BANKING THEORY AND

PRACTICES
DR. KETAN MULCHANDANI, FRM, FIII, FMVA
ASSOCIATE PROFESSOR
GITAM – SCHOOL OF BUSINESS – GITAM (DEEMED TO BE UNIVERSITY)
 UNIT 4
BANKING INNOVATIONS
• CONTENTS TO BE COVERED :

 BANKING SERVICES AND INNOVATIONS

 PRODUCT CENTRIC INNOVATIONS

 PROCESS CENTRIC INNOVATIONS

 MARKETING INNOVATIONS

 PRICING INNOVATIONS

 E-PAYMENT SERVICES

 ELECTRONIC BANKING
 BANKING SERVICES AND INNOVATIONS

• GLOBALIZATION AND INNOVATIONS

• CASES OF BANKS
• ICICI BANKS
• SBI BANK
• HSBC BANK
 ICICI BANK

• NCASH DEBIT CARD

• INTERNET BAKING
• ANYWHERE BANKING
• PHONE BANKING
• DEMAT SERVICES
 SBI

• INNOVATION THROUGH NETWORKED ATMS

• INNOVATION- DEPOSITORY SERVICES AND DEMATERIALIZED (DEMAT)
• INTERNET BANKING
• PORTFOLIO MANAGEMENT
• INNOVATION THROUGH STEPS
 HSBC

• ACCOUNTS
• FIXED DEPOSITS
• COD
• DEMAT ACCOUNTS
• SMART MONEY ACCOUNT
• BUSINESS ACCOUNT
• CREDIT CARDS
• LOANS
• HOME LOANS
• LAP
• PERSONAL LOAN
 HSBC

• WEALTH MANAGEMENT
• INSURANCE
 E-BANKING
• THE TERM ONLINE BANKING IS BASICALLY WHAT IS CALLED INTERNET BANKING, E-
BANKING OR VIRTUAL BANKING. A CUSTOMER USES AN ELECTRONIC MEDIUM TO VISIT
THE WEBSITE OF A BANKING INSTITUTION FOR FINANCIAL TRANSACTIONS. BOTH, THE
MEDIUM AND THE FINANCIAL SERVICE PROVIDER TOGETHER FORM THE TERM
ELECTRONIC BANKING.
• ONLINE BANKING SERVICE
• ATM AND DEBIT CARD
• PHONE BANKING
• SMS BANKING
• MOBILE BANKING
• FUND TRANSFER SERVICES THROUGH VARIOUS CHANNELS.
• POINT OF SALES BANKING.
 BENEFITS OF E-BANKING
• FOR BANKS
• REDUCTION IN EXPENSES

• REDUCE MARGIN OF HUMAN ERROR

• REACH NEW CUSTOMERS AND INCREASE THE BASE
• EFFICIENCY
• CUSTOMER SERVICE AND SATISFACTION
• IMAGE

• FOR CUSTOMER
• CONVENIENCE
• NO GEOGRAPHICAL BARRIERS
• SYSTEMATICALLY IMPORTANT PAYMENT SERVICES
• FINANCIAL MARKET CLEARING AND OTHER IMPORTANT RETAIL PAYMENT FACILITIES
 SECURITY ISSUES IN E-BANKING
• IDENTITY THEFT
• CARDING/SKIMMING
• PHISHING
• EMAIL PHISHING
• PHARMING (DUPLICATE WEBSITE)
• SPEAR PHISHING (EMPLOYEE GROUP)
• VOICE PHISHING
• MAN IN THE BROWSER
• MULES
• LACK OF DIRECT CONTACT BETWEEN CUSTOMER AND BANKING OFFICER
• TRANSACTION PROBLEMS
• TRAINING AND DEVELOPMENT REQUIREMENT
 PRODUCT INNOVATIONS

• CASE OF BARCLAYS BANK

• UK BANKING

• BARCLAY CARD

• BARCLAY CAPITAL

• BARCLAYS GLOBAL INVESTORS

• BARCLAYS WEALTH MANAGEMENT

 PRODUCTS AND SERVICES

• BARCLAYS BANK ACCOUNT (BBA)

• INSTANT CHEQUE BOOK (CURRENT ACCOUNT)
• CAN BE UPGRADED
• PERSONAL OVERDRAFT POUND 5000
• NO INTEREST PAYMENT TILL THE CUSTOMER NOT USES THE FACILITY
• DEBIT CARD AND CASH BACK POUND 50 ON SUPERMARKET PURCHASES
• NO TRANSACTION CHARGES WHEN USING AT CASH MACHINES

• YONG PERSONS ACCOUNT (YPA)

• TAILOR MADE FOR THE AGE GROUP OF 16-19 YEARS
• CAN SHOP ONLINE WITH VISA ELECTRON
• CAN WITHDRAW POUND 300 WITH A VISA ELECTRON AT ANY BARCLAYS OR WOOLWICH CASH
MACHINES
• DIRECTLY SALARY OR ALLOWANCES CAN BE PAIN IN ACCOUNT HOLDER FROM ANOTHER ACCOUNT
• STUDENT ACCOUNT
• FREE MOBILE PHONE INSURANCE FOR THE FIRST YEAR OF STUDY
• 20% DISCOUNT ON SELECTED RESTAURANTS

