Atish Bakshi XIMB
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Transcript of Atish Bakshi XIMB
Atish BakshiXIMB
Xavier Institute of Management Bhubaneswar
DIGITAL V/S BRANCH BANKING – A COMPARATIVE STUDY AND RECOMMENDATIONS FOR DIGITIZATION
Executive Summary
Background
Benefits to Stakeholders
Engagement Overview
Survey Results
Implementation Roadmap
Way forward
Banks need to redefine their business models to keep up with digitization to enhance customer experience. 50-70% higher levels of primary banking relation with customers is possible through digitization. Globally, around 78.8% of customers having positive banking experiences believed that their banks take care of their needs.
• For Customers: Positive Customer Experience, Enhanced Trust, Convenient, less time consuming
• For Bank: Reduced Costs, Increased Revenues, Broader Customer Base
• For Society: Greater financial inclusion, technological innovation, less costs of banking
Develop Strategy for Digitization, Develop systems and governance procedures for implementing digitization strategy, engage customers at digital touch points, use data analytics to gain deeper insights into customer needs, develop customized products/services
Aim for total digitization within 3-5 years. Gradual digitization of processes will reduce costs which could be re-invested in newer technologies. Enhancing customer experience should be the primary motive.
• 71.8% respondents most often use Digital Banking
• Time Constraint, Convenience, Regular Updates are important factors to consider.
• SWOT Analysis of Branch and Digital Banking
• PEST Analysis • Primary Research to derive
important factors for customer banking experience
• Plan for going digital and requirements for the plan
• Digitization Roadmap
BANKING INDUSTRY HIGHLIGHTS AND PROJECTIONS
Robust Asset Growth
• FY 13 Total Asset Size: USD 1.8 Trn
• FY 12 Total Asset Size: USD 1.5 Trn
• FY 10 Total Asset Size: USD 1.3 Trn
Credit off-take growth
• FY06–13, credit off-take CAGR = 22.8% (USD 991 billion)
• FY 14 Estimated credit off-take = USD1140 billion
Deposit growth
• FY06–13, deposits CAGR = 21.2% (USD 1274.3 billion)
• FY 14 Estimated deposits = USD 1452.7 billion
High ATM and Rural Penetration
• Estimated ATMs per million population to rise from 85 to 170
• Banking connectivity has increased from 67694 to 211234 villages in 2013
Sources: Planning Commission, RBI, Aranca Research
SWOT Analysis for Branch Banking
PERSONAL TOUCH
EASY TO ACQUIRE GOODWILL
MORE MARKET PENETRATION
BETTER GRIEVANCE REDRESSAL
STRENGTHS
CUSTOMER WAITING TIME
MAINTENANCE EXPENSES
DOCUMENT MANAGEMENT
FIXED TIMINGS FOR OPERATIONS
BRANCH LIQUIDITY ISSUES
WEAKNESSES
RURAL BRANCHES
SELF SERVICE BRANCHES
MSME SECTOR MAY PREFER
OPPORTUNITIES
DIGITIZED TRANSACTIONS
MORE INTERNET ACCESSIBLITY
NBFCs
TECHNOLOGICAL OBSOLESCENCE
THREATS
SWOT Analysis for Digital Banking
QUICKER TRANSACTIONS
LOW MAINTENANCE COSTS
EASY DATA ANALYTICS
ANYTIME, ANYWHERE
LATEST TECHNOLOGY
STRENGTHS
NO PERSONAL TOUCH IN SERVICE
DEPENDS ON INTERNET ACCESSIBILTIY AND LITERACY
SECURITY AND PRIVACY
INCREASED EMPLOYEE TURNOVER
WEAKNESSES
NEW DIGITAL PRODUCTS/SERVICES
PROCESS INNOVATION
THIRD PARTY PARTNERSHIPS (EG: E-COMMERCE STORES)
CUSTOMIZED CUSTOMER SERVICE
CONSUMER-SPECIFIC PRODUCTS
OPPORTUNITIES
TECHNOLOGY RISK
CONSTANT UPGRADATION OF TECHNOLOGY
THREATS
PEST Analysis for Digital Banking
Political Economical Social Technological
• Government’s Pradhan Mantri Jan-Dhan Yojana Programme
• SEBI includes NEFT and RTGS as payment modes for dividend and other cash benefits
• RBI has simplified the rules for credit to exporters
• GDP on the rise (expected CAGR 7% over 2012-17)
• Increase in lending to self-employed women (USD 31 bn in 2010 to USD 43 bn in 2012)
• 30-50% higher cross-selling of products than traditional banking models.
