Abhishek Sinha XIMB
Jun 14, 2015
Abhishek Sinha XIMB
BRANCH BANKING TO DIGITAL BANKING - THE CHALLENGE
EXECUTIVE SUMMARYDigital Banking vs. Branch Banking
Road Map for Implementation
Primary Research – Survey Statistics Secondary Research Industry Research and
Growth Predictions
SWOT Analysis Future Scope of Products
Building Blocks Strategy
Inclusion
The Digital Banking Promise Emerging Trends
Fair price with
transparency
Immediate, high-quality
interaction & processing
Rich spectrum of
products
Enhanced revenue model
Integrated IT infrastructure
Lean channel and
organization structures
Outside interactions
Source: A.T. Kearney and EFMA Global Retail Banking study
INTRODUCTION
Mobile app suite
Electronic wallet solution
Personal finance tool
Video chat function
Crowdfunding
Person-to-person payment
Social investing
Gamification
Other
0%20%
40%60%
80%100%
93%
69%
66%
28%
17%
10%
3%
3%
3%
Product and Service Enhancements Leading Change
Inside operations
PRIMARY RESEARCH INSIGHTS
3%
64%6%
10%
8%10%
Age Group<20
21-30
31-40
41-50
51-60
>60
5%
16%
10%
4%5%
53%
8%
OccupationBusiness
Private Service
Public Service - Banks
Teaching
Self-employed
Student
Retired
Total Number of Respondents : 102Please Note : Some questions were multiple-select
Branch Digital0
20406080
100
23
87
Banking Preference
Branch Digital0
102030
1420
Banking Preference (Age 31 & Above)
Branch
Officia
ls
Web
Searc
h Engin
es
Frien
ds & Fa
mily
Newsp
apers
Others
03060 45 54 59
279
Digital Banking - Information Sources
1 •Information Security
2 •Control
3 •Trust
1
•Convenience
2
•Time of Transaction
3
•Ease of Use
Reasons for preferring Branch Banking Reasons for preferring Digital Banking
Points to Note1. The reasons for
choosing Digital and Branch Banking vary widely.
2. The sources of information for Digital Banking is incredibly less from the branch itself, and more from online sources and friends/family.
PRIMARY RESEARCH INSIGHTS
0306090
79
4929 31
74 6543 40
22
Branch Banking - Uses
0306090
3354
0 021
1130 29
84Digital Banking - Uses
Trust
Convenience
Ease of Use
Information Security
Personal Assistance
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00
7.735.94
6.325.56
4.772.72
6.252.071.87
1.76 1
•Ease of Transactions
2
•Quickness of Transactions
3
•Ease of Approach
4
•Online Banking
5
•Personal Banking Assistance
6
•Branch Query Resolution
7
•Customer Care Facilities (Telephone and SMS)
Banking Service Satisfaction IndexBanking Service Importance Index
Points to Note1. Digital Banking is mainly used for Fund Transfer purposes. There is huge scope for its penetration in other aspects of banking.2. Customers give maximum importance to Trust, Convenience and Information Security when it comes to Banking. Digital Banking
scores high on the second aspect but doesn’t match up to customer expectations in the other two factors.3. Banks fall short in Personal Assistance and Customer Care Facilities departments, indicating a need to redesign CRM processes.
SWOT ANALYSIS
• Wide spread of branches
• Enormous customer base
• Mediocre publicity
• Poor image of certain products
• Stringent policy measures
• Entry of NBFCs
• Growing rural market
• Cross selling opportunities
Strength Weakness
ThreatOpportunity
DIGITAL BANKINGBRANCH BANKING
• Insufficient law• Foreign banks
hit
• Loan solution for MSMEs
• Increased demand
• Compound talent shortage
• Poor CRM• Lack of
security
• Competitive advantage for economies of scale
• Rich customer resources
Strength Weakness
ThreatOpportunity
INDUSTRY RESEARCH & ANALYSIS
Asia
ASEAN and Australia
Greater China
India
Japan and South Korea
0200
400600
8001000
12001400
16001800
670
60
380
100
170
1700
150
900
450
200
20202012
Present and Potential Digital Customers (in Millions)
Source: McKinsey - How to prepare for Asia’s digital-banking boom
Source: BCG – Indian Banking 2020
Top Trends - Indian Banking Industry by 2020
1 •Mortgages to cross Rs 40 trillion by 2020
2 •Wealth management will be big business with 10X growth
3 •“The Next Billion” population will be the largest segment
4 •The number of branches to grow 2X; ATMs to grow 5X
5 •Mobile banking to see huge growth and will redefine transaction banking paradigm
6 •Customer Relationship Management (CRM) and data warehousing will drive the next wave of technology
7 •Banking margins will come under pressure
8 •New models to serve the Small and Medium Enterprises
9 •Investment banking will grow over ten–fold
10 •Infrastructure financing to hit over Rs 20 trillion on commercial banks books
ROADMAP for IMPLEMENTATION
Customer Understanding
• Analytics based segmentation• Socially informed knowledge
Top-line Growth
• Digitally enhanced selling• Predictive marketing• Streamlined customer processes
Customer Touch Points
• Customer service• Cross channel coherence• Self service
Process Digitization
• Performance improvement
Worker Enablement
• Working anywhere anytime• Broader and faster communication• Community knowledge sharing
Performance Management
• Operational transparency• Data driven decision making
Customer Experience
Operational Process
Business Model
Unified Data & ProcessesAnalytics Capability Digital Capabilities Business & IT Integration
Solution Delivery
Building Blocks of the Digital Transformation
Digitally Modified Business
• Product/Service augmentation• Transitioning physical to digital
New Digital Business
• Digital products• Reshaping organizational boundaries
Digital Globalization
• Enterprise integration• Redistribution decision authority• Shared digital services
ROADMAP for IMPLEMENTATIONStrategic Positioning
1• Find value
proposition targeted to the segment identified.
