Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Channels of future – planned by Banks Making the channels deliver Challenges

In past,

Market Realities

Regulatory restrictions helped keep competition at bay Proximity to potential customers was the key competitive advantage Customers were satisfied with one branch and restrictive timings Easy comparison of products & services was not possible

Todays Customer

Anywhere Anytime Anyway customer convenience -Online banking -24/7 service -8 to 8 branch service -365 days branch service Instant comparison of products and services Reduced Turn Around Time Enriched interactivity through customized services Better Informed

Banks
Redefine Traditional concepts Role of the branch Business processes Wider and more focused market reach Reduced distribution costs Cross Sell Leverage customer database Customer acquisition / retention Credit screening and data mining

Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Channels of future – planned by Banks Making the channels deliver Challenges .

Development of Alternate Channels is Important to Reach out to new customers Reach out to remote geographies Improve existing offerings by providing faster processing through cost effective solutions Deliver new products Data collection and mining .

Multi-channel delivery model m-Banking Internet Bank ATM Network Branch Network Agent Network Call centre .

Bank Branch Central & Regional Processing Hubs Larger deposit market share with fewer branches Freeing branch resources for cross-selling and non-routine servicing .

Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Channels of future – planned by Banks Making the channels deliver Challenges .

in 1990s. The PIN has to be kept secret by the customer. etc. . to prevent any misuse or fraudulent in the event of loss of the card. • ATMs are primarily use for performing some of the banking functions such as withdrawal of cash or the deposit of cash/cheque.• Stand Alone ATMs made their appearance in India . by using a Debit Card. • The customer provided with an Debit card with a unique personal identification number (PIN).

• Migration of the routine transactions to the ATMs frees the bank staff for more productive work. • Privacy in transaction. • Any branch/anywhere banking enabled. • To the Bank• Cost of setting up an ATM is lower than a setting up a branch. • Acceptability of cards across multiple bank ATM.• To the Customer• 24 * 7 access availability. details of recent transaction. • Other services like clearing cheques deposits. • Less time for transactions. cheque book requisition. . • Balance enquiry.

• Online:.When an ATM is connected to bank database. it is said to be stand alone. they are said to be networked.When ATM is not connected to bank database. it is stated to be offline. • Networked:. • Less hassle in handling cash.• ATMs serve as the crucial touch point for cross selling of the bank’s products.when ATM is not connected to any ATM network. . it is stated to be online.When ATM are connected to an ATM network. • Stand Alone:. • Enables the bank to display products on the screen and serves as a media for publicity for the bank. • ATM Models in India• Offline:.

• E-ticketing in railways. .• The following components of the ATM provide the customer interface• Video Display Monitor. • Deposit slot. • Touch Screen • Slots: There are slots in the ATM for various purposes as detailed below. • Key board/Keypad. • Card Reader • Cash Dispenser • Envelope Dispenser. • Future Perspective of ATM:• Increasing the number of transactions per day per ATM. • Establishing connectivity with point of sale (POS) terminals at merchant establishment. roadways and airways and International payment networks VISA and Master card.

5 cm by 5. it has the name and the account number of account holder embossed on it. ◦ Credit Card. ◦ Restricted card/Member card.5 cm. There are different types of credit cards. . ◦ Smart card or Chip card. some of which are discussed below. ◦ Charge card. also allow withdrawals of cash for emergency purposes and levy a service fee for such withdrawals. ◦ Debit card.A credit card is small plastic card around 8.◦ Credit Cards:. Many card issuers being banks.

e.e. The credit card holder is given about 25 to 50 day’s time to credit his account in case there are insufficient funds in his account at the time of debit. not debited to the account immediately such cards are charge cards.  Charge card :-In such cards. he can pay it in monthly installments later.e. i. Since the transaction are accumulated. i. debited to the account.  Credit cards:-In credit card the card holder has the option to pay the entire amount as soon as the account is debited or he may choose to pay only a certain percentage of the amount debited and he gets a credit to extent of rest. generally a month and the total amount charged. i. transaction are accumulated over a period of time. it is only charged. .

may contain a processor. Member Card – This is used exclusively by the member of a hotel or chain of hotels/ clubs etc. .A bank issue a card that allows its user to access their funds for the purpose of paying for merchandise. and communicates with the external world through contacts on the card.The Smart card looks exactly like any other plastic card or an ATM card with an integrated circuit (IC) installed. This chip contains memory.   Debit Cards:. A debit card acts like a credit card. the difference being that funds are immediately taken from the cardholders accounts Smart Card:.

