marketing in banking
TRANSCRIPT
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INDEX
SR.
NO.
DESCRIPTION Pg no.
1. The Financial System 4
2. Origin of The Word BANK 5
3. Definition of Bank and marketing 5
4. Finance and banking in India 6
5. Users of Banking Services 6
6. Meaning of Marketing 6
7. Evolution of the marketing concept 6
8. Marketing and Competition 8
9. Marketing Concepts Its application toBanking
9
10. Meaning of Bank Marketing 10
11. Market Research in Indian Banks 13
12. Increasing Importance of Marketing in BankingIndustry
16
13. Market Segmentation 19
14. Marketing Mix for Banking Services 27
15. Strategies for Segmentation 21
16. Marketing Mix for banking services 27
17. Strategies for effective bank marketing in India 28
18. Technology in Banking 4319. Conclusion 60
20. Refrences 61
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Chapter 1
THE FINANCIAL SYSTEM
The financial system consists of variety of institutions, markets and instruments that
are related in the manner shown in the below figure, it provides the principal means
by which saying are transformed into investment. Given its role in the allocation of
resources, the efficient functioning of the financial system is of critical importance to
a modern economy. Financial manager negotiate loans from financial institutions,
raises resources in financial marked and invests surplus funds in financial market. In
very significant way he manages the interface between the form and its financial
environment.
Financial System placed a very important role in the development of a country.
Through Financial System, entire money or money equals are channelized in such a
way so that each sector of economy like industry, agriculture and services can be
developed rationally. Financial sector development is the locomotive force for
economic development of a country.
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Chapter 2
ORIGIN OF THE WORD BANK
According to some economists the word Bank has been derived from the German
word BANC which means a Joint Stock Firm while others say that it has been
derived from the Italian world BANCO which means a heap or mound.
There is still another group of people who believe that word bank has been derived
from the Greek work BANQUE which means a bench. In the olden days, Jews
entered into money transactions sitting on benches in a marked place. When a
banker was not in a position to meat his obligations, the on which he was carrying on
the money business was broken into pieces and the was taken as bankrupt. Thus
both the words Bank or bankrupt are said to have origin from the word Banque.
Definition of Bank
According to Oxford English Dictionary, Bank is, An establishment for custody of
money received from or on behalf of, its customers. Its essential duty is the payment
of the orders given on it by the customers, its profit mainly from the investment of
money left unused by them.
Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as,
Banking Company means any company which transacts business of banking in
India. According to Section 5B, banking means the accepting of deposit of money
from the public for the purpose of leading or investment, which are repayable on
demand or otherwise and are with drawable by cheque, draft, order or otherwise.
Different economists, banking professionals and authorities explained their viewpoint
regarding bank or commercial bank. It has been rightly said by A.K. Basu that a
general definition of a bank or banking is by no means easy, as the concepts of
banking differ from age to age, and country to country.
Finance and banking in India
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India is a vast country, before 1947, undivided India was equal to Europe excluding
Russia in its area. It is situated in south of Asia. In spite of a part of Asia, it is
separated from it. It is separated by Himalayas in North India. India has vast oceans
in South, East and West. Due to its vastness it is also called sub continent. That vast
country has given different names in different times. In Vedic period, it was called
Arya-V-arat. In Bir period and ancient period, it as called Bharatvarash. Perhaps
due to fame of king Bharat, it was called Bharatvarsh. Greek called it Indus on the
name of river Sindh. Iranians called it Hindu. Chinese travelers called it Tienchu and
Yintu. Ipsing called Arya Desh and Brahmrashtra. Bible has called it Hoddu. In
medieval period, it was called Hindustan and Hind. European called it India. After
Independence, it is return as Bharat Ganrajya or Indian Republic in Indian
Constitution.
Evolution of the marketing concept
The Role of marketing in the banking industry continues to change. For many years
the primary focus of bank marketing was public relations. Then the focus shifted to
advertising and sales promotion. That was followed by focus on the development ofa sales culture.
Although all the elements of the marketing concept customer satisfaction, profit
integrated framework, and social responsibility will remain important, customer
satisfaction must receive the greatest emphasis in the years ahead.
The chief concerns of most bank executives still focus on legal and regulatory
issues, according to most surveys. Community banks are particularly concerned with
eliminating barriers that give unfair advantages to financial services competitors,
such as credit unions. However, another concern pertains to technology: keeping
nonblank competitors out of the payment system.
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Bankers Identify Near-Team and Long Term Concerns
1991 2015
Maintaining profitability
Credit Portfolio ManagementService Quality
Regional Economy
Cost Management / Expense reduction
Declining Earnings/ more failures
Market / customer focus
Capital adequacy
Stock market value
Industry Overcapacity
Service quality
Maintaining profitabilityMarket / customer focus
Operations/systems/technology
Credit portfolio management
Productivity improvement
Investment to stay competitive
Stock market value
Asset/liability management
Electronic Banking
When this gateway system was first proposed, access to the Internet was very new
and few banks had the resources and knowledge to set up their own direct-access
lines for customers. Customers have shown a growing interest in online banking
services, and banks have responded by quickly putting in place proprietary sites on
the World Wide Web and offering PC banking.
Within the next five years, 93 percent of community bank executives surveyed say
they plan to offer telephone banking, and 79 percent plan to offer PC banking.
When asked which technology holds the most potential for the future, bank
executives identified call centers first. As customers continue the transition the
transition into a high-tech world in which they want information and answers more
quickly and accurately than ever before, call centers offer the ideal bridge. With 24-
hour access to either automated information or live operators, customers do
everything from check their accounts to apply for a loan. Bank executives also
identified PC banking as having the most promise for the future, followed by Interest
access and broad function kiosks.
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Chapter 3
MARKETING AND COMPETITION
In view of the declining profitability and productivity of the banking sector and
extremely low rate of profit percentage, the determination of the financial health of
the system requires drastic remedial measures not only to build up investor
confidence but also to combat competition from all over. It is time that the pros and
cons of the oncoming banking era are properly understood and advantage taken of
various opportunities. This will require an efficient marketing approach to bank
management in which target markets will be tackled successfully along with effective
satisfaction levels and in which the usual basic elements product, pricing,
promotion and distribution will be taken care of in a proper format of an efficiently
working marketing organization.
The nationalised banks must face competition from private banks, non-banking
financial institutions, foreign banks and others. The competition is in the fields of
deposits and credits, foreign trade, consumer credit and miscellaneous banking
activities. The competition will benefit customers and force the banking system to
raise its productivity, minimize expenses, and remain sensitive to evolving issues.
Narasimham Committee Reports while recommending internal autonomy long with
compliance with prudential norms suggested rule-based credit policies, fiscal
balance and a gradual movement towards liberatlisation.
To deal with the competition from foreign banks, the Indian banks should go in for
diversification and extension of services as well as expansion of products and
business. Economic freedom and innovative spirit have contributed greatly to thesuccess of the market-oriented financial sector in the Western countries. Directed
credit and investment has done just the opposite. Interventionism is not necessarily
bad provided it is associated with a committed leadership. Indian financial sector had
for more than four decades, neither full economic freedom nor a well disciplined
interventionism so that it cost operational flexibility as well as functional autonomy
both of which were concerned with profitability performance and related factors.