2
• Enter the market with four to five simplified core offerings. Ensure a couple of necessity products are included.
3
• Offer personalized web experience, so that customers receive recommended products based on digital data
4
• Introduce a social and mobile-centric dimension, in which latest digital technologies and platforms would be used to enhance their reach and offering
Channel Offerings
1• Make multichannel
access a core feature of the value proposition.
2
• Inculcate a light physical presence and agents to enhance the customer experience, as well as to promote trust and branding.
3
• Foster affinity and loyalty with fun ways to engage younger customers (selective gamification of certain aspects of banking).
4
• Foster a cross-partner ecosystem allowing creative collaboration and formation of communities and integrated applications.
Shifting Strategies
1
•Shift from - Branch-centric, product-focused model. This is at best a follower strategy in Digital Banking.
2
• Shift to - Self-directed digital-centric model. This is a more proactive approach where customers are empowered to do their own banking
Points to Note:1. The digital future for banks will come in the form of the end-to-end digital bank. 2. A near-term digital strategy is deploying technology to reduce costs and increase effectiveness across elements of the sales
process.3. The impetus for the end-to-end digital bank that is now being pioneered by innovative attackers will, however, only become
stronger as the young digital generation gets older and wealthier.
ROADMAP for IMPLEMENTATION
Rural India – Inclusion of the Last Household
Urban India – Inclusion of the Older and/or Orthodox Population
CRMImprove CRM by improving
query handling and approachability
Customer CareImprove customer care facilities by providing training to improve
efficiency
Personal Banking Assistance
Introduce and/or sharpen personal banking assistance
Knowledge SharingTrain employees in the art of providing knowledge to new,
digitally un-evolved customers
Go MobileTarget Mobile Phone banking
as the medium to spread reach into the rural sector
Bank Village KiosksAssign registered kiosks in
villages to provide basic banking facilities to residents
Micro FranchisingAllow local players to operate their own banking franchises
with due support and verification from the company
Infrastructure Development
Play a pivotal role in building rural infrastructure
CASA
Present
• Drawn-out physical process, based at the branch
Future
• Online portal for form submission and identity verification
Loans
Credit/Debit Card Applications Forex Services
Insurance Wealth Management
FUTURE OF PRODUCTS WITH DIGITAL
Present
• Paperwork and processing done at the branch
Future
• Online request submission
• Verification process integrated with UID.
Present
• Already exists
Future
• Propagation of ‘smart’ chip based cards
Present
• Limited availability and minimal use
Future
• Ability to trade currencies through bank accounts, similar to demat accounts
Present
•Drawn-out physical process, based at the branch
Future
•Online portal for form submission and identity verification
Present
• Ever increasing demand
Future
•Hyper-connected, high-speed access through mobile channels
CONCLUSION
Learning from the Analysis1. The Indian banking industry is poised for change, both in terms of demand as well as in terms of
technological advancement.2. Bridging the digital divide is the most important challenge facing banks. This challenge has two
facets:i. Bridging the gap between conventional bankers and digital banking.ii. Reaching out to the rural population.
3. ING Vysya has to implement a step-wise approach towards the shift from Branch to Digital Banking.
4. The challenge lies in adopting the change in mindset as well as concentrating on improving those very same features which are inherently deficient in Branch Banking for the success of Digital Banking.
5. Some of the important points to note towards the Digital Banking transformation include:i. Improved CRM systems.ii. Improved customer support and personal assistance.iii. Knowledge sharing.iv. Demographic, financial and social inclusion.
6. It would help ING Vysya immensely if they could be the first mover towards this change. However, a strategic focus towards the long-term, including stakeholder development and future sustainability should be kept in mind while driving towards this change.
SOURCES & REFERENCESHow to prepare for Asia’s digital-banking boom
• McKinsey Report
Digital Transformation: A Roadmap for Billion-Dollar Organizations• Capgemini Consulting
World Retail Banking Report 2013• Capgemini
Analysis of SWOT on Internet Banking• Ulster University
Banking in a Digital World• A.T. Kearney & Efma
The Digital Challenge in Retail Banks• Bain & Company
Indian Banking 2020 - Making the Decade’s Promise Come True• Boston Consulting Group
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