What is happening in Retail Banking?
Anupam Kumar
Gr EVP, Head - Liability, NRI Banking & Wealth at CSB Bank Limited Ex HDFC Bank / ICICI Bank
First weekend of New Year. Here are my thoughts on what is happening in Retail Banking in India. These are not futuristic forecasts but a summary of what is happening now.
Key factors influencing the Banking scene are:
a.????? Rising Interest rates
b.????? Advent of FinTech
c.????? Increasing Compliance
d.????? Employee Management
Here are some key developments happening now:?
1. Liability Pressure: There is tremendous pressure on banks to build their deposit book. Credit is growing at a much higher rate than deposit growth. Retail money is moving to either FDs or Stock Market (directly or through MFs). So, CASA ratio is declining. Banks are forced to offer higher rates on FDs to mobilise funds, resulting in pressure on the Net Interest Margin.
?2.?Big Banks getting Bigger: This is related to the above point. Our economic recovery has been, as many economists point out, K-shaped. Rich are getting richer, and therefore investing more, as is evident from the inflows in MF and Equity market. Most of the rich have banking relationships with bigger banks, so bigger banks are benefiting. Also, bigger banks dominate the Capital Market banking, i.e. Broker’s A/c, AMCs account etc. thus, getting a pie of increased inflow in stock market as well. Mid- and small-sized banks are facing the challenge of building their liability book, often resulting in higher pressure on the cost of funds.
?3.?Commoditised Products- Pricing and Service are the only differentiators: Most of the products in banking space are commoditised, i.e. little differentiation across the banks other than pricing and service. Service is experiential, customers need to be onboarded first. That leaves pricing as one of the key weapons for sourcing, more on the liability side of the business. The higher Savings Account rates offered by some banks are a result of this phenomenon. Banks cannot rely on third parties to source liability, unlike Asset products. Building an attractive, if not fully differentiated, product proposition and a robust sourcing engine is the key challenge for banks for sourcing new accounts.
领英推荐
?4.?FinTech: FinTech are forcing banks to not only innovate but also to collaborate to have better products and wider reach. They are helping in the democratising innovation by lending a helping hand to smaller banks with limited technological capabilities. Regulators are keeping a tight eye on the developments and are formalising the operations of FinTech, especially with relation to their collaboration with banks.
?5.?Cybersecurity Concerns:?With increased digital adoption comes the risk of cyber threats.?Banks are strengthening their security measures,?but building customer awareness remains crucial. Banks and regulators are investing in building customer awareness. At an organizational level, CISOs are becoming more important as key stakeholders in protecting banks and their customers.
?6.?Increasing Compliance: Regulators have been proactive in taking stronger steps to protect the interests of customers and reduce systemic risk. This is helping in protecting the overall banking system. Banks are on their toes to follow the guidelines and take care of their customers.
?7.?Branches are here to stay: Despite all the hullabaloo about digital penetration, branches are not dead yet. The presence of a branch in neighbourhood not only generates trust in customers, but also gives them a feel of human touch. Banks are building their distribution strategy around branches.
8. Data Privacy Debate:?The balance between financial convenience and data privacy needs careful consideration.?Building trust through transparency and ethical data practices is paramount. The debate around this topic will only increase in coming days.
9. Employees are demanding attention: Higher attrition levels amongst most of the private sector banks have attracted attention from the regulator. Better work environment, skilling and better performance rewards are the order of the day. We will see more on this in coming days. Good for employees as well as customers, which in turn will benefit banks also.
Interesting days ahead!
?
?
Expert in operations and customer service
10 个月Very well explained the reality of Retail Banking. All these are challeges that banks must target to overcome. Fintech, cyber security data privacy, adhering to compliance are most prominent one.
Managing Director at Momenta India & Founder at ISCP Singapore | Global Advisory Board Member at ISOFP Singapore | Leadership and Executive Coach | Business Strategist and Consultant
10 个月Absolutely true Anupam. Banks that move fast in taking care of their employees will benefit. Focus will have to move on to employees and customers from products.
Extremely well articulated Sir. Given the presssure on CASA ratio and lending with increasing interest rates is affecting the growth rate on an absolute basis. NII is under a scanner and so is the quality of lending. Service first and financial strength of Banks in terms of book quality and relevant ratios backed by well trained satisfied staff will define the future of every bank. Short sighted resources with just a focus on a switch to increase their salaries will fall short of a growth path due to lack of relevant experience to steer the organization towards well routed growth. Employees physical , mental and financial health will make a lot of difference as it defines the human capital health of an organisation which will help pull the organization to a well steered growth path.
Assistant Vice President & Branch Manager AU Bank Patna Ex Bandhan| Ex Ujjivan| Ex Indusind
10 个月Great overview Sir
Experienced banker in Branch & Corporate Banking, Freelance BFSI Trainer- Functional & Behavioral, Author, Motivator and imparting knowledge.
10 个月Very well captured the whole scenario of retail banking. Employees are seeking attention in attrition Customers are seeking services solutions in smiles. Investors are seeking incentives to stay invested.