The Remote Banking Proposition

Its a well-known fact that Banks can reduce their operating costs by reducing the number of branch transaction and delivering their offerings through alternative channels like phone-banking, ATMs, online banking etc. Here’s an extract from an ICICI report (slightly dated):

“In India, the experience of ICICI Bank also confirms that transaction costs can be significantly reduced if transactions are moved from branches to ATMs, call centre or the Internet. The transaction cost for a branch is estimated at Rs. 34 ($0.68), Rs. 28 ($0.56) for call centre and Rs. 20 ($0.40) for an ATM. Acknowledging this fact, ICICI Bank has leveraged these new technologies to move transactions away from the branches.”

It makes perfect sense for providing the right kind of incentives for consumers to utilize alternative delivery formats. But, banks face critical challenges in ‘selling’ and leveraging the Remote Banking proposition.

–> Firstly, a significantly large number of Indians are averse to the idea of transacting on the phone or internet. It’s the ‘Touch and Feel’ factor, stupid! There is a low level of trust in transferring funds to another bank account through the internet. After all, who do I hold responsible, if there is a goof-up!! How can I buy insurance/mutual funds over the phone? How can I give my credit card number to someone I can’t even see? Wherever money is concerned, Indians are really very conservative and apprehensive. Perhaps, its the collective programming of our minds over centuries that make us so attached to family silver. An attitudinal change is imperative.

–> Secondly, let’s say that a large number of Indians get rid of their apprehensions and embrace the remote banking proposition (although the ATM, phonebanking phenomenon is largely restriced to urban area), what do banks plan to do about service levels? My personal experiences with ATMs started with a satisfied feeling of convenience and quite quickly degenerated into waiting endlessly in queues for my chance to interact with the ‘smart’ teller. Or, llistening constantly to “Your call is important to us; one of our phone banking officers will attend you shortly.” It almost seems like a eternal wait!!

–> Human error is something that banks cannot afford. In the quest for eliminating standard human errors, banks invested in IT systems, mechanical CRM techniques, complex algorithms etc. They definitely help in smoothening out remote banking transactions. But, in this quest, banks took out the human touch which is so essential to the business of banking. The business of banking is based on trust and humans (despite all the differences we have with other human beings) trust people and not machines. Solutions of a pure technical nature do not strike the best of emotional bonds between a brand and its customers. The human touch is essential. A proper mix of remote banking and branch banking is called for, while squeezing costs from other areas of operations and the core business.

The banking sector is all set for a high growth trajectory. Consumerism is on a high, Indians are shunning their negativity about credit, cashless transactions are on a rise and earnings are surging. Amidst this postitive scenario, banks should focus on winning loyalty of their customers. Understanding their needs, attitudes and emotional response to interactions with the banking channels is paramount. Loyal customers are not only more profitable, but are also more likely not to fall prey to price cuts by competition. Such customers are more likely to tolerate small goof-ups; they ‘understand’. They do more business with you and generate a positive word-of-mouth. Its only a set of loyal and emotionally satisfied customers that would enable banks to ‘pull’ new customers rather than having a swarming army of DSAa and their employees walking on the streets offering ‘free’ credit cards and ‘lowest’ rate on personal loans!

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