Retail banking

INNOVATIONS IN RETAIL BANKING
ITM EXECUTIVE SMBA -2012 - 14
Assignment on Retail
Banking
Submitted By:
 Shivanand Annigeri - Roll No. 59
 Pradeep Yadav - Roll No.71
 Radhagobind Mohanty - Roll No.94
 Sangram Patra - Roll No.95
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INTRODUCTION TO RETAIL BANKING
· INTRODUCTION
· DIFFERENCE BETWEEN CORE BANKING AND
RETAIL BANKING
· ADVANTAGES AND DISADVANTAGES
· DRIVERS OF RETAIL BUSINESS
· OPPORTUNITIES AND CHALLENGES
· SERVICES OFFERED
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INTRODUCTION:
RETAIL BANKING is a banking service that is geared primarily toward individual
consumers. Retail banking is usually made available by commercial banks, as well as smaller
community banks. Unlike wholesale banking, retail banking focuses strictly on consumer
markets. Retail banking refers to provision of banking services to individuals and small
business where the financial institutions are dealing with large number of low value
transactions. The concept is not new to banks but is now viewed as an important and
attractive market segment that offers opportunities for growth and profits.
Excess of liquidity, increased dependence of corporate on capital markets, the rising
income of middle class with increase in purchasing power and ability to handle debts,
the increasing amount of NPAs from corporate portfolio and the growth and future
growth potential of the credit card business has induced banks to shift from wholesale
banking to retail banking.
Retail banking has immense opportunities in a growing economy like India. As the growth
story gets unfolded in India, retail banking is going to emerge a major driver. Some of the
key policy issues relevant to the retail-banking sector are: financial inclusion, responsible
lending, and access to finance, long-term savings, financial capability, consumer protection,
regulation and financial crime prevention.
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DIFFERENCE BETWEEN CORE BANKING AND RETAIL
BANKING
Often retail banking is referred to as "non commercial banking" this would be your common
checking accounts and consumer loans. Where as "core banking" is often the very solid
business accounts and commercial loans. It is referred to, as 'core' because it is a core or
central to the banks business. Few banks survive from just retail banking services, they need
those core business accounts that are perhaps more stable than retail business.
"Business Banking" tends to work with small-to-medium sized enterprises (SMEs). Business
banking does all the things that retail banking does but adds the following things:
1) More services: Business Banking includes things like more treasury services, revolving
credit, merchant credit, cash management, group insurance, corporate cards and secure
Internet banking (e.g. server-to-server).
2) Better rates: Since SMEs bring in more money, they tend to get better rates than the retail
banking customer, who tends to need lots of maintenance compared to their deposit sizes.
Retail, SME and corporate banking customers use the same infrastructure, but the sales
platforms tend to be different to cater to their specific needs.
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ADVANTAGES AND DISADVANTAGES OF RETAIL
BANKING:
ADVANTAGES:
Retail banking has inherent advantages outweighing certain disadvantages. Advantages are
analyzed from the resource angle and asset angle.
- RESOURCES SIDE
(a) Retail deposits are stable and constitute core deposits.
(b)They are interest insensitive and less bargaining for additional interest.
(c)They constitute low cost funds for the banks.
(d)Effective customer relationship management with the retail customers
built a strong customer base.
(e) Retail banking increases the subsidiary business of the banks.
-ASSETS SIDE
(a) Retail banking results in better yield and improved bottom line for a bank.
(b) Retail segment is a good avenue for funds deployment.
(c) Consumer loans are presumed to be of lower risk and NPA perception.
(d) Helps economic revival of the nation through increased production activity.
(e) Improves lifestyle and fulfills aspirations of the people through affordable credit.
(f) Innovative product development credit.
(g) Retail banking involves minimum marketing efforts in a demand –driven
economy.
(h) Diversified portfolio due to huge customer base enables bank to reduce their
dependence on few or single borrower
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(i) Banks can earn good profits by providing non fund based or fee based services without
deploying their funds.
DISADVANTAGES:
(a) Designing own and new financial products is very costly and time consuming for the bank.
(b) Customers now-a-days prefer net banking to branch banking. The banks that are slow in
introducing technology-based products, are finding it difficult to retain the customers who
wish to opt for net banking.
(c) Customers are attracted towards other financial products like mutual funds etc.
(d) Though banks are investing heavily in technology, they are not able to exploit the same to
the full extent.
(e) A major disadvantage is monitoring and follow up of huge volume of loan accounts
inducing banks to spend heavily in human resource department
(f) Long term loans like housing loan due to its long repayment term in the absence of proper
follow-up, can become NPAs.
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DRIVERS OF RETAIL BUSINESS IN INDIA
· ECONOMIC PROSPERITY and the consequent increase in purchasing power have
given a fillip to a consumer boom. During the 10 years after 1992, India's economy grew
at an average rate of 6.8 percent and continues to grow at the almost the same rate – not
many countries in the world match this performance.
· CHANGING CONSUMER DEMOGRAPHICS indicate vast potential for growth in
consumption both qualitatively and quantitatively. India is one of the countries having
highest proportion (70%) of the population below 35 years of age (young population).
The BRIC report of the Goldman-Sachs, which predicted a bright future for Brazil,
Russia, India and China, mentioned Indian demographic advantage as an important
positive factor for India.
· TECHNOLOGICAL FACTORS played a major role. Convenience banking in the
form of debit cards, internet and phone-banking, anywhere and anytime banking has
attracted many new customers into the banking field. Technological innovations relating
to increasing use of credit / debit cards, ATMs, direct debits and phone banking has
contributed to the growth of retail banking in India.
· TREASURY INCOME OF THE BANKS which had strengthened the bottom lines of
banks for the past few years, has been on the decline during the last two years. In such a
scenario, retail business provides a good vehicle of profit maximization. Considering the
fact that retail’s share in impaired assets is far lower than the overall bank loans and
advances, retail loans have put comparatively less provisioning burden on banks apart
from diversifying their income streams.
· DECLINE IN INTEREST RATES have also contributed to the growth of retail credit
by generating the demand for such credit.
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OPPORTUNITIES AND CHALLENGES FOR RETAIL
BANKING
Retail banking has immense opportunities in a growing economy like
India. As the growth story gets unfolded in India, retail banking is going to emerge a major
driver. How does the world view us? The BRIC report is viewing India as an economic
superpower. A.T. Kearney, a global management-consulting firm, recently identified India as
the “second most attractive retail destination” of 30 emergent markets.
The rise of Indian middle class is an important contributory factor in this regard. The
percentage of middle to high-income Indian households is expected to continue rising. The
younger population not only wields increasing purchasing power, but as far as acquiring
personal debt is concerned, they are perhaps more comfortable than previous generations.
Improving consumer purchasing power, coupled with more liberal attitudes towards personal
debt, is contributing to India’s retail banking segment.
The combination of above factors promises substantial growth in retail sector, which at
present is in the nascent stage. Due to bundling of services and delivery channels, the areas
of potential conflicts of interest tend to increase in universal banks and financial
conglomerates. Some of the key policy issues relevant to the retail-banking sector are:
financial inclusion, responsible lending, and access to finance, long-term savings, financial
capability, consumer protection, regulation and financial crime prevention.
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SERVICES OFFERED IN RETAIL BANKS
· Any Time Banking: -
(a) This refers to banking service available 24 hours a day and 365 days a year.
(b) Such facility is made available to the customer through the Automated Teller machine.
(c) Banking, being a service industry, is primarily driven by customers needs.
(d) Each customer is willing to pay a price for the services provided it is made available to
him when he wants and where he wants.
(e) In the present day of server competition, banking services are driven by technology,
which is more oriented towards providing better services to the customer.
(f) The concept of banking hours has been changed from the fixed 4 hours to 24 hours.
(g) This has been made possible through use of ATMs. Even under the manual service, the
banks have stated to extend the service from the traditional 4 hours to 5 hours and even
up to 12 hours say from 8 AM to 8 PM.
(h) Some banks have introduced the practice of Sunday Banking or Holiday Banking.
· Automated Teller Machine (ATM ): -
(a) ATM is a machine in the nature of a computer in general sense, but is dedicated to do
certain types of specific jobs only.
(b) The hardware and the proprietary i.e. the software used in one machine can not be used in
one machine.
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· Customer Services : -
The following customer services are offered through the system:
(a) Cash withdrawal (up to a specified limit)
(b) Cheque/Cash deposit (the receipt being only for the deposit of the envelope containing
cash but not for the amount therein).
(c) Enquiry about balances
(d) Printing of statement of accounts
(e) Request for cheque book and standing instructions.
(f) Transfer of funds
(g) PIN change
· Telebanking : -
(a) From the conventional banking, where the services were provided manually across the
table, it has come to a stage where the customer is not required to visit the bank enquiry
of balance in the account, sending a remittance, to get a statement of account, etc.
(b) The concept has become so popular that in USA customers do not visit the bank for 97%
of their transactions and these are done from either customer’s residence or office using a
telephone or a home PC.
(c) In telebanking the customer is required to open the account with the bank initially by
visiting the bank.
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(d) Telebanking services are, generally, provided by the bank over the telephone on a special
number.
(e) The number at the bank is connected to a terminal in the bank, which is either handled
manually or is automated by connecting the same to the computer network.
(f) Where the system is automated, two types of technology are used.
· Home Banking: -
(a) Under home banking the customer is served at his residence and there is no need for the
customer to visit the bank’s premises for a number of routine transactions.
(b) If the customer needs some information the same can be got by contacting the bank over
the phone as described in the telebanking.
(c) If the customer wants to put through transaction and wishes to see his account or to get a
statement of his account, he may have to use a PC.