• STUDENT BARCLAY CARD

• MONEY MANAGEMENT THROUGHOUT THEIR UNIVERSITY LIFE
• POUND 600 OPENING CREDIT LIMIT
• 56 DAYS INTEREST FREE CREDIT ON PURCHASES
• OPTIONAL PAYMENT BREAKS

• GRADUATE PACKAGE
• HELP TO GRADUATE WHEN THEY ARE STARTING THEIR CAREERS
• FEATURES WORTH POUND 382 JUST FOR POUND 5 A MONTH
• MOBILE PHONE INSURANCE
• 20% DISCOUNT ON SELECTED RESTAURANTS

• CAREER DEVELOPMENT LOAN

• POUND 300-8000 LOAN
• INTEREST FREE FOR UP TO 1 MONTH AFTER THE END OF THE COURSE
• REPAYMENT PERIOD 12- 60 MONTHS
• BARCLAYS PERSONAL LOANS
• UNSECURED
• SECURED

• OTHER SERVICES
• ONLINE BANKING

• MORTGAGES
• TRAVEL SERVICES
• RECENT INITIATIVES
• COMPREHENSIVE MOBILE INSURANCE
• GREEN FLAG ROADSIDE ASSISTANCE
• LEGAL HELPLINE
• INSURANCE PRODUCTS
• FOR HOLIDAYMAKERS
 STATE BANK OF INDIA

• SBI TERM DEPOSITS

• LOW AMOUNT RS. 1,000
• 15 DAYS TO 10 YEARS

• RECURRING DEPOSITS
• 6 MONTHS TO 10 YEARS
• AMOUNT AS LOW AS RS. 100

• HOUSING LOAN (MAXGAIN)

• AN OVERDRAFT ACCOUNT
• LOW EMI (6.8% PER ANNUM)
• NO HIDDEN OR ADMINISTRATION COST
• NOMINAL PROCESSING CHARGES
• LOW PROCESSING FEES

• HOUSING LOAN (GREEN HOME LOAN)

• SBI EDUCATION LOAN
• SBI STUDENTS LOAN SCHEME
• REPAYMENT PERIOD UPTO 15 YEARS + 12 MONTH PAYMENT HOLIDAY (AFTER COURSE COMPLETION)
• LOAN UPTO 10 LACS NIL PROCESSING CHARGES
• UPTO 7.5 LACS NO COLLATERAL
• UPTO 4 LACS NO MARGIN

• SCHOLAR LOANS (IIT, IIMS, NITS STC.)

• 100% FINANCING
• NO PROCESSING FEES
• FULL TIME AND FEW PAR-TIME COURSES
• FULL FEES COVERED (HOSTEL, TUITION, LIBRARY, PURCHASE OF BOOKS/LAPTOP ETC.)

• SKILL LOAN COURSES

• RS. 5000 – RS. 1,50,000 LAON AMOUNT
• TUITION/COURSE FEES
• NO COLLATERAL
• LOAN REPAYMENT TENURE 3 TO 7 YEARS
• SBI ABROAD EDUCATION LOAN
• FULL TIME COURSE
• LOWER INTEREST RATE
• LOAN AMOUNT UPTO 1.5 CR.
• REPAYMENT UPTO 15 YEARS EMI
• EARLY APPROVAL
• TAX BENEFITS
• ALL EXPENSES COVERED (EXAMINATION, TUITION, LIBRARY ETC.)
• INSURANCE COVERAGE
• LOWER PROCESSING FEES
• THIRD PARTY COLLATERAL ALSO ACCEPTED
• LOAN AGAINST SHARES
• MINIMUM LOAN AMOUNT: RS 50,000/-
• MAXIMUM LOAN: RS 20.00 LACS
• (LOANS AGAINST SHARES NOT TO EXCEED RS 10 LACS IF THE PURPOSE IS FOR SUBSCRIBING TO
IPOS.)
• NATURE OF LOAN IS OVERDRAFT / DEMAND LOAN
• YOU WILL NEED TO PROVIDE A MARGIN AMOUNT OF 50% OF THE PREVAILING MARKET PRICES
OF THE SHARES BEING OFFERED AS SECURITY.
• PLEDGE OF THE DEMAT SHARES AGAINST WHICH LOAN IS SANCTIONED.
• PROCESSING FEE OD/DL : 0.75% OF THE LOAN AMOUNT + APPLICABLE GST SUBJECT TO MINIMUM
OF RS.1000 (NON REFUNDABLE)
• RS 1000 + APPLICABLE SERVICE TAX (APPLICABLE ONLY FOR OVERDRAFT A/C)
• LOAN AGAINST MUTUAL FUND
• MINIMUM LOAN AMOUNT : RS 25,000/-
• MAXIMUM LOAN :
• (A) : EQUITY/ HYBRID/ ETF MF : RS 20,00,000
• (B) : DEBT/ FMP MF : RS 5,00,00,000.
• MARGIN
• (A) EQUITY/ HYBRID/ ETF MF : 50%
• (B) DEBT/ FMP MF : 15%
• PROCESSING FEES : 0.75% OF THE LOAN AMOUNT + APPLICABLE SERVICE TAX (ST) (MAX: RS 50,000
+APPLICABLE ST)
• REVIEW/RENEWAL CHARGES (YEARLY) : RS 1000 + APPLICABLE ST
• MEDI PLUS SCHEME
• LOAN AVAILABLE FOR SPECIALIZED MEDICAL TREATMENTS
• IT COVERS
• ANGIOPLASTY
• HEAR VALVE REPLACEMENT
• HIP AND KNEE REPLACEMENT
• SERIOUS ACCIDENT AND MULTIPLE INJURIES ETC.

