Acquisition project | IDFC FIRST Bank

Disclaimer : All views expressed are personal. All data given below are representative and is not be construed as real data from IDFC Bank. I didn't have access to IDFC Data at the time of doing this project. 

Elevator Pitch for IDFC FIRST Bank Savings Account

Imagine boosting your savings by up to Rs 50,000 last year alone. That's the IDFC FIRST Bank advantage. Our savings account offers an unbeatable 7.25% interest rate, credited monthly, with zero fees on services. Why settle for less when your money could work harder for you? Switch to IDFC FIRST - the savings account that truly values your financial growth.​

Understanding Savings Account

What is a Savings Account Product?

A Savings Account constitutes the foundational offering in a retail bank's product portfolio. Essentially, it is a financial instrument that enables users to safeguard their capital while accruing modest interest. In the Indian financial landscape, the savings account serves a dual purpose, functioning as both a traditional savings repository and a transactional account, facilitating multiple financial operations akin to a checking account in other markets.

What is the core value proposition of a Savings Account?

A savings account provides customers with a formalized, legally recognized, and insured repository for their money. It serves as the primary receptacle for all legitimately earned income by individuals. Furthermore, it functions as a conduit through which account holders can manage their expenditures, facilitate monetary transfers to other parties, and allocate funds towards diverse investment vehicles that offer potentially higher returns.

In essence, the savings account acts as a central hub in an individual's financial ecosystem, enabling efficient management and deployment of monetary resources.

What are the features of IDFC FIRST's Savings Account Product?

IDFC FIRST Bank's Savings Account offerings encompass the following features:

• Secure capital repository with government-backed deposit insurance up to a specified threshold
• Competitive interest rates with monthly accrual and credit
• Comprehensive transaction capabilities, including: a. Fund withdrawal via Debit Card, Cheque, and in-branch servicesb. Digital fund transfer options: IMPS, NEFT, RTGS c. Payment facilitation through Debit Card and UPI d. Auto Debit instruction setup for automated transfers and loan repaymentse. Bill payment services, including auto-pay options
• State-of-the-art, award-winning mobile application for enhanced transaction convenience
• Zero-fee structure on savings account transactions
• Premium customer support services
• Loyalty program featuring reward points, exclusive offers, and commercial partnerships

What are the other alternatives for a savings account product?

At its core, a savings account functions as a secure repository for monetary assets. It lies pretty low on Maslow's hierarchy and other than physical cash stored in vaults, it doesn't have any alternatives. There are many competitor banks and other fintech's offering similar products and this is covered in more detail in the competitor analysis section.

As an investment vehicle, savings account is one of the plethora of options available for customers including fixed deposits, mutual funds, equity, F&O, real estate etc. but savings account always exist in parallel to these investment vehicles and customers tend to keep some balance in savings account for their day to day transactions apart from their investments in other instruments listed. Further, balances in savings account are also insured upto Rs 5 Lakhs by the Reserve Bank of India.

As an transaction fund source, credit instruments such as credit cards, BNPL lines etc can work as an alternative to a savings account but some modes of transactions such as NEFT, IMPS, RTGS etc. require funds in savings account for transfer for an average consumer.

In summary, there is no quite wholistic alternative for a savings account as it is a fundamental product that is required for any customer who is part of the formal monetary system.

How does one get onboarded to IDFC FIRST Bank Savings Account?

A customer can open IDFC's savings account either offline (branch or RM assisted channel) or through digital flows. For the purpose of this project, we will discuss only the digital flow.

Currently IDFC only has an adaptive web journey for onboarding. This flow/page adapts to the screen size of the user. The main data entry is limited to a single page. ~ 80% of the traffic to the this page is from mobile devices the rest divided between desktops/laptops and tablets.

The journey can be accessed from URL: https://digital.idfcfirstbank.com/apply/savings

Information captured in this page can be divided into the following sections

1) KYC information including Aadhaar, PAN, Email and Mobile number. Once the Aadhaar and PAN are verified using respective service provider APIs, the customer's address is fetched as stored in Aadhaar database and the customer can either confirm this address as their current communication address or enter a new address

2) Profiling Information - Including Occupation, Income range, source of income and mother's name

3) Product selection - Here there are only 2 variants offered differentiated purely by the Minimum Average Balance Requirement of Rs 10,000 and Rs 25,000 and details regarding the main differences between the variants are provided

4) Nominee Information - Self explanatory and it is an optional field.