Marketing concepts
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Its application to Banking, when we apply marketing to the banking industry, the
bank marketing strategy can be said to include the following
i) A very clear definition of target customers.
ii) The development of a marketing mix to satisfy customers at a profit for the
bank.
iii) Planning for each of the source markets & each of the use markets (A
Bank needs to be doubly market oriented it has to attract funds as well
as were of funds & services.
iv) Organization & Administration.
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Chapter 4
MARKETING IN BANKING
We define bank marketing as follows: Bank marketing is the aggregate of functions,
directed at providing services to satisfy customers financial (and other related)
needs and wants, more effectively and efficiently that the competitors keeping in
view the organizational objectives of the bank. Bank marketing activity. This
aggregate of functions is the sum total of all individual activities consisting of an
integrated effort to discover, create, arouse and satisfy customer needs. This means,
without exception, that each individual working in the bank is a marketing person
who contributes to the total satisfaction to customers and the bank should ultimately
develop customer orientation among all the personnel of the bank. Different banks
offer different benefits by offering various schemes which can take care of the wants
of the customers.
Marketing helps in achieving the organizational objectives of the bank. Indian banks
have duel organizational objective commercial objective to make profit and social
objective which is a developmental role, particularly in the rural area.
Marketing concept is essentially about the following few thing which contribute
towards banks success:
1) The bank cannot exist without the customers.
2) The purpose of the bank is to create, win, and keep a customer.
3) The customer is and should be the central focus of everything the banks
does.
4) It is also a way of organizing the bank. The starting point for organizationaldesign should be the customer and the bank should ensure that the services
are performed and delivered in the most effective way. Service facilities also
should be designed for customers convenience.
5) Ultimate aim of a bank is to deliver total satisfaction to the customer.
6) Customer satisfaction is affected by the performance of all the personal of the
bank.
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All the techniques and strategies of marketing are used so that ultimately they induce
the people to do business with a particular bank. Marketing is an organizational
philosophy. This philosophy demands the satisfaction of customers needs as the
pre-requisite for the existence and survival of the bank. The first and most important
step in applying the marketing concept is to have a whole hearted commitment to
customer orientation by all the employees. Marketing is an attitude of mind. This
means that the central focus of all the activities of a bank is customer. Marketing is
not a separate function for banks. The marketing function in Indian Bank is required
to be integrated with operation.
Marketing is much more than just advertising and promotion; it is a basic part of total
business operation. What is required for the bank is the market orientation and
customer consciousness among all the personal of the bank. For developing
marketing philosophy and marketing culture, a bank may require a marketing
coordinator or integrator at the head office reporting directly to the Chief Executive
for effective coordination of different functions, such as marketed research, training,
public relations, advertising, and business development, to ensure customer
satisfaction. The Executive Director is the most suitable person to do this
coordination work effectively in the Indian public sector banks, though ultimately the
Chief Executive is responsible for the total marketing function. Hence, the total
marketing function involves the following:
a) Market research i.e. identification of customers financial needs and
wants and forecasting and researching future
financial market needs and competitors activities.
b) Product Development i.e. appropriate products to meet consumers
financial needs.
c) Pricing of the service i.e., promotional activities and distribution system
in accordance with the guidelines and rules of the
Reserve Bank of India and at the same time
looking for opportunities to satisfy the customers
better.
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d) Developing market i.e., marketing culture among all the customer-
consciousness Personnel of the bank through
training.
Thus, it is important to recognize the fundamentally different functions that bank
marketing has to perform. Since the banks have to attract deposits and attract users
of funds and other services, marketing problems are more complex in banks than in
other commercial concerns.
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Chapter 5
MARKET RESEARCH IN INDIAN BANKS
After enquiring with all the public and 14 private sector banks whether they had
undertaken any market research studies. The following board areas of market
research were considered for the study:
(a) New service development,
(b) New service product acceptance,
(c) Research and development of existing financial service,
(d) Bank images study,
(e) Measuring banks advertising effectiveness,
(f) Measurement of market potentials,
(g) Market research of competitive service products,
(h) Customers opinion study,
(i) Customer profile study, and
(j) Market share analysis.
In response to the inquiry information was received from 17 banks. Out of these
banks, 14 are public sector banks and 3 are private sector banks. Two nationalized
banks and two private sector banks informed that they have not conducted any
markets research studies.
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Information regarding Bankwise Market Research Studies
Bank Title of the MarketResearch Study
Remarks
1. Allahabad Bank
2. Bank of Baroda
a. Survey on Customer Service
b. Marketing of deposits and
allied services to non-residents
customers opinion (1958)
Not formal report
prepared.
MP Ranade: BMP
Thesis.
3. Canara Bank a. Marketing research study for
two new deposit schemes
(1989)
For internal use
only
4. Central Bank ofIndia
a. Market survey of customerservices
b. Marketing deposits
(Customers)
Conducted by thestudents of BITS,
Pilani. For internal
use only service
(1986)
5. Indian Overseas
Bank
a. Potential areas for future
business expansion
For internal use
only
6. Oriental Bank ofCommerce
a. Study of customer service inOBC with special reference to
metropolitan branches (1989)
R Upendran MBPThesis
7. Punjab National
Bank
a. Sample survey on customers
responses (1987)
b. Sample survey on customer
service (1988)
c. Study on deposit linked
housing loan scheme (1982)
For internal use
only
For internal use
only
Formal Report
8. Punjab and Sind
Bank
a. Study on customer turnover
(mail questionnaire based
study of customers who have
closed their accounts) (1989)
b. Changing Profile of Punjab and
Sind Banks Customers and
their expectorations, a survey
For internal use
only
J S Kalra:
BMP Thesis
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based study (1988)
9. State Bank of
Bikaner
a. A survey on customer service,
level of customer satisfaction
and customer expectations(1998)
For internal use
only
10. Syndicate Bank a. Evaluation Study on the quality
of customer service (1989)
b. Marketing of bank service with
special reference to branches
in Bombay city of Syndicate
Bank-customer service (1979)
For internal use
only
K M Kanath
BMP Thesis
11. Union Bank of India a. Customer responses (Opinion)
survey (1988)
For internal use
only
12. UCO Bank a. Customers opinion study
(1989)
For internal use
only
13. United Bank of India a. Report of the survey on
customer opinion (1987)
b. Improvement of customer
service in a metropolitan
branch (1979)
For internal use
only
K P Ramesh Rao
BNP Thesis
14. Vijay Bank a. Report of the customer service
survey (1988)
Formal Report
15. Karur Vysya Bank a. Study on the image of the bank
(1989)
Undertaken by a
Consultant
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Most of these market research studies were conducted for internal use and no formal
reports were prepared. It is important to note the subject or issue researched by the
bank. The most important subject for market research in terms of the number of
studies conducted, is the customer service / customer profile opinion studies. Few
banks have conducted even more than one customer service / opinion studies.
Increasing importance of marketing in banking industry
The various other factors which have led to the increasing importance of marketing
in the banking industry are categorized as follows:
Government Initiatives
The Indian economy embarked on the process of economic reform and various
policy measures initiated by the government resulted in the increasing competition in
the banking industry, thereby highlighting the importance of effective marketing. The
Narasimhan Committee Report evidence of the Governments desire to re-regulate
the banking industry so as to encourage efficiency through competition. The
Government initiatives include:
Deregulation of Interest Rates
The bank may reduce their Minimum Lending Rates so as to attract customers
(individual and corporate). Such reduction in lending rates reduce the spread
between the deposit rates and lending rates, i.e. the banks margins would decline
and they would have to increase their volumes or provide attractive services so as to
maintain profits. This calls for bank marketing.
