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Marketing in Banking

INDEX SR. NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. DESCRIPTION The Financial System Origin of The Word BANK Definition of Bank and marketing Finance and banking in India Users of Banking Services Meaning of Marketing Evolution of the marketing concept Marketing and Competition Marketing Concepts Its application to Banking Meaning of Bank Marketing Market Research in Indian Banks Increasing Importance of Marketing in Banking Industry Market Segmentation Marketing Mix for Banking Services Strategies for Segmentation Marketing Mix for banking services Strategies for effective bank marketing in India Technology in Banking Conclusion Refrences Pg no. 4 5 5 6 6 6 6 8 9 10 13 16 19 27 21 27 28 43 60 61

Marketing in Banking

Chapter 1


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.

Marketing in Banking

Chapter 2


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 m oney 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

Marketing in Banking 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 of a 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.

Marketing in Banking

Bankers Identify Near-Team and Long Term Concerns

1991 Maintaining profitability Credit Portfolio Management Service Quality Regional Economy Cost Management / Expense reduction Declining Earnings/ more failures Market / customer focus Capital adequacy Stock market value Industry Overcapacity Service quality Maintaining profitability Market / customer focus Operations/systems/technology Credit portfolio management Productivity improvement Investment to stay competitive Stock market value Asset/liability management Electronic Banking 2015

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 24hour 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.

Marketing in Banking

Chapter 3


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 the success 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

Marketing in Banking Its application to Banking, when we apply marketing to the banking industry, the bank marketing strategy can be said to include the following i) ii) A very clear definition of target customers. 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.

Marketing in Banking

Chapter 4

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) 2) 3) The bank cannot exist without the customers. The purpose of the bank is to create, win, and keep a customer. 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 organizational design 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) 6) Ultimate aim of a bank is to deliver total satisfaction to the customer. Customer satisfaction is affected by the performance of all the personal of the bank.

Marketing in Banking 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: 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.

a) Market research

Marketing in Banking d) Developing market i.e., marketing culture among all the customerconsciousness 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.


Marketing in Banking

Chapter 5


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.


Marketing in Banking Information regarding Bankwise Market Research Studies Bank 1. Allahabad Bank Title of the Market Research Study a. Survey on Customer Service Remarks Not formal report prepared. 2. Bank of Baroda b. Marketing of deposits and MP Ranade: BMP

allied services to non-residents Thesis. customers opinion (1958) 3. Canara Bank a. Marketing research study for For internal use two new deposit schemes only

(1989) 4. Central India Bank of a. Market survey of customer Conducted by the services b. Marketing (Customers) students of BITS, deposits Pilani. For internal use only service (1986) 5. Indian Bank 6. Oriental Bank of Overseas a. Potential areas for future For internal use only

business expansion

a. Study of customer service in R Upendran MBP OBC with special reference to Thesis metropolitan branches (1989) a. Sample survey on customers For internal use responses (1987) only


7. Punjab Bank


b. Sample survey on customer For internal use service (1988) c. Study on deposit only linked Formal Report

housing loan scheme (1982) 8. Punjab Bank and Sind a. Study on customer turnover For internal use (mail questionnaire based only

study of customers who have closed their accounts) (1989) b. Changing Profile of Punjab and J S Kalra: Sind Banks Customers and BMP Thesis their expectorations, a survey


Marketing in Banking based study (1988) 9. State Bikaner Bank of a. A survey on customer service, For internal use level of customer satisfaction only and (1998) 10. Syndicate Bank a. Evaluation Study on the quality For internal use of customer service (1989) b. Marketing of bank service with special reference to branches K M Kanath in Bombay city of Syndicate BMP Thesis Bank-customer service (1979) 11. Union Bank of India a. Customer responses (Opinion) survey (1988) 12. UCO Bank a. Customers opinion study (1989) For internal use only For internal use only only customer expectations

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 Undertaken by a (1989) Consultant


Marketing in Banking 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


Marketing in Banking 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 15

Marketing in Banking experimenting with money transmission at Point of sale, e.g., petrol station linked with banking network.

Credit is Easier to Obtain Growing 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.


Marketing in Banking

Chapter 6


When we apply marketing to the banking industry, the bank marketing strategy can be said to include the following: i. ii. A very clear definition of target customers. 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 every individual 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.


Marketing in Banking

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


Marketing in Banking 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 helps policy 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.


Marketing in Banking 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 the different segments of the household sector. 20

Marketing in Banking

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.


Marketing in Banking

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 for profit 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.










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


Marketing in Banking 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.


Marketing in Banking

Chapter 7


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.


Marketing in Banking

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 socioeconomic 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 that they 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.


Marketing in Banking

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


Marketing in Banking 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 the formulation 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


Marketing in Banking 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.


