Is it the banks that should choose a convenient way of interacting with customers or is it the customers who should choose a preferred way of transacting with banks?
It was in the year 1987 when India got its first ATM set up by Hongkong and Shanghai Banking Corporation (HSBC). It was in the year 1997; ICICI bank started offering internet banking services in India. Since then the non-branch distribution channels have become a common offering by most of Indian banks.
Despite of availability of non-branch distribution channels, branch banking has always remained the core channel for banking needs. The alternate distribution channels such as ATMs, internet banking, telephone banking and more recently, mobile banking have been positioned and perceived more as value additions than potential core channels for banking needs. Banks introduced these alternate channels to offer convenience, anytime & anywhere banking and extra touch points for customers. In spite of availability of these multiple distribution channels, a bank’s branch still has an important ‘service function’ role to play.
Recent news in The Times of India caught my attention. It reads;
From July 1, HDFC Bank will allow SB account holders only five transactions within the branch in a month. The sixth and subsequent ones would be charged Rs 100 per transaction. Besides, the bank has also set a limit of only 100 transactions at the branch level in a year. “Salary account holders occupy our time. If they still wish to transact without levies let them switch over to holding a current account,” an HDFC Bank employee said.
Do the non-branch distribution channels exist to fulfill needs of the banks or its customers? Is it the banks that should choose a convenient way of interacting with customers or is it the customers who should choose a preferred way of transacting with banks?
Agreed that the availability of alternate channels offer many advantages to banks. The alternate distribution channels offer creation of additional revenue streams at low costs, reduce operational costs, improve time to market, gain a higher market share and reduce customer acquisition & servicing costs. Having made heavy investments in development of non-branch distribution channels, all banks and financial service providers are under tremendous pressure to achieve a reasonable penetration of alternate distribution channels and looking for that tipping point that can change customer behavior to accelerate the migration process from branches to less expensive non-branch channels.
However, the multi channel adoption in India is still in its infancy. Customers don’t always find buying/interacting experience easy and convenient across different channels. There is a high degree of skepticism and mystery built around these channels, all of which is impacting its adoption. Therefore the strategy to migrate customers to alternate channels needs to be thoughtfully carved out with laser like focus on customer needs for it to be effective, evolving and mutually beneficial. Transformation from branch banking being the distribution channel to being one of the distribution channels is going to be a slow process and adoption rates may not come as quickly as banks would like.
Driving customers away from branches by punishing them for using branch banking channel is hardly an effective migration strategy.
An effective channel migration program can be developed based on a thorough understanding of customer needs. It is important to understand the reasons that drive customers to the branch and devise an appropriate strategy that addresses those drivers to motivate customers migrate to alternate channels.
The traditional branch channel plays a vital role in this transition and here is how;
Educate: Many customers are unaware of the alternate channel offerings and do not perceive any compelling need to know more about it. Banks need to structure campaigns for creating awareness, educating and training customers to use alternate banking channels.
The alternate channels should be positioned not as a way to drive down costs but to help and offer convenience to customers.
Demonstrate: Many customers lack trust in the consistency and stability of the channels. They are skeptical about the ease of use and whether they can adopt. Banks need to develop confidence by offering assistance to complete required tasks on alternate channels, by broadcasting success stories through various print and screen displays placed in the branches.
HSBC Bank had launched Assisted Internet Service. Under this service customers visiting branch were asked what activity they want to perform in the branch and if they were willing, they were supported to perform that using internet banking.
Assure: One of the biggest barriers to adoption of channels is perceived security threats such as phishing, identity fraud, unauthorized account access etc. Customers need help and assurance to overcome these fears.
Encourage: Many Customers keep using the same channel just because they are used to it. They need to be encouraged and helped to migrate. To encourage customer adoption, banks can offer exclusive price incentives, reward points, discounts etc. for transactions carried over alternate channels.
One of the banks in India offered pizza coupons to each new customer registering for internet banking.
In case of HDFC bank’s migration strategy, customers would rather appreciate a balanced approach that offers five free transactions a month at branch and thereafter each subsequent task can be performed at the branch but on alternate channels with assistance from the bank staff.
‘Handholding’ is probably the right first step to begin customer migration to non-branch channels.
What do you think are the reasons behind slow adoption of alternate channels (even in urban areas)? and what could be effective channel migration strategies?
This article was first published by Anand on Indiabanks