Posted at 12.26.2018
The Bank Industry is a unique service industry where customers are involved at both the initial and final periods of service delivery. Hence service delivery requires whole lot of effort from the firms part in ensuring customer expectations and needs are fulfilled to the fullest. When analysing the Indian bank industry, we observe that how they have evolved through the years with how customer expectations altered from traditional customers who seen branch to modern customers who would like convince sitting at their homes. The various sizes of service quality was also analysed to better understand the factors that would help fulfil customer prospects. The service blue printing of the industry was mapped to better understand the factors where customer connection happened. The importance of physical servicescape and how the same can be used as to improve client satisfaction was examined. Being in an exceedingly competitive industry, banks adopted various advertising tactics to lure customers with similar product offering across most banks and service being the only real differentiating factor. The final portion of the record was specialized in the industry analysis which helped know how RBI regulations in the original years helped develop a strong backbone for the Indian banking industry and how it could develop going forward and various opportunities which been around on account of the strong local demand in the Indian market.
A sound Banking system varieties the backbone of any country and India is not a exception with bank industry adding around 5% of India's GDP as well as making job for over 4 million people. Bank represents a essential link between the economic plans of the federal government and the various economic factors within the country. In the age of market oriented-economics bankers have become the most important financial intermediaries and act as a representation of the performance of the economy as complete. The focus of the survey will be on the Retail Banking segment.
The bank industry in India has been subject to major changes down from the pre liberalisation era when RBI (Reserve Standard bank of India) heavily governed the industry to the post liberalisation phase where limitations were eased and private as well as overseas banks played a much more significant role. The major developments which have been seen off past due in the Bank Industry are:
Retail banking will continue steadily to grow due to the strong local demand from the vast Indian demographic. Mortgage loans are expected to grow and mix Rs 40 trillion by 2020.
The new middle income consumer segment which is currently growing at an instant pace will accentuate the demand for low cost banking solutions in the future.
Branches and ATMs remain growing in order to better serve the huge bankable society of India. Low cost branch network with smaller sized branches will be followed for the same.
Mobile banking should come of age with increasing access of internet on the mobile phone. New era customers choose online banking instead of visiting the actual branches.
Banks will choose CRM (Customer Relationship Management), data warehousing and Business Analytics in a major way to reduce customer acquisition costs and improve risk management.
Margins will dsicover downward pressure both on retail and corporate banking due to increasing competition spurring banks to create more fees and improve operating efficiency.
Despite the IT saga of the banking industry starting in the mid eighties with RBI forcing bankers to automate services, it was only with the advancement of private sector banking companies was technology truly leveraged. Technology has now become an integral part of any bank's business strategy and is employed as an instrument for creating value and client satisfaction. The major applications are in the areas of:
Improving Customer experience through services such as Internet and Mobile Banking.
Reducing costs and enhancing efficiency
Business Intellect and Analytics in better targeting customers
Indian Banking industry can be grouped the following:
These are federal government controlled finance institutions and comprise of almost 90% of banks in the Indian banking industry. They further can be divided into: THEIR STATE loan company group (RBI is the owner of the majority stake in this group comprising of State Bank or investment company of India (SBI) and its own other associate banking institutions), Nationalized banking institutions (Punjab national bank or investment company, Indian overseas standard bank and oriental bank of business) and Regional rural finance institutions (RRB's). The state of hawaii group and nationalized banking institutions are collectively referenced as open public sector finance institutions (PSB's)
These are non-incorporated banking institutions where bulk stake is held by private individuals or are exchanged on the market. ICICI lender, HDFC lender, Axis bank or investment company etc. are categorized as this category.
These are multinational finance institutions headquartered in international countries which came into India post 1991 liberalisation. Citi standard bank, HSBC etc. are categorized as this category.
Apart from the people mentioned above, there are cooperative banks, non-banking financial companies (NBFC's), capital market intermediaries and state and central financial entities which are categorized as the broad spectrum of finance institutions in India.
The major competition Retail Banking industry may face is from the financial market segments. Traditional customers used to be risk averse as the new age customers tend to be risk taking and therefore invests a substantial portion of their savings in the currency markets expecting higher results. In addition to stock markets small level local investors could also take money straight from the people. Thus competition for the Retail banking industry is moderate to low.