5) Acceptance of terms and conditions.

Once the user clicks on proceed to open a/c in this page, they are taken to a payment gateway page to complete their funding of the account.

On successful funding, the user is redirected to auto connect to Video KYC where the user gets on a call with an IDFC agent to complete their video KYC process as per RBI norms. The user also has an option to schedule the video KYC call for later.

On successful completion of video KYC or on scheduling for later, they are taken to a success page which gives details of the a/c such as Account Number, Customer ID and Branch IFSC Code. They are also then prompted to download IDFC FIRST's mobile banking application.

Understanding Savings Account Market and Competitors

Overview

The Indian banking system consists of 12 Public Sector Banks, 21 private sector banks, 44 foreign banks and 12 small finance banks. Savings accounts are offered, by most, if not all of these banks. The number of savings accounts and deposits in savings account has seen a robust growth in the last decade due to multiple socio economic factors including rising income levels, introduction of final inclusion schemes such as PMJDY (Pradhan Mantri Jan-Dhan Yojana), Direct Benefits Transfer coupled with supporting Digital Public Infrastructure, mainly Aadhaar and UPI. As per RBI's reports, over 90% of people over 15 years old have a savings account as of 2024 compared to only about 44% in 2011. Deposits in Savings also grew from $1149 Bn. in FY16 to $2452 Bn. in FY 24.

​Market Sizing

For calculating the Total, Serviceable and Obtainable markets for Savings Accounts in India, we will take the following factors into consideration

1. Population that is eligible for Savings Account

2. Internet and Smartphone penetration

3. Income levels and concentration of balances in Accounts

4. Market share realistically achievable in the medium term given all factors

#1 Population eligible for Savings Account

While anyone technically can open a savings account, we will target the customers who have some bit of interent exposure and disposable income for them to open a savings account. This population aged between 15 to 64 years consists of ~67.5% of India's Population of ~142 Cr people.

Hence Total Potential Accounts that can be opened = 67.5% of 142 Cr = ~95.85 Cr.

#2 Internet and Smartphone Penetration

Given that usage of a digital savings account will largely be limited to smartphone users, lets then further subtarget the population with smartphone which as per latest estimates is 71%.

Hence Total Potential Accounts that can be opened = 71% of 95.85 Cr = ~68 Cr.

#3 Income Lets and Concentration of Balances in Account

India has a high gini co-efficient and income is highly distributed between fewer people. Given that IDFC only allows Savings account with minimum balance of Rs 10,000, the people who are able to maintain this kind of balance in Savings Account greatly reduces. Assuming that people on an average don't maintain more than 20% of their income in Savings Account balances (Assuming that the rest 80% is used towards expenditures and investments), we need to consider people who have a monthly income of atleast Rs 50,000 (5 * Rs 10,000) as population we can target for Savings Account.

While the estimates vary, on an average it can be considered that only 10% of income earn more than Rs 50,000 per month.

Hence the Total Potential Accounts that can be opened = 10% of 68 Cr = ~ 6.8 Cr Accounts.

With the actual revenue from Savings Account depending on other factors such as balances mainted, Net Interest Margin etc. We will keep the TAM calculation simple to only touch on no. of Accounts to be opened.

So Total Addressable Market in terms of no. of Accounts is 6.8 Cr or Roughly ~7 Cr Accounts.

We can calculate dollar value of TAM by taking into account Average Balances in Indian Accounts and Average NIM.

At IDFC, the average balance in an account is ~ Rs 40,000 against a Rs 30,000 national average. For purpose of TAM calculation, we will go with national average or Rs 30,000.

NIM at IDFC is ~5% where as the national average is ~3%. Again we will go with national average.

So TAM in Rs value is = Rs 7 Cr * 30,000 * 3% = Rs 6,300 Cr.

Now let's get on to a Serviceable Addressable Market

1. IDFC has roughly 300 branches compared to 3000+ branches of HDFC/ICICI and largely serves Metros, Tier-1 and Tier-2 cities

2. While Digital Accounts allow the customer to open an account anywhere in India, it is known through internal data that customers who live outside of 50 KM radius of a branch build only 20% of balances vs customers who live within 50KM radius of branch.

