Marketing in Retail Banking
Retail Banking unlike Corporate Banking is primarily driven by number of customers each bank possesses.
Bank Marketing can be defined as
'the creation and delivery of customer - satisfying services at a profit to the bank'
'the matching of bank's resources with the customer's needs in the most profitable manner'.
Customer is the centre of attraction in retail banking and marketing and all the activities have to be
focussed towards
(a) Identifying the customers' needs,
(b) Developing appropriate products to satisfy their needs,
(c) Providing them with efficient delivery channels for availing the products.
(d) Making them avail the products continuously.
Fundamental ingredients of an effective marketing mix in retail banking which are as follows:
(i) Product
(ii) Price
(iii) Promotion
(iv) Place
(v) People
(vi) Process
(vii) Physical evidence
The success of the seven Ps and the marketing strategies are measured only by the responses from the
customers from the point of view of need satisfaction.
Delivery Channels in Retail Banking
Customer satisfaction has to happen through different channels and choices are to be offered to
customers to experience the optimum channel mix for maximum satisfaction.
Direct channels may be the best fit for a conservative customer whereas young and tech savvy customers
may opt for remote channels.
The channels through which retail banking services are offered are illustrated below:
Branch
The transactions carried out in the branch premises infuse a sense of confidence in the minds of the
customers that they are not only physically involved in the transactions but also feel the service
experience at the branch.
Though customers have accepted the electronic channels of delivery in retail banking with both hands,
they still want to transact personally at the branch for their banking requirements. To put it short, they
want a human intervention for their services than simply go through on-line or mechanical interventions
like ATMs and Internet and Mobile Banking.
Branch layout may be broadly defined as the system of locating the various service facilities within the
Branch in order to deliver the most convenient service to the customers.
"Personal Banking Branches" enhance the delivery effectiveness of services by prescribing TAT (Turn
Around Time) for different retail loans. Only the formalities for opening the accounts are completed at the
branch level and opening of accounts, issue of Pass Book/Cheque.
Book, Debit Card, PIN etc are carried out through a centralised back-office mechanism.
The areas of operations of Extension Counters were restricted to a closed group like Courts, Educational
Institutions like Schools and Colleges or a specific company in their premises.
ELECTRONIC/REMOTE DELIVERY CHANNELS
Automated Teller Machines (ATMs)
There are basically two types of ATMs to deliver services to retail customers.
1. On Site ATMs and
2. Off Site ATMs.
On Site ATMs are intended to offer the facility of Cash Withdrawals, Cash Remittances, Balance Enquiry
etc., at the branch premises itself.
Off Site ATMs are designed to be situated away from the branches at convenient and busy locations to
enable the customers to access it for their different needs but not necessarily from the branch.
"National Financial Switch" was initiated for ATM operations.
ATMS are always complaint prone because of the break downs and cash out situations.
These two faults would result in reputation risk for the bank and may result in customer switching also.
Point Of Sale Terminal (POS)
Point of Sale terminals are the enablers of payment of credit and debit cards in merchant establishments.
Whenever a customer makes a purchase in a merchant establishment.
Reserve Bank of India (RBI) allowed cash to be withdrawn from any merchant establishment with a POS
terminal. The RBI has, however, put a ceiling of Rs 1,000 a day on withdrawal of cash at merchant
outlets using debit cards.
Mobile Banking
Globally, mobile banking initiatives were stared by Wachovia in 2005 and the full fledged mobile browser
in 2007. Banking can be done at your finger tips and right in the place where you are. It is convenient,
simple and readily accessible.
Internet Banking
Internet banking would have great implications on
(1) Internet commerce
(2) new types of electronic retail payments
(3) electronic retail banking
(4) the movement more generally of retail financial services to electronic delivery, including insurance,
discount brokerages, and mutual funds
Internet Banking as a service and channel was initiated by foreign banks and new generation private
sector banks in the past decade. The level of acceptance of Internet Banking, generally, from the public
sector bank customers was initially lukewarm though some banks were able to push it hard.
Delivery Models
The success of the Retail Banking depends on how the products and services are delivered
to the customer. Delivery effectiveness in physical channels is determined more by the
persons who are delivering the services.
The three important human interventions in physical channels are
(i) Internal Customer - Staff of the Branch
(ii) Specialised Marketing Personnel
(iii) Direct Selling Associates (DSAs).
In many of the public sector banks, retail banking is carried on only as a separate
departmental activity and not as a Strategic Business Unit (SBU).