• NRI ACCOUNT
• SAVING BANK
• NRE RUPEE ACCOUNT
• CURRENT ACCOUNT
• TERM DEPOSITS (INTEREST PAID QUARTERLY)
• SPECIAL TERM DEPOSITS (INTEREST COMPOUNDED QUARTERLY)
• ETC.
• SBI HOLIDAY SAVING ACCOUNT (COX & KINGS)

• SBI HOLIDAY SAVING ACCOUNT (THOMAS COOK)

• GOLD BANKING

• CREDIT CARDS

• INTERNATIONAL BANKING

• AGRICULTURAL ACCOUNTS
 INNOVATIVE PRODUCTS OFFERED BY INDUSIND BANK
• DUO CARD
• INDIA’S FIRST DEBIT-CUM-CREDIT CARD, DUO COMES WITH TWO MAGNETIC STRIPES & EMV
CHIPS. OFFERING CUSTOMERS A VARIETY OF BENEFITS THAT ENSURES THEY GET THE BEST
FEATURES OF A CREDIT AND DEBIT CARD ALONG WITH A SINGLE ACCOUNT STATEMENT AND
COMBINED REWARD POINTS.

• BANKING ON ALEXA
• BANKING ON WHATSAPP
• FINGERPRINT BANKING
• MY ACCOUNT MY NUMBER
• CHECK ON CHEQUE
• DENOMINATION SELECTION
• VIDEO BRANCH
• POSITIVE PAY
 CORPORATION BANK
• DEPOSITS SCHEMES
• SAVING ACCOUNT
• ANY BRANCH BANKING
• CORP POWER CHEQ (MULTI-CITY CHEQUE BOOK)
• FREE INTERNATIONAL DEBIT CARD
• INTERNET BANKING
• CORP SENIOR ACCOUNT (MONTHLY REMITTANCE)
• CORP ELITE ACCOUNT (FREE ADD-ON FACILITIES)
• CORP CLASSIC ACCOUNT (EARN INTEREST EQUAL TO TERM DEPOSITS)
• CORP JEEVAN RAKSHA (PROVIDE LIFE INSURANCE FROM LIC)
• CORP ANYTIME PREMIUM (PAY LIC PREMIUM ANY ATM’S OF CORPORATION BANK)
• TERM DEPOSITS
• KSHEMANIDHI CASH CERTIFICATE
• REINVESTMENT OF INTEREST (6 MONTHS TO 10 YEARS)
• MONEY FLEX
• 6 – 120 MONTHS
• MINIMUM DEPOSIT RS. 5,000 AND MULTIPLE OF RS. 1,000 THEREAFTER
• PARTLY WITHDRAWAL AVAILABLE
• CORP CLASSIC
• HIGH RETURN AND TOTAL LIQUIDITY
• FIXING AND UNFIXING OF CUSTOMER SAVING DEPOSIT TO TERM DEPOSIT IN UNITS OF RS.
1,000
• CONTINUOUS CLASSIC
• CAN CHOOSE BETWEEN SIMPLE AND COMPOUND INTEREST
• READY CASH DEPOSIT
• RS. 5,000 MULTIPLE FOR A PERIOD OF 12-36 MONTHS
• HE CAN WITHDRAW THROUGH CHEQUES WHENEVER REQUIRED
 PRICING INNOVATIONS

• THE INDIAN BANKING INDUSTRY HAS BEEN TIGHTLY REGULATED

• MOST BANKS FOLLOW A COST-PLUS AND MARKET-BASED PRICING STRATEGY, WHICH WAS
JUSTIFIABLE UNTIL RECENTLY AS THE BANKING INDUSTRY WAS IN A NASCENT STAGE AND
THE MARKET, LARGELY UNDERPENETRATED
• THE APPROACH FOR BANKS’ PRICING FACTORS IN THE COST OF FUNDS, RISK-BASED
SPREAD AND AN ASSESSMENT OF THE COMPETITORS’ PRODUCT PORTFOLIOS.
• OTHER COMPONENTS THAT ARE EITHER UNDERESTIMATED OR NOT FULLY ACCOUNTED
FOR SUCH AS THE CORRECT COST OF SERVICING AND THE CUSTOMERS’ VALUE
PERCEPTION REGARDING SUCH PRODUCTS.
• TRADITIONAL PRICING APPROACH (TPM)
• MARKET BASED APPROACH
• RISK PREMIUM
• COST OF FUNDS

