How Airtel Payments Bank and MobiKwik Embraced Open Banking to Drive Costs of Customer Acquisition (CAC) Toward Zero
ChallengeAirtel Payments Bank realized that open banking’s greatest opportunity lies in India because it has the region’s largest population of underbanked people. Most Indian adults have a bank account, but but commercial banks only serve the top 100 million to enjoy access to financial services, such as loans, insurance, or wealth management. There are up to 800 million people with bank accounts but who are excluded from the formal financial sector. Banks Banks don’t serve them because the costs of doing so outweigh the amount of business these people can provide.
Airtel Payments Bank understood that brick-and-mortar branches were too expensive to reach new customers. Partnering with consumer companies is the only way to drive down costs. The bank solved the financial service distribution problem using open banking to serve less affluent users and slashed operational costs. By partnering with MobiKwik, the bank leveraged a huge user base. The partnership used Aadhaar, the state-built national identity database, to reduce the costs and risks of sharing customer information (assuming customers give their consent and understand what they’re agreeing to). Aadhaar also provided a sandbox sandbox toexperiment with the collaborative model. Aadhaar’s affiliate, United Payments Interface (UPI), enabled common standards for digital payments. UPI made it more efficient to reach rural customers.
MobiKwik helped the bank to offer micro-sized products at scale, with insurance policies priced as low as Rs99 and BNPL loans of Rs500, making it easier for rural customers to utilize such services.
Interesting fact: 2 or 3 years ago, only 15% of newly acquired customers in Indian villages would be signed up to use UPI to make domestic mobile payments. The introduction of 5G lead to a sharp rise in rural adoption. The penetration rate of smartphones in India reached 66.21% in 2022 and was estimated to reach 96% in 2040.
Strategizing Open Banking architecture and business modeling is a lot simpler with Blinq. Decoupled from the gateway, Blinq works with almost every option out there (IBM, webMethods, etc.). Blinq unlocks your Saudi Arabia Open Banking potential. ₹114.96 billion worth of payments annually at less than ₹1 per transaction. With open banking, this cost tends to shift by a multiple of 10 to less than ₹0.1 per transaction. Lower costs mean attracting more customers effectively and ultimately improving the profit margin for the bank. As a result, Airtel Payments Bank's revenues rose 87% to ₹4740 million during FY20, driven by a surge in digital payments, money transfers, and offtake of new services. The addition of new services (such as insurance) to the portfolio also buoyed the numbers. The The bank now has 310 million active customers, with a network of over 500k neighborhood banking points.
