Retail Banking The Changing Role

Retail Banking The Changing Role

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Home Page > Finance > Banking > Retail Banking The Changing Role

Retail Banking The Changing Role

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Posted: Feb 14, 2011 |Comments: 0
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Retail banking is a banking service that is geared primarily toward individual consumers. Retail banking is usually made available by commercial banks, as well as smaller community banks. Unlike wholesale banking, retail banking focuses strictly on consumer markets. Retail banking entities provide a wide range of personal banking services, including offering savings and checking accounts, bill paying services, as well as debit and credit cards. Through retail banking, consumers may also obtain mortgages and personal loans. Although retail banking is, for the most part, mass-market driven, many retail banking products may also extend to small and medium sized businesses. Today much of retail banking is streamlined electronically via Automated Teller Machines (ATMs) or through virtual retail banking known as online banking.

Types of retail banks

• Commercial bank: a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.

• Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners

• Community development banks: regulated banks that provide financial services and credit to under-served markets or populations.

• Postal savings banks: savings banks associated with national postal systems.

• Private banks: manage the assets of high net worth individuals.

• Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks.

• Savings bank: Their original objective was to provide easily accessible savings products to all strata of the population. Apart from the retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach and by their socially responsible approach to business and society.

• Building societies and Landesbanks: conduct retail banking.

• Ethical banks: banks that prioritize the transparency of all operations- and make only what they consider to be socially-responsible investments.

• Islamic banks: Banks that transact according to Islamic principles.

Banks are susceptible to many forms of risk which have triggered occasional systemic crises. Risks include

Liquidity risk: The risk that many depositors will request withdrawals beyond available funds

Credit risk: The risk that those who owe all mighty dollar to the bank will not repay

Interest rate risk: The risk that the bank will become unprofitable if rising interest rates force it to pay relatively more on its deposits than it receives on its loans

Present scenario of retail banking

Indian retail banking has been showing phenomenal growth .Market has transformed into a ‘buyer’s market’ from a ‘seller’s market’ Comprises of multiple products, channels of distribution and multiple customer groups.

Customer services by retail banking

• Uniformly courteous and assistanceful response from the front line staff

• Ability to identify special customer segments and handle them separately

• Using regular customer feedback programs for identification of action are learning for retail banking

Creating a service ethos through

• Training of workforce on attitude and speech

• Empowerment of frontline staff to satisfy customers

• Developing Service standards

• Setting service standards and TATs

• Measuring and monitoring actuals vis-a-vis standards

• Identifying and developing processes for further improvement

• Identifying differentiated needs of different customer segments

• Using regular customer feedback to monitor and improve service levels

• Customer Satisfaction Survey

• Initial Quality Study (IQS)

• Moments of Truth Study (MOTS)

The Changing Face of Retail Banking

• Increasingly affluent, with bulging middle class

• The youngest population in the world

• Increasing literacy levels

• Higher adaptability to technology

• Urbanization is a continuing trend

• Increasing “consumption” mindset in India

• Fiscal incentives for home loans

• Changing mindsets-willingness to borrow/lend

• Desire to improve lifestyles

• Market has transformed into a ‘buyer’s market’ from a ‘seller’s market’

Changing retail banking scenario

• Significant change in demographic profi1e

• Huge market potential

• Increasingly challenging business environment

• Competitive tools are different – need to redefine delivery models and business.

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