottoms up

IndividualsEnterprises

Internet FinanceTraditional FS

Micro Enterprises Masses

SME Mass Affluent

BIG Corporates

Wealthy Individuals

IndividualsEnterprises

Micro Enterprises

Masses

SME Mass Affluent

BIG Corporates

Wealthy Individuals

Sh

are

of

Re

ve

nu

e

Area of Disruption

Disruptive trends

Payments –Apple Pay,

Google wallet Samsung Pay

Block chain

Digital banks & Digital currency

Lending –P2P, Social & psychometric credit scores

Digital Payments –

Wallets, Bharat Bill pay, UPI

Artificial Intelligence -

BOTs

Digital Branches

Security –more use of Biometrics

Global India

Transactions/Platform

• Retail Payments

Risk Management

• Retail Lending

• Corporate Lending

Knowledge & Skill

• Wealth Management

• Advisory Services

• Investment Banking

High Medium Low

Intensity of Disruption

Areas of Disruption

High

Low

Leve

l of

Dis

rup

tio

n

Payments and Txns

Distribution

Third Party Products

Core Products – CASA & High End Loans

Impact on Revenue High

Disaggregation in BankingLeading to higher efficiency

Bank Employee DSA / DSTAggregators – Bank Bazaar / Snapdeal

Cash Debit / Credit card Mobile wallet

TelcosNeighbourhood

stores Wallet/Bank

Lending

Payment

Mobile Recharge

Fixed Cost Model Variable Cost Model Low Cost – Digital

Example

E-commerce and Fintech are coming together

Source: MXV Consulting report

Globally Digital bank models are finding their footholdsIndia Payments banks could be form similar platforms

Product Retail Banks

Leader

Digital Banks

Challenger

Liability Focus

(Narrow Product)

Asset Led

Full portfolio

Banks with digital focused strategy

• Youth & Digital Savvy

• Pricing Led10

Population 1285 Mn

Digital - An imperative for Indian banksIndia’s Key Digital Statistical Indicators

Mobile Penetration -

79%

Internet Users –28%

Social Media -13%

Digital infrastructure rapidly expanding

•~270 Mn urban internet users in sep 2015

•>651 Mn smart phones by 2019

Regulatory changes becoming more facilitative

•Aadhaar – eKYC (UIDAI accounts rapidly expanding)

•Information bureaus for instant credit appraisal

Customer digital readiness rapidly increasing

•~60% customers with internet digitally influenced for banking

•> 40% express strong interest for right digital solutions

Integral part of the changing competitive context

•Digitization top of the agenda for incumbents

•New / non-banks putting digital at centre of strategy

•Revenue pools coming under threat

*smart phone users – 220 mn

Partner Compete

Digital demands continuous evaluation of options

Reimagining Customer

ExperienceBuild Afresh

Transformation Pure play digital

E Commerce

Compete Acquire

Fin Tech

Collaborate

Re-engineering

Digital Approach

Digitalization is Organisational Journey not IT Projects

Transactional and1-to-1

Conversational; Many-to-Many

Customer Interaction

Standardized and Inflexible

Differentiated and Fluid

Process Approach

Operational Metrics

Customer Based Metrics

Process Metrics

IT Driven Strategy

Two-Speed IT –Innovations and BAU

Role of IT

Banks need to be a part of Consumer daily life cycle

Morning

Going to office (Taxi, Metro payments )

During the Day

Travel & Canteen requirements

Evening

Buying Grocery, music, movies

Night

Dining out, home orders

Routine Payments

Recurring Payments

Savings

Investment & Insurance

Organized Payments

Bill Payments, Society, school fees

Unorganized Payments

Monthly payments to house helps

Spend

Shopping

Capture thru Digital Offerings

Technology choices for transactions

Technology choices for transactions

Banks play a role in

bridging the technology

gap

Kotak’s Digital DNA

Agile

Design Thinking

Customer Centricity

Collaborative

Fail fast- learn fast

Innovation at heart

Skill based resource

Geography is history

Attracting Talent from other industry/ ring

fence them

Governance structureDesign Thinking

Employee first

Stakeholders alignment

Customer Experience

Design at core

Improving Customer Experience … with Innovations

Hashtag banking - First bank to integrate twitter with banking

Kaypay – First Bank-agnostic P2P Payments Platform

Jifi – World’s 1st Digital+ Social bank a/c

Bharat Banking – 1st Offline multilingual app

In app shopping - highest rated banking app

Digital Focus @ kotak

Online

Acquisition

Digital Payments

Lending Digital

Adoption & Analytics

Physical & Digital Co existence

Digital Transformation

Digital Platform focused Transformation focused

Performance in global benchmarking metricsKotak leading bank in digital sales

Results as per finalta Global benchmarking survey, conducted in 2015 -16 on 100+ banks. Aus/NZ scores included as global leaders in digital metrics.