(d) This type of facility is available with a town, city or metropolitan area.
(e) Under such a situation the customer should have a:
(i) PC
(ii) Modem
(iii) Telephone line
(iv) A compatible software for the home PC
(f) The home banking service can be broadly classified under two groups, one without using
the information technology and another using information technology.
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(g) When customer contacts the bank o the phone no specific technology is involved and the
services of telebanking are provided to him.
· Electronic Fund Transfer (EFT): -
(a) In India the fund transfers are basically done through Mail Transfer, Draft or Telegraphic
Transfer.
(b) In case of Telegraphic Transfer (TT) again the Department of Telecommunication was
the sole provider of Telephone, Telex and Telegram facilities.
(c) With the process of liberalization private operators have started providing alternative
voice communication channels through mobile phones and vast communication as an
alternative channels for data communication.
(d) It was normal for any TT to be credited to the beneficiary’s account after delay of 2 to 4
days
(e) The different forms of EFT prevalent in the use are:
(i) EFT through Electronic Data Interchange
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(ii) BANKNET
(iii) RBINET
(iv) IDRBT VSAT Network
(v) EFT from Point of Sales
(vi) Electronic Cash
(vii) SWIFT- Global System for Funds Transfer
(viii)Electronic Clearing Settlement
· Internet Banking :-
Introduction: -
The delivery channels include direct dialup connections, private networks, public networks,
etc. with the popularity of computers, easy access to Internet and World Wide Web (WWW),
Internet is increasingly used by banks as a channel for receiving instructions and delivering
their products and services to their customers. This form of banking is generally referred to
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as Internet Banking, although the range of products and services offered by different banks
vary widely both in their content and sophistication.
Banking Services through Internet: -
(a) The Basic Level Service is the banks’ web sites which disseminate information on
different products and services offered to customers and members of public in general. It
may receive and reply to customer’s queries through e-mail,
(b) The Second level are Simple Transactional Web sites which allows customers to submit
their instructions, applications for different services, queries in their account balances,
etc. but do not permit any fund-based transactions on their accounts,
(c) The Third level of Internet banking service are offered by Fully Transactional Web sites
which allow the customers to operate on their accounts for transfer of funds, payment of
different bills, subscribing to other products of the bank and to transact purchase and sale
of securities, etc. The above forms of Internet banking service the customer or by new
banks, who deliver banking service primarily through Internet or other electronic delivery
channels as the value added services. Some of these banks are known as ‘Virtual’ banks
or ‘Internet only’ banks and may not have physical presence in a country despite offering
different banking services.
CHAPTER-2 OVERVIEW OF ICICI BANK
· OVERVIEW
· HISTORY
· 7 P’S OF MARKETING MIX OF ICICI BANK
 PRODUCT
(1)DEPOSITS
(2)LOANS
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(3)CARDS
(4)MOBILE BANKING OF ICICI BANK
(5)DEMAT
(6)INVESTMENTS
(7)INSURANCE
(8)INTERNET BANKING
 PRICE
 PLACE
 PROMOTION
 PROCESS
 PHYSICAL EVIDENCE
 PEOPLE
OVERVIEW
ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion (US$ 100
billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year ended March
31, 2008. ICICI Bank is second amongst all the companies listed on the Indian stock
exchanges in terms of free float market capitalization*. The Bank has a network of about
1,308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a
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wide range of banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialized subsidiaries and affiliates
in the areas of investment banking, life and non-life insurance, venture capital and asset
management. The Bank currently has subsidiaries in the United Kingdom, Russia and
Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).
HISTORY
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at
the initiative of the World Bank, the Government of India and representatives of Indian
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industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses. In the 1990s,
ICICI transformed its business from a development financial institution offering only project
finance to a diversified financial services group offering a wide variety of products and
services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In
1999, ICICI become the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context of the
emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities,
and would create the optimal legal structure for the ICICI group's universal banking strategy.
The merger would enhance value for ICICI shareholders through the merged entity's access
to low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services. The merger
would enhance value for ICICI Bank shareholders through a large capital base and scale of
operations, seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various business
segments, particularly fee-based services, and access to the vast talent pool of ICICI and its
subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal
Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The
merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High
Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at
Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI
group's financing and banking operations, both wholesale and retail, have been integrated in
a single entity.
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7 P’S OF MARKETING OF ICICI BANK
PRODUCTS
(1)DEPOSITS
ICICI Bank offers wide variety of Deposit Products to suit consumer requirements.
Convenience of networked branches/ ATMs and facility of E-channels like Internet and
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Mobile Banking
 Savings Account
(a) Debit-cum-ATM Card
(b) Money Multiplier Facility
(c) Internet Banking
(d) Customer Care
(e) Mobile Banking
(f) Standing Instructions
(g) Nomination facility
(h) Bank @Home
(i) DD Call and Collect
 Fixed Deposit
(a) Wide range of tenures
(b) Choice of investment plans
(c) Partial withdrawal permitted
(d) Auto renewal possible
(e) Loan facility available
 Life Plus Senior Citizen Services
ICICI Bank brings the following benefits along with new 'Life Plus'
Senior Citizen account
(a) Designated Senior Citizen Desk
(b) Higher Interest Rates on Term Deposits
(c) Demand Loans against your deposit
(d) Free collection of outstation cheque drawn on any ICICI Bank
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location
(e) Special Senior Citizen 'Life Plus' Debit card
(f) Money Multiplier Facility
(g) Anywhere Banking
(h) Internet Banking
(i) Customer Care
(j) Nomination Facility, and more
 Young Stars Savings Account
Young Stars is a banking service for children, aged up to 18 years,
brought to consumers by ICICI Bank to help the parents meet the
present and future aspirations that they hold for their child. It offers
various savings and investment options to the parent along with
teaching the child to manage his/her personal finance in a more
responsible and independent manner.
 Recurring Deposit
ICICI Bank's Recurring Deposits are the ideal way to invest small amounts of money every
month and end up with a large saving on maturity.
(a) Encourages savings without stress on your finances.
(b) High rates of interest (identical to the fixed deposit rates).
(c) Non-applicability of Tax Deduction at Source (TDS).
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 Easy receive Saving account
Easy receive account is a unique savings account that caters to domestic banking needs,
while offering additional benefits for remittances received in the account from abroad.
(2)LOANS
 Home Loan
(a) Home Loan tenure upto 25 years
(b) Simplified Documentation
(c) Doorstep Delivery of home loan papers
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(d) Sanction approval without having selected a property.
(e) Free Personal Accident Insurance (Terms & Conditions)
(f) Insurance options for your home loan at attractive premium
 Personal Loan
(a) Key Benefits of ICICI Bank Personal Loan:
(b) Loan up to 15 lakhs
(c) No security/guarantor required
(d) Faster Processing
(e) Minimum Documentation
(f) Attractive Interest Rates
(g) 12-60 Months repayment options
 Farm Equipment Loans
(a) Comfortable repayment tenures from 1 year to 6 years.
(b) Flexible repayment options in tandem with the farmer's seasonal liquidity
(c) Financing farm equipments in over 381 locations spread across the country
 Business Installment Loans
(a) Loans upto 25 Lakhs
(b) No security/guarantor required
(c) Faster Processing
(d) Minimum Documentation
(e) Attractive Interest Rates
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(f) 12-48 Months repayment options
 Farmer Finance
Providing finance to the farmer for his various needs of inputs and
consumption in the form of crop loans, dairy loans and loans for
allied activities to agriculture like irrigation etc. For input needs and
auto loans (two, three and four wheeler) and personal loans for
consumption needs. The customer can also avail of working capital
term loan for setting up a poultry project. Flexible repayment
pattern and tenure to align to the cash flow of the customers
(3)CARDS
 Travel cards
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The ICICI Bank Travel Card is a powerful new concept for international travelers: a pre-paid
card that you can buy using Indian rupees, and withdraw in any local currency in the world.
The ICICI Bank Travel Card has made travel abroad convenient and safe. Available in US
Dollars, Australian Dollars, Canadian Dollars, Swiss Francs, Euros and Pound Sterling, the
International Traveler gets the widest of the choices. Some of the powerful features are
Replacement Card (part of kit), SMS alerts for every transaction, online access both to
customers and corporate, card useable over the Internet etc. making travel totally hassle-free.
BENEFITS
(a) Easy Purchase: Easy purchase through ICICI Bank branches or select authorized
Money Changers. For a location nearest to the customer, he should call up 24 hour
customer care center. Pay in rupees; buy across the counter ICICI Bank Travel Card in
the currency of your choice
(b) Easy Cash: Access to over 1 million VISA ATMs all over the world. Although the card
may be in the base currency i.e. currency with which it was loaded, you can withdraw
cash in the local currency of the country you are in.
(c) Easy Shopping: The ICICI Bank Travel Card can be used to shop at over 14 million
Merchant Establishments accepting VISA cards. So there is no need to carry cash.
Besides, there are no charges for using the card at Merchant Establishments but the card
cannot be used in India, Nepal and Bhutan.
(d) Replacement Card: A Replacement card is issued along with the Primary Card, as part
of the Travel Card Kit. This ensures that incase you misplace your Primary card; you
don't have to wait 2-3 days for the Replacement Card to be couriered to you.
(e) SMS Alert: SMS Alerts for each and every transaction act as a very powerful security
feature incase there is a misuse of the card.
(f) Online Account Access: Both the customers and the corporate can have online access to
the card details. Card balance, card statement, card blocking etc are some of the features
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available online.
(g) Internet Transactions: The ICICI Bank Travel Card has been enabled for usage over