. It provides a proof of purchase through banking channels. It also allows him to delegate spending power to add-on-members. It inculcates a sense of financial discipline in him. It also extends additional facilities like insurance cover/discounts.  The advantages of credit card system to the concerned parties are as under:To the Card Holder:◦ ◦ ◦ ◦ ◦ ◦ It is convenient to carry. It also gives exposure to banking.

. ◦ This also provides additional customer service to the existing clients. ◦ Preferred location by card holder. ◦ Development of a prestigious clientele base. Etc. ◦ Helps in establishing banking relationship with new customers. Better network spread of cardholders and their increased use higher popularity and image for the bank.. To Banks:◦ Scope and potential for better profitability out of share earned from the traders turnover. ◦ Advertising of a promotional support on a national scale. Etc.  To the merchant establishment:◦ Increase in sales because of increased purchasing power of the cardholder due to unlimited credit available to him.

      Dynamic Signature Verification:.the dynamic signature tablet automatically verifies weather the signature is genuine or not. Vein Recognition:.It uses a computer which is programmed to recognize different voices and compares the voice with the recorded original.Researches shown that individual hands have unique features such as finger lengths. the retina is scanned using a low intensity infrared beam and the person’s identification is thereby ascertained. like retinal pattern identification. use the unique vein structure of the human body to identify individuals. Visual recognition too.It is used to identify weather the user of the smart card is genuine or not by electronically scanning fingerprint ridges.It traces the way in which a signature is written. Retinal Pattern Verification:. Hand Geometry:. Systems are available to measure hand geometries by scanning them. Voice Recognition System:. Fingerprint Verification:.This method.The pattern of the blood vessels on the human eye is a unique physical characteristics. . skin web opacity and radius of curvature of fingerprints.

ATMs have eliminated the time limitations of customer service. Anywhere Banking:. In some of the Indian public sector banks. and offer a host of banking services including deposits. This type of banking is called electronic banking. withdrawals. instructions and transfers. a service particularly useful for frequent travelers. remote banking is being further extended to the customer’s office and home. Customers need not to visit branch for their banking transaction like tele-banking. requisitions. Anytime Banking:.   With the introduction of computers in Indian banks and with the advent of ATMs the banking service are provided across the bank. .Interstation connectivity of ATMs has also facilitated withdrawals from other stations. remote banking facility are there.

Today. With less and less time available to conduct routine banking business they are being extended home banking facilities. . ◦ Opening letter of credits. Corporate Banking:. ◦ International remittances. banking customers are more affluent and technologically sophisticated than ever before. ◦ Ordering intra-bank and inter-bank fund transfers.  Home Banking (Corporate and Personal):. At present by utilizing remote banking facility.Remote banking has become very popular among corporate customers especially big business/industrial houses which are already automated. corporate customers will be able to get to following services: ◦ Getting their current balance or getting their statement of accounts for any pre-defined period. ◦ Ordering cheque books.

Corporate Customers will be able to directly prepare messages in the SWIFT format by setting in their office. By obtaining a special SWIFT (Society for Inter-bank Financial Telecommunication) authentication facility in arrangement with their bankers. will be able to get connectivity to the branch’s designated computer.By using tele-banking facility. which is connected to the computer and. customers can dial up the branch’s designated telephone number. cheque books and few selected services through this phone banking  . and transfer the particulars in the respective templates to their bankers. Personal Banking:. and also can place order for statement of account. by dialing his identification number. A customer can have access to his balance.

