View
14.472
Download
0
Category
Tags:
Preview:
DESCRIPTION
ING Hunt for Lions
Citation preview
Rohin ThomasSIMSREE
Digital vs Branch Banking• The digital revolution is far more significant than the
invention of writing or printing – Douglas Engelbart, Internet pioneer
DIGITAL BANKING
Branch Banking
2000s DIGITAL BANKING2014
2020
Branch Banking
Because of1. Ease of use2. High Speed Internet3. Regulatory Reforms
4. Instant Transactions
Executive Summary• Digital to impact all businesses globally• Indian Banking Industry also maturing to Digital– Proactive Regulatory Reforms– Fast growing Unique Identification Project– Ambitious Govt. vision of a Digital India
• Vision:– Analyze customer buying behaviour to serve specialized purposes– Paper money to be replaced by digital payments – mobile, internet, POS
and ECS
• Opportunity:– 30% jump in sales productivity through digitization– Increased productivity can be passed on to customers through better
interest rates– Better customer service through quicker customer responsiveness
Executive Summary
• Challenge:– Change in mindset from old legacy to new – Investments in IT infrastructure– PSBs to become irrelevant if they don’t undergo this
transformation to digital
• Role of RBI & Govt.:– Financial Inclusion of prime importance, PM’s Jan Dhan Yojna a
great start, more schemes needed– PayM in UK, Giro Vision in Sweden schemes need to be emulated
in India– Net Banking in local languages to be looked at to include people
from remote areas
Digital Banking• “Despite a strong demand for digital
banking products from customers, and the fact that customers are willing to pay for these services, banks have been rather slow to respond to digital innovations” – PwC Report, 2012
• “Around 44% of our Bank transactions originate through Mobile or Internet” – Head of Digital, HDFC Bank
• Number of digital banking customers in India to increase from 100 million in 2012 to 450 million in 2020 – McKinsey Report, 2014
• Online shoppers growing by 30% each year• By 2020, India’s average age to be 29 years – a digital demographic
Digital Banking is the future of Indian Banking
SWOT Analysis
StrengthsEasy and Immediate Operative24/7 AvailabilityService fees savingHigher Yield
WeaknessesInternet Mis-trustComputer and Internet connection neededTechnology InvestmentSystem Failure
OpportunitiesLack of geographical constraintsCompare productsPro-Internet customersTech improvements
ThreatsPhishing‘Personal touch’ of traditional banksNot achieving ‘critical mass’ to cover tech costs
Digital Banking
StrengthsIndividualized
customer service Physical transactions,
not virtualAll financial products
under one roof
WeaknessesHigh overhead costs
Fixed timingsDifficult to reach out
to everyone via branches
OpportunitiesBuild new client
relationshipsBranch Banking
preferred by manyRural Markets still an untapped segment
ThreatsPeople switching to Digital BankingBranch Banking
losing its relevance
Branch Banking
• Sales staff armed with tablets to cater to customers
Wealth Management
• Non-cash transactions through kiosks, video-tellers
Self-service Branch
Roadmap towards Digital Banking
• Heavily staffed • Low level of
automation
Brick & Mortar
• Access to financial experts and RMs through in-house services
RM Center
• Digital signage• Call centre
extensions for cross-selling
Sales Branch
Despite Emphasis on Digital Banking Channels, customers remain Branch Loyal− Depositing Cash/En-cashing cheques− Advice on Complex Financial Products− Selling cross-functional Financial Products like Mutual Funds
Branches should be looked not as ‘Transaction Centers’ but as ‘Customer Engagement Centers’
Lessons from Retail Industry
• Banking Industry currently at an inflection point where the Retail Industry was a few years ago– Offline only – More Megastore, Subhiksha, Vishal Retail etc.– Online only – Bluestone.com, Caratlane.com, Dell, eBay etc. – These offerings either perished or embraced the other format for
survival• Both formats need to work in conjunction, not isolation• Banks need to digitize front-end and back-end operations thus
blurring online, offline divide– Reliance Retail, Tata Group, Wal-Mart planning entry into Online space
• The Branch in the Digital Age: its all about Online & Offline Co-ordination
Blurring the Online Offline LineDigital Elements in a Bank’s Physical Channel help extend a Branch’s presence−US Bank BBVA Compass’s “Virtual Banker” an example−Allows video-conferencing between consumers in branches and remote bank advisors−Integrated document sharing through Scanner & Printer to send and retrieve signed documents