DEDICATED MARKETING MANAGERS
1. Dedicated Marketing Managers were appointed in addition to existing internal human
resources.
2. These specialist Marketing Managers (MBAs in Marketing) were young and energetic and
recruited from the campuses of management Schools.
3. Some banks appointed them in Junior Management and some other banks in middle
management.
DIRECT SELLING AGENTS (DSAS)
1. DSAs are agencies appointed by banks to source business for them on a fee basis.
2. DSAs are primarily engaged in sourcing Credit Cards and Retail Loans.
3. The employees of the DSAs missell credit card products and make the customers fall into a
debt trap by misusing the cards.
4. Same is the case with misselling of retail loans and in this space, the pricing for the loans
are not explained clearly.
5. Ultimately this will result in dissatisfaction for the customers and reputation risk for the
bank.
Reputation Risk is always a threatening factor in the DSA model
DSAs focus on pure selling by pushing the products than effective marketing after verifying
the needs of the customers and their actual requirements.
SALES THROUGH TIE UPS
Banks enter into tie ups with the following agencies for extending different types of loans.
1. Tie up with Builders as a preferred financier for extending Home Loans to prospective
buyers.
2. Tie ups with auto dealers is another method adopted by banks for expanding retail credit.
3. Sanctioning of Personal Loans under tie up with different institutions is another model
adopted by banks to expand retail loans.
Even educational loans are disbursed on a tie up basis. Banks set up special counters during the
admission season in reputed educational institutions and offer education loans based on merit.
Customer Relationship Management in Retail Banking
There are three elements in CRM viz.
(a) Customer
(b) Relationship
(c) Management
Bank has to manage the customer by offering the right product/s matching the needs of the
customer.
Relationship with the customer means that the service quality of the bank should match the
customer expectations in total and result in total satisfaction of the customer.
Customer Relationship Management (CRM) is basically having a 360 degree view of the
customers and their profile, dynamically tracking their requirements, offering matching
products and services, cross selling relevant products to his changing needs and keeping
him happy for ever.
1. The objectives of a good CRM are aimed at to build long term profitable relationships with
specific customers.
2. Offer optimal products and services on a dynamic basis and achieve life time value from
customers.
3. The purpose of CRM is to increase the share of wallet of the customer with the banks'
services and increase the per customer profitability of banks.
Customer optimisation is the essence of CRM and can be addressed through three
dimensions viz.
(a) Acquisition of New Customers who are immediately profitable to the bank.
(b) Retention of Existing Customers who are most profitable and valuable to the Bank for
the longest duration.
(c) Expansion of the customer relationship with the bank encouraging more purchases and
shifting the less profitable customers to lower - cost delivery channels.
CRM is not just an option for the banks but a compulsion to achieve business synergies and
optimization of resources.
Needs for banks for implementation of a CRM program :
(i) Need to increase operational efficiencies
(ii) Need to derive more value from employees.
(iii) Increasing Competition in retail banking.
(iv) Rising NPAs.
(v) Increasing Importance of Fee Based Income.
(vi) Delivery Channel Efficacy
(vii) Application of Technology
IMPLEMENTATION PROCESS OF CRM IN BANKS
Different key issues in the implementation of CRM by banks are :
a. Business Processes
b. Information Processes
c. Information Systems
d. Internal Organisational Culture
IMPLEMENTATION STAGES IN CRM
There are four stages through which CRM is implemented
a.Identification of Customers
b. Classification of Customers
c. Interaction With the most Valued Customers
d. Customisation of Bank's Products and Services for Different Customer
Segments
Service Standards for Retail Banking
Banking Codes and Standards Board of India (BCSBI) prescribed the various compliance requirements for
the promises made by the banks for offering services to retail banking customers and they have codified
the promises into a document. This is a voluntary Code, which sets minimum standards of banking
practices for banks to follow when they are dealing with individual customers.
The Code has been developed to:
(a) promote good and fair banking practices by setting minimum standards while dealing with you.
(b) increase transparency so that you can have a better understanding of what you can reasonably expect
of the services.
(c) encourage market forces, through competition, to achieve higher operating standards.
(d) promote a fair and cordial relationship between you and your bank.
(e) foster confidence in the banking system.
BCSBI has spelt out various commitments regarding the various services which are detailed below for
information.