• MISSING COST ELEMENTS (MCE)

• COST OF TECHNOLOGY
• COST OF PRODUCT DEVELOPMENT
• COST OF ROLLOUT AND INFRASTRUCTURE
• COST OF PROCESSES

• VALUE BASED PRICING (TCM + MCE)

• GENERATE INCREASED VALUE FOR CUSTOMERS
• CAPTURES CUSTOMERS AT THE RIGHT TIME
• SUPPORTS GROWTH IN WALLET SHARE
 ESTIMATIONS OF THE RIGHT COSTS OF
SERVICING

• THE CURRENT ESTIMATES DO NOT TAKE INTO ACCOUNT OTHER ASSOCIATED COSTS.
THESE INCLUDE THE COST OF MAINTENANCE OF INFRASTRUCTURE (BRANCHES, ATMS
AND CALL CENTRES) AND THOSE INCURRED TO SUPPORT TECHNOLOGY, PRODUCT
LAUNCHES AND PILOTS.

• FEE-BASED INCOME DOES NOT AID IN THE RECOVERY OF THE COST OF SERVICES.

• WHEREIN THE SPREAD (NET INTEREST MARGIN) COMPENSATES FOR THE COST OF
SERVICES ARE RARE, AND IT MERELY COMPENSATES FOR RISK-ADJUSTED RETURNS ON
THE EQUITY OF THE CORE LENDING BUSINESS.
• HIGH COST OF MAINTENANCE OF A BRICK-AND-MORTAR NETWORK IN URBAN CENTRES
• TABLE 1: AVERAGE COST OF AN ATM TRANSACTION
• NUMBER OF ATMS IN THE NETWORK (A) 5000
• COST OF SERVICING AN ATM PER ANNUM (B) INR 8-9 LAKH PER ATM (INCLUDES
RENT, SECURITY, ELECTRICITY AND OTHER CASH MANAGEMENT CHARGES)
• TOTAL COST OF MAINTAINING THE NETWORK (C= A*B) INR 450 CRORE
• COST OF MAINTAINING THE NETWORK PER DAY (D=C/365) ~ INR 1.25 CRORE
• AVERAGE TRANSACTION PER DAY PER ATM IN INDIA1 (E) 125
• TOTAL TRANSACTIONS THROUGH THE NETWORK PER DAY (F=A*E) 6,25,000
• AVERAGE COST PER TRANSACTION (AVG = D/F) INR 20
• INCORRECT DISTRIBUTION OF THE COST OF CENTRAL FUNCTIONS USING TRADITIONAL
COST ALLOCATION METHODS

• INADEQUATE REPRESENTATION OF ACTIVITY-BASED EFFORT IN COST ESTIMATION:

 VALUE BASED PRICING
• A VALUE-BASED PRICING APPROACH FOCUSES ON UNDERSTANDING THE CUSTOMERS’
WILLINGNESS TO PAY A PREMIUM FOR PRODUCTS OR SERVICES ON THE BASIS OF THE
VALUE OFFERED.
• BANKS CAN OPTIMIZE THEIR PRICING AND SECURE A LARGER SHARE OF CUSTOMERS’
WALLETS WITH AN INCREASED FOCUS ON PRODUCT INNOVATION AND CUSTOMER
ANALYTICS APPLICATIONS.
• POINTS TO BE CONSIDER WHILE DECIDING ON PRICING STRATEGIES OF PRODUCT
• HOW TO MAKE A PRODUCT DIFFERENTIATION STRATEGY MORE RELEVANT FOR THEIR
CUSTOMERS?
• WHAT PRICE POINT WILL ATTRACT CUSTOMERS TO BUY PRODUCTS?
• WHAT MAKES A CHANNEL MORE DESIRABLE FROM THE CUSTOMERS’ PERSPECTIVE?
• COSTLY CUSTOMER ACQUISITION DOES NOT ALWAYS LEAD TO A SUSTAINED INCREASE IN
MARKET SHARE
• CUSTOMERS HAVE EASY ACCESS TO MARKET INFORMATION
• POOR MARKETING COULD LEAD TO DISSATISFACTION WITH PRICES
• LOW-INVOLVEMENT PRODUCTS ARE DIFFICULT TO PRICE HIGHER

• IT IS IMPORTANT TO NOTE THAT VALUE-BASED PRICING DOES NOT ALWAYS CALL FOR AN
INCREASE IN THE PRODUCTS’ PRICING. OPTIMIZED PRICING MAY ALSO BE NEEDED TO WIN
A LARGE SHARE OF CUSTOMERS’ WALLETS, THEREBY IMPROVING PROFITABILITY.
• A YOUNG RETAIL CUSTOMER HAS A SAVINGS ACCOUNT WITH BANK XYZ. HE ALSO HAS A LONG
FAMILY HISTORY OF BANKING WITH THE LENDER, AS HIS PARENTS HOLD MULTIPLE FIXED DEPOSITS
AND SALARY ACCOUNTS IN IT.