the Internet. The card first needs to be activated for Internet Usage, by the customer,
through the customer log in screen, before the card can be used over the Internet.. User id
is 16 digit card number and password is the web password (given along with ATM Pin)
FEATURES
(a) Life Long Activation: The card can be kept active for internet usage lifelong
(b) Activation in Hours: The card can be activated for Internet Usage for a certain number
of hours. After the expiry of the said number of hours, the card would again be disabled
for Internet Usage.
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(c) Activation for Days: The card can be activated for Internet Usage for a certain number
of days. After the expiry of the said number of days, the card would again be disabled for
Internet Usage.
(d) Limit on the Amount per Transaction: Limit can be placed on the maximum amount
per transaction, for which the card can be used over the Internet. If card is attempted to be
used for an amount exceeding the amount as defined, the transaction would be rejected.
(e) Easy Refund: At your nearest ICICI Bank branch or Money Changer. Fill up a refund
form and provide a copy of your ICICI Bank Travel Card and passport. Your money will
be refunded immediately. You can also request for your foreign exchange refund
certificate.
(f) Easy Reload: Easy reload on your existing card with an additional amount before your
next trip. Visit an ICICI bank branch or authorized Money Changer. Use the reload
coupon that comes with your card.
(g) Remote Reloading: Corporate travelers can reload their ICICI Bank Travel Cards even
when they are abroad. Contact your office, the ICICI Bank branch or the Money Changer
for details. Subject to RBI regulations—currently the maximum is $10,000 per year for
individuals—higher for corporate travelers.
(h) Easy Replacement if Misplaced: Customer has to call up the 24-hour customer care
center and request for hot listing the Primary Card and activation of the Replacement
Card. Incase customer loses the Replacement card also, his existing card will be blocked
and a replacement card along with its ATM-PIN will be couriered to the customer within
48 hours. Customer has zero liability from the time he reports it. As a security measure,
the new card will be sent to him in a deactivated state. Call up the customer care center
and confirm receipt of the card in proper condition to activate it.
(i) Easy Statements: Easy Statements of monthly transactions on email, so the customer
can access it wherever he is traveling.
(j) Best Security Features: All cash transactions on the card are protected by customers
personal 4 digit ATM-PIN. All purchases at merchant outlets are protected by the
signature on the card. The card also comes with Zero Lost Liability.
(k) Best Account Management Features: Internet access of the card statements,
statement /balance alerts on email and free SMS alerts when card is loaded, reloaded or
refunded, or for available balance
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 Credit Cards
(a) Auto Debit`
Customer having an account with any ICICI Bank branch,
has the option of making payment of his monthly credit-
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card statement (either the minimum amount due or the total amount due) directly through
customers bank account
(b) Internet Banking
ICICI Bank offers access to Credit Card related information through the Internet at
www.icicibank.com. Customer can make transactions like accessing account information -
current and last statement - getting payment status, viewing monthly statement by e-mail,
requesting a duplicate PIN, recording a change of address, ordering a draft, giving auto debit
instructions, requesting a replacement card or an add-on card, redeeming points online from
the Rewards catalogue and subscribing to statement by e-mail and mobile alerts.
(c) Payment options:
(i)Cash
Customer may deposit cash towards his credit card payment at any ICICI bank branches
from 8 a.m. to 8 p.m. The payment would reflect in his account within 24 hours. Payment
should be made before the due date to avoid late payment charge and interest charge.
(ii) Cheque
Make a cheque or Draft in favour of ICICI Bank Credit Card and drop it at any of the
ICICI Bank branches / ATM locations / Skypak drop boxes.
An ICICI Bank cheque will take 3 days to clear, whereas a non-ICICI-Bank cheque will take
5 days. Drop cheque well in advance to avoid any Late Payment charge and Interest charge.
(iii)Internet Bill Pay facility
If customer holds a savings account with ICICI Bank he may even pay online through Bill
Pay.
(iv)Phone
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Customer may even pay over the phone if he holds a savings account by calling at any of
ICICI Banks 24-hour Customer Care numbers closest to you. It will take 3 working days for
the payment to reflect in credit card account.
(d)Email Statement / Mobile Alerts
Statement Online is a very simple, powerful and convenient way to view credit-card
statement details instantly without any postal delays. Sign up for Statement Online and get
faster, reliable access to account statement. Mobile alerts from ICICI Bank provide
information to customer about his ICICI Bank Credit Card even when he is on the move.
(e) Balance Transfer
ICICI Bank's Balance Transfer gives the option of transferring outstanding balances from
any other bank's credit card to your ICICI Bank Credit Card.
(f) Cash Advance
With an ICICI Bank Credit Card in your wallet, customer will not be strapped for cash ever
again. A customer can withdraw cash on his card, 24 hours a day from any VISA or
MasterCard participating member bank ATM using APIN. During banking hours cash can
also be withdrawn over-the-counter, from any ICICI Bank branch in cities where the ICICI
Bank Credit Card has been introduced.For each cash transaction, there is a fee of 2.5% levied
on the amount withdrawn subject to a minimum of Rs.300. In addition to the Transaction fee,
an Interest charge will also be levied from the date of transaction to the date of repayment
(g)Dial-a-draft
To order a draft from the customer’s convenience, he can simply call the ICICI Bank's 24-
hour Customer Care and ask for a draft, payable anywhere in India and favour of any
company or individual. The draft will be delivered to your mailing address. For each draft
request, a transaction fee of 3% of the amount withdrawn, subject to a minimum of Rs.300,
will be levied. In addition to the Transaction fee, an Interest charge will also be levied from
the date of transaction to the date of repayment. The amount of the draft will be billed in
customer’s monthly Credit Card statement.
(h)EMI on Call
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EMI-on-call gives the option to pay back credit card purchases in easy installments. Now
customers can convert any of their credit card purchases of over Rs. 2,000 into EMI-on-call
with just a phone call.
They can avail of the EMI-on-call facility instantly without submitting any documents.
Simply call 24-hour Customer Care and customer can put in his request.
(i) Cash In
Cash-in is a personal loan on credit card. The loan can be against the credit/cash limit or over
and above the credit limit. Not only is Cash-in pre-approved, it can be availed of without
submitting any documents. Customer need to do is call 24-hour Customer Care and check
eligibility limit. Cash-in is available at a very attractive rate of interest and at tenures of 6,
12, 18, 24, 36 and 48 months. A one-time processing fee will be applicable. Service tax as
per the prevailing rate will be applicable on the interest component of the EMI, fees and all
other charges.
(j)Add on Card
Customer can freely present a maximum of two add-on Cards to his wife, sister, brother,
parents or children above 18 years of age. To apply for this add-on Card, referred to as
"Bandhan", customer can call 24-hour Customer Care and place request with the executive
who answers. A form will be sent to customer and customer can also place your request
online if he is linked with Internet Banking user-ID.
(k)Self Set Limit
The only Card that allows you to pre-define your own credit limits. Customer can request a
limit lower than what he is eligible for. He can even preset the monthly spending limits on
the "Bandhan" Card. Any transactions over the specified 'Spend Limit' will be declined. This
monthly spending limit can be reset every billing cycle by simply calling 24-hour Customer
Care and placing the request with the executive. Customers spend limit will be changed on-line
and come into force from the following billing cycle.
(l)Temporary Credit Limit Enhancement
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There may come a time when customer would feel the need for an increase in his credit limit
to enable himself to make increased purchases on his Card. This facility is available only
after 9 months of membership and on the basis of customers credit history.
(m)Permanent Credit Limit Enhancement
There will be times when customer often feels the need for an increase in its credit limit to
enable himself to make increased purchases on his Card. To avail of a permanent credit-limit
enhancement, all customer need to do is to call 24-hour Customer Care.
(n)Rewards Programme
A special bonus plan that allows to earn points every time customer use his Card, every
Rs.200 that customer spends earns him 1 point. One can redeem reward points against the
products and services in the rewards catalogue or against his renewal fees.
 Debit Cards
Combining the wide acceptability of a credit card and the
thoughtful prudence of an ATM card, the ICICI Bank Debit Card
is the most convenient accessory for the customer. “No more fear
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of overspending, No more searching for the nearest ATM, only more comfort and
convenience!”
(a) Cashless Spending!
This debit card enables instant on-line debit to customers ICICI Bank account. Every time the
customer swipes his card at restaurants, shops, petrol pumps, multiplexes, etc., the amount that he spends is debited to
his account.
(b) Use Online Safely!
Customer can now use his VISA Debit Card online to shop, buy airline and movie
tickets, pay bills and all of this from the convenience of home or office. To ensure that
money stays safe, ICICI Bank has added a second level of security for online usage of
card – in addition to card details, customer also need to enter his Internet Banking User
ID and Password to complete the transaction. VISA Debit Card can only be used on
websites which are secured and Verified by VISA.
(c) Lost Card Protection!
Card is safer than cash! Customer can feel safe even in the event of losing his card!! The
customer need to do is to call 24-hour Customer Care, and a new card would be issued to
him within a week. Customer is also protected from any financial liability arising from
any purchase transaction made on his lost card. This insurance is valid only on non-cash
transactions made at merchant outlets within 30 days prior to the date of reporting.
(d) Countrywide Acceptance!
Customers debit card is accepted at over 3.5 Lakhs merchant establishments in India i.e.
restaurants, department stores, grocery stores, petrol pumps, etc. Besides, customer can
use it conveniently at more than 3,000 ICICI Bank ATMs and more than 18,000
VISA/Master Card ATMs all over India.
(e) Worldwide Acceptance!
“Travel the world and enjoy the freedom of using your debit card”. This debit card gives
customer the access to over 24 million shops and 1 million Visa ATMs all over the
world, giving him the freedom of payment anywhere in the world
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(4)MOBILE BANKING OF ICICI BANK
Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer
what it used to be. ICICI Bank offers the Mobile Banking facility to all its Bank, Credit
Card, Demat and Loan customers.
33

