“Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgage loans, personal loans, debit cards, credit cards etc.”

Retail banking sector is characterized by three basic characteristics:

Multiple products (deposits, credit cards, insurance, investments and securities)

Multiple channels of distribution (call center, branch, internet)

Multiple customer groups (consumer, small business, and corporate).

HSBC First Bank to Introduce ATM: 1987 Companies Came with IPO New Technology : EDI, EFT helped mass

Banking, Completion from NBFCs

Higher Interest Rates Low Risk of NPAs Relationship Not the Sole means Of

Growth Need For publicity Sensitivity To Pricing Volume Based Strategy Freebies For Customers

Changing Demographics Technological Advancements Lower NPAs Liquidity In Banking System

1. Liability Products Savings accounts No-frills accounts Current accounts Fixed deposits/ Term deposits Recurring deposits

2. Asset products Housing loans Personal loans Education loans Gold loans Loans to senior citizens Property and mortgage loans Vehicle loans Agriculture loans

3. Credit cards/ Debit cards Credit cards Debit cards

4. Investment products Insurance products Pension plans Mutual funds

Associated with a liability on the bank’s side

According to RBI’s guidelines of KYC(Know your customer), the bank segregates their customer into different risk categories

Documentation requirements to open an account change with the risk profile

In India, customer deposit accounts are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC)

Allows a customer of the bank to save a small amount of money

Money can both be deposited and withdrawn from the account

Withdrawal is done through cheque books or withdrawal forms

ATM’s have reduced the dependence on traditional withdrawal systems

Savings money is invested in different avenues and the bank pays an interest on it

Specially designed savings accounts for children, women etc are a new innovation by the banks

A type of savings account with zero-balance or low minimum balance facility

In 2005, the RBI instructed the bank to introduce such accounts so as to include the poor sections of the society in the financial system as well

Allahabad Bank and UCO Bank have been providing such account facility for quite some time now

Helps the customer to perform multiple transactions in a day

No interest on the amount deposited in the account

Include cheque book facility, internet banking etc

Used to pay rents, utility bills, insurance premiums etc

Type of a time deposit Deposits a fixed amount for a fixed

period of time Interest is paid on the money deposited

at pre fixed time intervals The money can be withdrawn at

maturity, but if its withdrawn before that the bank pays less interest

FD’s many a times also linked with safe deposit locker facility

A type of time deposit which allows the customer to save small amounts of money with bank every month

Aimed at people with high expenditure in a month

Modest interest paid for the amount saved, quarterly, half yearly or annually

An asset is what the bank holds in terms of the credit given to the customer

Interest rate charged are different for different products

Fixed interest followed for some products while a floating interest charged for others

The interest rate varies with the changes in the inter-bank rates like Benchmark Prime Lending Rates

If there is an increase in the BPLR then the customer has to pay a higher EMI and vice-versa

In fixed interest rates, the customer is protected against fluctuations in the interest rate

These form majority of the asset portfolio for a retail bank

Given in order to extend financial support to the people who want to construct a house

The amount extended depends on the expenditure involved and the repaying capacity of the customer

The repayment period is long term in nature

Is given to customers to help them meet personal expenses like marriage, travel etc

Depends on the customer’s ability to repay and his credibility

Personal loans given to salaries employees and self employed people

One of the most common type of loan extended by the banks

Under this, property assets like land, buildings, vehicles and gold etc are mortgaged

Interest rates fixed on the prevailing bank rates

Typical products include crop loans, farm equipment loans against warehouse receipts

Provide loans for horticulture activities, poultry, dairy, rearing of goat and sheep, sericulture etc

Depends on mortgaging or hypothecation in most loans

Loan cards have been brought by many banks which can be ATM’s or credit cards

Provide loans for purchase for two wheelers, four wheelers and commercial vehicles

Usually financed up to 85-90% of the total invoice amount

Repayment is made through equated monthly installments (EMI)

In credit cards, the amount is paid to the merchant electronically

The money is paid by the card user to the bank through EMI’s or in a lump sum amount

In Debit cards, the amount is deducted from card holder’s account and paid to the merchant

No interest is paid by the Debit card holder Credit cards are very aggressively marketed

by bank merchants

A fairly new category as compared to asset and liability products

Includes pension and mutual funds, insurance products etc

Provides additional liquidity to the bank to invest in other avenues

These products are also used as tools to retain the customers

These are mainly cross-sold

• Innovation in banking• Affect five areas: operations, media,

pricing, delivery and product• Tool: Customer Knowledge Management• Helps banks to understand customers

better• Provides insights to what the customer

expects

Online shoppers: Security of payment Cybercrime Pre approved loans Research and development Evaluation of new product ideas, design

of plans, implementation, testing for viability and recommending implementation

HDFC Bank launched Netsafe virtual card in association with Visa International.

- Safe payment mode- No need to disclose credit card

information- Net safe enables to realise full value- Created with a pre defined limit amount- Can access the card through ID and

password.

Banks segment customers using different bases.

HNI classify customers on different parameters.

NRI’s help in foreign exchange. Common products for this- remittance accounts, NRI deposits and NRI loans.

Eg- ICICI has tie up with Wells Fargo Bank, HSBC in Hong Kong, Me-Bank in UAE.

IndusInd Bank launched a product Fast-Remit through a tie up with Bank of New York

Corporate banking- discriminatory pricing followed.