• TRANSACTION
• THE CLIENT NEEDS AN EDUCATION LOAN FOR THE STUDY OF MEDICAL.
• THE EDUCATION LOAN MARKET HAS LOW PRODUCT DIFFERENTIATION,
• UNSECURED,
• HIGH INTEREST RATES FOR THESE PRODUCTS.

YEAR 1 MEDICAL COURSE STARTED YEAR 5 YEAR 10

NEED 10 – 15 LACS NEED BUSINESS LOAN EXPAND CLINIC

15-20 LACS 10 LACS
• PRICING
• MEDICAL PROFESSION IS BOOMING PROFESSION (DEMAND-SUPPLY)
• BANK CAN TARGET THIS SEGMENT BY NEW PRODUCT (EDUCATION LOAN + BUSINESS
LOAN WITH COND. 70% PASSING MARKS)
• RELAX REPAYMENT DURING EDUCATION AND HIGHER PAYMENT DURING THE EARNING
PERIOD
• VALUE ADDITION
• AN ENVIRONMENT IN WHICH THE CUSTOMERS’ EDUCATION AND PROFESSION ARE KEY
PARAMETERS ENABLES BANKS TO MAXIMIZE THEIR SHARE OF WALLETS BY GAINING
THEIR LOYALTY.
• Y. A COMBI-PRODUCT THAT IDENTIFIES CUSTOMERS AT A YOUNG AGE AND POSSESSES
THE RIGHT SET OF INSTITUTIONAL PARTNERS HAS THE POTENTIAL TO ESTABLISH
ITSELF AS A MARKET LEADER.
 IMPLEMENTATION OF VALUE BASED PRICING

• THE REGULATORY REGIME DOES NOT DISCOURAGE BANKS FROM PRICING THEIR
SERVICES AS PER THE VALUE PERCEIVED BY THEIR CUSTOMERS. IT ONLY MANDATES THE
PROVISION OF BASIC SERVICES FREE OF COST, ESPECIALLY TO CUSTOMERS AT THE
BOTTOM OF THE BANKING PYRAMID.
• BANKS WILL HAVE TO FOCUS ON IMPROVING THEIR CUSTOMER SERVICE AND INNOVATION
IN PRODUCTS AND PRICING.
• EFFECTIVE PRICING STRATEGY ALSO REWARDS LOYAL AND HIGH-YIELD CUSTOMERS BY
PROVIDING BUNDLED SERVICES AT REDUCED COSTS.
• SMALL CROSS-FUNCTIONAL TEAMS CAN COORDINATE WITH THOSE THAT ARE EXISTING.
CAPABILITIES IN THEIR PRODUCT MANAGEMENT AND ANALYTICS FUNCTIONS CAN HELP
DRIVE SUCH STRATEGIES.
• ONCE A PRICING STRATEGY HAS BEEN SUCCESSFULLY ROLLED OUT, THE BENEFITS ARE
IMMEDIATELY VISIBLE.
• BANKS SHOULD DEPLOY A DUAL TRANSFORMATION STRATEGY FOCUSED ON BOTH TACTICAL
MEASURES AND STRATEGIC ENABLERS TO IMPLEMENT VALUE-BASED PRICING STRATEGY.
• BANKS SHOULD SET UP STRATEGIC ANALYTIC FUNCTIONS, WHICH SHOULD BE SUPPORTED BY
PRICING OPERATIONS, PRODUCT MANAGEMENT, DATA ANALYTICS AND TECHNOLOGY.
• MARKETING CAMPAIGNS
• BANKS SHOULD DEPLOY DEDICATED MARKETING CAMPAIGNS FOR THE LAUNCH OF NEW
PRODUCT FEATURES, WHILE TARGETING A SET OF CUSTOMERS.
• MARKETING CAMPAIGNS THAT EMPHASIS DIFFERENTIATED VALUE PROPOSITIONS FOR
DEDICATED CUSTOMER SEGMENTS ENABLE A FASTER GO-TO-MARKET APPROACH.
• DYNAMIC PRICING:
• THE CONCEPT IMPLIES THAT THE PRICING OF PRODUCTS AND SERVICES ADJUST ON A REAL-TIME
BASIS TO THE PREVAILING DEMAND.
• CUSTOMERS EXPOSED TO E-COMMERCE ARE FAMILIAR WITH THIS CONCEPT AND WILL NOT
VIEW IT AS A NEGATIVE.
• FOR EXAMPLE, THE USAGE OF ATM NETWORKS OR CALL CENTERS CAN BE DYNAMICALLY
PRICED ON THE BASIS OF TIME AND LOCATION.
• LOYALTY PRICING:
• THIS WILL NOT ONLY ENABLE THEM TO RETAIN AND INCREASE THEIR SHARE OF WALLETS
WITH EXISTING CLIENTS, BUT CAN ALSO HELP INCREASE MARKET SHARE.
• THE CONCEPT IS GAINING PROMINENCE IN E-COMMERCE AND CREDIT CARDS, AND CAN
ALSO BE USED TO MARKET OTHER BANKING PRODUCTS.
• FOR INSTANCE, ANY BANK CAN OFFER A ‘NEXT VEHICLE LOAN’ TO ITS EXISTING VEHICLE
LOAN CUSTOMERS AT A SLIGHTLY COMPETITIVE RATE.