Increasing Emphasis on Bank Profitability:
With the Narasimhan Committee Report, banks have been directed to improve their
efficiency, productivity and profitability. Banks are required to be self-sufficient. In
fact, the report has adopted the BIS standards of capital adequacy (though in a
phased manner).
Foreign Banks
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Foreign banks offer stiff competition to the Indian Banks and with their superior
services and technology offer them a competitive advantage. Thus Indian Banks
have to effectively apply marketing concepts to attract customers.
Entry of New Private Banks
In the early 90s new competition emerged in the form of new Private Banks, who
brought along with them a high technology-based banking matching with
International Standards and have made a significant dent in the banking business by
capturing substantial share in the profits of the banking industry.
Reduction of Statutory Liquidity Ratio:
With the Governments aim of reducing the SLR to 25 percent, the banks will have
surplus funds for which they will have to attract users.
Social Environment
Increasing Urbanization, Education and Awareness: The higher literacy level,
migration to urban areas and higher awareness due to the boom in the mass media
have important implications for the retail banker. He needs to be conscious of the
fact the increasing proportion of people are aware of financial service and are,
therefore demanding and expecting higher quality services.
Increasing Urbanization, Education and Awareness: The higher literacy level,
migration to urban areas and higher awareness due to the boom in the mass media
have important implications for the retail banker. He needs to be conscious of the
fact the increasing proportion of people are aware of financial service and are,
therefore demanding and expecting higher quality services.
Decline in Traditional Indian Values (Borrowing as Taboo), Rising Consumerism,
Rise in the Percentage of Working Women.
Technology Development
Modernization of Technology has facilitated the introduction of new banking services
as to attract new customers. An example of this is the Automated Teller Machines
or the facility of Any Time Money. Also in foreign countries, banks are
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experimenting with money transmission at Point of sale, e.g., petrol station linked
with banking network.
Credit is Easier to ObtainGrowing Importance of Non-Banking Financial Institutions: Fixed
Deposits being offered by the NBFCs are very attractive for the public, because of
the wide gap of interest rates offered by banks on term deposits and that offered by
the NBCSs. further, they offer a variety of specialized services to their customers so
as to attract and retain them.
Disintermediation: The increasing role of capital markets in mobilizing funds is
reducing the importance of banks as intermediaries. Companies are directly
approaching the savers through the capital markets. Mutual funds help in attracting
the small investors who do not want to take much risk.
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Chapter 6
MARKETING CONCEPTS ITS APPLICATION TO
BANKING
When we apply marketing to the banking industry, the bank marketing strategy can
be said to include the following:
i. A very clear definition of target customers.
ii. The Development of marketing mix to satisfy customers at a profit for the
bank.
iii. Planning for each of the source markets and each of the user markets (A
bank needs to be doubly market oriented its has to attract funds as well as
users of funds and services).
iv. Organization and Administration.
Consumer Behavior and Segmentation
Need for segmentation
Philip Kotler has described the dilemma of the seller (especially, a seller dealing with
masses, e.g. banks) as follows:
How the seller determines which buyers characteristics produce the best
partitioning of a particular market? The seller does not want to treat all customers
alike nor does he want to treat them all differently.
Banks deal with individuals, group of persons and corporates, all of whom have their
likes and dislikes. No bank can afford to assess the needs of each and everyindividual buyer (actual or potential).
Segmentation of the market into more or less homogenous groups, in terms of their
needs and expectations from the banking industry, provides a solution to this
problem.
This involves dividing the market into major market segments, targeting one or more
of this segments, and developing products and marketing programs tailor-made for
these segments.
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In the first segmentation, the market is divided from a unitary whole, to groups of
buyers who might require separate products and marketing mix. The marketer
typically tries to identify different segments in the market and develop profiles of
resulting market segments.
The second step is market targeting in which each segments attractiveness is
measured and a target segment is chosen based on tits attractiveness.
The third step is product positioning which is the act of establishing a viable
competitive position of the firm and its offer in the target segment chosen.
In the process of segmentation, the market can be divided into major segments
which are gross slices of the market, or into smaller specially formed segments,
otherwise known as niches. Niche customers have a specific set of needs which the
markerter tries to address. While a market segment attracts several competitors, a
niche attracts fewer competitors and therefore, a company should clearly define its
target segment and devise strategies to target the customer, so that it has a
competitive advantage in the segment.
These concepts can be applied in personal banking by an Indian Bank. Traditionally,
Indian Banks have not had any conscious strategy for selecting customers from the
personal banking area, apart from some banks which have a geographic
concentration strategy such as concentrating on a particular region or state. These
banks will have to segment the market on certain basis, and identify market
segments or niches which they want to cater to. For example, a bank like SBI may
not be able to cater high income groups (say, managers, professional, NRIs, etc.
who earn above Rs. 4,00,000 p.a. and who want a higher quality of products /
services and who are willing to pay for them), as the services required by such a
profile of customers are entirely different from the kind of products / services SBI can
offer.
Initiation of Segmentation in India
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Station Bank of India was the first Indian Bank to adopt the concept of market
segmentation. In 1972, it reorganized itself on the basis of major market segments
dividing customers on the basis of activity and carved out 4 major market segments,
viz. Commercial and Institutional, Small Industries and Small Business Segment,
Agriculture, Personal and Services Banking. The objectives of this scheme were:
Deeper penetration and coverage of market by looking outwards.
Adequate flexibility of organization to accommodate growth and rapid change,
Delegation of work for releasing senior management for more futuristic tasks.
Criteria for Segmentation
Segmentation in a right fashion makes the ways for profitable marketing. This helpspolicy planner in formulating and innovating the policies and at the same time also
simplifies the task of bank professionals while formulating an innovating the strategic
decisions. The following criteria make possible rig segmentation.
An important criterion for market segmentation the economic system in which we find
agricultural sector, industrial sector, services sector, household sector, institutional
sector and rural sector requiring of weightage while segmenting.
Agricultural Sector: In the agricultural sector, there are four category rise since the
needs of all the categories cants be identical.
The mechanization of agriculture, the improved or scientific system of activation, the
help of nature, the magnitude of risk, the availability infrastructural facilities influence
the level of expectations vis--vis the needs and requirements. The banking
organization are supposed to know and under stand the changing requirements of
different categories of farmers.
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Industrial Sector: The banking organizations subserve the interests of the industrial
sector. The large-sized, small-sized co-operative and tiny industries use the services
of banks. The expectations of all the categories cants be uniform.
The banking organizations are supposed to have an indepth knowledge of the
changing needs and requirements of the industrial segment.
Services sector: It is an important sector of the economy where the banking
organizations get profitable business. The two categories of organizations such as
profit-making and not-for-profit making are found important in the very context.
The banking organizations need to identify the changing needs and requirements of
the services sector. With the frequent use of information technologist and with the
mounting pressure of inflation and competition, we find a change in the hierarchy of
needs.
