The un-banked & the affluent

Written by Manju Srivatsa | Updated: Jan 31 2010, 05:45am hrs
The retail banking landscape is abuzz with action. With smart products, marketers, sellers and smarter discerning buyers in the fray, the challenge for every player is to acquire the right customer, identify the specific aspirations and to build and retain the relationship with the customer.

At Axis Bank, customer-centricity is the touchstone against which all initiatives are measured. It is this singular focus on customer segmentation that has paid rich dividends, both for the customer as well as for the bank.

Today, customers see limited value in just products being pushed at them. The real differentiator lies in being able to identify what exactly the customer wants.

While this banking truth holds across customer segments, it is best exemplified in the mass affluent customer segment.

The explosive growth of the upper middle class in metros and mini-metros has led to the development of a masstige customer who is knowledgeable and consequently more demanding. This is a customer who has high aspirations but a down-to-earth value consciousness and, therefore, wants to simulate the experience even while being on the journey to get there.

It is here that banks can become a natural partner and have to move beyond offering uni-dimensional products such as savings accounts or auto loans. Instead, they have to work at offering a life stage solution to the customer. The customer must feel the difference in the product, package and, more importantly, in the treatment.

This is where the real challenge begins.

With the globalisation of banking services and standards, the only real bankable differentiator is the service. A masstige customer may enter into a relationship with the bank based on the strength of a well-designed product, but will continue the association only on the strength of the relationship and the universe of the services offered with the promises of efficiency, accessibility, safety and uncompromised growth prospect.

The relationship is thus not built at once but takes nurturing over a time frame and this is precisely the challenge and also the reward.

If the mass affluent segment is a challenge in sustaining relationships, the inclusive segment poses the opposite challengethat of initiating a banking relationship with the under-banked.

Today, the banking industry has moved beyond asking why The industry is well aware of its social responsibilities. There can be no argument to the fact that a mere 40% of Indians have access to a bank, that there is a market potential twice the size of the population of the United States, waiting to be tapped.

The question before us is therefore how and the pressure is on how soon The challenge is to develop a sustainable model of service delivery for products and services that can make a tangible difference to the segment while extending the reach and at the same time maintaining cost efficiency.

The disadvantaged customer has a similar need as compared to that of his urban and more privileged counterpart. For example, these customers need the banking account for their savings. But they also need health insurance. The only difference being that it may be more effective for the bank to deliver a micro-health insurance scheme customised to serve their specific needs, rather than the conventional product.

Clearly, the answer lies in being able to blend innovations in business processes, products and technology with the focus on reaching out to a critical mass of customers at a sustainable cost and without diluting core banking principles.

There are two notable enablers that are expected to transform inclusive banking.

The first is the rapid proliferation of communication technology600 million Indians are expected to own mobile phones by 2011with a 40% growth in connections coming from rural India itself. The lower cost of service delivery through mobile phones makes it a feasible model to provide banking facility and which can be implemented and replicated on a much wider scale.

The second and more interesting enabler from the banking perspective is the UID project. Once the project is implemented as envisaged, the bankable, KYC compliant population, is expected to increase exponentially.

In a way, the story of the retail banking industry mirrors the story of India in the 21st centurywith growth at both ends of the spectrum. The tremendous diversity coupled with dynamism and growth has provided the banking sector with immense opportunities and challenges that can transform the fortunes of many a bank and the country.

The future is indeed very exciting.

The writer is President, Retail Banking, Axis Bank