• BEHAVIORAL PRICING:
• BEHAVIORAL PRICING IS A FORM OF PRICE DIFFERENTIATION BASED ON CUSTOMERS’
USAGE OR BUYING HISTORY.
• BEHAVIORAL PRICING CAN BE EASILY APPLIED IN THE ALLIED AREAS OF E-COMMERCE
LIKE MOBILE BANKING, CARDS AND OTHER PAYMENT-RELATED PRODUCTS.
 PROCESS INNOVATIONS

• APPLICATION PROGRAMMING INTERFACE

• ROBOTIC PROCESS INNOVATIONS

• AUGMENTED REALITY

• SMART MACHINES IN BANKING

• INSTANT PAYMENT

• BLOCKCHAIN TECHNOLOGY
APPLICATION PROGRAMMING INTERFACE (API) IN
BANKING
• BANKS GRANT SECURED ACCESS TO THEIR FINANCIAL SERVICES TO THIRD-PARTY
PLATFORMS, HELPING COMPANIES BUILD PRODUCTS AROUND BANKING SERVICES. 
• ESSENTIALLY, THE CORE OF THE BANKING OPERATION REMAINS THE SAME, BUT
THE EXPERIENCE IS HEIGHTENED.  
• LET’S CONSIDER AN EXAMPLE WHERE THE BANK IS HDFC*, AND THE THIRD-PARTY
COMPANY IS RAZORPAYX.
1.HDFC BANK ALLOWS RAZORPAYX TO ACCESS ITS BANKING SERVICES, MAKING
TRANSFERS, BALANCE QUERY, AND OTHER FUNCTIONS AVAILABLE
2.NEXT, THE INTEGRATION OF HDFC’S APIS WITH RAZORPAYX’S PRODUCTS TAKES
PLACE
3.FINALLY, RAZORPAYX MAKES API CALLS AND FETCHES THE NECESSARY SERVICES
FROM HDFC TO FURTHER EXECUTE BANKING OPERATIONS
 BENEFITS OF API BANKING

• REGULATORY COMPLIANCE

• MEETING CONSUMER DEMAND

• BETTER CUSTOMER EXPERIENCES

• BUSINESS AGILITY

• FOCUS ON WHAT YOU DO BEST

 ROBOTIC PROCESS AUTOMATION IN BANKING

• ROBOTIC PROCESS AUTOMATION (RPA) IS USED BY BANKS AND OTHER

FINANCIAL INSTITUTIONS TO AUTOMATE MANUAL BUSINESS PROCESSES
SO THE BANKS CAN REMAIN COMPETITIVE IN TODAY’S MARKET.
• WE CAN DEFINE RPA IN BANKING AS THE USE OF A COMBINATION OF
ROBOTS AND ARTIFICIAL INTELLIGENCE (AI) TO REPLACE AND AUGMENT
HUMAN OPERATIONS IN BANKING.
• DIGITAL TRANSFORMATION PROJECTS ARE A MAJOR PRIORITY FOR MANY
BANKS AND RPA IS JUST ONE ASPECT OF THE DIGITAL TRANSFORMATION
PROCESS.
• BANKS USE RPA TO PERFORM REPETITIVE TASKS LIKE DATA ENTRY AND
TO AUTOMATE CUSTOMER SERVICE AND BACK-OFFICE WORKFLOWS.
 APPLICATION OF RPA IN BANKING

