SBI plans separate digital bank, to revamp app to ‘Only Yono’

SBI is looking to implement the revamp in 12-18 months, including migrating existing Yono customers to Only Yono.

“Only Yono is envisaged as the next generation of Yono which will make SBI ready to launch a complete digital bank with a leaner and modular architecture, more streamlined journeys, sleek and personalized customer-centric design and capturing value from ecosystems,” according to a notice by the bank seeking consultants for this initiative.

Globally, banks have experimented with the idea of opening separate digital entities to cater to a defined customer segment, providing a more targeted approach than ever before. In India, a Niti Aayog discussion paper released in November last year recommended a new segment of regulated entities – full-stack digital banks. To be sure, there is no separate licensing arrangement for such banks by the Reserve Bank of India (RBI), but lenders want to be prepared if and when the regulator floats such a proposal.

While the concept of digital bank is not standardized in India and is defined by individual banks, SBI believes that the Niti Aayog discussion paper on licensing of digital bank may result in formal guidelines by the regulator.

Launched in 2017, Yono crossed 70.5 million downloads as on 31 March 2021 and had a user base of 37.09 million. Earlier, the bank was actively looking to spin off Yono into a separate subsidiary with then chairman Rajnish Kumar saying in September 2020 point that it could fetch over $40 billion. However, the bank has not yet gone ahead with this plan. That apart, Mint reported last December that Jio Payments Bank, the 70:30 joint venture between Reliance Industries Ltd (RIL) and SBI, could see its formal launch delayed further as the company is still working on its business model.

“Though Yono has been adopted by customers at a very high pace, in order to consolidate its leadership position, it has been decided by the bank to give Yono a revamp as Only Yono not only in terms of features and functionality, but also in terms of ease of use and customer experience,” the bank said.

Experts have pointed out how exercises to create digital banks lead to cost savings. McKinsey said in its Global Banking Annual Review in December 2020 that in the past decade, some banks have dramatically optimized both revenue and cost for a small part of their business by creating a separate digital-only bank within the bank, essentially building the bank’s own disruptor.

“The digital-only bank can operate at very low cost, up to 70% lower in steady state compared with traditional operations. Creating such a separate entity often allows it to be launched faster, with fewer constraints related to legacy technology, and it allows banks to test concepts at lower risk before attempting to transform their entire business,” the report said, adding that over time, the bank can move parts of the legacy business to the new system.