ICICI Bank deploys AI, data analytics to offer digital credit to younger customers

In a bid to attract younger customers, ICICI Bank is making a short-term digital credit facility available on a selective basis by using self-developed algorithms based on data analytics.

“The new digital credit facility is the result of our experiment that we ran with an e-commerce platform, under which we offered a pay-later feature,” Madhivanan Balakrishnan, chief technology and digital officer at ICICI Bank, told TechCircle. 

The lessons learnt from the experiment led the bank to offer a “digital ‘pay later’ feature” to its customers via its mobile apps, he added. 

The executive said the bank noticed that many customers, who have no credit history, are looking for short-term credit, and that millions of young people are shopping online.

“This could be from shopping on e-commerce platforms such as Flipkart or Amazon to buying movie tickets on BookMyShow, or purchasing travel tickets from the likes of Yatra, or even ordering food from Zomato or Swiggy,” Madhivanan said. The instant digital credit line will enable the bank’s customers to undertake small-ticket purchases, he added.

Interestingly, startups such as Lazy Pay and Simpl also offer short-term credit for food, groceries and utility bill payments for 15-18 days. These payment options are integrated within apps such as Zomato or BookMyShow. Taxi-hailing apps Ola and Uber also offer similar token credit services.

ICICI Bank's new lending facility will be invite-only for a few lakh customers over the next week out of the bank’s 18 million digitally active customers, the tech chief said. The bank had gathered data  from different sources, both internal and external, to programme an algorithm that will assess credit risk profiles suited for the product, he said.

“We have used internal data, information from Credit Information Bureau (India) Ltd, and some data from customers that we gathered with their permission to come out with the back-end for the solution,” Madhivanan said, adding that the bank will invite more customers after 10 days, depending on response.

The product will be later made accessible via the retail banking channel and expanded to accommodate non-ICICI bank customers, said the tech chief.

Currently, the lending product has limited the average ticket size of credit with no interest to somewhere between Rs 5,000 and Rs 20,000 for a maximum of 45 days.

Madhivanan said the product was integrated using the UPI 2.0 framework, which allows credit profiles to be attached to identities on the basis of the state-backed Unified Payments Interface. This helps banks detect and attach overdraft accounts with savings bank accounts.

“We have tried to make it as seamless as possible. By integrating with UPI, you don’t need traditional physical tools, such as cards, which can add to costs,” the tech chief said. He added that the bank expects to use this tool to convert mature young customers into credit card customers down the line.

“The central idea is to look for new business models to generate more revenues,” Madhivanan said.

The bank plans to test the new product during the festive season with e-commerce companies as well.

ICICI Bank’s new initiative assumes significance as all private-sector lenders are looking to use technology to bring down the cost of customer acquisition, enable new products for more revenue or cut down time to market differentiated products.

In an earlier interview with TechCircle, HDFC Bank tech chief Nitin Chugh had said that the lender was extensively using artificial intelligence and machine learning to improve customer experiences and bring in new products to underserved segments.

Kotak Mahindra Bank tech chief Deepak Sharma also told TechCircle that the bank was using technology to boost its customer growth in a fiercely competitive market.

In an earlier interview, Madhivanan had said that ICICI Bank was using newer technologies as part of a strategy to bring down the cost-to-income ratio.