Source: KUHF –Houston Public Radio, “Virtual Banking Links Consumers to Specialists at Other Branches”, Dec, 2009
Physical Elements in a Bank’s Digital Channel creates a seamless experience−Hapoalim, one of Israel’s largest banks integrated a human element into virtual channel through Poalim Connect−Simple and intuitive front-end−Allows customers to connect with a real personal banker through online banking without having to go to a branch
Source: Forrester, “Case Study: Hapoalim injects a Human Touch into Digital Banking”, 2012
Branch Models of Future• Traditional banking Network using ‘One-size-fits-all’ strategy no longer
sustainable• Need for differentiated branches targeting specific customer segments• Based on levels of digitization and integration of Online & Offline elements,
4 main Branch formats are proposed:
Branch Format
Level of Customer Intimacy
Level of Advice
ComplexityALPHA LOW HIGH
BETA HIGH LOW
GAMMA HIGH LOW
LION LOW HIGH
Branch Models of Future• ALPHA
– Offers retail-like displays, opportunity to browse self-serve aisles– Focus on standard products like account opening, loan application etc.– Low levels of digitization, low staffing required hence Low Operating costs– Cannot offer customized and tailored services & products– Suited for students and first-time bankers– Implemented successfully by Danish Bank Jyske Bank
• BETA– Provides customers with terminals for online banking needs– Low digitization with minimal banking staff to address customer queries– Staff has knowledge of basic financial products, not complex advisory skills– Primarily developed to build strong customer relations by providing a
relaxed environment and simultaneously offering basic financial advice– Target high income individuals for cross-selling of services– Implemented successfully by Virgin Group
Branch Models of Future• GAMMA
– Employs advanced digital tools like video-conferencing, online document sharing, digital signatures etc.
– Focus is on providing customers with evolved and immersive digital experience– Requires significant investment in technology– High levels of digitization with minimal branch staffing– Target Generation Y customers who need flexibility to transact anytime and are open to
use new technology– Successfully implemented at Brandesco Bank, Brazil
• LION– Comprehensive full service branch comprising all aspects of self-serve and online banking– Self-service kiosks, ATMs, service staff with iPads etc.– High Online/Offline co-ordination– Staff well equipped to provide complex personalized advice– To be used as flagship branch to attract new and existing customers showcasing
innovative tools and high standards of service– High operating costs due to large size, staffing and digital requirements– Should be located at prime locations to attract maximum footfalls
Rationalization of Branch Models• Assume a mix of branch models: 45%, 20%, 20% and 15% for ALPHA,
BETA, GAMMA and LION• Based on Annual Reports of ING Vysya Bank for FY 2013-14:
• Proposed costs of target branch Models:
Total Network Cost with homogenous branchesNet Banking Income 6072
Operating Expenditure 1492Capital Expenditure 524
Total Cost (Capex + Opex) 2016
Branch Model Type CAPEX (As a % of regular Branch)
OPEX (As a % of regular Branch)
LION 160% 160%
GAMMA 80% 75%
BETA 65% 50%
ALPHA 50% 65%
Rationalization of Branch Models• Total Branch network cost with branch differentiation
• Total Current Expenses: ₹2016 Crore• Total Expenses post rationalization and new Mix: ₹1408 Crore (Savings of
30%)The transformation from Branch to Digital Banking may not happenovernight, but banks need to re-think the role of physical branch
andhow it blends with digital channels
Branch Model
Branch Split Target CAPEX
Target OPEX Total (CAPEX +
OPEX)
LION 15% 114 322 436
GAMMA 20% 75 201 276
BETA 20% 61 135 196
ALPHA 45% 107 393 500
Total Cost 1408
References• http://www.ingvysyabank.com/• https://www.linkedin.com/company/12936?trk=vsrp_companies_cl
uster_name&trkInfo=VSRPsearchId%3A3605988161411669059285%2CVSRPtargetId%3A12936%2CVSRPcmpt%3Acompanies_cluster
• http://www.thehindubusinessline.com/industry-and-economy/banking/for-aam-india-cash-is-still-king/article5538950.ece
• http://www.pwc.in/press-releases/digital-banking.jhtml• ‘Future of Bank Branches Co-ordinating Physical with Digital’ by
Capgemini Consulting, 2013• ‘Branch Bank of the Future – Transforming to stay relevant’ Anil
Radhakrishnan, Abhinav Jaipuriar et al. www.infosys.com• ‘Digital Banking in Asia’ McKinsey & Co., January, 2014• ‘Bank governance Leadership Network – Leading the digital
transformation of banking’ Aug, 2014• ‘The Global Retail Banking Digital Marketing Report 2013’, May, 2013
Recommended