ICICI Bank Mobile Banking can be divided into two categories of facilities:
Alert facility: The ICICI Bank Mobile Banking Alert facility informs customer promptly of
the significant transactions in his accounts. It keeps customer updated wherever he goes.
Request facility: ICICI Bank Mobile Banking Request facility enables customer to ask for
his account information.
ICICI BANK LAUNCHES IMOBILE
iMobile is a breakthrough innovation in banking where practically all internet banking
transactions can now be simply done on mobiles phones. Customers can now transfer funds
to ICICI and Non ICICI Bank accounts just with the click of their mobile. The application
covers Savings bank, Demat, Credit Card and Loan accounts.
Customers can also pay their utility bills and insurance premium through this facility. ICICI
Bank offers this facility free of charge to customers.
(5)DEMAT
With Mobile Banking customer can remain updated while he is on the move, without even
making a phone call or a visit or logging on the Internet. ICICI Bank Mobile Banking for
Demat Accounts can be divided into two categories:
34

Request Facility
Through the ICICI Bank Mobile Banking Request facility, one can request information
pertaining to your demat account anytime at his convenience. Customer can ask for:
· Balance enquiry
· The status of a transaction
· Bill enquiry
· ISIN enquiry
Alert Facility
Through this facility, customer will receive SMS alerts from ICICI Demat on the following
events:
· Demat account getting credited
· Demat account getting debited
· Pledge creation
· Pledge closure
· Rejection of submitted instruction
(6)INVESTMENTS
At ICICI Bank, they care about all customer needs. Along with Deposit products and Loan
offerings, ICICI Bank assists customer to manage his finances by providing various
investment options ranging from ICICI Bank Tax Saving Bonds to Equity Investments
35

through Initial Public Offers and Investment in Pure Gold. ICICI Bank facilitates following
investment products:
· ICICI Bank Tax Saving Bonds
· Government of India Bonds
· Investment in Mutual Funds
· Initial Public Offers by Corporate
· Investment in "Pure Gold"
· Foreign Exchange Services
· Senior Citizens Savings Scheme, 2004
(7)INSURANCE
ICICI Provides:
-Travel Insurance
-Motor insurance
-Home insurance
-Life insurance
-Health insurance
(8)INTERNET BANKING
(a) Transaction History
(b) Transfer Funds Online
36

(c) Card-2-Card Fund Transfer
(d) Use your Debit Card Online
(e) Pre-paid Mobile Recharge
(f) Pay your Utility Bills
(g) Send a Smart Money Order
(h) Open Fixed Deposits and Recurring Deposits
(i) Order a Demand Draft / Pay Order
(j) Subscribe for Mobile Banking
(k) Request a Cheque Book
(l) Stop Payment Request
(m)Re-issue/Upgrade of ATM/Debit Card
(n) Request a Debit Card
(o) Monthly Bank Account Statement by E-mail
(p) Link Bank Accounts to ATM/Debit Card
(q) Renewal / Premature Closure of FD/RD
(r) Request a Duplicate Physical Bank Statement
(s) Secure Mailbox
PRICING
37

The pricing decisions or the decisions related to interest and fee or commission charged by
banks are found instrumental in motivating or influencing the target market. The RBI and the
IBA are concerned with regulations. The rate of interest is regulated by the RBI and other
charges are controlled by IBA.
The pricing policy of a bank is considered important for raising the number of customers’
with reference to the increase of deposits. Also the quality of service provided has direct
relationship with the fees charged. Thus while deciding the price mix customer services rank
the top position.
The banking organizations are required to frame two- fold strategies. First, the strategy is
concerned with interest and fee charged and the second strategy is related to the interest paid.
Since both the strategies throw a vice-versa impact, it is important that banks attempt to
establish a correlation between two. It is essential that both the buyers as well as the sellers
have feeling of winning.
(a) Pricing Bank Products:
Steps for bank to meet its financial objectives:
Some considerations for loan and deposit pricing are:
(a) ROA or ROE objectives
(b) Related income taxes
(c) Earning assets to total assets
(d) Equity-to-asset ratio
(e) Cost to service earning assets being funded or deposits funding an earning asset
(f) Pricing for the activities and risks associated with the product
(g) Rate tiers based on product balances
(h) Asset and liability mix
Another element to consider in the pricing of earning assets is the risk of loss. Most notably,
this is relevant in loan pricing. Many banks assign a risk weighting to individual loans over
a certain size or based on loan type and assign a credit risk charge based on those ratings.
38

Customer relationships are difficult to assign a value to in the pricing process. Customers
will generally press for some price concessions in consideration of other relationships they
have with the bank.
Asset and liability mix also impacts pricing results. Generally speaking, banks operating with
higher loan-to-asset ratios are able to afford to pay more for deposits. Likewise, banks can
afford to be more competitive on certain deposit products if they have fewer maturities in a
particular timeframe or less total outstanding balances in a product line.
(b) Need right balance:
Pricing is a key issue for the associates who sell bank products to your customers. The fact
is, lenders want the lowest rates, and people dealing with depositors want to pay the highest
rates. You need the right balance of fee income, strategies to reduce operating costs, and a
healthy asset and liability mix to change your required pricing.
PLACE
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This component of marketing mix is related to the offering of services. The services are sold
through the branches. The 2 important decision making areas are: making available the
promised services to the ultimate users and selecting a suitable place for bank branches. The
number of branches OF ICICI: 1900 in India and 33 in Mumbai.
Headquarters ICICI Bank Ltd.,
ICICI Bank Towers,
Bandra Kurla,
Mumbai, India
Reasons of selection of Bank
(a) The selection of a suitable place for the establishment of a branch is significant with the
view point of making place accessible.
(b) The safety and security provisions a Convenient to both the parties, such as the users and
the bankers
(c) Infrastructure facility
(d) Market coverage
PROMOTION
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· Advertising: Television, radio, movies, theatres
· Print media: hoardings, newspaper, magazines
· Publicity: road shows, campus visits, Sponsorship
· Sales promotion: gifts, discount and commission, incentives, etc.
· Personal selling: Cross-sale (selling at competitors place),personalized service
· Telemarketing: ICICI one source Call center (Mind space)
PROCESS
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(a) Flow of activities: All the major activities of ICICI banks follow RBI guidelines. There
has to be adherence to certain rules and principles in the banking operations. The
activities have been segregated into various departments accordingly.
(b) Standardization: ICICI bank has got standardized procedures got typical transactions.
In fact not only all the branches of a single-bank, but all the banks have some
standardization in them. This is because of the rules they are subject to. Besides this,
each of the banks has its standard forms, documentations etc. Standardization saves a lot
of time behind individual transaction.
(c) Customization: There are specialty counters at each branch to deal with customers of a
particular scheme. Besides this the customers can select their deposit period among the
available alternatives.
(d) Number of steps: Numbers of steps are usually specified and a specific pattern is
followed to minimize time taken.
(e) Simplicity: In ICICI banks various functions are segregated. Separate counters exist
with clear indication. Thus a customer wanting to deposit money goes to ‘deposits’
counter and does not mingle elsewhere. This makes procedures not only simple but
consume less time. Besides instruction boards in national boards in national and
regional language help the customers further.
(f) Customer involvement: ATM does not involve any bank employees. Besides, during
usual bank transactions, there is definite customer involvement at some or the other
place because of the money matters and signature requires.
PHYSICAL EVIDENCES
42

Physical evidence is the material part of a service. Strictly speaking there are no physical
attributes to a service, so a consumer tends to rely on material cues. There are many
examples of physical evidence, including some of the following:
 Internet/web pages
 Paperwork
 Brochures
 Furnishings
 Business cards
 The building itself (such as prestigious offices or scenic headquarters)
The physical evidences also include reports, punch lines, other tangibles, employee’s dress
code etc.
Financial reports: The Company’s financial reports are issued to the customers to emphasis
or credibility.
Tangibles: Bank gives pens, writing pads to the internal customers. Even the passbooks,
cheque books, etc reduce the inherent intangibility of services.
Punch lines: Punch lines or the corporate statement depict the philosophy and attitude of the
bank. Banks have influential punch lines to attract the customers.
Employee’s dress code: ICICI bank follows a dress code for their internal customers. This
helps the customers to feel the ease and comfort.
PEOPLE
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 All people directly or indirectly involved in the consumption of banking services are an
important part of the extended marketing mix. Knowledge Workers, Employees,
Management and other Consumers often add significant value to the total product or
service offering. It is the employees of a bank which represent the organization to its
customers.
 In a bank organization, employees are essentially the contact personnel with customer.
Therefore, an employee plays an important role in the marketing operations of a service
organization.
 To realize its potential in bank marketing, ICICI become conscious in its potential in
internal marketing - the attraction, development, motivation and retention of qualified
employee-customers through need meeting job-products. Internal marketing paves way
for external marketing of services. In internal marketing a variety of activities are used
internally in an active, marketing like manner and in a coordinated way.
 The starting point in internal marketing is that the employees are the first internal market
for the organization. The basic objective of internal marketing is to develop motivated
and customer conscious employees.
 A service company can be only as good as its people. A service is a performance and it is
usually difficult to separate the performance from the people.
 If the people don’t meet customers' expectations, then neither does the service. Therefore,
investing in people quality in service business means investing in product quality.
CHAPTER-3
44