The caller generally a customer of the bank will be able to call the bank anytime and enquire balances or transaction history.  The function of tele banking services is based on the voice processing facility available with bank computers. . Some banks uses telephone answering machines in which case the services is not really ‘tele-banking’ per se but simply a telephone answering system. and to transfer funds between accounts.

. ◦ The third level of Internet Banking services are offered by Fully Transactional Websites. This form of banking is generally referred to as Internet Banking. banks increasingly use internet as a channel for receiving instructions and delivering their products and services to their customer. With popularity of PCs and easy access to Internet and World Wide Web. ◦ In the next level is Simple Transactional Website.  Broadly the level of banking services offered through the internet can be categorized in to three types◦ The Basic level Services is the banks website.

    It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. which have always been matters of concern. given that the Internet is a public domain. . It has added a new dimension to different kinds of risks traditional associated with banking. being the efficient and cost effective mechanism of banking services. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected. heightening some of them and throw new risk control challenges and risk perceptions. customers privacy. not subject to control by any single authority or group of users. Security of banking transactions. It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology. validity of electronic contract. etc.

request for a cheque book etc. stop cheque payment. Mobile banking comes with features like 128 bit encryption and open Internet technology.e. . it is not dependent on any specific service provider and the handset company. A customer on his/her mobile screens can check his bank balance or order a demand draft. i. This service is free of charge.

  A cheque truncation is defined by the new section 6(b) of the NI Act as a Cheque which is truncated during the course of a clearing cycle either by the clearing house or by the Bank whether paying or receiving payment immediately on generation of an electronic image for transmission. create an electronic image of a cheque). ◦ The electronic image of the cheque truncation will substitute the physical cheque from the point and time of truncation onwards ◦ Truncation is to be done only during the course of a clearing cycle to reduce the time taken for realisation. ◦ The paper cheque after truncation is to be kept in the custody of the bank/ clearing house that truncated the cheque.e. . substituting the further physical movement of the cheque in writing. ◦ Only the Banks involved and the clearing house can truncate a cheque ( i. Characteristics: ◦ It is an electronic image of a paper cheque.

Abroad even the account number of the customer is precoded. Ways in which truncation can be done: Using MICR data: MICR cheques have the cheque number. The cheque is moved to off-site storage and the image is used for further processing.    Addition of digital signature of the truncating bank/ clearing house to the electronic image of the cheque truncated is optional. It involves scanning of both sides of the cheque and storing the image in the digital form. bank and branch number and transaction code pre-coded. The entire MICR line is then captured electronically. the amount as well as the payees name is inserted in the MICR line. city. Using Image Processing: Image Processing is the latest document handling system. . During encoding the collecting bank. The cheques do not move further. The electronic information is then exchanged with other for clearing (Inter Bank Data Exchange or IBDE).

The cheque itself is then truncated and stored. Further processing is done through the electronic medium.     Advantages: Cheque truncation truncates or stops the flow of cheques through the banking system. Truncation can also occur at the branch where the customer deposits the cheque. . Information from the cheque is converted into a medium for electronic processing.

ICICI Bank Making the channels deliver Challenges .Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Some Channels of future .

transaction history. etc. Mobile to mobile payments  Applications   Source: Presentation by ICICI Bank .High speed. and processes requests like ‘stop cheque’. Small denomination transactions executed instantly Useful for small transactions in places like petrol pumps. etc. toll booths. stock quotes. etc. User Friendly Features  Complete Financial status information like account balance.

Ensures that there is no misuse Could be combined with other cards for multi-service usage Applications   Source: Presentation by ICICI Bank .Specific and Secure Features  Octroi Card  Closed user group card that allows transfer only with select merchants In use at Ahmedabad Municipal Corporation for Octroi collections Used by transport agencies for paying octroi.

low risk.Offline. low cost Features  Prepaid cash card with value stored in the card Ability to recharge   Eliminates cash replenishment Applications  Travel cards  Public Transportation Source: Presentation by ICICI Bank .

Features  ◦ ◦ ◦  Banking Transactions Balance Enquiry Cash Withdrawal Cash Deposit Utility payment  Proprietary payment devices – PCs/Cash Registers Wide reach to provide financial transactions Applications   Increased customer convenience Source: Presentation by ICICI Bank .