Household Sector: This is also constitutes an important sector where different
income group have different needs and requirements. in below figure we find thedifferent segments of the household sector.
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Household Segment: The high income group, middle income group, low income
group, substance level group and marginal income group have different hierarchy of
need which influence the level of their expectations.
Gender Segment: In the gender segments, we find male and female having
different needs and requirements. The banking organizations are supposed to
identify the level expectations of both sexes.
Some of the women are housewives and therefore they have different need and
requirements whereas some of them are working ladies having different needs and
requirements.
In the profession segments, we find different categories of professions an therefore
we find a change in their needs and requirements.
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The technocrats, bureaucrats, corporate executives, intellects, white and blue
collar employees have different needs and requirements and therefore the banking
organizations should know their expectations.
Some of the organizations are known as cultural organizations, some of them are not
forprofit making, some of them are philanthropic and some of them are related to
trade and commerce. The emerging trends in the social transformation process
determine the hierarchy of needs.
Markets segmentation thus simplifies the task of understanding the
customers/prospects. The bank professional find it convenient to formulate and
innovate the marketing mix of world class which simplify the process of excelling
competition.
In the Indian perspective where we find agrarian economy contributing substantially
to the transformation of national economy, it is pertinent that the banking
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organizations assign due weightage to the rural sector of the economy where we find
tremendous opportunities.
The urbanization is likely to gain the momentum and villages, outskirts of big towns
and cities are to be developed on a priority basis. Almost all the organizations are to
get tremendous opportunities there. The marketing resources if of innovative nature
would make the ways for capitalizing on the same profitably.
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Chapter 7
MARKETING MIX FOR BANKING SERVICES
The formulation of marketing mix for the banking services is the prime responsibility
of the bank professional who based on their expertise and excellence attempt to
market the services and schemes profitably.
The bank professionals having world class excellence make possible frequency in
the innovation process which simplify their task of selling more but spending less.
The four submixes of the marketing mix, such as the product mix, the promotion mix,
the price mix and the place mix, no doubt, are found significant even to the banking
organizations but in addition to the traditional combination of receipts, the marketing
experts have also been talking about some more mixes for getting the best result.
The People as a submix is now found getting a new p lace in the management of
marketing mix. It is right to mention that the quality of people/employees serving an
organization assumes a place of outstanding significance. This requires a strong
emphasis on the development of personally-committed, value-based, efficient
employees who contribute substantially to the process of making the efforts cost
effective. In addition, we also find some of the marketing experts talking about a new
mix, i.e. physical appearance. In the corporate world, the personal care dimension
thus becomes important. The employees re supposed to be well dressed, smart and
active. Besides, we also find emphasis on Process which gravitates our attention
on the way of offering the services. It is only not sufficient that you promise quality
services. It is much more impact generating that your promises reach to the ultimate
users without any distortion. The banking organizations, of late, face a number of
challenges and the organizations assigning an overriding priority to the formulation
processes get a success. The formulation of marketing mix is just like the
combination of ingredients, spices in the cooking process.
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The Product Mix:
The banks primarily deal in services and therefore, the formulation of product mix is
required to be in the face of changing business environmental conditions. Of course
the public sector commercial banks have launched a number of polices and
programmers for the development of backward regions and welfare of the weaker
sections of the society but at the same it is also right to mention that their
development-oriented welfare programmes are not optimal to the national socio-
economic requirements. The changing psychology, the increasing expectations, the
rising income, the changing lifestyles, the increasing domination of foreign banks and
the changing needs and requirements of customers at large make it essential thatthey innovate their service mix and make them of world class. Against this
background, we find it significant that the banking organizations minify, magnify
combine and modify their service mix.
It is essential that ever product is measured up to the accepted technical standards.
This is due to the fact that no consumer would buy a product which contains
technical faults. Technical perfection in service is meant prompt delivery, quick
disposal, presentation of right facts and figures, right filing proper documentation or
so. If computers starts disobeying the command and the customers get wrong facts,
the use of technology would be a minus point, and you dont have any excuse for
your faults.
Product Portfolio
The bank professional while formulating the product mix need to assign due
weightage to the product portfolio. By the concept product portfolio, emphasis is on
including the different types of services/ schemes found at the different stages of the
product life cycle. The portfolio denotes a combination or an assortment of different
types of products generating more or less in proportion to their demand. The quality
of product portfolio determines the magnitude of success. It is excellence of bank
professionals that help them in having a sound product portfolio.
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We find the composition of a family sound, if members of all the age groups are
given due place. Like this, the composition or blending of a service mix is considered
to be sound, if well established and likely to be profitable schemes are included in
the mix. It is against this background that a study and analysis of product portfolio is
found significant. The bank professionals are supposed to perform the responsibility
of composing the same. A sound product portfolio is essential but its process of
constitution is difficult. An organization with a sound product portfolio gets a
conducive environment and successes in increasing the sensitivity of marketing
decisions. The banking organizations need a sound product portfolio and the bank
professionals bear the responsibility of getting it done suitably and effectively.
If the banks rely solely on their established services and schemes, the
multidimensional problems would crop up in the long run because when the well
established services/schemes would start saturating or generating losses, the
commercial viability of banks would of course, be questioned. The banking
organizations relying substantially on a profitable scheme and ding nothing for new
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scheme likely to get a profitable market in the future is to face is to face a crisis like
situation. It is in this context, that we find designing of a sound product portfolio
essential to an organsition. We cant deny that the product portfolio of the foreign
banks is found sound since they keep their eyes moving. The innovation, diffusion,
adoption and elimination processes are taken due care. The public sector
commercial banks need to innovate their service and this makes a strong advocacy
in favour of analyzing the product portfolio.
Designing an attractive package:
In the formulation of product mix for the banking organization, the designing of
package is found important. In this context, we find packaging decision related to theformulation of a mix of different schemes and services. Developing an attractive
package required professional excellence and therefore, the bank professionals are
required to be aware of the different key issues influencing the formulation process.
What the package should basically be or do for the particular target. We re aware of
the fact that a number of schemes and services are included in the service mix of
bank product and all the services or schemes cant be preferred by all. Of course we
find some of the public sector commercial banks now evincing stage. This makes it
essential that a bank manager thinks in favour of developing a package. The
importance of packaging cant be underestimated considering the functions it
performs and the effects which we witness in the process of attracting and satisfying
the customers. In addition to other aspects, it is also pertinent that a bank manager
is familiar with the package developed by the leading competitive banks since this
would help them in innovating the package. It is an important component of the
product mix and a bank manager while formulating or designing a package needs to
assign due weightage to the formulation process. While developing a package, it is
essential that the packages offered are efficacious in establishing an edge over the
packages of competitors. Thus needs and preferences of the target market in
addition to the packages offered by the competitors need due weightage while
designing a package.
In the designing process the bank professionals can make a package, an ideal
combination of both, the core and peripheral services. The main thing in the process
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is to make it profitable, convenient and productive to the customers so that they
prefer to transact with the bank. For the bank professional, it is an important
persuasive efforts that helps in increasing the business even without developing or
innovating the services or schemes.
