Understanding the Indian Retail Banking Customer

According to the study, 30% of banking customers transact with more than one bank with 2.4% of churn expected among primary bank customers within one year

March 14, 2014 8:59 IST | India Infoline News Service

IBM announced the launch of a banking study conducted by IDC and commissioned by IBM to understand the evolving banking landscape in India. The study helps in analyzing the changes in investment behavior of domestic retail customers.

The study titled ‘Understanding the Indian Retail Banking Customer’ is based on findings from over 5000 customers spanning across 10 banks (5 public and 5 private sector banks) which highlights the banking landscape in the country as well as evolving change in customer behavior and preferences. According to the findings, there is great opportunity for the sector to deploy new age technologies which can help innovate, grow, connect and sustain customers.

According to the study, 30% of banking customers transact with more than one bank with 2.4% of churn expected among primary bank customers within one year. Private sector banks fare slightly better in customer penetration due to a larger portfolio of account offerings and their ability to leverage process capabilities to unlock higher revenue opportunities.

The study shows that 87% of customers have only one account with their primary bank and only 58% of their investments lie with them. This provides potential business opportunities for other banks to take advantage of the remaining 42% of customer investments with the help of analytics backed personalization. This clearly indicates the growing need of banks in understanding the nuances of investment behavior and preferences of their customers.

An interesting finding describes that while multi-banking is picking up – reflecting customers’ desire to diversify deposits and associated risks, private sector banks are at a higher risk of losing their customers to others as compared to PSU banks due to non-satisfactory customer services. Ensuring quality experience is critical for customer acquisition and retention. The findings further reveals that 41% of private bank (as primary) customers transact with more than 1 bank, versus 24% of PSU Bank customers and 86% of the 41% customers of private banks possess accounts at PSU banks as well.

Banks are increasingly realising the need to give their customers a more holistic, seamless experience throughout the value chain. The need of the hour is to understand individual consumer’s transactions and nuances of their unique investment behaviour. Integrated and consolidated solutions by IT partners become imperative as technology will drive the business priorities of banks in the future,” said Venkatramani Subramanian, VP and Leader for Banking, Financial Services and Insurance (BFSI), IBM ISA. “The survey reveals that word-of-mouth is a source for more than half of customers, which shows that the days of push marketing are over and creating brand advocates is a priority,” he adds.

Below are the key findings of this survey which clearly highlights some major industry gaps which need to be addressed along with technology adoption in order to grow the Retail Banking Sector.

Need of enhancing Customer Experience and harnessing customer advocacy: According to the survey 50% of customers acquire information about banks through word-of-mouth and 2.4% of churn is expected among primary bank customers within one year. Technology can help provide continuous enhancement/support for front end process automation tools through analytics solutions and intuitive digital channels. This will in turn help in providing quality service through ease of use, speedy transactions, better accessibility and personalization for customer acquisition and retention.

Evolution of Omni-Channel Distribution: The prime reasons for customer dissatisfaction are unsatisfactory branch experience (63.6% of respondents), problem resolution (55.3%) and channel experience (41%). Uniform experience across channels is a prime factor to increase satisfaction levels.

Driving account/ customer penetration through Cross Selling: The survey reveals that there is a huge gap between the numbers of monthly transactions (81%) v/s wallet share (58%). It’s important for banks to understand the customers’ selection criteria in the context of their savings and investments, customizing services accordingly.

Developing Social media platforms: Nearly 26%of customers use social media for banking related activities, 25 - 35% of these same customers use it as an information ‘exchange’ and 61% use social media as an information source. With technology in place, banks can leverage analytics to identify new revenue sources from customer interactions and information captured through conversations and online discussions.

Channel Adoption – Primary and Alternative Channels: The survey reveals that the adoption of internet banking (22.1%), mobile apps (13.6%) and credit cards (24.1%) is still low; less than 45% of customers prefer ATMs due to safer use and error free transactions. Through technology adoption, banks can even further improve security/ errors through intelligent and secure ATMs,

Personalization and Loyalty Programs: According to the survey 72% of customers are ready to update their personal information at-least once every 6 months and 67% of customers mention that their bank has not made efforts to personalize their services. With better CRM/ POS/ web solutions integrated with cross-channel customer data sources, banks can offer better advisory service and loyalty programs.

As a leading technology player IBM is uniquely positioned to address gaps with its full range of capabilities that redefine the banking experience for consumers. IBM’s unparalleled capabilities including predictive analytics, intensive data demands to manage risk and compliance, innovative differentiation and product pricing models, along with its ability to leverage technologies such as cloud computing, social media and mobility, allows its partners to fully realise their potential. IBM’s customer-centric smarter solution approach is helping make a measurable difference to its customers, irrespective of their size and location.

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