• CUSTOMER SERVICE
• COMPLIANCE
• ACCOUNTS PAYABLE
• CREDIT CARD PROCESSING
• MORTGAGE PROCESSING
• FRAUD DETECTION
• KYC PROCESS
• GENERAL LEDGER
• REPORT AUTOMATION
• ACCOUNT CLOSURE PROCESS
 AUGMENTED REALITY (AR) BANKING
• BANKING INDUSTRY IS GOING THROUGH A MASSIVE TRANSITION AND TRANSFORMATION TO
GET THE NEXT GENERATION OF TECH-SAVVY INDIVIDUALS ON THEIR PLATFORMS THROUGH
VARIOUS MEANS.
• AUGMENTED REALITY AND MIXED REALITY ENABLE USERS TO UNDERGO AN IMMERSIVE,
INTERACTIVE EXPERIENCE WHERE REALITY IS “AUGMENTED” AND ENRICHED WITH
COMPUTER-GENERATED DATA, IMAGES, AND SOUNDS.
• APPLICATION OF AR IN BANKING
• LOCATING ATMS AND OFFERS
• SELF SERVICE
• PAYMENTS EXPERIENCE
• CUSTOMER ACQUISITION
• BANK BRANCHES
• STOCK TRADING
• FINANCIAL EDUCATION
• SECURITY
• REDUCED DOCUMENTATION 
 AUGMENTED REALITY BANKING
• WESTPAC BANK IN NEW ZEALAND LAUNCHED THEIR AUGMENTED
REALITY MOBILE APP WITH LOT OF INTERACTIVE FEATURES.
• SCANNING OF DEBIT CARD OR CREDIT CARD WITH THEIR PHONE’S
CAMERA
• OVERLAID ON THAT CARD, CUSTOMERS CAN SEE THEIR CURRENT
BALANCE, SPENDING IN THE LAST TWO WEEKS, CATEGORIES THEY
HAVE SPENT MOST ON AND FUTURE PAYMENTS DUE ON THEIR
CREDIT CARDS.
• THEY CAN ALSO COMPLETE THEIR DUE PAYMENTS THROUGH THE
AUGMENTED REALITY PAYMENT GATEWAYS SEAMLESSLY.
• AXIS BANK – AUGMENTED REALITY
• NAVIGATION TO ACCESS ATMS, BRANCHES AND FOOD OUTLETS
 ARTIFICIAL INTELLIGENCE IN BANKING
• AI USES MACHINES TO PERFORM COMPLEX TASKS THAT ONLY HUMAN INTELLIGENCE CAN
RESOLVE. 

• BANKS THAT ARE MOST LIKELY TO BENEFIT FROM AI ARE THOSE THAT CAN RETHINK APPROACHES
TO PEOPLE AND PROCESSES.

• ARTIFICIAL INTELLIGENCE IN THE BANKING SECTOR MAKES BANKS EFFICIENT, TRUSTWORTHY,

HELPFUL, AND MORE UNDERSTANDING.

• AI IN BANKING ALSO HELPS USERS TO SELECT LOAN AMOUNTS AT AN ATTRACTIVE INTEREST

RATE.

• THE AI TECHNOLOGY IN THE BANKING SECTOR ALLOWS BANKS TO UPDATE PROCESSES

AUTOMATICALLY AND WORK UNDER EXISTING REGULATORY COMPLIANCE.
 APPLICATIONS OF AI IN BANKING
• AI CHATBOTS
• INDIAN BANKS HAVE EXPLORED THE USE OF AI, IT HAS PRIMARILY BEEN USED TO
IMPROVE CUSTOMER EXPERIENCE BY ADDING CHATBOTS AS AN ADDITIONAL
INTERFACE FOR CUSTOMERS LIKE SIA BY STATE BANK OF INDIA, EVA BY HDFC AND
IPAL BY ICICI.
• AI ENHANCES CUSTOMER EXPERIENCE
• BRINGS AUTOMATION AND MAKES THE PROCESS SEAMLESS
• DATA COLLECTION AND ANALYSIS
• PORTFOLIO AND WEALTH MANAGEMENT
• RISK MANAGEMENT FUNCTIONS
• NEXT-GEN SECURITY IS GUARANTEED
• AI MOBILE APPS DETECTS FRAUD
• AI FOR COMPLIANCE IN BANKING
 SMART MACHINES IN BANKING
• ASSISTANTS LIKE AMAZON’S ALEXA AND GOOGLE HOME IN ACTION. CAN YOU
IMAGINE THE IMPACT THESE COULD HAVE ON BANKING APPLICATIONS?

• BANK OF AMERICA HAS ALREADY DEVELOPED ERICA AS A VIRTUAL ASSISTANT

SPECIFICALLY FOR BANKING OPERATIONS.

• ERICA COMBINES THE LATEST TECHNOLOGY IN ARTIFICIAL INTELLIGENCE,

PREDICTIVE ANALYTICS AND NATURAL LANGUAGE TO BE A VIRTUAL FINANCIAL
ASSISTANT TO CLIENTS.

