The consumer is king

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Redefining customer convenience is the buzzword today. Customer acquisition and customer retention are the double-pronged forte of any business and banks are no exception. Liberalisation and globalisation have forced banks to shore up their service standards and offer newer products. Though banks continue to deliver basic banking services like savings/ current account, deposits, loans etc., the service standards and transparency levels have gone up. Besides the traditional products, a whole gamut of new age feature-rich products is being served by banks to lure customers to their fold.

Banks have been moving towards offering all kinds of financial products/ solutions under a single roof and that has led to a stage where most of the banks have already established themselves as financial supermarkets. A financial supermarket (commonly referred to as universal banking in European countries) has been defined from two perspectives—from the consumer’s angle as well as from the marketer’s point of view. For the consumer, a financial supermarket can offer convenience, with choice of many products, be it insurance, stocks, loan on stocks, mutual funds, credit/debit cards, etc. all at one place and efficiency, since his/her money need not continually shift from one institution to another. For the institution, an all-encompassing relationship with the consumer is more advantageous on many counts than handling just one aspect of a customer’s financial needs. And remember, all these products are offered cost effectively too.

One of the major drivers of financial supermarkets is the recent boom in the retail sector in India. According to a report prepared by McKinsey & Co and the Confederation of Indian Industry (CII), India’s retailing industry has the potential to generate $300 billion per year by 2010. Population growth combined with an increase in disposable incomes is providing the impetus to this boom. This trend may lead logically to promoting the concept of financial supermarket chains. Consolidated accounting and supervisory techniques would have to evolve and appropriate firewalls built to address the risks underlying such large organisations and banking conglomerates.

Another important aspect that can be noticed is the way consumerism is being encouraged with the same goal of grabbing a share of the consumer’s wallet. The proof of this can be seen from the fact that the world over, airports make more revenue from other channels like running duty-free outlets. And what is really aiding the evolution of financial supermarkets? I think technology is taking us a step closer to a situation where all the complex banking, investment and insurance products can be sold under the same roof. The level of customer data available with various institutions is on the rise. Data mining and analytical tools are being used to predict customer behaviour and to offer him a suitable product at the time when he requires it most.

The present state of our economy and the society at large is also supportive for the creation of large financial powerhouses. This may lead to a stage of consolidation, which will lead towards formation of large and dominant players in the industry who will offer various options to the customer, and the customer will be spoilt for choice.

Can we see the emergence of supermarkets that will vend everything from clothes to vegetables, to travel plans to banking/savings options to insurance products? Probably yes, but not in the immediate future.