Offer interest rate based on:1. Credit rating2. Relationship with bank3. Bargaining power Pricing decisions influenced by- policy

changes, bank rate fluctuations, perceived value from customers perspective

If demand for asset product is elastic, slight decrease in price, increases demand for the product

If demand is inelastic slight decrease in price, may not have a significant impact on volume of business.

Eg- countries UK and US. Eg- India: interest on home loan reduced

increase in demand. Increase in interest rate of fixed deposits

leads to increase in demand.

Banks free to price their liability products.

Can decide on the penalties to be charged.

Eg- in 2005, when there was liquidity crunch in India.

Banks increased their deposit rates. Thus the net interest margins decreased.

As deposit rates started increasing banks raised their lending rates by 100-125 b.p

1. As net interest margins started shrinking2. To maintain profitabilityPricing for HNI’S and NRI’S- Discriminatory pricing- Customer analysis and cost analysisEg- loan given at 2% less than the normal

rate

Overt pricing: charges that banks collects directly from its customer for its product offerings. Eg- usage of ATM- flat fee

Variable fee- volume and frequency of account information

Covert pricing: cost which are not explicitly charged to customers against products consumed.

Eg- the cost incurred by bank recovered by charging a customer higher price.

Eg- ICICI Bank offer lifetime credit cards for free to get high sales.

Pre-Deregulation:- - Product-centric Approach,

- Little emphasis on Market Research,

Post-Deregulation:- - Advertising & Sales Promotion became important

Reasons for advertisement in Retail Banking:- Services are Intangible, Inseparability of Services, Heterogeneity of Services, Perishability of Services.

Thus as a part of advertising strategy, retail banks marketers showcase concrete physical evidence, the reputation, and the documentation of service delivery.

The popular advertising modes in retail banking are:- Print Media, the Internet, Outdoor advertisement,

Statement insert, Co-branding.

Advertising Appeal:- The manner in adv is developed and expressed in anticipation of a specific customer response.

Types of Appeal:1. Rational Appeal- Informational or logical

appeal Price appeal, Quality appeal, Features appeal

& Competitive appeal.

2. Emotional Appeal- Portrays human emotions. Humor appeal, Fear appeal, Music appeal, etc

Sales Promotion is used to attract new customers by giving offers and incentives.

Sales Promotion techniques used by Banks:-

‒ Premiums, Gifts, Cash back offers, discounts, etc.

Brand can be a long-term asset, branding of financial institutions is a part of long-term strategy.

There are various advantages of Brand Building:-

Wide spread recognition and improved loyalty.

It decreases the customer acquisition cost. Bank can charge premium prices and

customer will not hesitate to pay.

Personal Selling is a prominent form of branch level promotion.

There are two approaches of personal selling:- Product Based Approach Customer Based approach

In Telemarketing information is given to customer on the Telephone.

40% to 50%(approx) Credit Cards and up to 25% retail loans are sold through telemarketing.

Negative reactions from customers.

It targets specific customer groups. Customized presentation. Information is provided in an attractive

format.

Direct-Response:- It is a variant of direct mail where a product is first without the full detail being given, interested customers are requested to contact the Bank for full details.

In traditional approach Public Relations was considered to be important.

The new approach has changed the traditional view towards Public Relations, now PR is used as a sophisticated tool to improve image of Banks.

The main objective of PR is to maintain a consistently positive image in the public.

Distribution Channels

Advantage – 1. Reduce transaction cost & operating

overheads.2. Increase reach.3. Avenues of promotion for banks

products & offerings.

Traditional & important.

Other channels used for transactions.

Channel that diffrentiates.

Deregulation.

Cost reduction & better service.

Atm sharing.

Which was the first bank to introduce ATM's in India?

Total no of atms in India ?

Uses.

Cheapest channel of distribution.

Penetration rate is low.

It provides flexibity & convenience. Mobile banking transaction includes

use of phone by the customer to debit or credit their accounts.

Services – Checking account balance, cheque status enquiry, ordering a cheque book, payment of utility bills, transfer of funds.

Enables customer to carry out cashless transactions at merchant establishments where invoice amount of goods purchased is debited from customers account & credited to merchant’s bank account.

Nominal fee. Channel became popular with

consumer spending & increase in no of debit card holders.

DSA’s conducts marketing of financial products on behalf of the bank.

Banks outsource selling of liability & assets products.

Banks provide database of customers.

This channel is under severe criticism1. Field staff is not well equipped with the

information on various products of the bank.

2. They may not spend time in understanding customer’s needs.

3. Different DSA’s of same bank may keep calling the same customer.

4. Customer fears an invasion of their privacy.

Inbound call centers - Act as distribution-cum-service delivery channels by taking calls on product enquiries, change of address,complaints.

Outbound call centers – Used for telemarketing.

Financial institutions may form strategic alliances at the corporate level, the scope of which would include sharing the respective distribution networks at the operational level.

Strategic alliance between Corporation bank , Indian bank & Oriental bank of commerce includes sharing of bank branches & ATM’s, training infrastructure & even people.

The strategy of pushing new products to current customers based on their past purchase.Cross-selling is designed to widen the customer reliance on the bank and decrease the likelihood of the customer switching to a competitor.

Benefits to Banks Reduction in the total cost of acquiring

new customers Improved customer retention Insights that help offer better suited

and more customized products Enhanced ‘Per Customer Lifetime

Profitability’

Benefits to Customers Reduced prices Faster and easier processing Customized product

Mindset of the executives in a bank Risk of causing customer

dissatisfaction

Amreen NathaniShivika NagrathAyushi JalanPankaj UpadhyayYogesh SuhagKrishanu Roy