How retail banking has changed

Till as recently as the nineties, banks were brick-and-mortar outlets. Customers were asked to stand in a queue and they were serviced manually by bank staff at their own sweet pace.

After reforms in the banking sector were flagged off in the nineties, banks made rapid strides on the technology front. Innovations like ATM, phone banking, Internet banking and mobile banking changed the rules of the game.

With core banking solutions in place, customers became customers of the bank rather than the branch. New generation banks started with these technology tools from day one, while public sector banks made efforts to transform themselves into technology-savvy banks, despite the many hostile factors at work.

The need for servicing customers at the branch has now reduced manifold, with technology-based solutions taking over many of the branch-specific functions. The role of bankers now has evolved into a marketing and advisory role for financial products.

Competition has forced banks to go beyond offering bank products to dealing in a wide range of financial products such as insurance and mutual funds.

New Generation Banks

Core banking, Internet banking, mobile banking, ATM, debit/credit cards and phone banking were some of the pioneering solutions brought in by new generation banks. A huge population waiting for these conveniences lapped them up.

These banks also used data warehousing and data mining technologies to effectively target their customers for cross-selling various products. The new banks were also able to bring about the first effective marketing strategies in the banking industry. Many state-run banks saw their long-standing customers suddenly switching over to these technology-savvy banks. These banks also found that attracting the youth to their branches was their biggest challenge. Hence, new marketing systems evolved among different banks in India.

There was no well-defined marketing structure in commercial banks till the nineties. The branch manager did all the selling for the branch and staff assisted him with the servicing of customers. There was no real brand-building or product differentiation at work. The same deposits and loans were offered under different names.

The entry of new generation banks resulted in cut-throat competition. It was only then that banks started thinking in terms of specialised marketing to target the different customer segments. It is interesting to look at how banks created different structures to sell their services at the branch level.

Relationship Managers

Banks dealing with high net-worth individuals (HNI) do not want to lose them. Hence, dedicated relationship managers are appointed to take care of such HNIs.

Banks recruit officers specialised in marketing and entrust them with the basic function of generating business for the bank. They are employed both for retail and commercial segments.

With technology making rapid strides, fewer staff are needed to man the branch counters. A few public sector banks have converted some general officers to marketing officers. Employees with a higher age profile and accustomed to desk work resist the move, as it involves field work.

Clerical staff in a few public sector banks who have shown interest and flair for interacting with people have been redeployed as marketing assistants.

Staff on Contract

Yet another lot of banks have started employing sales officers purely on a contract basis. This not only enables banks to reduce their manpower costs, but also compensates employees based on performance. Contracts are renewed annually depending on performance.

A few banks have formed a separate subsidiary for marketing the bank’s products and services. This enables them to manage their sales costs and avoid employing agents.

Some banks have employed direct selling agents, who are compensated on the basis of the business they generate. Many have been appointed for both selling retail products as well as for recovery of bad loans. Their loan recovery methods have, however, impacted the image of banks.

Cross-selling

A few banks are aggressively into cross-selling their products. When a customer enters into a relationship with a bank, he is persuaded to avail of its other financial products. Cross-selling has, however, rubbed a few customers the wrong way.

Some banks have also adopted telemarketing, both in-house as well as outsourced, as a strategy for selling their services.

In addition to the above strategies, the branch manager continues to be a marketer for the bank, with generating business being one of his key result areas.

It is very clear that in this competitive era, banks cannot operate without a marketing focus. Now, with competition being severe and the interest spreads under pressure, banks are laying emphasis on marketing.

With customers becoming more and more demanding by the day and the continuous emergence of new technologies, it is expected that bank marketing in India would continue to evolve.

(The author is Assistant Professor, Xavier Institute of Management and Entrepreneurship, Bangalore.)

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