Product Development
In almost all the services, the development of a product is an ongoing process. The
banking organizations also need to develop new services and schemes. We cant
deny that the development of product specially in the banking services is found
diffcult since they dont have any discretion, however they can do it, of course in a
limited way. By minifying, combining, modifying and magnifying, the banking
organizations can give to the services or scheme a new look. The regulations of the
Reserve Bank of India, no doubt stand as a barrier but professionally sound
marketers make it possible even without violating the rules and regulations. The
banking organizations in general have been found developing product by including
some new properties or features. Generally we find two process for the development
of product. The first process is found proactive since the needs of the target market
are anticipated and highlighted. The second process is reactive and in this context
the banks respond to the expressed needs of the target.
Proactive Process
In the pro-active process, we find product to market needs. This makes it essential
that the branch managers are aware of the changing needs of the target market.
There are six stages for the development of the product, such as idea generation,
screening of the concept, assessing of market potential, analyzing the cost, test
marketing and final commercial launching. The bank professionals have to be careful
at all the stages so that whatever the services or schemes are developed are found
instrumental in getting a positive response. The customers and competitors help
bank professional substantially in generating a new idea. The screening of the
product concept focuses on the process of narrowing down the list of the ideas
generated to a small number of concepts.
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The assessment of market potential is the third stage in which we find scanning of
the market potentials at the apex level. The branch managers can assess the
potential sin their command areas.
The fourth stage draws our attention on analyzing the cost on the basis of a cost-
benefit analysis and the fifth stage before launching is test marketing which is found
instrumental in minimizing the risk element. And finally, we find commercial
launching. The Reserve Bank of India is also required to make the regulations liberal
so that the pubic sector commercial banks get an opportunity to make their services
or schemes internationally competitive. The unfair practices, illegitimate steps should
be checked but fair practice should essentially be promoted to make the business
environment conductive.
Promotion Mix
In the formulation of marketing mix the bank professionals are also supposed to
blend the promotion mix in which different components of promotion such as
advertising, publicity, sales promotion, word-of-mouth promotion, personal selling
and telemarketing are given due weightage. The different components of promotion
help bank professionals in promotion the banking business.
Advertising
Like other organizations, the banking organizations also us this component of the
promotion mix with the motto of informing, sensing and persuading the customers.
While advertising, it is essential that we know about the key decision making areas
so that its instrumentality helps bank organization both at micro and macro levels.
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Finalizing the Budget
This is related to the formulation of a budget for advertisement. The bank
professionals, senior executives and even the police planners are found involved in
the process. The formulation of a sound budget is essential to remove the financial
constraint in the process. The business of a bank determines the scale of
advertisement budget.
Selecting a Suitable vehicle
There are a number of devices to advertise, such as broadcast media, telecast
media and the print media. In the face of budgetary provisions, we need to select a
suitable vehicle. The latest developments in the print technology have made print
media effective. The messages, appeals can be presented in a very effective way.
Making possible creativity
The advertising professionals bear the responsibility of making the appeals, slogans,
messages more creative. The banking organizations should seek the cooperation of
leading advertising professionals for that very purpose.
Instrumentality of branch managers
At micro level, a branch manager bears the responsibility of advertising locally in his
/ her command area so that the messages, appeals reach to the target customers of
the command area. Of course we find a budget for advertisement at the apex level
but the business of a particular branch is considerably influenced by the local
advertisements. If we talk about the cause-related marketing, it is the instrumentality
of a branch manager that makes possible the identification of local events, moments
and make advertisements condition-oriented.
Public Relations
Almost all the organization need to develop and strengthen the public relations
activities to promote their business. We find this component of the promotion mix
effective even in the banking organizations. We cant deny that in the banking
services, the effectiveness of public relations is found of high magnitude. It is in this
context that we find a bit difference in the designing of the mix of promoting the
banking services. Of course in the consumer goods manufacturing industries, we
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find advertisements occupying a place of outstanding significance but when we talk
about the service generating organizations in general and the banking organizations
in particular, we find public relations and personal selling bearing high degree of
importance. It is not meant that the banking organizations are not required to
advertise but it is meant that the bank executives unlike the executives of other
consumer goods manufacturing organizations focus on public relations and personal.
Personal Selling
The personal selling is found instrumental in promoting the banking business. It is
just a process of communication in which an individual exercise his/her personal
potentials, tact, skill and ability to influence the impulse buying of the customers.
Since we get in immediate feed back, the personal selling activities energies the
process of communication very effectively.
The personal selling in an art of persuasion. It is a highly distinctive form of
promoting sale. In personal selling, we find inter-personal or two-way communication
that makes the ways for a feed back. There is no doubt in it that the goods or
services are found half sold when the outstanding properties are well told. This are of
telling and selling is known as personal selling in which an individual based on
his/her expertise attempts to transform the prospects into customers.
Dynamics of Personals Selling
The dynamics of personal selling are found instrumental in activating the selling
activities. Sales preparations are considered most crucial for the actual sales. Pre-
sale activities and post-sale services cant be left neglected to improve the marketing
activities. The customers may be interested in knowing the main features of the
services, how a particular service would help them, rationale behind the technical
services and proof in regard to its uses. The pre-sale activities would bring the
positive results, if preparations are adequate.
Some of the customers are found highly aware of the developments, they are found
well informed. On the other hand, we also find other category of customers who are
in dark. Here, the branch managers are expected to match the level of awareness of
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customers. As for instance, Mr. A goes up the matrix but Mr. B has not enough time
for the branch managers. The branch managers are supposed to prepare a synopsis
of their sales talk. Not surprisingly the highly aware customers are found in
apposition to make independent decisions and know all about. While selling to the
less aware customers, the managers should stress on the main features of the
services and the expected benefits of these services.
Sales Promotion: It is natural that like other organisations, the banking
organizations also think in favour of promotional incentives both to the bankers as
well as the customers. The banking organizations make provisions for incentives to
the bankers and call the bankers promotion. Like this, the incentives offered to the
customers promotion. There are a number of tools generally used in the different
categories of organizations in face of the nature of goods and services sold by them.
The gift, contests, fairs and shows, discount and commission, entertainment and
travelling plans for bankers, additional allowances, low interest financing and
retalitary are to mention a few found instrumental in prmoting the banking business.
As and when the banking organizations offer new services and schemes, the tools of
sales promotion are required to be innovated. This is with the motto of stimulating
the new and old customers. An important thing in the very context is the changing
needs and requirements of customers/prospects. The bank professionals been
outstanding task of studying the competitors strategies which would help them in
intiating the process of innovation. Here it is important to mention the promotional
incentives to the customers would focus on decision related to the selection of a tool.
There are a number of considerations to streamline the process. The bank
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professionals are supposed to study the market conditions and make necessary
suggestions, especially regarding the incentives.
It is a blending process and bank professional have to be sure that whatever
provisions, they make are fulfilled on priority basis. More incentives more efficiency
or vice-versa conditions more efficiency, more incentives motivate bankers
substantially.
The price mix:
In formulation of product mix, the pricing decisions occupy a place of outstanding
significance. The pricing decisions or the decisions related to interest and fee or
commission charged by banks are found instrumental in motivating or influencing thetarget market. The reserve bank of india and the Indian Banking Association are
concerned with regulations. The rate of interest is regulated by the RBI and other
charges are controlled by Indian Banking Association. To be more specific in the
Indian setting, we find this component of the marketing mix significant because the
banking organizations are also supposed to subserve the interest of weaker sections
and backward regions. The public sector commercialbanks in particular complicate
the problem of pricing.