Marketing in Banking 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 costbenefit 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.


Marketing in Banking 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 30

Marketing in Banking 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. Presale 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 31

Marketing in Banking 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


Marketing in Banking 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 the target 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 nonbanking 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 satisfacti on cant be quantified in terms of money since it differs from person to person, keeping in view


Marketing in Banking 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


Marketing in Banking 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


Marketing in Banking 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. 36

Marketing in Banking 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.


Marketing in Banking 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.


Marketing in Banking

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 started gradually 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


Marketing in Banking 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.


Marketing in Banking

Chapter 8

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 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 frontend machine. Traditional banking Gunpowder Personalized services, time consuming, limited access Virtual or E-banking Nuclear charged Real time transactions, integrated platform, all time access

Intense competition has forced banks to rethink the way they operated their business. 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,


Marketing in Banking not survive. New products and services are emerging that are set to change the way we look at money and the monetary system.


Marketing in Banking

Automated Teller Machine (ATM) These are cash dispensing machine, which are frequently seen at banks and other locations 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.


Marketing in Banking

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.


Marketing in Banking

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 bank has 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 archite cture and must


Marketing in Banking 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


Marketing in Banking 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.


Marketing in Banking

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. Onetime 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 transfer
Any 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 customers

Credit 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.


Marketing in Banking

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.


Marketing in Banking

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 saving your 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 time, it may turn out to be an expensive affair. The branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank branch would take eight days to deliver it at your doorstep. If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for you. As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost."


Marketing in Banking

Impact of e-Banking on Traditional Services

One of the issues currently being addressed is the impact of e-banking on traditional banking players. After all, if there are risks inherent in going into e-banking there are other risks in not doing so. It is too early to have a firm view on this yet. Even to practitioners the future of e-banking and its implications are unclear. It might be convenient nevertheless to outline briefly two views that are prevalent in the market.The view that the Internet is a revolution that will sweep away the old order holds much sway. Arguments in favor are as follows: E-banking transactions are much cheaper than branch or even phone transactions. This could turn yesterdays competitive advantage - a large branch network - into a comparative disadvantage, allowing e-banks to undercut bricks-and-mortar banks. This is commonly known as the "beached dinosaur" theory. E-banks are easy to set up so lots of new entrants will arrive. Old -world systems, cultures and structures will not encumber these new entrants. Instead, they will be adaptable and responsive. E-banking gives consumers much more choice. Consumers will be less inclined to remain loyal. E-banking will lead to an erosion of the endowment effect currently enjoyed by the major UK banks. Deposits will go elsewhere with the consequence that these banks will have to fight to regain and retain their customer base. This will increase their cost of funds, possibly making their business less viable. Lost revenue may even result in these banks taking more risks to breach the gap. Portal providers are likely to attract the most significant share of banking profits. Indeed banks could become glorified marriage brokers. They would simply bring two parties together eg buyer and seller, payer and payee. The products will be provided by monolines, experts in their field. Traditional banks may simply be left with payment and settlement business even this could be cast into doubt. Traditional banks will find it difficult to evolve. Not only will they be unable to make acquisitions for cash as opposed to being able to offer shares, they will be unable to obtain additional capital from the stock market. This is in contrast to the situation for Internet firms for whom it seems relatively easy to attract investment. There is of course another view which sees e-banking more as an evolution than a revolution.


Marketing in Banking E-banking is just banking offered via a new delivery channel. It simply gives consumers another service (just as ATMs did). Like ATMs, e-banking will impact on the nature of branches but will not remove their value. Experience in Scandinavia (arguably the most advanced e-banking area in the world) appears to confirm that the future is clicks and mortar banking. Customers want full service banking via a number of delivery channels. The future is therefore Martini Banking (any time, any place, anywhere, anyhow). Traditional banks are starting to fight back. The start-up costs of an e-bank are high. Establishing a trusted brand is very costly as it requires significant advertising expenditure in addition to the purchase of expensive technology (as security and privacy are key to gaining customer approval). E-banks have already found that retail banking only becomes profitable once a large critical mass is achieved. Consequently many e-banks are limiting themselves to providing a tailored service to the better off. Nobody really knows which of these versions will triumph. This is something that the market will determine. However, supervisors will need to pay close attention to the impact of e-banks on the traditional banks, for example by surveillance of:

strategy customer levels earnings and costs advertising spending margins funding costs Merger opportunities and threats, both in the UK and abroad.