INNOVATION IN RETAIL BANKS BY HEWLETT-PACKARD
 HP AND RETAIL BANKING
 SPECIAL REPORT
 THREE PRONGED STRATEGY
 PORTFOLIO OF 23 SOLUTIONS
 GROWTH
 CONFORMITY
 COSTS
HP AND RETAIL BANKING:
45

How can a retail bank promote its growth, reduce costs, and deal with regulatory compliance
in an increasingly competitive environment? To rise to these challenges, HP has developed
the Retail Banking Initiative (RBI), an approach that allows it to work with its banking
customers to identify their current and future needs in terms of growth and value creation,
compliance and cost reduction.
With this goal in mind, HP is working hand in hand with banks to anticipate customer
needs and design the bank of the future. This approach and style are very different from what
is generally seen on the market, but it is bearing fruit.
Dexia Bank chooses HP for its branch of the future
To prepare its branch of the future, Dexia Bank – like other institutions such as Bank of
India– has opted for customized banking solutions developed by HP. This ambitious project
to transform Dexia Bank consists of consolidating the 1,100 servers in the branches into 300
HP Blade System servers installed in a data center. In addition, the 6,000 PCs in the branches
have been replaced by 6,000 HPCompaq t5710 Thin Clients.
OBJECTIVES ACHIEVED:
46

(a) The solution streamlined operations and reduced maintenance costs.
(b) Personnel mobility was increased by using HP Mobile Office solutions. Bank agents
now have easy access to all IT resources regardless of the branch. In addition, bank
agents can visit customers for all types of operations with a laptop and portable
printer, both contained in a business suitcase trolley.
(c) Lastly, the architecture and technologies used allow more than cost reduction,
streamlined management and increased reliability; most importantly, they offer
customers a completely novel banking experience outside the walls of the branch.
(d) "With HP, its branches were able to acquire a powerful infrastructure that is perfectly
suited to their needs. What's more, the HP solution will allow major savings."
Transforming retail banking:
Though HP is known worldwide for its technology solutions for consumers and businesses,
its operations in the world of banking seem to be a well-kept secret. Yet the company has
been strategically investing for several years in vertical solutions specially designed to meet
the needs of financial institutions. Heidi Ezzouaoui, Director Financial Markets, Worldwide
Financial Services Industry, HP tells us about this HP strategy. "Just because we're showing
an interest in the banking industry doesn't mean that HP wants to develop a financial
consulting service. Our business is and remains IT technology and related services.
However, by better understanding the needs of our bank customers, we can design
technological solutions that are better suited to this industry.
SPECIAL REPORT:
As part of HP’s Retail Bank Initiative (RBI), the CIO’s and business managers of the 15
47

largest European banks were interviewed in order to gain insight into their priorities and
more specifically what they are looking for in a company such as HP. They then built a suite
of banking solutions that are based on their technological portfolio and especially suited to
the priorities stated by their customers."
THREE-PRONGED STRATEGY:
48

For a bank, this requires that it implements automated processes for reporting, on business
processes that are sometimes still manual. As a company, HP has had to implement
automatic reporting mechanisms, relative to the Sarbanes-Oxley Act for instance, and it
therefore has the know-how to implement compliance solutions. The third area, cost control,
remains a priority, though the goal today is to support growth and comply with the
requirements of the regulatory authorities. 2 to 3 sales a day: Statistics show that out of 100
visits per day to a branch, only two customers leave with new products. How can these
branch sales be increased? HP is working with John Ryan Ltd., specialized in consumer
behavior. "Together we examined how a branch can optimize customer interaction. For
example, when the customer is waiting in line, interactive screens can display information.
HP employs roughly 151,000 people in 178 countries, with 86 billion dollars in revenues, 8
billion dollars in cash and 3.5 billion dollars invested in R&D per year.
To Support its growth, HP has developed a three-pronged strategy:
49

Capital Strategy: Optimum management of the company's financial, intellectual and human
capital.
Efficiency: Increased efficiency in the production of technological solutions and in their
deployment and monitoring. Deliver customers more value at less cost. The combination
of these two areas supports the company's growth.” Based on our experience as a
multinational, we have applied it to the banking industry," explains Heidi Ezzouaoui."
Relative to RBI our customers encounter three types of problems.
(a)They need to ensure steady growth.
(b)One of the bank's priorities is to acquire and retain customers, not only through unique on-line
services, but also by bringing customers back to the branch, where interactions are
more conducive to the sale of new products than the Internet.
(c)Furthermore, after the scandals in the business world and on the financial markets, the
regulatory authorities are stepping up pressure to monitor the operations of financial
institutions. The strategic importance of these three areas has been confirmed by all our
customers."
PORTFOLIO OF 23 SOLUTIONS:
50

To better meet the needs of its customers in each of these three areas – supporting growth,
compliance and cost reduction – HP has defined 23 solutions
GROWTH:
(a) Acquire-retain customers: With 1 billion customers, HP has extensive customer
51

experience. "We have detailed insight into consumer behavior and the parameters that
influence their satisfaction. We can share this insight with our bank clients and see how
to optimize direct and indirect channels to attract and retain customers. By simply
pressing a button, a customer can request information on a personal loan, and perhaps
print information sheets. There are also other techniques, such as RFID. They identify
customers as soon as they enter the branch, and are valuable in offering tailor-made
services."
(b) E-statements: HP is known as a leader on the printer market. This experience is valuable
for a bank seeking to reduce bank statement printing and mailing costs. "The goal is to
encourage consumers to print their bank statements at home, reducing costs for the bank.
We have developed a project with a bank in the form of a promotion. Any young person
opening a new account receives an HP printer free. Consequently young people have an
incentive to open a new account, and the bank acquires a new market share. In addition, it
allows the bank to reduce its printing costs."
(c) Forthcoming innovations: The idea is to provide exposure to IT strategy managers in
the banks and business managers on our R&D programs to help them design possible
applications for our future technologies."
(d) Call centers and portals: Nothing is more frustrating than to start a procedure on a bank
website, for example to request a loan, and then to suddenly run up against a parameter
that you can't provide. "If you contact the call center, most of the time the operator can't
access the data already entered during your Internet session, so you have to repeat the
whole process on the phone. HP offers solutions to integrate these channels."
(e) Bank transformations and Branch of the future: Many banks still have vast branch
networks that are cumbersome to manage, with PCs that are often obsolete, servers that
are expensive to maintain, and applications that must be downloaded and updated. This
means that deploying new applications is a slow process, incurring high costs. "With the
banks, HP is examining how to streamline this model, for example by replacing PCs with
thin clients that connect remotely to a centralized system. By reducing computer
hardware in the branch to the strict minimum, we greatly decrease both investment and
operational costs. Lastly, by centralizing the application logic of the branches, application
52

updates can be managed more easily and more efficiently.
CONFORMITY:
(a)Disaster Recovery Plan (DRP) Solutions: Operational risk management is a key factor
in compliance. For example, if you centralize the services of 1,500 branches in a data
center, a Disaster Recovery Center must be established since there is an increased risk of
failure in the data center. Banks therefore need to plan DRP solutions. "This is an HP core
business. We have data centers for customers and we can provide the best in the field."
(b)Compliance and audit: HP has implemented efficient techniques to achieve compliance
and they share them with the banks. This is particularly true for all aspects of traceability
of customer advice, whether provided in paper or digital form or via voice, video or
Internet sessions.
(c) Business Process Insight and Continuous Measuring and Monitoring: Our
application and process monitoring technologies are a natural fit for enabling the banks to
measure their business processes and meet customer service levels.
COSTS:
(a) Outtasking and Outsourcing: The Canadian Imperial Bank of Commerce (CIBC) first
called on HP services more than 10 years ago."Gradually, the bank entrusted us with the
53

management of their entire IT system - a 2 billion dollar contract that has just been
extended through 2013. This is an excellent example of the level of responsibility we are
ready to shoulder, in partnership with a bank, though in Europe the current trend is more
toward selective out tasking."
(b) Migrations and re-platforming: Most of a bank's IT costs pertain to mainframes
and their applications. HP believes that the use of mainframes or their equivalent in
the form of a unix platform is justified. "In fact, we see a bank's architecture as
having three layers. The first layer comprises factories that process the basic
transactions, payments, credits, operations, etc. Since this consists of large volumes
of simple transactions, a monolithic server is perfectly suited for the job. However,
the second layer that implements the business logic needs to change quickly
according to business needs. In this case, mainframe-type central platforms are no
longer appropriate. We discuss with the customer about how to reduce mainframe
costs and selectively migrate the applications on the central mainframe to less
expensive platforms such as Unix, Linux and .Net. The third layer is the user
interface,. Whether in a branch or on an electronic system, it becomes increasingly
thin using virtualization techniques."
(c) IMAC services and Branch in a box: A banker's job is not to manage branch
infrastructures. "We offer packaged services in which we take ever-increasing
responsibility in managing the branch's infrastructure. If we send an engineer on site to
repair the servers, PCs or printers, he can use the opportunity to check the network and
ATMs as well. The bank reduces its costs and can focus more on customer services. Our
other solutions are Thin Client Transformation, Information Life –Cycle Management,
Security Solutions, Integrated Network and Systems Management, Business Process
Outsourcing, and Transformation of IT to Commodity TCO.
Business value assessment: a consultative approach: HP organizes
discovery workshops with customers to present the 23 solutions tailored for retail banking.
"It's a shared investment between the customer and HP; with the CIO's support, we explore
54

the potential our RBI initiative represents for the bank. We interview both the CIO's team
and the business managers that the CIO designates," explains Hédi Ezzouaoui. "With a joint
customer-HP team, we evaluate each RBI solution and assess their applicability from a
technical, functional and even economic standpoint. Together with the customer, HP selects
three or four priority areas. For these areas, we develop the business case (current costs,
future costs, transformation costs, risks and implementation plan). We've named this
approach Business Value Assessment, or BVA. It's a consultative and partnership approach.
BVA has drawn the interest of many of our large European bank customers."
CHAPTER-4
CUSTOMER RELATIONSHIP MANAGEMENT IN RETAIL
BANKING
55