• Digital banks can have a cost-income ratio advantage of around 10-15% over traditional banks.
• More than 50% customers worldwide are thinking of switching or are unsure of staying with their bank in the next 6 months
• Globally, around 89.4% of Customers having positive banking experiences also trust their banks.
• Number of people using net banking rose to 7% in 2012
• India’s working age population estimated to grow at 3.01% CAGR over next 5 years
• Data Analytics• Big Data• Cloud • Indian banks
devoting around 15% of total spending on technology
• Estimated 9.8% increase in spending on IT products and services for Indian banks
• Tele-density in rural India up to 40.8% in February 2013 from <1% in 2007
Benefits of Digital Banking
Faster, secure
processing
Instant High Quality
Information
Wide range of products
Price transparency
Lean channel structure
Streamlined governance
Integrated IT infrastructure
Enhanced revenue model
External Benefits
Internal Benefits
Improved, digitally enabled risk analysis and
compliance tools
Multichannel Integration
Digital tracking of client interactions, leveraging “big data”
Increased wallet share, lower Opex, revenue growth
Multichannel Integration
Effective customer acquisition, Interactive client education
More product and service customization
Faster response times, Reduced cost for delivery, Higher self-service rate
BENEFITS OF
DIGITAL BANKING
Primary Research Results
Research Details
• Sample Size: 103• Survey Method: Internet Survey• Analysis: Discriminant Analysis with 9 variables (SPSS
used)• Two Groups: Use Digital Banking Often (coded as 0) and
Use Branch Banking Often (coded as 1)• Only 17.1% of variation in discriminant scores
not explained by differences between two groups. Indicative of a good model
• The variable Convenience has the highest discriminating power and is the most important factor that people consider when choosing between digital and branch banking.
• 100% of the cases have been classified correctly using the 9 independent variables. Indicates an excellent model for prediction.
• Time Constraint, Convenience, Regular Updates are important factors to consider for digital banking.
Transformation of Business Model
Traditional Business Model
Extensive documentation and paperwork involved when financing a customer’s purchase
Core business takes place at branches
Act as a medium between customer and third parties from whom the customer is buying
Branch help desks for more insightful assistance and personalized service
Digital Banking Business Model
Financing is hassle-free, available to customer anytime, on the spot through mobile, laptop etc
Core business takes place digitally, branches are there for specialized operations
Partner with third parties from whom the customer buys to influence his/her purchases
Provide personalized service digitally by harnessing the power of call centers, social media and data analytics
BANKING BUSINESS
RETAIL PRIVATEWHOLESALE
Banking and Financial Institutions
Corporate and Investment Banking
Emerging Corporate
Financial Markets
Agricultural and Rural Banking
Business Banking
Retail Assets
Retail Deposits
Credit Desk
Capital Market Operations
Advisory Desk
Private Bankers
Compliance and Products
In such a model, the segments in each business line work in silos. Customer and product information are usually not shared between segments which leads to repetitive processes of customer data collection, verification, risk attribution etc. Moreover, products in each segment are designed on the basis of customer information gathered from that segment only. This stutters innovation.
ING Vysya’s Current Structure
The plan for going digital is to first integrate activities across segments. The objective is to reduce duplication of business process and products by doing away with repetitive processes that are common to various segments.
The primary objective of the digital model would be to create value from customer information. Instead of focusing on pre-designed products, the focus should be on the customer and to design customized products on the basis of consumer data.
What to consider for going digital?
Infrastructure
Data
Content Mgmt.
Analytics
Third Party Partners
User Interface at
Touch points
BI, content lifecycle analysis, product evaluation
Master Data Mgmt., unified reporting and integration of data
Integrated structure for easy storage and distribution of data.
Real-time data analysis on the basis of customer, product, channel etc
Unique and consistent user interface for a better user experience
Partnerships for client-facing processes, gamification, mobile applications
Plan for Implementing Digital Banking
CUSTOMER DATABASE
ORIGINATION SYSTEM
DEDICATED SERVICES
INDEPENDENT PROCESS SUPPORT
DATA REPOSITORY
PRODUCT MAINTENANCE SYSTEMS
All front-end systems consolidated into one origination system for product origination. Needs extensive integration with customer database.