Pricing policy of a bank is considered important for raising the number of customers
vis--vis the accretion of deposits. Ofcourse, there are a number of factors to
influence the process but it is also right to mention that the key role in the entire
process is played by the RBI. A National Consumer Survey conducted by the
L.H.Associates reveals that the quality of consumer service was one of the three top
issues and the consumers ranked the quality of their bank relationships as even
more important than the fees charged for the services. To be more specific when we
find a number of domestic and foreign banks working in the Indian economy, the RBI
bears the responsibility of making the business environment sonductive. The non-
banking organizations and foreign banks have been found attracting customers by
offering them a number of incentives. The potential customers or investors frame
their investment plans in the face of pricing decisions made by the banking
organizations. While formulating the pricing strategies, the banks have also to take
the value satisfaction variable into consideration. The value and satisfaction cant be
quantified in terms of money since it differs from person to person, keeping in view
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the level of satisfaction of a particular segment, the banks have to frame their pricing
strategies. The policy makers are required to be sure that the service offered by
them are providing satisfaction to the customers concerned. The pricing decisions
may be bit liberal, if the potential customers are found shifting ti the non-baking
investments. In this context, it is pertinent that pricing is used as motivational tool.
The banking organizations are required to frame two-fold strategies. First, the
strategy concerned with the interest and fee charged and second, the strategy is
related to the interest paid. Since both the strategies throw a vive-versa impact, it is
pertinent that the banks attempt to establish a correlation between the two. It is
essential that both the buyers as well as sellers have a feeling of winning.
The banks have to take the value satisfaction variable into consideration while
designing the pricing strategies. Mclver and Naylor opine that a marketing manager
has to regard price as a variable to be traded off against product quality and
promotion rather that as an absolute where the lowest price is not desirable.
The RBI has to be more liberal so that the public sector commercial banks make
decisions in the face of changing business conditions. There is no doubt in it that the
commercial banks bear the responsibility of energizing the social marketing, they are
also supposed to bear the social costs. It is also right that the foreign banks have
found making the business environment competitive. These emerging trends
necessitate a close look on the pricing problem. The policy makers find it difficult to
bring a change since the regulations of the RBI make things more critical. The
expenses are not regulated by the RBI and the banking organizations are forced to
increase the budgetary provisions. The sources of revenue are regulated which
complicates the task of bank professionals. This makes it essential that the RBI, the
Government of India and the banking organizations think over this issue with a new
vision.
The Place Mix:
This component of the marketing mix is related to the offering of the services. The
two important decision making areas are making available the promised services to
the ultimate users selecting a suitable place for bank branches.
The selection of a suitable place for the establishment of a branch is significant with
the viewpoint of making the place accessible and in addition, the safety and security
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provisions are also found important. The banking organizations are not free to open
a branch since the RBI regulates the subject of branch expansion but so far as the
management of branch is concerned, the branch managers have option to select a
place which is convenient to both parties, such as the users and the bankers. In the
Indian perspective, the protection to the banks assets and safety to the users and
bankers need due weightage. The vulnerable area or regions need adequate
provisions to make the branch safe. The management of office is also found
significant with the viewpoint of making the services attractive. The furnishing, civic
amenities and parking facilities cant be overlooked.
Another important decision making area is related to the offering of services. This
draws our attention on the behavioral profile of bankers. The bankers in general and
the front-line staff in particular bear the responsibility of making available the
services promised to the ultimate users without any distortion often a gap is found
generated by the front-line staff that makes an invasion on the image of bank. The
bank professionals or a manager is required to be sure that whatever the promise
has been made regarding the quality of services are not distorted. The RBI and the
different public sector commercial banks are required to manage the distribution
process intelligently and professionally. Thus, the place mix is found to be an
important decision making area which requires due attention, both at macro and
micro levels. If the banking organizations sell the promises, it is essential that the
end users get the same without any distortion.
The People:
Sophisticated technologies, no doubt, inject life and strength to our efficiency but the
instrumentality of sophisticated technologies star turning sour if the human
resournces are not managed in a right fashion. Generation of efficiency is
substantially influenced by the quality of human resources. It is against this
background that a majority of the management experts make a strong advocacy in
favor of developing quality people and late, the people management has been
included in the marketing mix of organizations is general and the service generating
organizations in particular.
Not only the public sector commercial banks but almost all the public sector
organization and albeit other government departments, off-late, have been facing the
problem of quality people resulting into inefficiency, deceleration in the rate of overall
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productivity and profitability or so. The front-line staff are rough and indecent, the
branch managers are helpless and even the bankers have been found involved in
the unfair practices. The public sector commercial banks need to assign an
overriding priority to the development of the quality people majority of the
management of the experts have realized the significance of quality people in the
development of an organization and the board rooms are also found changing their
attitudes. The first task before the banking organizations at the apex level is to over
haul the recruitment processes. While fixing criteria for selction, they need to assign
due wieghtage to the ethical values. The education and training facilities are required
to be innovated the process of identification and inculcation need to be managed
carefully.
The foreign banks and private sector commercial banks reward for efficiency and at
the same time also demotivate the inefficient bankers. This helps them in improving
the effieicncy of even the inefficient people. The development of human resources
makes the ways for the information of human capital. Incentives, ofcourse, inject
efficiency and the organizations offering more incentives succeed in motivating the
people.
Having better and co-effective control over operations
Enriching the job content of employees at all levels.
Improving the quality of decision making, a must in the fast changing
environment.
Thus, the key focus areas in which information technology can be employed are:
Automated processing of back office operations like processing of forms,
policy customerization and product slection, pricing and preparation of
quotations etc.
Computer assisted telephone and intelligent voice processing of customer call
handling, new business marketing or handling after office hours enquiries.
Image processing for documents, storage and retrieval, folder management
and work flow management for the movement of documents with the bank.
Artificial intelligence and expert systems for complex decision making like the
appraisal of the of the creditworthiness of clients designing of innovative
instruments and strategy formulation.
RDBMS for the systematic use of information which would facilitate the cross
selling of products.
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Electronic Data Interchange for company wise communication and inter
connection of systems for the benefit of both banks MIS and the customers.
All the above systems should be client-base systems and not line of business
systems. Since these would provide better marketing and service to clients, facilitate
cross selling and customerization of schemes and hence, a better packaging for the
product. This would help the Indian banks think customer.
All these would, thus, help in the effective management of time. Recourse to
mechanized systems like ledger posting, machine, cash counting machine, and
cheque sorting machine would result in reduction in the number of tedious and
routine jobs to be handled manually saving time for the people to focus on the
customer.
Strategies for effective abnk marketing in India:
Introduction: since the inception of globalization in India, banking sector ahs
undergone various changes. Introduction of asset classification and prudential
accounting norms, deregulation of interest rate and opening up of the financial sector
made Indian banking sector competitive. Encouragement to foreign banks and
private sector banks increases competition for all operatives in banking sector. The
protective regime by the authority is over. Indian banks are exposed to global
competition. Even competition within the country has increased manifold. The almost
monopoly position enjoyed by the public sector banks of India is no more existence.
Under this development, Indian banks need to reinvent the marketing strategy for
growth.