The tangibility spectral range of the industry is as shown below:
Figure : Tangibility Spectrum for Banking Industry
Banking comes under the group of being intangible dominant because the only physical aspect is that of the documents one gets for the assistance. Most orders are done through electronic form with hardly any tangible components.
The customer goals of bank industry can be classified into 5 parts:
Figure : Customer Expectations
Simplified banking: Though bank has become superior through the years it still must be simple in conditions of process and services to improve banking experience for the customer
Service accessibility: Easy and reliable access to the service
Data Privateness & security: Protecting the customers Personal information and ensuring that their money and data is not miss used
Customer Serviceability: Creating a reactive, reliable and capable service model that may enhance customer satisfaction
Channel Amplification: Right mix of personal service and aided route for the orders is important for giving a rich and consistent bank experience for the customer
Banks generally attracts customers based on the pack of services they offer like a one who starts a bank-account wish to offer an ATM cards, DMAT consideration etc. from the same loan company itself. The client perception to this bundle thus plays an enormous role in the success of the bankers. The bundle markets well if the client gets the affordability as well as the perceived value. The importance of the same can be attributed to different income levels of the Indian human population. Banks can't entice consumers with basic services such as subsidized overdraft payment, debit card etc. To be able to attract modern customers, bank must focus on building lasting interactions that caters to all levels of the customer's lifecycle. Banking institutions need to deepen their understanding about the customers' needs to be able to make it through in face of competition in order to survive in the long run.
Some of the normal bundles in bank industry are:
In banks the primary service is usually the cost savings or current account. A typical bundle will contain other services like insurance, travel, credit facilities, online bank, mobile bank etc.
Loyalty things program as well as concentrating on customers with personalized offers such as discount rates at nearby restaurants when payed for using the bank's debit credit cards etc. have become popular of late.
Figure : Life Pattern of Bank Products
Zeithaml, Parasuraman and Berry designed a model where they found five sizes customers use when analyzing service quality. A similar can be used to measure the service performance of organizations in the industry. These measurements include:
In the banking industry, having experienced and polite personnel having the ability to win customers trust is of paramount importance in preserving long term relationship with banks. Banking institutions thus invest considerably in recruiting and training employees.
Banking industry is one where there may be no errors specially when dealing with customer's money. The ability of the lender to execute the promised service dependably and accurately is thus of paramount importance in making sure customers use the assistance provided by the lender.
When we analyse the tangible of the bank such as appearance of physical facilities, equipment, personnel, and communication materials, we see that modern banking companies are leading the general public sector lenders. But credited to evolution of retail banking so that customers rarely go to the lender nowadays as well as the understanding of people that public sector banks are safer, PSU banking companies tend to have the majority of the cost savings of the clients.
The willingness to help customers and offer them fast service is something which every bank offers priority to. Customer care centres have been created to handle any doubts or inquiries which customers may have in addition to the branches.
In order to build resilient romance with customers' bankers need to be give caring, individualized attention. Professionals have to be trained in order to make customer s feel valued.
When analysing the involvement of customers in the service delivery, we see that customer participation in the service delivery has been high over the years in the bank industry. However the customer's participation has advanced significantly during this time period. Within the last decade, we see that people used to be very traditional and risk averse and used to go the finance institutions and stand in queues for the service while nowadays people avail the a variety of services resting at their homes and hardly ever visit the genuine banks.
Few of the significant technologies which have increased customer participation in the service delivery are:
ATM machines: ATM is a self service technology which helped significantly reduce the cost of branch functions by separating small orders from the larger ones. This has significantly improved upon customer experience by minimizing the time taken in withdrawing cash.
Net Bank: With the progress of internet in India, almost all of the new era customers switched to online bank which advanced the customer's service experience as well as helped the banking companies reduce cost and improve functional efficiency. Customers though in the beginning feared the service citing basic safety reasons has now shifted to the web platform which gives a bunch of bank services.
Mobile Bank: Mobile Banking is still in its nascent phases but shows great promises in improving the client service experience by further simplifying the complete banking experience.
The diagram shown below depicts how customer participation has evolved over time and how customers are now becoming pioneers from paranoids.