Will provide front-end staff with latest information on customers.
Specific functionality providers to all front-end operations. Eg: Credit Appraisal
Should be independent of customer and product. Supports execution of processes.
Maintains originated products. Should be capable of scaling.
Customer data and product data to be stored separately for better analytics
Requirements For The Digital Model
Decide Digitization
Strategy
Design System for
Implementing Strategy
Decide on the Governance of
Digitization Strategy
New Customer Engagement
Implementation of the
Digitization Strategy with
existing customers and
products/services
Customer Data Collection
New Product/Service
Origination
Build In-house or Buy? Understand
digital consumer value chain, the solutions available and the
bank’s own capabilities
Channel Integration, Content management capabilities,
Value added services, Social Media Analytics, Community
Collaboration Platforms, Master Data Management System
Periodic Measurement andReporting, Roles & Responsibilities of Governance Board, Policies and Guidelines for regulatory compliance and information security, Organizational change management, knowledge management and sharing
Full or phased implementation? Understand resources available in target areas, cost-benefit analysis,
competitor analysis
New Customers are targeted and engaged at various digital touch
points
Collect and maintain a repository of customer data. This is a continuous
process. Data Analytics will be used to gain deeper insights into customer needs
Develop customized products from
customer data. Enhance Customer
Experience
Innovate business processes and try to enhance customer
experience at different touch
points
Roadmap to Digital Banking for ING Vysya
Continuous Process
New Customer Segmentation based on data
Segment potential customers on the basis of analyzed
data.
Products & Service Delivery After Digitization
PRODUCT/SERVICE PRESENT DELIVERY METHOD DELIVERY METHOD AFTER DIGITIZATION
REMARKS
Current & Savings Bank Accounts Apply Online/OfflineForm Fill OfflineDocument Verification Offline
Apply Online/OfflineForm Fill Online/OfflineDocument Verification Online/Offline
Online forms can be floated whereby customers can submit scanned copies of documents. Online verification saves time for the customers.
Forex Services Form Fill Offline, Transaction Offline Form Fill Offline, Transaction Offline Usually high touch service, therefore should be concentrated at the branches. Survey shows customers are willing to visit branch for Forex Services
Card Origination Apply Online/Offline, Form Fill Offline, Document Verification Offline
Apply Online/Offline, Form Fill Online/Offline, Document Verification Online/Offline
Online forms can be floated whereby customers can submit scanned copies of documents. Online verification saves time for the customers.Monitor card usage to gain information about purchases.
Change of Customer Details Form Fill Offline, Verification Offline Form Fill Online/Offline, Verification Online/Offline
Customer documentation submitted and verified online. Saves time and is more convenient.
Wealth Management Services Online/Offline Online/Offline Usually availed by HNIs, this should be at the discretion of customers. However, generally online reporting is encouraged.
Insurance Services Online/Offline Online/Offline Document verification online and examination of underlying asset should be at the customer’s doorsteps.
Research Files and References
Discriminant Output.spvDiscriminant Data.savMicrosoft Excel
WorksheetSURVEY DATA AND FILES:
References:• http://www.pwc.com/gx/en/banking-capital-markets/publications/digital-banking-survey.jhtml• http://www.slideshare.net/morellimarc/report-15092014• http://www.wordstream.com/blog/ws/2014/05/12/customer-churn• http://www.in.capgemini.com/thought-leadership/world-retail-banking-report-2013• http://www.executiveboard.com/exbd/about/index.page?• http://www.livemint.com/Opinion/TOfsav5Xaj2HZhtGNASgaN/Getting-financial-inclusion-back-on-track.html• http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/banking-in-a-digital-world/10192• Indian Bank's Association, Indian Banking Sector 2020, Business India Aranca Research • PWC, ‘Searching for new frontiers of growth’, Aranca Research • Capgemini Analysis, 2013; 2013 Retail Banking Voice of the Customer Survey, Capgemini• “DIGITAL BANKING”- Opportunity for Extraordinary Gains in Reach, Service, and Productivity in the Next 5
Years, Boston Consulting Group (BCG), FICCI, IBA
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