With financial safety being the current flavour of retail banking,
Demand Deposit Accounts (DDA) are receiving much attention. While different banks may innovate on their DDA business in different ways to make them more appealing, their end goal is to offer the right combination of product, service and channel to each customer at the lowest possible price.
DDA products have undergone much innovation in past years – no-frills accounts, auto sweep-in sweep-out facilities and structured deposits are some examples. Going forward, pricing could drive product innovation, as it has done in other industries. Where regulations permit, banks could consider bidding over the Internet for deposit accounts, offering the best interest rates and other services to win customers. Introducing account number portability, which enables customers to use one account for all their financial transactions, throughout their lives, can improve customer convenience and retention. And it will serve us all well to remember that its post-sales service that translates into more sales…the engaged customer who brings more business and customer-specific products that prove most profitable!
Other industries can inspire further innovation of processes surrounding DDA products. If the retail industry is an example of how to optimize distribution, the manufacturing sector can provide valuable lessons on how to maximize production in low cost destinations and sales in high value markets. Once again, pricing can drive innovation – higher process automation can save costs which could be passed back to customers.
Just as all products are not meant for all customers, channels too must be segregated as per the needs of different segments. In the absence of channel optimization, all modes are open to all customers, leading to waste and inefficiency. Service-led innovation prescribes offering specific product-channel combinations to customers based on need or usage pattern, and maybe even setting pricing structures accordingly. Thus, a Gen Y customer who has been allocated online banking as his primary channel must be charged extra if he wants to open an account at a physical branch.
In fact, this concept can be extended to various stages of the DDA life cycle starting with information dissemination and prospecting right up to sales, querying and troubleshooting, by allocating activities under each to different channels. So, a bank may provide information about the features of demand deposit accounts online, but handle customer complaints at the call centre.
Although business or strategic innovation works with a larger canvas, it can still impact the DDA business in many ways. For example, a decision to enter near-shore markets may necessitate improvising on DDA products to make them suitable to the destination environment.
However, one thing is certain – the goal of strategic innovation must be consistent with that of other innovation approaches – which is to bolster optimal combinations of products, services, channels and customers across various lines of business.
Related Read: Demand Deposit Account(DDA) Framework with Proven Resilience