Figure : Changing aspect of Customer Participation in the Bank Industry
The typical service blue print for a customer getting close a retail bank or investment company is as comes after:
Figure : Service Blue Print out of a typical service
The blueprint will have five components which include Physical Evidence, Contact Employee Activities, Customer Actions, Backstage Staff and Support Process.
Service blueprints supply the employees with an overview so that they can have understanding of the process followed. Regarding bank or investment company the physical data can be location of the customer table or location of the cashier counter. It is important the look of place should be such that customer has maximum convenience. The line of interaction between exterior customer and employees illustrates the connection which happens upon this front. This type of awareness should be designed so so as to facilitate the formation of a relationship.
"Moments of truth" creates the most vibrant impression of the assistance when the client interacts with the service company. By these encounters the customers receive an idea about the service quality provided by the business. Each point of contact of customer with employee decide the customer overall satisfaction will quality of service and their willingness to do business with the organization. Committing errors at initial level are extremely precarious plus they do have additive effect, because the failing at this time will cause higher dissatisfaction at succeeding levels.
In the situation of bank the moment of reality is when customer interacts with the client attention centre; second point in time of reality is when the customer connect to cashier. Just how cashier interact with the client becomes third instant of truth. As soon as customer enter the lender and enough time spend in bank relationship with the staff is moment in time of real truth for loan company. Any bad impression at any moment of truth can provide a poor impression to the client.
A services blueprint is an functional planning process which provides guideline about how to provide service, especially physical information, selection of staff, the support system, and the essential infrastructure needed to ensure smooth delivery of services by different route. For example, to plan how you will loan devices to users, a service blueprint would help determine how this might happen at something desk, what kinds of maintenance and support activities were needed behind the moments, how users would find out about what's available, how it would be examined in and out, and with what means users would learn on how to utilize these devices.
Services Blueprint help marketer how different route be made to deliver the services and should be able to show physical evidence of the services. In addition, it clearly identifies the role of the frontline personnel, the responsibility of backend personnel and also of the support staff in order to provide reliable and reliable services. Blueprint helps in organizing roadmap and efficient way of understanding the procedure sequence which will help provide service. Any mistake can be identified when the blueprint is followed by iterative process and changes can be produced so that there surely is no gap still left in the service provided and expected level.
Servicescape plays an important role in how customers connect to the service. In the banking industry we all types of servicescape consumption like for example ATMs (Self-service), Loan provider Branches (Interpersonal services) and Mobile Bank (Remote control Service).
Figure : Platform to comprehend Servicescape of the Banking Industry
On mapping the bank servicescape with construction shown above, the key inferences are:
The need for Physical environmental dimensions has decreased through the years with people seldom visiting bankers.
The most significant aspect is the internal response of employees in making the customers sensing appreciated and in creating a sense of confidence in them.
The behavioural aspects are also important in guaranteeing the bank is able to build a long-term relationship with the client.
Looking at the bank industry, we believe that servicescape may become a way to obtain competitive gain if leveraged with technology. In retail bank, the latest trends are towards expanding electronic servicescape where customers go through the bank services through the internet or even through mobile websites. Banks should thus invest in online servicescape which effectively let us the clients see tangible evidence of the service without actually being in the lenders. This is in line with how customers have been changing and will help finance institutions reduce cost and improve operational efficiency.
Banks are realizing that old fashioned promotion strategy in today's market condition is inadequate. Traditionally bank tried to attain every community people, but recent research demonstrates bank should purpose at micro segments. The campaign role now could be that they must target at building long-term relationship with customer by carefully selecting them. Financial institutions are knowing that their established promotion practices are inadequate for new market conditions as levels of customer defection in the sector grows up. So bankers are implementing new promotional strategies for their product and brand.
