HDFC Bank to launch revamped payments, banking application soon

To take on Google Pay, PhonePe with new PayZapp

HDFC Bank, India’s largest private sector lender, will soon be launching its revamped mobile and internet banking platforms, besides a “better version” of its payments application — PayZapp, people aware of the development told Business Standard.

These launches are part of the bank’s Digital 2.0 initiative, with the payments app aimed at directly competing with PhonePe and Google Pay – the top two third-party application providers (TPAPs) in the Unified Payments Interface (UPI) space.

The bank is transforming its technology architecture by making it more cloud native so that it can be scaled on demand. “We will soon introduce a better version of the app, which is a significant step-up from the current version. For example, it will allow card payments on the same app,” said a source on PayZapp.

While these revamped versions have already been launched for a closed-user group, a wider launch for the bank’s 70 million customers is expected soon, sources said. “We have launched something to compete with PhonePe and Google Pay. It will be far superior, and we will launch it soon for the public at large,” a source aware of the development said.

PhonePe and Google Pay together have over 80 per cent market share in terms of volume of transactions processed on the UPI platform. These are TPAPs, which basically are service providers to payment service providers (PSPs) and participate in UPI through PSPs.

In the past, the regulator has pointed out that large banks have been slow to respond to the evolution of the UPI. “How is it that a system of transactions between two bank accounts has evolved in a way where most of the business is owned by non-banks? Clearly, banks missed a step here,” T Rabi Sankar, deputy governor, Reserve Bank of India (RBI), had remarked a few months ago. 

‘Fintech’ first

• HDFC Bank has created two factories: Enterprise Factory and Digital Factory 
• Enterprise Factory is to change the underlying tech architecture and move it to Cloud
• Under Digital Factory, bank is collaborating with fintechs to bring out products
• On the merchant side, bank has launched ‘Vyapar’ for kirana shops 
• Bank’s vision is to be a fintech company which is into banking, according to a top source

HDFC Bank has created two kinds of factories: one is ‘enterprise factory’, which has been tasked with changing the underlying core technology architecture of the bank and moving it to cloud; second is ‘digital factory’ (one each in Pune, Mumbai, Bangalore, and Hyderabad), which has been entrusted with creating new platforms in collaboration with smaller, nimble, and agile fintechs. Products under the Digital 2.0 initiative will be launched through ‘digital factory’.

On the merchant side, the bank has launched ‘Vyapar’ for grocery shops. More than 1.5 million customers live on this platform.

“Every month we will be launching new products. We are going to be launching a new mobile app and a new website soon, which will be done entirely by our factory. Our vision is: We should be a fintech which is in banking,” said a highly placed source.

The bank had suffered several outages in the past, resulting in the RBI imposing a ban on the on-boarding of customers. Its Digital 2.0 initiative was also put on hold by the central bank. In August 2021, the RBI lifted its ban on issuing new credit cards, and in March 2022, the regulator removed its embargo on the bank’s Digital 2.0 activities.

The bank has been aggressive in sourcing credit cards since then. The bank had initially guided that it would look to go back to its pre-embargo run rate of issuing 300,000 cards per month. Subsequently, it said it would look at issuing about half a million cards per month to regain market share it had lost to its competitors.