Speaking in Mumbai on Monday, KPMG Consulting European head (financial sector strategy) Philip Middleton said, "Contrary to received wisdom which holds that 20 per cent of customers account for 80 per cent of profits, our research demonstrates that the top 20 per cent of customers account for between 130 per cent and 170 per cent of profits. Put in another way, the bulk of most retail banks customers are destroying shareholder value".

According to him, protecting and nurturing profitable customers offer a key to profit improvements potentially of the order of 20 per cent. "However, one major problem for many of India's bankers is that they currently have no means of identifying the good customersfrom the bad", Middleton said.

He said, "Customer-centric management" is more than just declaring that the bank intends to be nice to customers this week and instructing branch staff to smile. "The real winners will be obssesive about understanding their customers, their behaviour, preferences, profitablity and potential and act accordingly. Though scruplous attention to building a match between the interests of the customer and those of the institution, they will build deep relationships which be imprevious to competitor blandishments", he said.

He said the world is in the threshold of a financial-services management and it will revolve around knowledge management and customers' hearts and minds. "A lot more changes will take place in banking and the winners will not be the masters of banking but people who understand customers", Middleton said. Unless banks in India start restructuring, they will be losing ground to their foreign counterparts, he said.

The face of banking is changing due to the adventof technology and major deregulation in the banking industry with the Government moving away from this business and handing it over to private ownership and unprecedented capital inflows and transfer of huge funds from one part of the world to another.

Charting out of the map for better customer-centric management, Middleton said banks can increase their profits from retail through customer retention, customer acquisation, cross selling of retail products and customer profitablity management.

"The winners in the financial sector in future will be the ones which exploit the latest technology, actively manage the behaviour of their customers, use sophisticated model to predict customer needs and, last but not the least, surprise and delight customers with superior services", Middleton said.

"Working with clients we are perpetually surprised by how little many know about their cleints, and they are perpetually surprised by how quickly the right moves start to transalate into improved profits," said KPMGIndia managing director (consulting) J Rajagopal.