· INTRODUCTION
· BENEFITS
· CRM IMPLEMENTATION OF ICICI
 THE RETAIL STRATEGY
 THE CRM ROADMAP
 IMPLEMENTING CRM
 SELECTING AND IMPLEMENTING A TECHNOLOGY
BASED CRM
 LESSONS SO FAR FROM THE ICICI EXPERIENCE
INTRODUCTION:
Retail banks are facing greater challenges than ever before in executing their customer
management strategies. Intensifying competition, proliferating customer contact channels,
56

escalating attacks on customer information, rising customer expectations and capitalizing on
new market opportunities are at the top of every bank executive’s agenda.
In looking for ways to drive growth, banks need to evaluate their customer management
strategies.
BENEFITS OF A CRM SOLUTION:
Faced with these numerous and varied trends, retail banks are reshaping the way they must
interact with their customers. A fully integrated, enterprise wide CRM platform ensures
banks have the core capabilities to take full advantage of their customer relationships and
capitalize on these market dynamics, rather than losing out because of them.
 Gaining Sales Momentum
In today’s increasingly competitive environment, where maximizing organic growth is a
bank’s priority, sales momentum is essential. To build this momentum, banks need to focus
simultaneously on:
(a) Increasing acquisition rates of new and emerging customer segments.
(b) Improving retention of existing customers and saving “at risk” customers
(c) Increasing profitability of customer relationships, either at the top-line through increased
sales, or at the bottom-line through more cost-effective service
(d) Improving integrated channel distribution strategies to get the right product, to the right
client, at the moment the customer has the need
(e) Maximizing the value and return from CRM investments that have already been made.
 Increasing acquisition of new customers
A CRM solution should help a bank target customers based on the “value” they bring to the
bank, now and throughout the life of the customer (and beyond through “next generation”
marketing). Banks need to ensure that their value propositions have grip with the right
market segments. This will enable the bank to identify, target and capture new customers.
Clearly, customer insight and strategy are the core differentiators for the bank. CRM
57

solutions (people, applications, systems and processes) must support these strategies to get
the right products and services to the right customers.
 Improving Retention Of Existing Customers
Customer retention can be achieved by enhancing customer satisfaction and loyalty,
improving problem resolution, and creating the ability to identify and save “at-risk”
customers. In fact, an “at-risk” customer actually represents a major opportunity for
additional revenue – if handled correctly. However, the greatest danger for banks is either not
identifying “at risk” customers or not having the capabilities to do anything to recover them.
For example, a customer makes a large withdrawal from his or her account. This may signal
that the customer is switching funds to another bank. Or the customer may be buying a
house, or paying college coaching, in which case there are clear opportunities to sell
additional products or investments. The identification and treatment of this customer should
reflect his or her lifetime value. CRM-driven techniques will help retain customers and can
migrate mere “account holders” into loyal, long-term, profitable customers.
 Increasing the Profitability of Customer Relationships
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Boosting revenues requires improving the product pipeline and close rates, while reducing
sales and service costs. On the revenue side, the bank’s CRM solution should use customer
intelligence to target specific offers and manage marketing campaigns for a high likelihood
of acceptance. Customer treatment strategies should be fully integrated with a CRM platform
and the processes to support them. On the cost side, better channel management, CRM
automation and integration will help increase the efficiency and effectiveness of sales and
service.
 Improving Distribution And Channel Management
To win profitable customers and build long-term relationships with them, banks need to have
the right insight, products and services for the right customer at the lowest possible cost.
From call centers to Web sites, every one of a bank’s multiple channels must be scalable,
flexible, low-cost and fully integrated with all the other channels. This is the only way to
consolidate customer information and provide consistent treatment across the enterprise.
Each of the bank’s channels must also be able to accommodate change and adapt to future
trends in the marketplace.
CRM IMPLEMENTATION OF ICICI BANK
59

ICICI has transformed itself into a technology intensive financial services group in the last
decade. To achieve its long term goal of being in a position to practice 1 to 1 marketing.
ICICI has taken a series of initiatives. As part of the plans, it is implementing various
projects to establish world-class CRM practices; which would provide an integrated view of
its customers to everyone in the organization. The paper discusses some of the lessons learnt
while implementing these projects.
INTRODUCTION
ICICI, set up as a Development Bank over four decades ago to provide products and services
for the corporate segment, diversified into the retail segment of the financial markets in the
early 1990s. In the last decade it has transformed itself to a technology intensive financial
services group. The first such move came in the mid-nineties when ICICI raised debt from
the retail market. Since then, ICICI has been increasing its reach to this segment in terms of
resources mobilization, and by offering quality investor service through ICICI Infotech
Services, its subsidiary. In 1994, it established ICICI Bank as a commercial bank that is
flexible, In addition to the bank, the retail initiatives include –
(a) Prudential ICICI AMC – a tie up with the Prudential Group of UK for its foray into the
mutual funds business,
(b) ICICI Personal Finance Services (PFS) – to offer retail assets products like home
finance, automobile finance, durables finance etc.
(c) ICICI Capital Services – to service retail liability products like bonds and deposits.
(d) ICICI Web trade – to facilitate end-to-end integrated web based trading service through
the web site www.icicidirect.com
(e) Prudential ICICI Life Insurance – to offer the insurance services, and
(f) ICICI Lombard General Insurance – the latest venture to offer non-life insurance
services,
This apart the retail initiatives of ICICI also include a plethora of web-based
businesses including city portals and various other utility sites such as
billjunction.com, icicimoneymanager.com, magiccart.com, among others. All these
group companies are jointly spearheading ICICI Group’s foray into the retail market.
 THE RETAIL STARTEGY
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ICICI has ambitious plans for its retail business initiatives. The retail strategy revolves
around intensive deployment of technology. Information technology will help reduce cost of
service, increase customer retention, help in cross-selling and up-selling while improving
process efficiencies. Electronic channels including internet, ATMs , call centers, contact
centers, desktops, kiosks, mobiles and other hand held devices will perform financial
activities while ensuring that customer has multiple options for access and transactions.
The group has adopted a ‘click and brick’ strategy to leverage the power of electronic
channels and physical presence to ensure rapid product delivery, fulfillment of financial
deals and documentation.
As part of the plans, it is implementing various projects to establish world-class CRM
practices, which would provide an integrated view of its customers to everyone in the
organization. CRM at ICICI involves increased communication between the virtual
universal bank and its customers and prospects, as well as within the group itself. The
underlying idea is to enhance every instance of contact with the customer. ICICI believes
that a true customer-centric relationship can only be accomplished by considering the unique
perspectives of every single customer of the organization. Hence the pressing need to put in
place a technology enabled CRM solution.
 THE CRM ROADMAP
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CRM, at ICICI, is viewed as a discipline as well as a set of discrete software technologies,
which will focus on automating and improving the business processes associated with
managing customer relationships in the areas of sales, marketing, customer service and
support. The organization aims to achieve the end goal of one-to-one marketing.
The CRM software applications will not only facilitate the coordination of multiple
business functions but also coordinate multiple channels of communication with the
customer-face to face , call centre, ATM, web, telephone, kiosk, bank, branch, sales
associates, etc. – so as to enable ICICI carry out cradle-to-grave customer management more
efficiently. It should allow ICICI to engage in one-to-one marketing by tracking complete
customer life-cycle history. To begin with, it will automate process-flow tracking in the
product sales process, and be able to generate customized reports and promote cross product
sales process, and be able to generate customized reports and promote cross face for
definition, tracking, execution and analysis of campaigns.
From an architecture perspective, the enterprise-wide CRM solution should
seamlessly integrate non-transactional information housed in the Back Office. Creating the
enterprises CRM strategies required the combination of nine distinct steps as shown below.
CUSTOMER
STRATEGY
PROCESS
ORGANISATION
PEOPLE
INTELLIGENCE
AUTOMATION
DATA
TECHNOLOGY
By combining these nine steps can one really start listening to the customers, and
understand what they are saying, maybe even in real time. Once that is achieved, profits
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begin to follow as optimization techniques are applied. Only then will the two crucial goals
for a successful business-case driven project be achieved, viz.
1. Effective change management
2. Technology-enabled evolution
CRM will essentially focus on providing optimal value to customers – through the
say we communicate with them, how we sell to them, and how we service them – as
well as through the traditional means of product, price, promotion and place of
distribution. ICICI recognize that customers make buying decisions based on more
than just price … more than just product. Customers make buying decisions based on
their overarching experience that includes product and price,-and sales, service,
recognition and support.
 IMPLEMENTING CRM
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A very detailed and comprehensive CRM Action Plan was developed based on the
understanding that CRM will require an enterprises wide transformation.
The CRM Business Transformation Map below shows the various aspects of that change.
There are five inter-related areas. These include:
1. Business Focus
2. Organizational Structure
3. Business Metrics
4. Marketing Focus
5. Technology
FIVE FOCUS AREAS OF BUSINESS TRANSGORMATION
BUSINESS FOCUS
Product Sales Channel Marketing Service Customer
ORGANISATIONAL STRUCTURE
Product Place Promotion Channel Contact Customer
Management Management Management Management Management Management
BUSINESS METRICS
Product Place Program Customer Customer patterns Customer
Performance Performance Performance Revenues and Profitability lifetime value
MARKETING FOCUS
Mass Sales Marketing Integrated Segment Customer
Advertising Promotion Campaigns Marketing Specific Relationship
Communication Marketing Management
TECHNOLOGY
Transaction Data Data Data Data Customer
Processing Maintenance Access Warehouse Marts Touch point
Systems
The Key to building the CRM action plan was in understanding where the organization
stood relative to each of the five aspects of change. Interviews with key individuals
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throughout the organization helped identify different initiatives that have been launched,
all focused on CRM. While all of these initiatives may have merit, failure to address the
total business transformation requirements can lead to very short-lived success.
The next step in the planning process was a Gap Analysis. This analysis essentially
and specifically describes the gaps. In addition to the more obvious gaps, this analysis
helped identify the CRM organizational holes:
1. Marketing Sales and services practices
2. Collection, capture, processing and deployment of customer information
3. Distribution and operations effectiveness at customer touch points
Another key factor in identifying gaps is to understand how the organization
functions relative to the CRM Business Cycle. There is a universal, underlying cycle
of activity that should drive all CRM initiatives and infrastructure development. All
initiatives and infrastructure development should somehow be tied to this core cycle
of activity. Careful evaluation of he organization’s ability to execute this cycle will
pinpoint and qualify additional organizational gaps.
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 SELECTING AND IMPLEMENTING A TECHNOLOGY
BASED SOLUTION
Technology:
The success of the CRM initiatives was contingent on various decisions pertaining to
technology. Some of the key issues were:
(a) Make or Buy – the decision to buy was based on an evaluation of an identified set of
criteria. The criteria set included the following :
· Functionality
· Flexibility in incorporating changes.
· Fit with existing architecture (legacy systems)
· Fit with global best practices
· Upgradability – which basically means that if the technology that enables CRM
advances tomorrow, the installed system should be able to take into its fold the
increased functionalities?
· Commercial impact – evaluated in terms of the life time of the solution.
Taking into account all the above factors, it was decide to purchase an off-the-shelf CRM
solution and customize it to suit ICICI’s requirements.
(b) From whom to buy – Once the decision to buy was made, the next step was to
identify the product seller and the system integrator.
The global CRM product market was scanned to shortlist about 15 large players from
a very fragmented market comprising of over 150 players claiming to have some sort
of CRM capability. Based on discussions with a global technological analysis group,
another set of criteria was drawn to shortlist the prospective product providers. This
included:
· CRM expertise
· Retail finance expertise
· Implementation worldwide specially in Asia Pacific
· Company focus on CRM (specially important in the context of many large ERP providers
having moved into the CRM space in recent times).
· Credentials including financials, client list, life history etc.
66