1. Objectives of the Code
2. Application of Code
3. Key Commitments
4. Our key commitments to you
5. Information - Transparency
6. General
7. Do Not Call Service
8. Interest rates
9. Tariff schedule
10. Terms and conditions
11. Advertising, Marketing and Sales
12. Privacy and Confidentiality
13. Credit Reference Agencies
14. Collection of dues
15. Security Repossession Policy
16. Complaints, Grievances and Feedback
17. Internal Procedures
16. Banking Ombudsman Service
17. Products and Services
18. Deposit Accounts
19. Clearing Cycle/Collection Services
20. Cash transactions
21. Stop Payment Facility
22. Cheques/Debit instructions issued by you
23. Branch closure/shifting
24. Settlement of claims in respect of Deceased Account Holders
25. Safe Deposit Lockers
26. Foreign Exchange Services
27. Remittances within India
28. Lending
29. Guarantee
30. General Information
31. Credit Card
32. Insurance
33. Mobile Banking
34. Credit Counselling Facility
35. Getting Records
36. Protecting Your Accounts
37. Secure and Reliable Banking and Payment Systems
38. Keeping Us Up To Date
39. Checking your account
40. Taking care
41. Internet banking
42. Cancelling payments
43. Liability for losses.
Unit - 15 : Technology in Retail Banking
Technology is the foundation on which the retail banking edifice is built across the globe.
Horizontal or vertical organized refers to whether data is available product wise on a stand-alone basis or
data is available customer wise on an integrated basis.
In terms of processes for integration of technology in retail banking, retail banks are using different
approaches to modularise and standardise their processes. Four distinct process models are :
(i) Horizontally Organised Model where individual process platform supports one product only. The sub
data in the model are not shared with other products and product platform.
(ii) Vertically Organised Model where functionality is provided across all products. In this model,
customer information is centralised. Centralised customer information builds common origination and
servicing processes across all its retail banking products.
(iii) Predominantly Horizontally Organised Model with some modularization within a product oriented feed
back. Customer data integration is available to a certain extent for other products.
(iv) Predominantly Vertically Organised Model is a hybrid model that offers common information for most
of the related services. The basic information is available across products for common services to the
various products.
Some of the user friendly features and benefits offered for retail banking by a major player in
the banking and financial services software solutions providers.
a. Advizor
b. Alerts
c. Customer Analytics
d. Wealth Management
Retail Banking unlike Corporate Banking is primarily driven by number of customers each bank possesses.
Bank Marketing can be defined as
'the creation and delivery of customer - satisfying services at a profit to the bank'
'the matching of bank's resources with the customer's needs in the most profitable manner'.
Customer is the centre of attraction in retail banking and marketing and all the activities have to be
focussed towards
(a) Identifying the customers' needs,
(b) Developing appropriate products to satisfy their needs,
(c) Providing them with efficient delivery channels for availing the products.
(d) Making them avail the products continuously.
Fundamental ingredients of an effective marketing mix in retail banking which are as follows:
(i) Product
(ii) Price
(iii) Promotion
(iv) Place
(v) People
(vi) Process
(vii) Physical evidence
The success of the seven Ps and the marketing strategies are measured only by the responses from the
customers from the point of view of need satisfaction.
Delivery Channels in Retail Banking
Customer satisfaction has to happen through different channels and choices are to be offered to
customers to experience the optimum channel mix for maximum satisfaction.
Direct channels may be the best fit for a conservative customer whereas young and tech savvy customers
may opt for remote channels.
The channels through which retail banking services are offered are illustrated below:
Branch
The transactions carried out in the branch premises infuse a sense of confidence in the minds of the
customers that they are not only physically involved in the transactions but also feel the service
experience at the branch.
Though customers have accepted the electronic channels of delivery in retail banking with both hands,
they still want to transact personally at the branch for their banking requirements. To put it short, they
want a human intervention for their services than simply go through on-line or mechanical interventions
like ATMs and Internet and Mobile Banking.
Branch layout may be broadly defined as the system of locating the various service facilities within the
Branch in order to deliver the most convenient service to the customers.
"Personal Banking Branches" enhance the delivery effectiveness of services by prescribing TAT (Turn
Around Time) for different retail loans. Only the formalities for opening the accounts are completed at the
branch level and opening of accounts, issue of Pass Book/Cheque.
Book, Debit Card, PIN etc are carried out through a centralised back-office mechanism.
The areas of operations of Extension Counters were restricted to a closed group like Courts, Educational
Institutions like Schools and Colleges or a specific company in their premises.
