Abhishek Sinha XIMB

BRANCH BANKING TO DIGITAL BANKING - THE CHALLENGE

EXECUTIVE SUMMARYDigital Banking vs. Branch Banking

Road Map for Implementation

Primary Research – Survey Statistics Secondary Research Industry Research and

Growth Predictions

SWOT Analysis Future Scope of Products

Building Blocks Strategy

Inclusion

The Digital Banking Promise Emerging Trends

Fair price with

transparency

Immediate, high-quality

interaction & processing

Rich spectrum of

products

Enhanced revenue model

Integrated IT infrastructure

Lean channel and

organization structures

Outside interactions

Source: A.T. Kearney and EFMA Global Retail Banking study

INTRODUCTION

Mobile app suite

Electronic wallet solution

Personal finance tool

Video chat function

Crowdfunding

Person-to-person payment

Social investing

Gamification

Other

0%20%

40%60%

80%100%

93%

69%

66%

28%

17%

10%

3%

3%

3%

Product and Service Enhancements Leading Change

Inside operations

PRIMARY RESEARCH INSIGHTS

3%

64%6%

10%

8%10%

Age Group<20

21-30

31-40

41-50

51-60

>60

5%

16%

10%

4%5%

53%

8%

OccupationBusiness

Private Service

Public Service - Banks

Teaching

Self-employed

Student

Retired

Total Number of Respondents : 102Please Note : Some questions were multiple-select

Branch Digital0

20406080

100

23

87

Banking Preference

Branch Digital0

102030

1420

Banking Preference (Age 31 & Above)

Branch

Officia

ls

Web

Searc

h Engin

es

Frien

ds & Fa

mily

Newsp

apers

Others

03060 45 54 59

279

Digital Banking - Information Sources

1 •Information Security

2 •Control

3 •Trust

1

•Convenience

2

•Time of Transaction

3

•Ease of Use

Reasons for preferring Branch Banking Reasons for preferring Digital Banking

Points to Note1. The reasons for

choosing Digital and Branch Banking vary widely.

2. The sources of information for Digital Banking is incredibly less from the branch itself, and more from online sources and friends/family.

PRIMARY RESEARCH INSIGHTS

0306090

79

4929 31

74 6543 40

22

Branch Banking - Uses

0306090

3354

0 021

1130 29

84Digital Banking - Uses

Trust

Convenience

Ease of Use

Information Security

Personal Assistance

0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

7.735.94

6.325.56

4.772.72

6.252.071.87

1.76 1

•Ease of Transactions

2

•Quickness of Transactions

3

•Ease of Approach

4

•Online Banking

5

•Personal Banking Assistance

6

•Branch Query Resolution

7

•Customer Care Facilities (Telephone and SMS)

Banking Service Satisfaction IndexBanking Service Importance Index

Points to Note1. Digital Banking is mainly used for Fund Transfer purposes. There is huge scope for its penetration in other aspects of banking.2. Customers give maximum importance to Trust, Convenience and Information Security when it comes to Banking. Digital Banking

scores high on the second aspect but doesn’t match up to customer expectations in the other two factors.3. Banks fall short in Personal Assistance and Customer Care Facilities departments, indicating a need to redesign CRM processes.

SWOT ANALYSIS

• Wide spread of branches

• Enormous customer base

• Mediocre publicity

• Poor image of certain products

• Stringent policy measures

• Entry of NBFCs

• Growing rural market

• Cross selling opportunities

Strength Weakness

ThreatOpportunity

DIGITAL BANKINGBRANCH BANKING

• Insufficient law• Foreign banks

hit

• Loan solution for MSMEs

• Increased demand

• Compound talent shortage

• Poor CRM• Lack of

security

• Competitive advantage for economies of scale

• Rich customer resources

Strength Weakness

ThreatOpportunity

INDUSTRY RESEARCH & ANALYSIS

Asia

ASEAN and Australia

Greater China

India

Japan and South Korea

0200

400600

8001000

12001400

16001800

670

60

380

100

170

1700

150

900

450

200

20202012

Present and Potential Digital Customers (in Millions)

Source: McKinsey - How to prepare for Asia’s digital-banking boom

Source: BCG – Indian Banking 2020

Top Trends - Indian Banking Industry by 2020

1 •Mortgages to cross Rs 40 trillion by 2020

2 •Wealth management will be big business with 10X growth

3 •“The Next Billion” population will be the largest segment

4 •The number of branches to grow 2X; ATMs to grow 5X

5 •Mobile banking to see huge growth and will redefine transaction banking paradigm

6 •Customer Relationship Management (CRM) and data warehousing will drive the next wave of technology

7 •Banking margins will come under pressure

8 •New models to serve the Small and Medium Enterprises

9 •Investment banking will grow over ten–fold

10 •Infrastructure financing to hit over Rs 20 trillion on commercial banks books

ROADMAP for IMPLEMENTATION

Customer Understanding

• Analytics based segmentation• Socially informed knowledge

Top-line Growth

• Digitally enhanced selling• Predictive marketing• Streamlined customer processes