· Understanding of ICICI’s experience
· Suggested solution including implementation timeline.
· Technical handholding expected
· Training and maintenance
A similar process was followed to shortlist the system integrators. Some of the criteria
included.
· CRM expertise & Retail finance expertise
· Focus on CRM
· Project team specifics including indicative CVs of project team
· Product preferences
After short listing two product vendors and system integrators, reference calls were made to
several of the past clients of all the short listed companies. The reference calls followed a
specific pattern, and were qualitatively adjudged. Some of the parameters included strengths
and weaknesses of the vendor/system integrator, timeliness, cost and time overruns,
commitment, training, quality control of customization and post-implementation support.
Processes:
All processes were mapped on to product by understanding the details. During the course of
the process mapping, several opportunities for improvement were identified and
implemented. To illustrate, the buying process of a loan product involves the following steps
–
(a) Prospect contacts the call center and leaves details
(b) Call center personnel passes on this lead to the DMA responsible for the area
from where the lead has come in
(c) The DMA contacts the prospect and collects documents. The DMA also fires
a Field Investigation (FI) request from a FI agency. The FI agency is external
to ICICI, and checks on the basic veracity of the statements submitted by the
prospect (e.g. that he has his own house in New Delhi etc.)
(d) The documents collected by them are filed and forwarded to the Credit
Processing Agency (CPA). The CPA also receives the FI report.
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(e) The CPA checks for completion of the file, generates a credit scorecard, and
passes on the document to the Credit Buyer.
(f) The Credit Buyer (CB) is an ICIC personnel, and takes the final call on the
loan sanctioning. He in turn passes oin the documents to the central
operations team for the processing. The central operations team is also
internal to ICICI.
The Sales Process Pre-CRM and Post-Implementation of CRM
Independent database
Call Centre Sales Agent Scrutiny Credit Agent Operations
Database
Call Centre Sales Agent Scrutiny Credit Agent Operations
Similarly, even the customer service and support function also has well defined processes
depending on the nature and type of query/complaint.
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 LESSONS SO FAR FROM THE ICICI EXPERIENCE
If CRM involves optimizing product, price, place of distribution, promotion, sales
and service, why are so many companies struggling? Hasn’t anyone really mastered the art
and CRM is difficult because it is an enterprise-wide initiative.
(a) CRM is not a technology initiative. Many have confused CRM as a technology initiative,
and assigned the CRM implementation project to their information system or IT group.
CRM conferences after equate to technology exhibits and demonstrations. Technology
is needed in order to implement CRM- particularly the customization part-but
technology is not the driver of CRM – or the solution to successful CRM
implementation.
(b) CRM is not exclusively a marketing initiative. Many organizations have merely equated
CRM with customer-focused marketing or date-driven/database marketing. CRM results
in more effective, data-driven marketing efforts: CRM requires marketing expertise.
But CRM is not strictly a marketing initiative.
(c) CRM is not exclusively a sales initiative. Similar to marketing, CRM is often lodged
within the sales department. The sales-force, after all, is extremely close to their
customers… understanding their needs and wants, and trying to fulfill them. Sales,
however just one functional area that can benefit from CRM and that is necessary for
effective CRM.
(d) CRM is not exclusively a service initiative. As with sales and marketing, customer
service is one functional aspect of success CRM implementation. But customer service
is not the sole driver of the process.
CRM involves marketing, sales, service and technology, as well as the other inner-workings
of an organization.
Thus, it is properly described as an enterprises-wide initiative. It involves all areas of
the organization and all functions of the organization, and it requires areas of the
organization to be working together in harmony. CRM requires all areas of the
organization to not only exist in harmony, but to be working toward the common goal of
stronger customer relationships.
69

Having even one “broken spoke in the wheel”… one area of the organization that is
less than committed to CRM… can make the difference between success and failure.
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CHAPTER-5
FUTURE OF RETAIL BANKING
(a) Retail banking will remain the dominant source of revenue for banks worldwide
through 2015. In 2006, the retail banking business accounted for 1.22 trillion pound
in revenues, or about 57% of the global banking revenue pool of 2.15 trillion euro.
· Fourteen banking groups earned retail revenues in excess of 10 billion pound in 2006,
with five groups bringing in more than 25 billion euro each. Even for most of the top ten
banking titans, retail business is still a critical revenue source-representing an average of
37 percent of total revenues.
· Through 2015, retail revenues will expand at an estimated compound annual growth rate
(CAGR) of 3.2 percent in real terms. Factoring in an inflation rate of roughly 3 percent,
overall growth should add up to about 6 to 7 percent. The retail banking business also
continues to deliver high return on equity (ROE) than other banking segments. Most
major banks currently achieve ROE above 25 percent (before taxes) from their retail
banking activities.
· By 2015, the share of global retail-banking revenues generated collectively in the top five
European countries and in the United States-which are all mature markets-will have
shrunk by an estimated 5 percent, with matching collective gains in strongly growing
markets in Asia-pacific and the Middle east.
· Vast numbers of “unbanked” consumers in emerging markets-what we call the next
billion- will take up banking relationships over the next generation. If such consumers in
China, India and brazil were to generate 50 percent of the revenues currently provided by
“banked,” low income customers in these countries, the amount of total new revenues
produced by 2015 in these markets could be above 20 billion euro-the bulk likely coming
from china.
71