ELECTRONIC/REMOTE DELIVERY CHANNELS
Automated Teller Machines (ATMs)
There are basically two types of ATMs to deliver services to retail customers.
1. On Site ATMs and
2. Off Site ATMs.
On Site ATMs are intended to offer the facility of Cash Withdrawals, Cash Remittances, Balance Enquiry
etc., at the branch premises itself.
Off Site ATMs are designed to be situated away from the branches at convenient and busy locations to
enable the customers to access it for their different needs but not necessarily from the branch.
"National Financial Switch" was initiated for ATM operations.
ATMS are always complaint prone because of the break downs and cash out situations.
These two faults would result in reputation risk for the bank and may result in customer switching also.
Point Of Sale Terminal (POS)
Point of Sale terminals are the enablers of payment of credit and debit cards in merchant establishments.
Whenever a customer makes a purchase in a merchant establishment.
Reserve Bank of India (RBI) allowed cash to be withdrawn from any merchant establishment with a POS
terminal. The RBI has, however, put a ceiling of Rs 1,000 a day on withdrawal of cash at merchant
outlets using debit cards.
Mobile Banking
Globally, mobile banking initiatives were stared by Wachovia in 2005 and the full fledged mobile browser
in 2007. Banking can be done at your finger tips and right in the place where you are. It is convenient,
simple and readily accessible.
Internet Banking
Internet banking would have great implications on
(1) Internet commerce
(2) new types of electronic retail payments
(3) electronic retail banking
(4) the movement more generally of retail financial services to electronic delivery, including insurance,
discount brokerages, and mutual funds
Internet Banking as a service and channel was initiated by foreign banks and new generation private
sector banks in the past decade. The level of acceptance of Internet Banking, generally, from the public
sector bank customers was initially lukewarm though some banks were able to push it hard.
Delivery Models
The success of the Retail Banking depends on how the products and services are delivered
to the customer. Delivery effectiveness in physical channels is determined more by the
persons who are delivering the services.
The three important human interventions in physical channels are
(i) Internal Customer - Staff of the Branch
(ii) Specialised Marketing Personnel
(iii) Direct Selling Associates (DSAs).
In many of the public sector banks, retail banking is carried on only as a separate
departmental activity and not as a Strategic Business Unit (SBU).
DEDICATED MARKETING MANAGERS
1. Dedicated Marketing Managers were appointed in addition to existing internal human
resources.
2. These specialist Marketing Managers (MBAs in Marketing) were young and energetic and
recruited from the campuses of management Schools.
3. Some banks appointed them in Junior Management and some other banks in middle
management.
DIRECT SELLING AGENTS (DSAS)
1. DSAs are agencies appointed by banks to source business for them on a fee basis.
2. DSAs are primarily engaged in sourcing Credit Cards and Retail Loans.
3. The employees of the DSAs missell credit card products and make the customers fall into a
debt trap by misusing the cards.
4. Same is the case with misselling of retail loans and in this space, the pricing for the loans
are not explained clearly.
5. Ultimately this will result in dissatisfaction for the customers and reputation risk for the
bank.
Reputation Risk is always a threatening factor in the DSA model
DSAs focus on pure selling by pushing the products than effective marketing after verifying
the needs of the customers and their actual requirements.
SALES THROUGH TIE UPS
Banks enter into tie ups with the following agencies for extending different types of loans.
1. Tie up with Builders as a preferred financier for extending Home Loans to prospective
buyers.
2. Tie ups with auto dealers is another method adopted by banks for expanding retail credit.
3. Sanctioning of Personal Loans under tie up with different institutions is another model
adopted by banks to expand retail loans.
Even educational loans are disbursed on a tie up basis. Banks set up special counters during the
admission season in reputed educational institutions and offer education loans based on merit.
Customer Relationship Management in Retail Banking
There are three elements in CRM viz.
(a) Customer
(b) Relationship
(c) Management
Bank has to manage the customer by offering the right product/s matching the needs of the
customer.
Relationship with the customer means that the service quality of the bank should match the
customer expectations in total and result in total satisfaction of the customer.
Customer Relationship Management (CRM) is basically having a 360 degree view of the
customers and their profile, dynamically tracking their requirements, offering matching
products and services, cross selling relevant products to his changing needs and keeping
him happy for ever.
1. The objectives of a good CRM are aimed at to build long term profitable relationships with
specific customers.
2. Offer optimal products and services on a dynamic basis and achieve life time value from
customers.