So, for purpose of calculation of SAM, we will assume 10% penetration of customers who are serviceable and for the rest 90% of customers, a balance value of 20% of their usual balances.

So SAM in no. of Accounts remains technically same as TAM

But SAM in Rs Value = 10% * 6300 Cr + 90% * 6300 Cr * 20% = Rs 1764 Cr.

Now lets move on to Serviceable Obtainable Market

Given we are addressing only the top 10% of India's digital population, competition is very fierce in getting their balances. Especially given that IDFC's market share in Savings Account market in currently around 0.6%. Even with aggressive strategies, realistic obtainable market with this level of competition within the ecosystem can be estimated to be around 5% market share.

This means SOM in terms of Account numbers is 5% or 7 Cr = 35 Lakh Accounts.

Given this is IDFC specific targeting, we will use the higher average balance and higher NIM's IDFC is able to obtain with its customers. This translates to as below

With average balance of Rs 40,000 in this account, in terms of balance this amounts to Rs 14,000 Cr. This aligns with internal budgeted numbers with IDFC to obtain roughly 3000 Cr in balances in the first year of digital savings account launch.

With NIM of 5%. This accounts to SOM of Rs 700 Cr.

Understanding Competition

Digital Savings Accounts have launched by all major banks in India. In that respect the competition is very high. However not many banks allow end to end opening of Savings Account online. For the purpose of this comparison, we will take the following banks into account

IDFC FIRST Bank, IndusInd Indie, Kotal 811, Axis ASAP Account, Digibank by DBS. While both ICICI and HDFC also offer online account journeys, both of them drop them from a lead stage and you will need to either visit a branch or an agent visits home to complete the process and hence these have not been considered.

To understand how to compare the competition, I did a small survey amongst users on what are the perceived values for different features of the account. The results of that is as below.

Taking the important features from the list above, here is how the main competitors stack up on feature set. All features are rated on a scale of 1-5 with 1 being the worst and 5 being the best

Given above, IDFC FIRST Bank's main right to win are in the categories of Monthly interest credits, Good App and Zero charges on savings account transactions. This is substantiated by the reviews on various platforms as well.

Understanding the Users

I spoke to multiple users of the Product to understand the profile of the customer who use IDFC's Savings Account product.

Details of the users spoken to and their characteristics are as below.

I also looked into IDFC's internal data to look at customers who generally build balances and provide good ARPU. The main segments which came out here are

• Self Employed - Professionals (Doctors, CAs, etc). Predominantly Male, Age 30-50
• Home Makers - Predominantly Female, Age 35-55.
• Retired People - Keep their savings balances for high interest rate. Male 70%, Female 30%. Age 60-75
• Salaried People with high income - Typically keep it as one of the investment portfolios for higher interest rates

Based on above data, we see some distinct patterns emerging

• People who value low transaction fees, are self employed professionals and want a good hassle free account
• People who have high salaries, are shrewd with their investments and consider savings account as liquid investment as part of their investment basket and are looking for high returns.
• Home Makers who are looking for good place to keep their savings and use it for day to day transactions.
• Retired people who are looking to keep their liquid savings in an high interest rate account.

A plot of these and their typical charactersitics are given below

We can prioritise the ICPs using the reference prioritisation framework below

Basis above one can identify ICP 1, and ICP 3 for as the prioritised user profiles we can target digitally for scale, primarily due to

• Being high on adoption
• Large enough TAM
• Having ability to maintain balances, though not as high as ICP 2 and 4

Product Maturity Stage Identification

Savings Accounts of IDFC FIRST Bank is in Mature stage of adoption due to the following reasons

• IDFC used to acquire roughly 1 Lakh accounts digitally per month at a cost of Rs 100/account per month before certain calls were taken to increase the quality of portfolio. Even post strict restrictions, it still acquires around 25K users/month and builds balances of Rs 150 Cr/Month
• There is strong WOM about the product. It gets discussed in lots of youtube videos, investment forums and over half the users I spoke to said that they were referred to IDFC by Friend/Family
• Certain channels are hitting their saturation point (i.e. increasing scale is coming at increasing marginal cost). This include mainly searches (brand). Organic traffic has also started plateauing.
• Retention is decently high at scale. Over 65% of users obtained in a particular month keep an average balance of Rs 80,000 in account. This number is getting pushed to near 75%
• Being the main product of the 5th largest private bank in India, there is sizeable scale that also gets driven by offline distribution to the product which also has spill over effects on the online flow.