(b) Competition in the global retail banking industry will become increasingly intense,
driven by the continuing deregulation and opening of international markets, the
opening regionalization and globalization of the industry, the expansion of direct
and online banking, and rising customer expectations
· The number of new entrants with attacking mindsets in the regional markets will
increase. Aggressive players-be they direct banks, product specialist, or traditional banks
seeking to expand their scope-will continue to battle incumbents with fresh price and
value prepositions all over the globe.
· The well known trend towards direct and online banking will change the nature of
industry significantly in terms of channel usage. The trend will gain momentum as
adoption rates across all age groups increase and as more young people-who have raised
using the internet-reach bankable age. The dynamic will inevitably lead to a further
decline in the importance of bank branches for some sale activities, although branches
will remain critical for customer acquisition and advice-intensive products.
· The transparency of the online world and the ability of sophisticated customers to
compare offers and price positions will push the pendulum of power in the retail banking
industry increasingly towards the customer, thus further pressurizing the competitive
landscape.
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(c) The grip of margin pressure will continue to tighten. From 2001 to 2006, the banks
in our benchmarking survey showed average margin decline in their retail segments
of about 21 percents.
· Many attackers’ poses highly cost efficient and scalable business models that allow them
to offer cheaper prices on a sustained basis. This fact along with the ongoing shift
towards online and direct banking will lead the industry towards a new structural
equilibrium at lower margin and cost levels.
· In some markets, attacking players have already taken sizable share from incumbents that
have reluctant to fight proactively on the price front. This trend will gain momentum as
more new competitors enter the fray. Incumbents will either have to offer commodity
products for certain segments at competitive prices or accept loss of market share.
· A key result of heavy price competition and its expansion into a wide range of products is
that revenue pools will grow at a lower rate in many major markets over the next few
years. This will make necessary for banks to drive down their cost growth in order to
keep cost-to-income ratios and profitability levels stable-let alone achieve more
ambitious targets. Resizing and reconstructing platforms to help achieve this will be a tall
challenge for many banks over the next decade.
(d) Tougher competition and tighter pressure on margins and costs woll encourage
increasing merger and acquisition (M&A) activity, especially in mature markets
with low growth rates.
· In the future, we will see bigger, differently structured, and increasingly international
deals. Given the current speed of both M&A activity and the forging of alliances,
especially in the Asia-pacific region, it is very likely that by 2015 there will be five to ten
truly global banks.
· Cross border mergers should be seen having two, three or more phases to allow sufficient
time for factors such as platform, scale, and market dominance to come into play-and for
all potential synergies to materialize.
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(e) The winning business models of the future have been taking shape in recent years
and will continue to evolve. These models are exemplified by six general types of
retail banks: global titans and regional expansionists, domestic champions, retail-oriented
attackers, direct banks, specialists, and trading-up players.
· The first five categories of players have clearly outperformed the pack or showed the
strongest improvements in recent years. They have an average advantage in their cost-to-income
ratio of 10 percentage points, an average ROE advantage of 10 percentage points,
and a revenue growth rate more than twice that of most other banks. They also dare to
invest in organic growth and in acquisitions-their top-line growth allowing cost growth
three times as high as that of most other players. The sixth category, trading-up banks, is
well positioned to catch up in the future, especially if the leading players maintain the
focus and expand more aggressively.
· Between 2001 and 2006, direct banks and retail oriented attackers showed the sharpest
revenue growth of the six groups, with a CAGR above 20 percent, and at the same time
achieved significant improvements in cost-to-income ratios. Nonetheless, despite direct
banks’ strong influence on overall industry margins and channel strategies, the largest
share of direct and online banking will remain with multi channel banks. All models will
show a stronger online profile going forward, and some interesting new combinations
may evolve as new players arrive on the scene.
(f) Over the next ten years, traditional incumbents will find themselves more engaged
than ever on several fronts.
· Incumbents will need to develop sharper positioning and coherent new business models
in order to defend their home markets and fight for share against an increasing number of
attackers. Because they have mature footprints, many incumbents seeking competitive
advantage will turn to product innovation and better customer service. Products and
pricing should remain easy to copy, the latter providing sustainable advantage only to low
cost players. Yet a small number of retail banks will realize long-term advantage by
delivering a difficult-to-copy superior customer experience
· Incumbents will also need to make direct and online banking a stronger part of their multi
channel strategies and upgrade their skills in online customer acquisition and loyalty
management. Winners will learn quickly from other industries and will transfer recipes
for success to retail banking
74

· Most future winners will have to be strong acquirers and integrators. Those that want to
lead in emerging regional markets should be prepared to initiate at least one or two major
mergers or acquisitions over the next five to ten years. Such movescan serve as powerful
levers for defending market positions, widening scope, and increasing efficiency.
· To deliver asuperior customer experience and achieve better cost efficiency, incumbents
will need to fully exploit the power of process. On average, cost savings of 15 to 30
percent can be achieved through improved process efficiency, internally shared services,
and outsourcing and offshoring. Strong consolidators can go even beyond that level. The
continuing deconstruction of the value chain will help banks improve efficiency and fight
margin pressure. A number of incumbent banks, however, may not be able to close
process efficiency gaps.
· Incumbents will also need to build meaningful presences in chosen emerging markets that
offer the steepest growth potential. Simply planting flags in numerous markets and
achieving inadequate shares will not be a successful and value-creating strategy.
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CHAPTER-6
PARADOX OF RETAIL BANKING-2015
Any serious discussion of the future of the retail banking industry eventually raises a basic
question: will future customers still need retail banks? The answer, it turns out, depends on
banks themselves. With technology and nonblank businesses providing new options for
safeguarding and managing their finances, customers will continue to depend on banks only
as long as banks can provide service and value that cannot be found anywhere else.
There are already signs that customers are questioning the ability of banks to look out for
their financial wellbeing. Only 36 percent of consumers believe what banks tell them,
according to a Forrester survey.
1 A separate survey also indicates that over 60 percent of U.S. households conduct their own
research before buying financial services products.
2 As a result, banks have begun to rethink what, where and how they serve an increasingly
informed and demanding customer base.
At the same time, a confluence of industry developments, including consolidation,
regulation, industry specialization, changing workforce needs and new technologies are
putting additional pressure on banks operating models and raising questions about traditional
strategies for growth and value creation. So, what will the future look like? How will banks
continue to grow revenues and remain profitable? What will it take to create and maintain
advantage in this highly competitive industry? An examination of the forces shaping the
industry reveals that the future will require superior efficiency and operational excellence
from all banks, while industry leadership will be attained by those institutions most adept at
harnessing product, service and process innovation to anticipate and meet customer needs.
Ultimately, to deliver on these imperatives, banks will have to focus on their core strengths –
those activities in which they excel – and partner with best-in-class specialists for everything
else: achieving more by doing less. On the surface, the competitive landscape of the retail
banking industry in 2015 will not look much different than it does today. Mergers and
acquisitions will likely have reduced the total number of banks, especially mid-tier regional
banks, and industry specialists and non-bank banks will play a more prominent role. But
most of today’s players, including universal banks, community banks, industry specialist
banks and non-bank banks, will still be vying to differentiate themselves in a crowded
76

marketplace. However, traditional approaches to creating value through growth and
efficiency will no longer be enough. Advantages gained through acquisition, new market
entry and reconfigured product offerings will be fleeting at best, while partnering and
outsourcing will make efficiency a basic requirement for all. Through market research and
interviews with industry executives, the IBM Institute for Business Value identified live
major industry trends that will impact the retail banking industry. By 2015, the combined
implications of these trends will create an environment in which nothing less than sharp
focus and excellence in day-to-day operations will be acceptable, and banks will have to
generate growth through continuous innovation or be left behind.
 Customers redefine the rules of the game –
Pronounced shifts in demographics, attitudes and behaviors, in addition to ever-present
information, are giving customers the power to demand much greater responsiveness and
transparency from their banks.
 Universal banks and ultra-focused niche players thrive –
Large players will generate higher aggregate profits by reaping the benefits of super scale,
while niche players will aggressively pursue the most desirable customers by addressing their
needs in distinct ways – those in the middle will get squeezed.
 Changing workforce composition dictates new approaches –
An older and increasingly mobile and diverse workforce will raise management complexity
and require flexible approaches to compensation and performance management.
 R egulatory burdens intensify –
Heightened requirements around privacy, security, partnership risk and
operational risk will require banks to take a more proactive, enterprise wide approach to
managing compliance issues.
 Technology improves inexorably to enable breakaway value –
Advanced technologies will allow banks to infuse their legacy operating models and
infrastructures with unprecedented functionality. Emerging technologies such as grid
computing, service-oriented architectures, virtualization of data and storage, and predictive
77

intelligence will cause entrenched insourcing philosophies to perish in favor of a partnership
model where specialized enterprises thrive. Of these trends, the first two increasingly
powerful customers and intensifying competition stand out as the most significant forces that
will drive industry change over the next decade. The other three trends changes in managing
human capital, regulations and technologies will strongly contribute to and reinforce the
effects of intensifying competition and customer empowerment on banks’ strategic choices.
In this emerging environment, innovation will take many forms, including advances in
products and services, markets, operational processes, customer intimacy, and new channel
and diversification strategies. But innovation will not be possible, nor will it have the desired
impact, unless banks create the requisite conditions for innovation development.
There are four strategic imperatives banks must follow to cultivate innovation and position
themselves for sustainable growth:
 Focus on core strengths and partner for everything
else – Leading banks will optimize their performance by becoming specialized enterprises,
managing only strategic, differentiating business components internally and partnering with
best-in-class specialists for those
capabilities that do not drive competitive advantage.
 Optimize the potential of each customer relationship –
Rather than attempting to be all things to all people, industry leaders will use superior
customer insights to offer the most appropriate and profitable products, tools and services to
targeted segments.
 Harness the potential of the workforce through effective performance
management– Banks will need to realign skills and set the right performance metrics to
motivate a changing workforce to continuously pursue innovation.
Recognize that technology will be a critical element of success – By making
technology a central component of the strategic decision making process, banks will be
78

Retail banking

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