Marketing in Banking

The Indian Scenario Drivers of change

Advantages previously held by large financial institutions have shrunk considerably. The Internet has leveled the playing field and afforded open access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers are embracing the many benefits of Internet banking. Access to one's accounts at anytime and from any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's Internet presence transforms from 'brouchreware' status to 'Internet banking' status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. The six primary drivers of Internet banking includes, in order of primacy are: Improve customer access Facilitate the offering of more services Increase customer loyalty Attract new customers Provide services offered by competitors Reduce customer attrition


Marketing in Banking

Indian Banks on Web

The banking industry in India is facing unprecedented competition from nontraditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study that was conducted by students of IIML shows some interesting facts: Throughout the country, the Internet Banking is in the nascent stage of development (more than 50 banks are offering varied kind of Internet banking services). In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development.


Marketing in Banking

Information technology analyst firm, the Meta Group, recently reported "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure due to increasing access to low cost electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency. Global players in the fray Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet along with general deregulation trends eliminates geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases. Certainly some existing brick and mortar banks will go out of business. But that's because they fail to respond to the challenge of the Internet. The Internet and its underlying technologies will change and transform not just banking, but also all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context.

E-Banking world wide

Since its inception, Internet banking has experienced strong and sustained growth. World Bank report on leapfrogging in e-finance pointed out that the three countries with impressive progress in information technology in this sense are Estonia, Republic of Korea and Brazil. Creation of the worlds leading electronic banking systems has been done at a remarkably low cost compared to other world-class internet banks . In the European Union, 60 million people, representing 18 per cent of the adult population, use online banking In France, the number of online banking accounts is


Marketing in Banking recording an annual growth rate of 75 per cent. However, Estonia is a country that has become a leader in Internet banking (which now reaches 18 per cent of the population), not only among Eastern European countries but in world rankings, through a combination of easyto- use software, free-of-charge transactions and behavior changes resulting from the influence of the Nordic countries IT culture on Estonia.

A sector in which Latin America is seems to be performing better than in other industries is online retail banking. Growth in this area has been driven by traditional banks, which have used the online channel to generate customer loyalty and improve their operating margins. Two Brazilian banks, Bradesco and Banco do Brasil, have thus achieved more than 4 million online customers each. Mexico is another leader of Internet banking in Latin America. It adopted legislation providing for the development of both E-Commerce and e-finance. In Mexico, the number of online bank users more than tripled from 700,000 in 2000 to 2.4 million in 2001, and it could reach 4.5 million in 2005 (E-Marketer 2002b). One reason for the success of Latin American banks online ventures seems to be the attention they have paid to providing retail customers with multiple ways to access their accounts (Internet, telephone, wireless). However, given that the share of the total population that actually has a bank account is relatively small, the expansion of Latin American online banking may be facing a bottleneck.

Compared with overall Internet usage estimated at 4.4 million in Australia, the major banks together have attracted only 1.2 million to online banking. The Internet is a global phenomenon and so is e-finance. Its deployment is not limited to developed countries, and indeed some developing countries such as India and the Republic of Korea are experiencing particularly strong growth in EBanking. In Asia one of the most impressive records has been achieved by the Republic of Korea. The Republic of Korea is leading in online brokerage and in mobile banking. In South-East Asia Internet banking is also developing rapidly in Thailand, Malaysia, and Singapore and to a lesser extent, in the Philippines.

In Bangladesh there is a large gap between the computerization of foreign banks and that of local commercial banks and as regards the state of their intra- and inter56

Marketing in Banking branch online networks. However, 75 per cent of local banks are planning to introduce E-Banking, which implies very dynamic improvements.

Apart from North and South Africa the Sub Saharan Africa is the region that is seriously lagging behind in Internet banking, although it is giving to the rest of the world the good example of microfinance developments.


Marketing in Banking

Chapter 9

Banking sector has undergone various changes after the new economic policy based on privatization, globalization and liberalization adopted by government of India. 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 increased competition for all operators in banking sector. Banks in India prior to adoption of new economic policy was protected by government and was having assured market due to almost state monopoly in banking sector. However, under the new environment, Indian banks needs to reinvent the marketing strategy for growth. In India geographical development is not even throughout the country, there are fully fledged urban areas covering the metropolitan cities and other big cities. On the other hand there are under developed rural areas too. For effective bank marketing different approach for different areas is required. In urban areas customer services is of paramount importance as the level of literacy and therefore awareness of the people is more. Also technology based marketing would have higher degree of success due to typical urban life style of the people. Universal banking providing all financial service under roof will have more success in urban areas. In the rural areas for bank marketing personalized banking will go in long way. Also banks need to offer innovative tailor made deposits and advances products to suit individual customers. Delivery of advances of right amount and at right time is essential in rural marketing.


Marketing in Banking

Chapter 10

Banking Theory Law and Practice, Dr. S. Guruswamy. Marketing Management, Philip Kotler. Customer Relationship Management, K. B. S. Kumar.