Finacle Blog

That high risk equals high reward in the world of financial investments needs no elaboration. But should banks turn that logic on its head in certain situations to reward low risk? Allow me to explain.
Today, Indian banks have a large number of loan products in their arsenal. Both public sector and private banks are vying for the same customers with an array of lookalike products and incentives. Loans are designed based on the customers' risk appetite, and accordingly packaged as fixed, floating or hybrid-interest rate schemes.
If the borrower's credibility is established by CIBIL, India's first credit information bureau, he faces fewer hurdles while getting the loan approved. So far, so good. But although the bank has assured itself of a profitable customer in this process, the borrower gets no tangible reward for his creditworthiness. At best, he might be handed a non-monetary incentive, but only after availing of the loan or some other financial product. A bit one-sided, isn't it?
Perhaps there's an opportunity here for a bank to differentiate itself and attract new customers by incentivizing sound credit history. One possibility is to lower the interest rate on an existing loan of a customer who has paid every installment on time and consequently upped his CIBIL score. (The other side to this story is that the bank can penalize the borrower should he subsequently default. This will discourage customers with poor creditworthiness from needlessly signing up for the incentive).
Implemented right, such a scheme can be a win-win for both the bank and its customers.
1) Only genuine customers, with stable future financial inflows and the ability to make timely repayment will opt for the loan, and enjoy its benefits.
2) The bank can reduce its credit risk and non-performing assets considerably by lending mainly to safe borrowers.
3) The bank can leverage this lucrative offer to position its product favorably versus those from competitor banks.
4) By rewarding borrowers, the bank can bind their loyalty and enhance its relationship with them.
Low risk can indeed go hand in hand with high reward, after all!

Posted by Jatinder Singh Malhotra at 8:36 AM | Permalink | Comments (0) | TrackBacks (0)

A 62-year-old customer makes regular trips to the branch to discuss his finances. Why? Because he is not comfortable with the remoteness of self-service banking. Face-to-face interaction is what he wants. Surprisingly, even a 31-year-old customer - with Internet at home and a mobile in his pocket, who does all his banking online - now starts to visit the branch. Electronic banking suited him fine when he wanted to check his account balance or make spur-of-the-moment investments. Now, with a family to look after, he needs professional advice to manage his finances.
Despite numerous epitaphs being written for the branch, it is still the most important mode of banking. And the channel of choice for high value, complex transactions. Which is precisely why banks continue to invest in it.
Of course, branch banking has its limitations.  For one, it is not the preferred banking channel of Gen Y.  It comes with high infrastructure and human resource costs.  Finding staff with the required expertise and cross-functional exposure is difficult.  Hence, the branch must not be wasted in routine activity, but rather strategically used as a valuable resource to support big-ticket business. This calls for a change in mindset and moving the focus from transaction fulfillment to customer engagement.
These are some ways in which branch banking can reinvent itself:
• Offering advisory services to Gen Y customers with little understanding of financial matters
• Providing cross-functional training to all employees to facilitate quick undisrupted service and reduce overdependence on particular employees
• Practicing right selling, rather than hard selling
• Enhancing in-branch customer experience through ambience, facilities and service
• Setting up an optimal number of branches, or even a network of "thin" specialized ones based on market need

Can you think of any other?

Posted by Saraswat Sarkar at 7:29 AM | Permalink | Comments (1) | TrackBacks (0)

An HNI customer walks into the bank with her RFID- embedded banking card in her wallet.  The bank representative has never met her, but he not only knows who she is but also has her account details in front of him.
Well, if you thought this was fiction, you can think again. RFID technology is just one of the innovations that banks are using to change in-branch customer experience.
Channel innovation is one of the survival mantras for banks faced with ever-increasing customer demands and competitive threat. Banks are trying to meet customer aspirations by investing time, money and effort in not only setting up new banking channels but also improving the features of existing ones.
For instance, customers with Smartphones are now saved the trouble of going to an ATM or branch for depositing a cheque.  All they need to do is use the phone to scan the cheque and send the image across to the bank for processing.
ATMs are also getting smarter, as they are enhanced with additional functionality to allow customers to pay taxes, contribute to charity etc. Another example is that of disabled-friendly ATMs, which employ voice technology to enable the visually challenged to transact.  
While the above innovations are targeted at urban customers, banks have introduced others - such as kiosk banking and mobile money transfer - to encourage the rural unbanked to adopt formal banking services.
Finally, technologies on the ascendant, such as social media and cloud computing are opening up exciting new channel possibilities, with the promise of improved reach, engagement and efficiency.
What are the other trends that will reinvent the delivery of banking services? Do share your views.

Posted by Rajesh Patta at 5:47 AM | Permalink | Comments (2) | TrackBacks (0)

According to a global survey of bank customers, the branch and the Internet are the most important banking channels.  This is yet another study which has debunked predictions that new banking channels would render branch banking obsolete.  Branches thrive because customers still visit the branch to carry out high value transactions, purchase complex products and seek financial advice. And they continue to enjoy the regular patronage of senior customers and others lacking tech-savvy.
But here comes the flip side. In the same survey, with the exception of respondents from North America, less than half the participants from other regions said that the two main channels provided positive usage experiences.  This is cause for concern, because it is well known that poor service is a major contributor to customer churn.
With branches continuing to be as important as they are, banks need to take various steps to improve the quality of in-branch service and experience.  Some of these are listed below:
•         Improve branch-to-customer communication by providing information in a transparent and simple manner.  Also, communicate key information, such as that pertaining to changes in regulations and procedures, quickly and regularly to branch staff.
•         Provide functional as well as soft skills training. Rotate employees on the job, enabling them to gain cross-functional experience.
•         Reduce customer transaction/waiting time by eliminating unnecessary procedures, introducing technology and redesigning branches for smoother workflow.
•         Shift focus from transactions to customer relationships by focusing on customer needs.
•         Offer innovative products and services in line with customer expectations.
•         Establish customer retention as a branch KPI.
Not that banks aren't trying. Many have made significant progress in their branch transformation endeavors. For example, a large U.K. financial institution has introduced a feedback gathering device and information display screens within its branches, and improved customer satisfaction by 25%. A Singapore bank has integrated marketing, sales, services, channels and core banking to enable service staff with a unified customer view to improve the quality of each interaction.
Do you know of other banks, which have launched innovative measures to revamp their branches? Do tell.
http://www.hindu.com/biz/2004/01/26/stories/2004012600051600.htm
http://www.bai.org/bankingstrategies/marketing-and-sales/marketing-and-promotion/customer-engagement-model-for-branch-banking

Posted by Varun Goyal at 6:07 AM | Permalink | Comments (0) | TrackBacks (0)