Symbiosis School of Banking and Finance

 Symbiosis International University
(Established under section 3 of the UGC Act 1956, by notification No. F.9-12/2001-U3 Government of India)
Re-accredited by NAAC with “A” Grade

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Changing trends in banking

Changing trends in banking.  And at a jet pace.
 
I was surprised to find how the millennials’ behavior and technology are changing the banking arena when I was reading an interesting report from Accenture titled “Banking Shaped by the Customer” published mid this year.  While this report is based on a survey of about 4,000 US and Canadian consumers, I would think similar trends could be found in the rest of the world. 
 
https://www.accenture.com/us-en/~/media/Accenture/Conversion-Assets/Microsites/Documents17/Accenture-2015-North-America-Consumer-Banking-Survey.pdf
 
Take branch banking convenience for example.  Aneasily accessible local branch was considered important by 36% of the surveyed US consumers in Accenture’s earlier survey of 2013, and 48 percent of US consumers said that they would likely switch banks if their branch closed.  Now, in just a couple of years, Accenture’s new survey reveals that 81 percent of consumers would not switch banks if their local branch closed—43 percent would simply use another branch location of their primary bank.
 
A good on-line connectivity and mobile banking are going to be very important delivery channels for banks in future.  Customers consider them as important like never before.  Rather the footfall in braches for conventional banking services has already started reducing as people can perform most of these functions on-line or at ATMs.  While millennials are way ahead in remote access, the Accenture report finds that ‘45 percent of consumers age 55 and over prefer the online channel to branch locations’.
 
Reduction in branches will help banks too, as they can still reach thousands of customers without spending large sums in creating and maintaining extensive branch network.  The report however suggests that while a few branches can be closed, some would still need to be in existence and need to ‘offer a different experience’.  The branch could have interactive screens and self-service remote advisors.  The branches also have a role in giving a personal touch to banking, thereby differentiating them from the competition and using this touch-point to become customers’ preferred service provider.  It is more than necessary now because of the following survey finding.
 
The report notes that 79% customers consider their relationship with banks as ‘transactional’.  Banking services are increasingly viewed as commodities and the customers don’t hesitate to access the competition for lower costs.  The concept of one bank being a total service provider is fast fading.  Customers are procuring products like car or housing loans, brokerage services, etc. from different banks and institutions based on their cost effectiveness.   Emergence of niche service providers is certainly not good news for the banks.
 
Traditional banking products are low margin items.  Banks have to sell specialized services to generate higher income.  Building a relationship based on trust with the customers, and becoming their advisors, is the key.  Banks need to perform three roles for their customers – advice provider, access facilitator and value aggregator.   Banks should advise customers on different financing options, various investment opportunities, their costs and rewards, and the risks involved.  Banks will have to perform the role of a relationship manager than only a product expert and provide end-to-end customer service.
 
The most valuable asset today is ‘information’ and the banks have it for all of its customers.  Banks can use technology, like data mining and business intelligence, to analyse it and ‘become more relevant to customers’.  Banks can use this data to improve their services, introduce products that customers want in respective geographies and age-groups, or anticipate future needs and be ready with offerings.   
 
Millennials are the new customers, and difficult ones for the banks to please.  The survey finds that 18 percent switched their primary banks within the past 12 months.  This is a big loss of clientele for banks and reiterates the fact that they have to use non-traditional, innovative ways to keep millennial customers happy.  Millennials look for online banking services, reasonable fees, branch convenience and loyalty rewards programs, according to the survey results.  Banks have to bring ‘wow’ factor in their relationship with millennials to be successful. 
 
The survey reiterates that banking is changing, and the change is very rapid.  Customer behaviour is dramatically shifting in short spans of time, and banks have to reengineer and reorient themselves often to continue to retain them.   Banking now consists of evolving channels, satisfying customer experiences, meaningful partnerships, and informative analytics. 
 

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Updated on: 23-08-2016