Current acquisition channels for the product

A view of current digital acquisition channels and relevant metrics are given below. We don't measure LTV separately for different channels but rather use cost as percentage of balance as core metric to evaluate channel quality. While we understand that different customers can get different LTV, LTV for a bank is measured basis many parameters including products per customer, cross sell potential, AUM etc. and is fairly complex to estimate for this project.

IDFC Spends Roughly XX Cr per month in paid acquisition and another YYL in referral pay outs. Breakup of paid, organic and referral channels in use are as follows. IDFC Doesn't currently have any integrations

The reason why I feel Organic Direct Search Channels are already saturated or nearing saturation are because for the top volume generic keywords, IDFC already typically ranks in the top 10 for most of the keywords. A list of these branded/non branded key words are as below

Clearly, it can be seen that for generic keywords, IDFC ranks very high but for most branded keywords the first page is fully populated the brands URLs. It is also seen that cost of acquiring customers through competitor keywords is high.

Given above data, I feel that there are 3 channels that show promise in further optimising user growth

• Paid Ads - Generic SEM using better targeting to improve user quality
• Increase the contribution of Referral to improve user quality, retention and improve costs
• Create a new channel of push organic using content loops (this is not being actively done now).

We will now get into more detail on how each of this is done.

#1 Paid Ads

Step 1 → We will define the ideal cost for balance acquisition, the benchmark for this is to be in line with branch base acquisition costs. This is between 1%-1.5%. So the target is to get the generic keyword cost of acquisition from current around 3% to around 1.5%, effectively halving itStep 2 → As decided earlier, we are specifically targeting generic keyword search specifically for the target segments of ICP 1 i.e customers who are self employed professionals (doctors, CAs, lawyers).Step 3 → Broad strokes of Search Ad campaign are as below

Campaign selection

We will select the campaign with the objective of bottom of funnel here as there are other organic methods creating the top and middle funnel. So the objective set here will be funding of atleast Rs 10,000 in the account. The signals can be passed back to Google by pixels placed in the success page after funding is completed in the journey. Additionally we will also pass an enhanced conversion signal on funding being maintained after T+4 days as it is found through empirical analysis that funds maintained till 4 days after account opening leads to higher retention rates.

Geography Selection

We will restrict the campaigns to pin codes which are within 50 km radius of where IDFC branch is present as we have

Keyword Selection

Keyword research for most obvious keywords like savings account for self employed, savings account for doctors, savings account for CAs, savings account for lawyers etc have very low search volume and hence don't yield any scale.

We will need to think on adjacent keywords (i.e. keywords used by these professionals otherwise) where the cost is low and can be used to scale. Some of the keywords and their cost per click are given below. We will use current conversion metrics for other search based channels to arrive at the cost of balance metric for these keywords assuming everything else remains same

Method to Account Open Cost Is Arrived As below

Click to Account Open Conversion Rate = 0.5%

Balance / Avg account open = Rs 40,000

Hence if CPC = X, this leads to 0.005 A/Cs opened which leads to 40000 * 0.005 i.e. 200 Rs in Balance for 1 click. Hence cost of balance in % is X/200 %. For example if CPC is Rs 5 then Cost of Account Open is 5/200% = 2.5%

Example Copy to be used for these given ICP are as below

Savings Account Tailor Made for Doctors

Open A/C in 5 mins online. Monthly interest credit of 7.5%. 0 Charges on Transactions

Best Savings Account for your profession

Fully digital A/C opening. 7.25% interest credited Monthly. Only 10K average balance

I would allocate around 5% of monthly budget of 2.5 cr in trying out the new platforms

#2 Content Loop​

I've not come across any good content loops that are specific to savings account so far. The most memorable Ads from my top of mind even are around the reward points being selectable. Scapia uses a content loop of picture of person travelling abroad.