The spread of the bank in Indian rural and semi urban areas are highly different from
state to state and region to region. Many states have fewer networks of bank
branches in the rural areas and research scenatios different marketing approach for
different areas are required. If the bank follows the same marketing strategy for all
areas the success would be difficult.
Marketing approach for urban areas:
The urban areas of India are developed taking into account all parameters of
development. The level of income of the people, the literacy rate and level of
education as well as awareness of the people about rights of the customer are
higher than that of the rural and even semi-urban areas. Thus, here for effective
bank marketing different approach is necessary than that of rural areas.
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The marketing strategy should be based on customer service and the use of modern
technology in banking. Under competitive environment for the success of the
business, better customers and retaining existing customers is possible only with
customer service. Use of modern technology in urban areas will also go long way for
marketing of banking services. Technology based services like credit card, debit
card, ATM, any where banking, internet banking and mobile banking are necessary
for urban areas. This is because it enables customer to perform banking transaction
at their convenience. Business hours of bank are also an important factor for urban
banking. India many private sector banks, especially co-operative banks and now
even some of the public sector banks have also started this practice and they find it
successful. To attract business and wholesale customers, banks need to adopt
technology based product and service which is suitable to such class of customer.
For instance, RTGS, collection of outstation cheques, issuing the cheques at par at
any branch in the country, cash management facility, DD etc are necessary. Another
strategy of effective marketing is bank need to change the focus from the traditional
banking to universal banking. In urban areas, the extend and variety if economic
activities demands that one institution should meet all financial needs of a customer.
Under such an expectation of people, universal banking would prove successful
approach for bank marketing. The term Universal banking in general refers to the
combination of commercial banking and investment banking that is issuing,
underwriting, investing, trading in securities.
For increasing customer base and retention of the existing clientele universal
banking approach is effective strategy. Universal banking offers number of benefits
to customers as well as the banks. For instance, economies of scale arise in multi
product firms because cost of offering various activities by different units are greater
than the costs when they are offered together. Moreover the most important benefit
for the bank is that it is useful to increase the fee beased income of the bank.
Financial sector passing from lower interest rate regime at present and added to this
the process of disintermediation is affecting the main and the traditional source of the
income for the banks i.e., interest income. All banks are striving hard to increase
their fee based income to improve their bottom line. Universal banking can help the
banks here positively.
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Marketing approach for rural areas:
Prior to nationalization of banks in 1969, the rural areas were virtually without
banking facilities. At that time unorganized sector was dominating in the rural
finance. After nationalization of banks in 1969 branches of the banks were startedgradually in the rural areas also. Today more than 50% branches of the banks are
found in the rural areas. However, the distribution of banks in the rural areas is highly
uneven. Here banks have to face competition with the unorganized sector. Moreover
the rural banking is highly regularized activity by the Government in India. Lending
as well as interest rate is regularized. Thus under such environment different
marketing approach is required. For effective rural marketing product development,
promotion and communication is important. All these parameters banks have to
balance with socio-economic factors prevailing in the rural areas. Bank need to
innovate product that could attract the depositors. Various loan schemes that are
suitable for them for getting funds at right time and also they find convenient to
repay. For instance traditional savings bank account may be given fixed deposit
concept that once a particulat limit of balance is reached the funds from savings
account is automatically coveted into fixed depost attracting higher interest rate.
Banks need to develop some scheme which would attract them to bank with. For
loans and advances products which are suitable to farmers, small traders, small
scale agro based rural industries are already in existence. Banks need to see how
value addition can be made to these existing scheme. Banks also need to tie up with
the NGOs and various SHGs for different types of loans and micro financing. This
will help the bank for building good image and reputation in the rural areas over and
above the business. Another potential area which can be explored by banks in the
rural area is retail banking. With the steady increase in the income of the rural people
there is ample scope for retail loan products like housing loans and loan for
consumer durables.
Marketing through customer services in rural areas is different from that of urban
areas. Here personalized banking is the success manthra for banks. Because of high
level of illiteracy people prefer to undertake banking transaction themselves. They
hesitate to depend upon technology based service. For effective marketing in rural
areas, bank should have staff with right soft skill like concern for customers problem,
positive attitude, good communication and negotiation skill. At every level of dealing
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with the customer bank need to educate them for banking activates and process. To
attract the customers from the unorganized sector most important factor is to
provide, the borrower the required finance of right amount at right time.
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Traditional banking
Gunpowder
Personalized services, time
consuming, limited access
Virtual or E-banking
Nuclear charged
Real time transactions,
integrated platform, all time
access
Chapter 8
EVOLUTION OF E-BANKING
The story of technology in banking started with the use of punched card machines
like Accounting Machines or Ledger Posting Machines. The use of technology, at
that time, was limited to keeping books of the bank. It further developed with the birth
of online real time system and vast improvement in telecommunications during late
1970s and 1980s.it resulted in a revolution in the field of banking with convenience
banking as a buzzword. Through Convenience banking, the bank is carried to the
doorstep of the customer.
The 1990s saw the birth of distributed computing technologies and Relational Data
Base Management System. The banking industry was simply waiting for these
technologies. Now with distribution technologies, one could configure dedicated
machines called front-end machines for customer service and risk control while
communication in the batch mode without hampering the response time on the front-
end machine.
Intense competition has forced banks to rethink the way they operated theirbusiness. They had to reinvent and improve their products and services to make
them more beneficial and cost effective. Technology in the form of E-banking has
made it possible to find alternate banking practices at lower costs.
More and more people are using electronic banking products and services because
large section of the banks future customer base will be made up of computer literate
customer, the banks must be able to offer these customer products and services that
allow them to do their banking by electronic means. If they fail to do this will, simply,
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not survive. New products and services are emerging that are set to change the way
we look at money and the monetary system.
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E-BANKING PRODUCTS
Automated Teller Machine (ATM)
These are cash dispensing machine, which are frequently seen at banks and otherlocations such as shopping centers and building societies. Their main purpose is to
allow customer to draw cash at any time and to provide banking services where it
would not have been viable to open another branch e.g. on university campus.
An automated teller machine or automatic teller machine (ATM) is a
computerized telecommunications device that provides a financial institution's
customers a method of financial\ transactions in a public space without the need for
a human clerk or bank teller. On most modern ATMs, the customer identifies him or
herself by inserting a plastic ATM card with a magnetic stripe or a plastic smartcard
with a chip that contains his or her card number and some security information, such
as an expiration date or CVC (CVV). Security is provided by the customer entering a
personal identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make cash
withdrawals (or credit card cash advances) and check their account balances. Many
ATMs also allow people to deposit cash or checks, transfer money between their
bank accounts, pay bills, or purchase goods and services.
ATMs are known by various casual terms including cash machine, hole-in-the-wall,
cash point or Bancomat (in Europe and Russia). The occasionally-used ATM
Machine is an example of RAS syndrome.
Some of the advantages of ATM to customers are:-
Ability to draw cash after normal banking hours
Quicker than normal cashier service
Complete security as only the card holder knows the PIN
Does not just operate as a medium of obtaining cash.
Customer can sometimes use the services of other bank ATMs.