KOTAK INDIA AVG GLOBAL AVG AUS/NZ

Public Site Secure Site Mobile App

Digital Sales133

8074

118

Per 1000 active customers

Kotak has 133 customers acquired through digital sales per 1000 active customer Vs. India avg. of 80 & global leader avg. of 74.

Kotak’s YOY growth of 47% vs Indian average of 10%

Evolved Ecosystem

• Real time Fund Transfer via NEFT, IMPS, CTS

•ECS, NACH for Recurring payments / EMIs

•Digitization of Bill Payments

•P2M via PG

Digital Payments @ Kotak Driving by improved customer convenience

Building Convenience• Single click payment through mStore and eStore• In-app merchant integrations for customer’s travel and stay requirements• P2P platforms (KayPay, Mail Money, Message Money)• Leveraging Social and Hashtag Banking and Social Commerce

Evolving

•Social, Mobile, email based payments

•Card-less cash

•Contactless Payments (tap n-pay)

•Biometrics & Ultrasonic

Kotak Innovations Journey in payments so far

Digital Payments

Mail Money – Email ID based P2P

Message Money –

Mobile no based P2P

PG – P2M tie ups with merchant

aggregators

mStore –P2M – Flight

& Hotel bookings

Hashtagbanking –P2M via twitter

Payments Journey Ahead

Payments App & Kotak Wallet

UPI

Bharat Bill Pay

Domestic Remittance Platforms

Reimagining Payments - Road Ahead360 degree presence in payments

Instant Pre approved personal Loan

Digital Lending @ KotakDelighting internal and external customers

• Instant credit & complete paperless process takes < 60 seconds

• Digital agreements, all a customer needs to authenticate with their Netbanking passwords

8.1

3.9 3.64.2

KOTAK INDIA AVG GLOBAL AVG AUS/NZ

10

8.1

5

3.1

KOTAK INDIA AVG GLOBAL AVG

AUS/NZ

Change in 90-day digital and mobile activity Percentage point change

Digital activity Mobile activity

Kotak leads over Indian and global banks. Kotak’s digital activity level change is at 8.1 pp vs India Avg. 3.9pp and Global leader avg. 3.6 pp

Mobile activity change for Kotak at 10pp vs India avg. 8.1pp

Monthly Login frequency on mobile highest in the country

Performance in global benchmarking metrics Digital activity levels grew at the fastest pace

Results as per finalta Global benchmarking survey, conducted in 2015 -16 on 100+ banks. Aus/NZ scores included as global leaders in digital metrics.

Sr. No. Bank Name Volume (Actual) Value (In Rs'000) Share of Mobile Txns Share of Mobile value

1 STATE BANK OF INDIA 1,51,83,778 17,63,60,419 38.4% 36.0%

2 ICICI BANK LTD 70,01,721 10,57,72,562 17.7% 21.6%

3 AXIS BANK LTD 60,28,436 6,26,78,529 15.3% 12.8%

4 HDFC BANK LTD. 39,13,278 8,71,68,948 9.9% 17.8%

5 KOTAK MAHINDRA BANK LTD 17,00,472 2,32,48,260 4.3% 4.7%6 CANARA BANK 6,87,099 39,64,850 1.7% 0.8%

7 YES BANK LIMITED 5,96,699 31,24,548 1.5% 0.6%

8 BANK OF BARODA 5,73,786 22,41,224 1.5% 0.5%

9 CITI BANK 5,71,462 67,63,207 1.4% 1.4%

10 UNION BANK OF INDIA 5,68,990 39,18,494 1.4% 0.8%

Top 10 banks in mobile transactions Kotak is 5th largest both in terms of value and volume

Source: Mobile banking transactions report, RBI, Dec 2015

0

5

10

15

20

Apr-15 Mar-16

VolumeIn Lacs

0

1000

2000

3000

Apr-15 Mar-16

Value in cr

Kotak Mobile banking Transactions

Analytics led approach for product design Online customer transaction behavior analysis led to launch of Kotak Jifi

50% of applicants were below 35 years

of age

Looking for A/c which suits their digital

lifestyle

55% of the existing Kotak

customer were on Facebook

Social behaviour suggested applicant

trusted reviews of their friends

more than marketing

60klogin attempts exited at DAC page

Kotak Website visitors search for matrimony options

7%

Delay in receipt of DAC

Opportunity to target this segment

Introduction of Voice DAC and Auto DAC

Promotion through Third Party Websites

(Matrimony Portals)

Big Data & AnalyticsWeb trends & Google analytics helping improve transaction experience

Analytics

Insight

Action

Transforming Customer Experience

•Customer Transaction Convenience

•Cost savings

•Increasing Productivity

•Enhancing revenue generation

Physical & Digital Co-existence Digital Transformation

Process Reengineering

• Physical movement of documents

• Wet Signature Processes

• Assistance Driven Processes

• Multiple Hand-offs and manual interventions

Re-imagining Branches Teller Automation & Self Service Kiosk Cash Deposit/Cheque Deposit Kiosk

Digital Performance Framework

Productivity

Efficiency

Revenue

Acquisition

Customer Experience

Cost Reduction