For the purpose of content loop, the ICP we are choosing is the Savvy investor. The hook we will create is around portfolio returns.

Why this?

Because savvy investors have literal competitions on who could do better. While they dont want to show off their portfolio value, they definitely want to show off their portfolio returns.

It might seem a bit off from the core savings product but IDFC also offer integration partnership with ICICI Direct for trading creating a 3-in-1 savings account. IDFC also offers a great mobile app where you can track your entire portfolio and gains made on the account. So the content loop is as follows

Hook

Hey, I made X% gains in my portfolio this week/month and I was able to do all of it from my IDFC FIRST 3-in-1 Account?

Generator

We can offer a provision for the user to generate the content from the IDFC App directly from the page for investments which gives a great summary of investments. We will need to make sure that this content is only about portfolio returns and not value. Extra points if we can also create a competition within IDFC FIRST users and give what percentile the user is in the set of users using IDFC App

Distribution

• Given this will be user generated content, primary distribution network should ideally be at the user's hand. i.e. sharing through social media specifically Whatsapp, Telegram and Reddit which are rife with people looking for investment advice and inspiration
• A parallel distribution loop can also by created by IDFC in its app and social feeds showing the top investors with high returns on IDFC Apps (thus prompting more users to share their own returns).

#3 Referrals

In my research of speaking to current users it is clear that people already like IDFC and would like to refer it primarily for high interest rates and good app. IDFC also awards Rs 250 the maximum allowed amount by RBI for account opening to both referrer and referee.

Current referral flow works as follows.

Link to Image: https://drive.google.com/file/d/1qb3s81jt_XfjrlF_oXVYUgrfdV1zNHbq/view?usp=sharing

Here are things that work about the current referral

• There are a couple of entry points for refer and earn flow.
• The message that is sent to users on clicking the refer through Whatsapp is good. There is an unique link for every user. There is no referral code which is good.
• The referral link directly takes the customer to the onboarding flow
• There is a decent reward for every referral.
• There is a place to track the status of referral but it doesn't up unless the user has completed the journey.

Heres what we should improve about the referral flow to really increase its contribution and get quality users to the bank

• Need more entry points to the referral flow. Particularly given a banking app, there are many flows that can lead to potentially validated referral flows. Some examples are
• After the completion of a successful payment/ money transfer, ask for feedback and then for referralOn first day of the month, after the monthly interest credit happens, send a PN to the user if they were happy with the monthly interest credit and if they ware willing to rate us. If they give a good rating then ask for a referralIf a customers service request gets resolved, ask for CSAT. If CSAT is good then ask for referralOn monthly EMI deduction, congratulate the user for successful payment and good credit behaviour. Prompt the user with an NPS question and if the user selects 9 or 10, then ask for a referral
• After the completion of a successful payment/ money transfer, ask for feedback and then for referral
• On first day of the month, after the monthly interest credit happens, send a PN to the user if they were happy with the monthly interest credit and if they ware willing to rate us. If they give a good rating then ask for a referral
• If a customers service request gets resolved, ask for CSAT. If CSAT is good then ask for referral
• On monthly EMI deduction, congratulate the user for successful payment and good credit behaviour. Prompt the user with an NPS question and if the user selects 9 or 10, then ask for a referral

• Get them to refer more users continuously. Given the platform currency in banking app is money itself, offer them slightly higher interest for every user they refer. For example 0.05% increase in monthly interest rate for every user they refer. We should also put in exponential reward for someone who refers 100 people, offer them a big prize, such as a foreign trip.

• Make the tracking journey a bit better. Currently it only shows people who have successfully completed the whole journey. Make sure WIP users are also shown and there is an option for the user to nudge their friends/family.

Conclusion

• IDFC Savings account is already a mature product but it operates in a proper red ocean with lots of competition.
• There are some solid features like high interest rate, zero charges and monthly interest credit which provide a lot of product differentiation to IDFC and it has gotten strong WoM
• Current acquisition is primarily driven by organic and paid efforts. referrals contribute to a small amount
• To grow the acquisition further, the main goal is to reduce cost and sustain further scale
• I have selected a sub segment of paid marketing, content loops for organic and referrals to put together a strategy for acquisition growth as these showed the most promise amongst the available options.