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Telebanking or Phone Banking
Telephone banking is relatively new Electronic Banking Product. However it is fastly
becoming one of the most popular products. Customer can perform a number of
transactions from the convenience of their own home or office; in fact from anywhere
they have access to phone. Customers can do following:-
Check balances and statement information
Transfer funds from one account to another
Pay certain bills
Order statements or cheque books
Demand draft request
This facility is available with the help of Voice Response System
(VRS). This system basically, accepts only TONE dialed input. Like the ATM
customer has to follow particular process, initially account number and telephone
PIN are fed for the process to start. Also the VRS system provides the users within
additional facilities such as changing existing password with the new desired,
information about new products, current interest rates etc.
Mobile Banking
Mobile banking comes in as a part of the banks initiative to offer multiple channel
banking providing convenience for its customer. A versatile multifunctional, free
service that is accessible and viewable on the monitor of mobile phone. Mobile
phones are playing great role in Indian banking- both directly and indirectly. They are
being used both as banking and other channels.
Internet Banking
The advent of the Internet and the popularity of personal computers presented both
an opportunity and a challenge for the banking industry. For years, financial
institutions have used powerful computer networks to automate million of daily
transactions; today, often the only paper record is the customers receipt at the point
of sale. Now that their customers are connected to the Internet via personal
computers, banks envision similar advantages by adopting those same internal
electronic processes to home use.
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Banks view online banking as a powerful value added tool to attract and retain new
customers while helping to eliminate costly paper handling and teller interactions in
an increasingly competitive banking environment. In India first one to move into this
area was ICICI Bank. They started web based banking as early as august 1997.
Types of Internet Banking or e-Banking
Understanding the various types of Internet banking will help examiners assess the
risks involved. Currently, the following three basic kinds of Internet banking are being
employed in the marketplace.
Informational- this is the basic level of Internet banking. Typically, the bankhas marketing information about the banks products and services on a stand-
alone server. The risk is relatively low, as informational systems typically have
no path between the server and the banks internal network. This level of
Internet banking can be provided by the banks or outsourced. While the risk to
a bank is relatively low, the server or web site may be vulnerable to alteration.
Appropriate controls therefore must be in place to prevent unauthorized
alterations to the banks server or web site.
Communicative- this type of Internet banking systems and the customer. The
interaction between the banks system and the customer. The interaction may
be limited to electronic mail, account enquiry, loan applications, or static file
updates (name and address change). Because these servers may have a
path to the banks internal networks, the risk is higher with this configuration
than with informational systems. Appropriate controls need to be in the place
to prevent, monitor, and alert management of any unauthorized attempt to
access the banks internal networks and computer systems. Virus controls
also become much more critical in this environment.
Transactional- this level of Internet banking allows customers to execute
transactions. Since a path typically exists between the server and the bank or
outsourcers internal network, this is the highest risk architecture and must
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have the strongest controls. Customer transactions can include accessing
accounts, paying bills, transferring funds etc.
Advantages of e-Banking
Convenience- Unlike your corner bank, online banking sites never close;
theyre available 24 hours a day, seven days a week, and theyre only a
mouse click away.
Ubiquity- If youre out of state or even out of the country when a money
problem arises, you can log on instantly to your online bank and take care of
business, 24\7.
Transaction speed- Online bank sites generally execute and confirm
transactions at or quicker than ATM processing speeds.
Efficiency-You can access and manage all of your bank accounts, including
IRAs, CDs, even securities, from one secure site.
Effectiveness- Many online banking sites now offer sophisticated tools,
including account aggregation, stock quotes, rate alert and portfolio managing
program to help you manage all of your assets more effectively. Most are also
compatible with money managing programs such as quicken and Microsoft
money.
Disadvantages of Internet Banking
Start-up may take time-In order to register for your banks online program,
you will probably have to provide ID and sign a form at a bank branch. If you
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and your spouse wish to view and manage their assets together online, one of
you may have to sign a durable power of attorney before the bank will display
all of your holdings together.
Learning curves- Banking sites can be difficult to navigate at first. Plan to
invest some time and\or read the tutorials in order to become comfortable in
your virtual lobby.
Bank site changes- Even the largest banks periodically upgrade their online
programs, adding new features in unfamiliar places. In some cases, you may
have to re-enter account information.
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E- BANKING SERVICES:
1. Bill payment service
Each bank has tie-ups with various utility companies, service providers and
insurance companies, across the country. It facilitates the payment of electricity and
telephone bills, mobile phone, credit card and insurance premium bills.
To pay bills, a simple one-time registration for each biller is to be completed.
Standing instructions can be set, online to pay recurring bills, automatically. One-
time standing instruction will ensure that bill payments do not get delayed due to lack
of time. Most interestingly, the bank does not charge customers for online bill
payment.
2. Fund transferAny amount can be transferred from one account to another of the same or any
another bank. Customers can send money anywhere in India. Payees account
number, his bank and the branch is needed to be mentioned after logging in the
account. The transfer will take place in a day or so, whereas in a traditional method,
it takes about three working days. ICICI Bank says that online bill payment service
and fund transfer facility have been their most popular online services.
3. Credit card customersCredit card users have a lot in store. With Internet banking, customers can not only
pay their credit card bills online but also get a loan on their cards. Not just this, they
can also apply for an additional card, request a credit line increase and God forbid if
you lose your credit card, you can report lost card online.
4. Railway pass
This is something that would interest all the aam janta. Indian Railways has tied up
with ICICI bank and you can now make your railway pass for local trains online. The
pass will be delivered to you at your doorstep. But the facility is limited to Mumbai,
Thane, Nasik, Surat and Pune. The bank would just charge Rs 10 + 12.24 percent of
service tax.
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5. Investing through Internet banking
Opening a fixed deposit account cannot get easier than this. An FD can be opened
online through funds transfer. Online banking can also be a great friend for lazy
investors.Now investors with interlinked demat account and bank account can easily trade in
the stock market and the amount will be automatically debited from their respective
bank accounts and the shares will be credited in their demat account.
Moreover, some banks even give the facility to purchase mutual funds directly from
the online banking system.
So it removes the worry about filling those big forms for mutual funds, they will now
be just a few clicks away. Nowadays, most leading banks offer both online banking
and demat account. However if the customer have there demat account with
independent share brokers, then need to sign a special form, which will link your two
accounts.
6. Recharging your prepaid phone
Now there is no need to rush to the vendor to recharge the prepaid phone, every
time the talk time runs out. Just top-up the prepaid mobile cards by logging in to
Internet banking. By just selecting the operator's name, entering the mobile number
and the amount for recharge, the phone is again back in action within few minutes.
7. Shopping at your fingertips
Leading banks have tie ups with various shopping websites. With a range of all kind
of products, one can shop online and the payment is also made conveniently through
the account. One can also buy railway and air tickets through Internet banking.
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Internet Banking versus Traditional Banking
In spite of so many facilities that Internet banking offers us, we still seem to trust our
traditional method of banking and is reluctant to use online banking. But here are few
cases where Internet banking will turn out to be a better option in terms of savingyour money.
'Stop payment' done through Internet banking will not cost any extra fees but when
done through the branch, the bank may charge you Rs 50 per cheque plus the
service tax.
Through Internet banking, you can check your transactions at any time of the day,
and as many times as you want to.
On the other hand, in a traditional method, you get quarterly statements from the
bank and if you request for a statement at your required ti