3. The purpose of CRM is to increase the share of wallet of the customer with the banks'
services and increase the per customer profitability of banks.
Customer optimisation is the essence of CRM and can be addressed through three
dimensions viz.
(a) Acquisition of New Customers who are immediately profitable to the bank.
(b) Retention of Existing Customers who are most profitable and valuable to the Bank for
the longest duration.
(c) Expansion of the customer relationship with the bank encouraging more purchases and
shifting the less profitable customers to lower - cost delivery channels.
CRM is not just an option for the banks but a compulsion to achieve business synergies and
optimization of resources.
Needs for banks for implementation of a CRM program :
(i) Need to increase operational efficiencies
(ii) Need to derive more value from employees.
(iii) Increasing Competition in retail banking.
(iv) Rising NPAs.
(v) Increasing Importance of Fee Based Income.
(vi) Delivery Channel Efficacy
(vii) Application of Technology
IMPLEMENTATION PROCESS OF CRM IN BANKS
Different key issues in the implementation of CRM by banks are :
a. Business Processes
b. Information Processes
c. Information Systems
d. Internal Organisational Culture
IMPLEMENTATION STAGES IN CRM
There are four stages through which CRM is implemented
a.Identification of Customers
b. Classification of Customers
c. Interaction With the most Valued Customers
d. Customisation of Bank's Products and Services for Different Customer
Segments
Service Standards for Retail Banking
Banking Codes and Standards Board of India (BCSBI) prescribed the various compliance requirements for
the promises made by the banks for offering services to retail banking customers and they have codified
the promises into a document. This is a voluntary Code, which sets minimum standards of banking
practices for banks to follow when they are dealing with individual customers.
The Code has been developed to:
(a) promote good and fair banking practices by setting minimum standards while dealing with you.
(b) increase transparency so that you can have a better understanding of what you can reasonably expect
of the services.
(c) encourage market forces, through competition, to achieve higher operating standards.
(d) promote a fair and cordial relationship between you and your bank.
(e) foster confidence in the banking system.
BCSBI has spelt out various commitments regarding the various services which are detailed below for
information.
1. Objectives of the Code
2. Application of Code
3. Key Commitments
4. Our key commitments to you
5. Information - Transparency
6. General
7. Do Not Call Service
8. Interest rates
9. Tariff schedule
10. Terms and conditions
11. Advertising, Marketing and Sales
12. Privacy and Confidentiality
13. Credit Reference Agencies
14. Collection of dues
15. Security Repossession Policy
16. Complaints, Grievances and Feedback
17. Internal Procedures
16. Banking Ombudsman Service
17. Products and Services
18. Deposit Accounts
19. Clearing Cycle/Collection Services
20. Cash transactions
21. Stop Payment Facility
22. Cheques/Debit instructions issued by you
23. Branch closure/shifting
24. Settlement of claims in respect of Deceased Account Holders
25. Safe Deposit Lockers
26. Foreign Exchange Services
27. Remittances within India
28. Lending
29. Guarantee
30. General Information
31. Credit Card
32. Insurance
33. Mobile Banking
34. Credit Counselling Facility
35. Getting Records
36. Protecting Your Accounts
37. Secure and Reliable Banking and Payment Systems
38. Keeping Us Up To Date
39. Checking your account
40. Taking care
41. Internet banking
42. Cancelling payments
43. Liability for losses.
Unit - 15 : Technology in Retail Banking
Technology is the foundation on which the retail banking edifice is built across the globe.
Horizontal or vertical organized refers to whether data is available product wise on a stand-alone basis or
data is available customer wise on an integrated basis.
In terms of processes for integration of technology in retail banking, retail banks are using different
approaches to modularise and standardise their processes. Four distinct process models are :
(i) Horizontally Organised Model where individual process platform supports one product only. The sub
data in the model are not shared with other products and product platform.
(ii) Vertically Organised Model where functionality is provided across all products. In this model,
customer information is centralised. Centralised customer information builds common origination and
servicing processes across all its retail banking products.
(iii) Predominantly Horizontally Organised Model with some modularization within a product oriented feed
back. Customer data integration is available to a certain extent for other products.
(iv) Predominantly Vertically Organised Model is a hybrid model that offers common information for most
of the related services. The basic information is available across products for common services to the
various products.
Some of the user friendly features and benefits offered for retail banking by a major player in
the banking and financial services software solutions providers.
a. Advizor
b. Alerts
c. Customer Analytics
d. Wealth Management
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