Harsimran SinghNMIMS Bangalore

ING CASE STUDY COMPETITION

Digital Vs. Branch Banking –A roadmap

Executive Summary

A snapshot of Indian Banking Industry and way forward

An analysis of Digital Banking and Traditional Banking and its selling points

Analysis of customer perception to the 2 routes and their openness and acceptance criteria

Analysis of various financial products and ING’s strategy vis-à-vis the changing environment

A Roadmap for ING Vysya to a move towards digital banking

MethodologyPrimary Research-Limited to Exploratory Analysis

Secondary Research

1. Various banks’ websites 2. Research Reports by consulting firms on banking trends 3. Banking Journal-The Indian Banker, Other magazines and newspapers

Sample Size Count 111

Gender MaleFemale

66.69%33.31%

Age19-30 30-50>50

87%8%5%

OccupationStudent

AcademicianService(Job)

Self Employed

58.34%25%8.338.33

Indian Banking Industry-Realism Vs Ambition

The country’s banking industry looks set for a greater transformation

Unparalleled potential with both sets of advanced as well as unbanked population existing at same point of time

The shift from a product centric model to customer-centric model clearly visible

With careful implementation of schemes like Jan-Dhan Yojna and new innovations like cardless cash withdrawl(ICICI Bank) and introduction of digital branches(SBI), Banking sector aims to tread a balanced path

Inclusive reach for the unbanked masses PLUS attractive bet for newly entering GEN-Y customers into the market the two prime objectives

Industry Research & Growth Predictions

2011 2012 2013 20140

5

10

15

20

25All SCB's growth rates Aggregate Deposits

Gross Bank Credit

2011 2012 2013 20140

5

10

15

20

25

30

Private Sector Banks growth rate

Aggregate DepositsGross Bank Credit

2011 2012 2013 201473.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

Credit-deposit Ratio (Per Cent) Gross bank credit growth rates have been decreasing in the last 4 years due to both macro and micro(industry level) factors

Especially with relation to private sector banks, deposit growth rates have increased at a faster growth as compared to credit rates

Also subdued demands in loans and credit is showing in the credit-deposit ratio over the past 4 years

Also CASA deposits, which are essentially low cost and essential for maintaining balance, have increased at a greater rate in private sector banks vis-à-vis public sector banks

With initiatives like jan dhan yojana, number of new accounts opened will go up in the coming time.

Industry Research & Growth Predictions

• With the outlook improving, bank’s deposits will grow at 14% for FY 14• Improvement in scenario and increase in savings interest rate expectedDeposits

• According to RBI estimates, bank credit expected to grow at 15% in FY 14.• Increase in demand of short term loans, working capital loans and retail

loans expected with pick up in manufacturing demandCredit

• NPA’s expected to reach 5% at the end of year 2014 according to RBI estimate.

• Efforts have been made to improve lending practices in the coming timeNPA’s

• According to Gartner’s research, about 2000 new branches would be added by 2014.

• Improved facilities on mobile and internet platforms which are customer centric

New Branches plus customer-centric digital

improvements

Traditional (Branch) Banking-What works and What does not?

All types of banking services available at a physical branch Based on the primary research, following are the attributes of Branch banking which goes in favour or against this route

Advantages/Benefits

Personalization(Rank 1)

Easy Follow Ups(Rank 2)

Security(Rank 3)

Customized Financial Advice(Rank 4)

Deterrents

Time Consuming Process(Rank 1)

Visiting a branch for every small/big transaction

(Rank 2)

No incremental value addition(Rank 3)

Digital Banking-What works and What does not?

All types of banking services available through routes other than physical branches. Based on the primary research, following are the attributes of Digital Banking which goes in favour or against this route

Advantages/Benefits

Anytime Anywhere Reach(Rank 1)

Swiftness(Rank 2)

Simplicity(Rank 3)

Paperless Functioning(Rank 4)

Deterrents

Security In Transactions(Rank 1)

Data Privacy(Rank 2)

Overall Trust in System(Rank 3)

Lacking personal appeal(Rank 4)

Strengths-Branch Banking Personalized Attention Easy follow ups Security Customized financial advice

Weaknesses- Branch Banking

Time Consuming Process Visiting a branch for all big/small

transactions No incremental value addition

S

Weaknesses-Digital Banking

Security in Transactions Overall trust in the system Data privacy Lacking personal appeal

W W

SStrengths-Digital Banking Anytime Anywhere Reach Swiftness Simplicity Paperless Functioning

SWOT Analysis between Branch and Digital Banking

Opportunities-Branch Banking Catering to the risk averse customers Focus on 40% of unbanked population,

many of whom are not tech savvy or have access to digital/online routes

Threats- Branch Banking

Increasing interest in online banking Regulations regarding opening a new

branch (Complying with norms) India’s demographic age- expected

average age being 29 in 2020. Younger demographic being inclined towards digital modes

O O

T T

OOpportunities-Digital Banking Opportunity to cater to Gen Y For businesses who want ease of

functioning and faster accessibility Opportunities in providing services

just beyond banking (Example-spending patterns, personal financial advice etc.)