Multipurpose. Wide Reach Features  Wireless / telephone line based internet access. online health checkup for insurance. Cost Efficient. etc. Could be solar-based for India Applications  Extend reach of our products to rural customers in remote areas at low costs Supplement by value-added services like video-conferencing for loan disbursal.  Source: Presentation by ICICI Bank .

Convenient. authentication. fast processing Features   Storage as well as processing capabilities Easy to carry and useful for offline processing Applications  Can be used by Agents to carry out transactions on behalf of the users Ideal for simple processing like generating insurance illustrations and rural banking  Source: Presentation by ICICI Bank .

ICICI Bank Making the channels deliver Challenges .Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Some Channels of future .

Foundation of creating superior channel is superior insight into customer behaviour Creating Superior Channel Network Channel requirement for delivery of different products vary with Customer Type Customer Behaviour Customer Profitability Adaptability by Customer .

Web and Call Center Consistent view across channels Consistent identification of the customer across the channels Offer customized products and services .Multi-product view to the customer across different channels like Branches.

Availability The channel should be readily available to customers Location ATMs spread across the country for easy accessibility Time 24X7 ATM access 24x7 Internet Banking access Extended 8 to 8 branch access .

Simplicity Simplicity Technology should be simple and user-friendly Customer should feel comfortable with the technology Simpler process for authentication and Verification Regional language ATMs .

Reliability Expected service levels to be met at all times Customer confidence must be built over a period of time When ATMs were introduced managing cash replenishment to ensure ready availability of cash at any time was of utmost importance Today ATMs are being managed remotely and with more efficiency through usage of technology .

Consistency Customer should not have conflicting experiences across various channels Need to provide integrated platform that can accept information from various other platforms used by various product groups of the Bank .

Channels must continuously strive to add greater value to customers in terms of services Mobile top-ups at ATMs Value-added services Benchmark innovative products / services across the world to add newer perspectives to electronic transactions Card to Card funds transfer .

Customer education on Channel potential Channel usage through hand-holding for the initial period Customer Education and Migration Plan Channel migration plan Clear plan on migrating customers and scale-up of new channel Accordingly incentivise customers to shift to the newer channels .

Continuous improvement customer inconvenience Avoiding Inconvenience to remove Avoid calls at odd hours Avoid mobile alerts at odd hours Process and systems improvements for reducing prolonged wait times at Phone Banking .

ICICI Bank Making the channels deliver Challenges .Changing Banking Paradigm Growing Importance of Channels Present Day Delivery Channels Some Channels of future .

Integration across channels Integration with back-end to deliver a one-bank experience to the customer Across various channels Across various product lines .

Service integration Seamless service integration between the front-line (branches/ Phone Banking) and back-office (Operations units) .

Channel Integration Product Systems Banking Channels Internet Banking Branches Credit Cards Customer Auto Loans Middleware ATMs Cyber Centers Call Center m-Banking Agents Home Loans Bonds Web Trade .

Channel placement Complementary placement of various channels – branches / ATMs to be located judiciously to ensure maximum coverage at minimum costs .

Managing the logistics involved in servicing the customers across the various channels Logistics Cash filling and replenishment across 1950 ATMs even at remote locations Handling drop-box requests at every nook and corner of country 8 to 8 banking Managing huge number of Phone Banking seats .

Trade off between security. Simplicity and user-friendliness Scale Vs. compromise on security or quality aspects Latest technologies and complex logics to avoid fraud Vs. Affordable cost . convenience & cost Added convenience Vs.

Employee Training and Customer Education Training of front-line staff manning all service points across branches. sales force to handle customer queries and service expectations Educating customers to encourage multiple channel usage . Phone Banking.

Foundation of creating superior channel is superior insight into customer behaviour Creating Superior Channel Network Channel requirement for delivery of different products vary with Customer Type Customer Behaviour Customer Profitability .

References: •IIBF Publications •Google •ICICI Bank Presentation on making channels deliver •RBI Website .

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