• CUSTOMERS CAN INTERACT WITH ERICA IN ANY WAY THEY CHOOSE, INCLUDING
VOICE COMMANDS, TEXTING, OR TAPPING OPTIONS ON THEIR PHONE'S SCREEN.
 INSTANT PAYMENTS

• CASE OF M-PESA’S FROM KENYA

 BLOCKCHAIN TECHNOLOGY IN BANKING

• BLOCKCHAIN TECHNOLOGY IS AN OPEN, DISTRIBUTED LEDGER THAT RECORDS

TRANSACTIONS BETWEEN TWO PARTIES EFFICIENTLY AND PERMANENTLY.
• A BLOCKCHAIN CONSISTS OF INDIVIDUAL BLOCKS OF DATA THAT INVOLVE A SERIES
OF RELATED TRANSACTIONS, LINKED TOGETHER IN A SPECIFIC ORDER.
• ALL OF THE INVOLVED PARTIES CAN SHARE A DIGITAL LEDGER ACROSS A COMPUTER
NETWORK WITHOUT NEEDING A CENTRALIZED AUTHORITY OR INTERMEDIARIES.
THAT’S WHY PROCESSING TRANSACTIONS THROUGH BLOCKCHAIN IS FASTER. 
• BANKING INSTITUTIONS WERE CREATED TO CONNECT GROUPS OF PEOPLE TOGETHER
AND ALLOW ALL KINDS OF TRADE AND COMMERCE BETWEEN THEM.
• A BLOCKCHAIN IS A TOOL THAT CAN ACCOMPLISH THE SAME BUT ON A GLOBAL
SCALE. MOREOVER, IT’S SECURE AND TRANSPARENT. 
• HTTPS://WWW.YOUTUBE.COM/WATCH?V=ZPXZK7HFQC8
APPLICATION OF BLOCKCHAIN IN BANKING

• FASTER PAYMENT
• CLEARANCE AND SETTLEMENT
• BUYING AND SELLING ASSETS
• FUNDRAISING
• CREDIT AND LOANS
• TRADE FINANCE
• DIGITAL IDENTITY VERIFICATION
• ACCOUNTING AND AUDITING
• HEDGE FUNDS
• PEER TO PEER TRANSFER
 MARKETING INNOVATIONS

• TARGET DIFFERENT DEMOGRAPHICS

• PUSH DIGITAL APPS AND SERVICES
• RETURN VALUE TO CUSTOMERS
• FOCUS ON CUSTOMER OUTREACH
• GET SMART WITH LOYALTY PROGRAMS
• PUT CUSTOMER EXPERIENCE FIRST
• DIGITAL MARKETING
• SEARCH ENGINE OPTIMIZATION
• SOCIAL MEDIA MARKETING
• APP STORE OPTIMIZATION
• E-MAIL MARKETING
• WHATSAPP BANKING
• SOCIAL MEDIA MARKETING
• USING MARKETING CAMPAIGNS

• DRAWING CUSTOMER INSIGHTS

• LEAD GENERATION AND SALES

• BRAND DEVELOPMENT AND REPUTATION MANAGEMENT (BRAND AWARENESS)

• PERFORMANCE MANAGEMENT (CUSTOMER FEEDBACK)

• FACEBOOK
• TWITTER
• LINKEDIN ETC.
• INTEGRATE PERSONALIZATION WITH BIG DATA
• BIG DATA ANALYTICS CAN HELP THE BANKS TO UNDERSTAND THE
CUSTOMER BEHAVIOR BASED ON THE INPUTS RECEIVED FROM VARIOUS
INSIGHTS WHICH INCLUDE INVESTMENT PATTERNS, SHOPPING TRENDS,
MOTIVATION TO INVEST, AND PERSONAL OR FINANCIAL BACKGROUND. 

• WITH DATA ANALYTICS IN FINANCIAL SERVICES, THERE IS HUGE

POTENTIAL FOR CUSTOMIZED MARKETING CAMPAIGNS BASED ON
CUSTOMER SHOPPING HABITS.

• HTTPS://WWW.YOUTUBE.COM/WATCH?V=1RYKGJ-QK4I&T=150S
• AUGMENTED REALITY MARKETING
• VIRTUAL REALITY MARKETING
• VIDEO MARKETING
 ARTIFICIAL INTELLIGENCE AND MARKETING
INNOVATIONS

• CUSTOMER RETENTION. AI IS ABLE TO HELP WITH CUSTOMER RETENTION WITH THE

HELP OF PERSONALIZED OFFERS, DISCOUNTS, AND SPECIAL SERVICES. WHAT’S MORE, IT IS
ALSO CAPABLE OF CHURN PREDICTIONS
• REAL-TIME CUSTOMER INTERACTIONS. AI-POWERED CHATBOTS ARE ALREADY SMART
ENOUGH TO SUPPORT CUSTOMERS AT EACH OF THE SALES FUNNEL’S STAGES.
• VOICE SEARCH. VOICE SEARCH IS ON THE RISE, AND THIS TECHNOLOGY IS FULLY AI-
POWERED. THERE ARE SPEECH RECOGNITION FUNCTIONS THAT HELP CUSTOMERS TO
SEARCH FOR THE COMPANIES FASTER.
• BUYER PROFILING. AI IS ALSO USEFUL FOR CUSTOMER SEGMENTATION, DATA ANALYSIS,
AND PROFILING. THESE ACTIONS ARE NEEDED FOR PERSONALIZED MARKETING
STRATEGIES DEVELOPMENT.