Customer Touch Points

• Customer service• Cross channel coherence• Self service

Process Digitization

• Performance improvement

Worker Enablement

• Working anywhere anytime• Broader and faster communication• Community knowledge sharing

Performance Management

• Operational transparency• Data driven decision making

Customer Experience

Operational Process

Business Model

Unified Data & ProcessesAnalytics Capability Digital Capabilities Business & IT Integration

Solution Delivery

Building Blocks of the Digital Transformation

Digitally Modified Business

• Product/Service augmentation• Transitioning physical to digital

New Digital Business

• Digital products• Reshaping organizational boundaries

Digital Globalization

• Enterprise integration• Redistribution decision authority• Shared digital services

ROADMAP for IMPLEMENTATIONStrategic Positioning

1• Find value

proposition targeted to the segment identified.

2

• Enter the market with four to five simplified core offerings. Ensure a couple of necessity products are included.

3

• Offer personalized web experience, so that customers receive recommended products based on digital data

4

• Introduce a social and mobile-centric dimension, in which latest digital technologies and platforms would be used to enhance their reach and offering

Channel Offerings

1• Make multichannel

access a core feature of the value proposition.

2

• Inculcate a light physical presence and agents to enhance the customer experience, as well as to promote trust and branding.

3

• Foster affinity and loyalty with fun ways to engage younger customers (selective gamification of certain aspects of banking).

4

• Foster a cross-partner ecosystem allowing creative collaboration and formation of communities and integrated applications.

Shifting Strategies

1

•Shift from - Branch-centric, product-focused model. This is at best a follower strategy in Digital Banking.

2

• Shift to - Self-directed digital-centric model. This is a more proactive approach where customers are empowered to do their own banking

Points to Note:1. The digital future for banks will come in the form of the end-to-end digital bank. 2. A near-term digital strategy is deploying technology to reduce costs and increase effectiveness across elements of the sales

process.3. The impetus for the end-to-end digital bank that is now being pioneered by innovative attackers will, however, only become

stronger as the young digital generation gets older and wealthier.

ROADMAP for IMPLEMENTATION

Rural India – Inclusion of the Last Household

Urban India – Inclusion of the Older and/or Orthodox Population

CRMImprove CRM by improving

query handling and approachability

Customer CareImprove customer care facilities by providing training to improve

efficiency

Personal Banking Assistance

Introduce and/or sharpen personal banking assistance

Knowledge SharingTrain employees in the art of providing knowledge to new,

digitally un-evolved customers

Go MobileTarget Mobile Phone banking

as the medium to spread reach into the rural sector

Bank Village KiosksAssign registered kiosks in

villages to provide basic banking facilities to residents

Micro FranchisingAllow local players to operate their own banking franchises

with due support and verification from the company

Infrastructure Development

Play a pivotal role in building rural infrastructure

CASA

Present

• Drawn-out physical process, based at the branch

Future

• Online portal for form submission and identity verification

Loans

Credit/Debit Card Applications Forex Services

Insurance Wealth Management

FUTURE OF PRODUCTS WITH DIGITAL

Present

• Paperwork and processing done at the branch

Future

• Online request submission

• Verification process integrated with UID.

Present

• Already exists

Future

• Propagation of ‘smart’ chip based cards

Present

• Limited availability and minimal use

Future

• Ability to trade currencies through bank accounts, similar to demat accounts

Present

•Drawn-out physical process, based at the branch

Future

•Online portal for form submission and identity verification

Present

• Ever increasing demand

Future

•Hyper-connected, high-speed access through mobile channels

CONCLUSION

Learning from the Analysis1. The Indian banking industry is poised for change, both in terms of demand as well as in terms of

technological advancement.2. Bridging the digital divide is the most important challenge facing banks. This challenge has two

facets:i. Bridging the gap between conventional bankers and digital banking.ii. Reaching out to the rural population.

3. ING Vysya has to implement a step-wise approach towards the shift from Branch to Digital Banking.

4. The challenge lies in adopting the change in mindset as well as concentrating on improving those very same features which are inherently deficient in Branch Banking for the success of Digital Banking.

5. Some of the important points to note towards the Digital Banking transformation include:i. Improved CRM systems.ii. Improved customer support and personal assistance.iii. Knowledge sharing.iv. Demographic, financial and social inclusion.

6. It would help ING Vysya immensely if they could be the first mover towards this change. However, a strategic focus towards the long-term, including stakeholder development and future sustainability should be kept in mind while driving towards this change.

SOURCES & REFERENCESHow to prepare for Asia’s digital-banking boom

• McKinsey Report

Digital Transformation: A Roadmap for Billion-Dollar Organizations• Capgemini Consulting

World Retail Banking Report 2013• Capgemini

Analysis of SWOT on Internet Banking• Ulster University

Banking in a Digital World• A.T. Kearney & Efma

The Digital Challenge in Retail Banks• Bain & Company

Indian Banking 2020 - Making the Decade’s Promise Come True• Boston Consulting Group

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