Advertising is highly public method of communication. In recent time role of advertising has gained considerably to market its product to both personal and commercial markets. Coupons, Discount, Interest, and insurance etc. are example of sales promotion. Trade promotions are also wanted to customer when lender services such as funding of car loan etc. are provided through the third party or vehicle industry. The bank provides incentives to their employees who offer superior performance. The main objective of advertising is to catch the attention of deal oriented customer rather than adding new customer. Immediate marketing involves linking to individual customer to gain both immediate response and also have resilient customer relationship. Corresponding to Ph. Kotler (Ph. Kotler, K. L. Keller, 2008), "direct marketing programs is the utilization of direct connection with consumers to handle their customers and deliver goods and services without needing the mediator of marketing. These stations are: direct email offer, selling on the catalogs, telemarketing, interactive television set, and computer sales presentations contacting for general public websites and mobile sites". The route includes immediate mailing, catalogs, telemarketing, interactive Television set, kiosks, websites, and mobile devices. This channel is now Main Avenue for service marketing. Now a day's viral marketing is becoming vital for advertising. This consists of paying people incentive to say positive about the lender product via e-mails, person to person and phones. Few banks have also used cross providing as promotion strategy to sell their product. When customer gets into into romance with the bank, the lender persuades the client to buy their other financial product. The company uses data ware cover and data mining technique to effectively aim for their possible client. Few promotional advertisements used by lenders are shown in Show 1.
When we analyse the Industry value chain, we see that banking industry is exclusive from the point of view that customers get excited about the starting as well as stopping of the value chain.
Figure : Value chain Research of the Banking Industry
One of the main element enablers of the banking industry is the human reference management where companies require very skilled and capable employees to comprehend and focus on the needs of the customer.
Figure : Porter's 5 pressure research of the Bank Industry
The Porter's 5 pressure analysis uncovers that the industry is overall unattractive scheduled to high competition as well as value leakage across the value string in conditions of option of substitutes.
The strength of the industry is terms of the restrictions which the RBI has imposed on the industry which can be seen from how Indian banking companies fared well compared to western counter parts through the 2008 crisis. Though there are numerous laws which a lender needs to satisfy in order to setup functions in India, these regulations have made the banking companies stronger in terms of handling unfavorable market situations. The bank industry has been growing at a wholesome rate of 16. 29% from 2011 - 2012. The weakness of the industry is within terms of the high distributor power (transitioning charges for customers is less, other suppliers like cards processing gateway also have high vitality) and the high buyer power who tends to switch finance institutions to get the best possible rates in the industry. The development of financial marketplaces in the country has also afflicted the industry with modern customers more risk consuming contrast to traditional customers. Due to these factors, we see that it is unattractive for a new player to type in the industry since there is limited chance to make profit. The general public sectors banking institutions also tend to have a very strong foothold against which new players will struggle to compete.
Figure : Market share of banking companies in the Indian bank Industry
In terms of opportunities, India being a country where only 57% of society has access to a bank-account (Source: Dun & Bradstreet India) there is still tremendous probable in portion the huge populace especially the under privileged. We also note that bank industry is one where technologies are adopted much faster than other market sectors. With new services like Online Banking, Mobile Bank etc. customers are now offered a wider range of services than was offered recently. Using the industry growing at 16%, and 43% of the Indian populace still lacking usage of financial services, it is noticeable that there surely is untapped potential on the market which various players can exploit.
In order to comprehend how the future of the banking industry will play out, one needs to understand how the bank industry in India has advanced over time. Looking at the past, we see that the bank industry was greatly controlled by the RBI with India being a developing nation lacking a stable currency. The post liberalisation era revealed how RBI eased rules to allow private and foreign players to better express themselves on the market.
With the introduction of strong financial market segments within the country, we imagine the role of banking companies in the country will change slowly and gradually. On analysing the finance institutions in India with those of developed countries we see that Indian banks have more loans in comparison to western bankers which maintain more bonds. So the role of bankers is more advisory in characteristics. We feel the same trend may happen in India once the bonds market segments are developed and then banking institutions would focus more on advisory income which is off balance sheet income. The shape below shows how proportion of other income has been increasing especially among the private banking institutions. The concentrate on customers will thus increase even more in the future.
Figure : Increase in Advisory Income
On a concluding take note, after careful research of the service components in the banking industry we see that bank is exclusive in way it consists of customer at the beginning as well as closing stages of the value chain. With the existing trends in banking industry as well progression of banking industry online with that of developed countries we see that the value of customers and employees for banking companies have increased even more than traditional times. For a company to compete, hence, it is important that it comprehends these aspects and offers services in a way which helps build long-term relationship with the clients.