Threats- Digital Banking

Web based risks (hacking, phishing etc.)

Technological obsolescence and compatibility

SWOT Analysis between Branch and Digital Banking

Analysis of the Research-Key Insights

Branch

ATM's

Internet/

Online

Mobile

Call Cen

ter0%

10%20%30%40%50%60%70%80%90%

Channel preference in common tasks

Making DepositsBills Payment/Transferring Funds Balance Enquiry/Account Status Financial Product Advice

Savin

gs Acco

unt

Current A

ccount

Loan

Products

(Home L

oan, A

uto Loan

etc)

Term

Deposit

s (FD

's, RD's e

tc.)

0%20%40%60%80%

100%

Banking Route preferred in buying following financial products

Digital

Traditional

68% of the sample still preferring branch banking for making deposits and also for financial product advice (42%)

Highest usage(17%) in mobile category being balance enquiry and overlooking account status

Active usage of internet/online banking in almost all common transactions, highest usage being transferring funds/bills payments category (84%)

22% of the sample using online route for making deposits as well signifying growing trust in the system

Almost 85% of the sample still preferring branch route for loan products, the risk perceived in such transactions being significantly high

Almost 40 percent of the sample using digital route for creating/extending term/recurring deposits etc.

Branch Mode still preferred but the overall percentages on a declining trend with the shift to digital mode visible at least in some banking products.

46.753.3

Have you started using mobile banking?

Yes

No

33.03

22.97

29.88

13.19

0.93

If Yes, In which services do use frequently?

Viewing past Transactions

Funds Transfer

Bill Payment/Top up Recharge

Credit Card payments

Others (Please Specify)

Almost 54% of the sample has already strarting using mobile banking

The top usage being viewing past transactions and account details(33%)

The percentages of funds transfer and credit card payments signifies that 46% of the sample who have started using mobile banking have overcome security fears in the mobile route and have developed a reasonable reliance on the digital banking

Also, app. 55% of the sample have started referring to online opinions and websites in getting to know about banking products

28% of the sample still prefers going to a branch bank and understanding product nuances from the bank officials personally.

Internet

opinions

Bank W

ebsit

es

Finan

cial A

dvisors

(In ban

ks)

Indepen

dent a

dvisors

05

101520253035

30.424.76

27.92

16.91

Route followed for researching/acquainting with a fi-nancial product

Routes

46.81

3.17

50.02

"I am ready to make a shift from traditional to digital banking"

Yes

No

Depends on the service I want to use

0

10

20

3026.43 24.24 22.77

16.68

4.88

If convinced or already using digital banking, your preference to the services offered

Services

Almost 50% of the sample is positive in making a shift from digital to branch banking

App. 47% of the sample say that they will customize their decision in accordance with the needed services

Among the present and future services which will be offered through digital mode (Extensive use of analytics involved in future services), Standard Account Management and personal finance management involving customized financial advice on investment options based on past choices and current balance available.

Roadmap for INGPointers from Secondary Survey:

Around 60 % of the sample still prefer traditional route for opening/starting the banking products viz. Savings, Current, Loan and Term Deposit products

Around 85% of the sample have started using online mode for transferring funds and bills payments purposes

Around 33% of the sample who had shifted to mobile banking use it for standard account management

Around 47% of the sample is convinced for a move from traditional to digital banking

With about 24% wanting personal finance management and 23% wanting spending patterns monitoring as a part of digital banking

Roadmap for ING-Deciding pointsDigital is undeniable the future, but innovation without customer utility and experience is futileAccording to PWC global digital banking survey findings, focus should be to improve customer interaction through an omnichannel experience.Banking innovation moving ahead without taking customer along carries the risk of creating a gap in the relationshipHence, ING should adopt following measures for its roadmap to digital banking

ING has to understand the customer segment and then customize the services according to the customer type

ING can enhance customer interaction and combine a customer’s information being fed into different channels so that a detailed picture of customer preferences and behaviour can be mapped

In case of better experience, ING can have a process of extensive personalization, wherein(for example) a customer in need of loan can apply through digital mode and a bank personnel can visit the residence for servicing that person

ING can create flagship digital branches in metropolitans that serve as showrooms for complex product sales and venues for providing trusted expert adviceBranch banking can be extensively used for personalized customer advice on products

Slowly and steadily, ING can save its cost by offering some products exclusively through online/digital mode for advanced customers