CAIIB RETAIL BANKING STRATEGIES | MARKETING OR SELLING
CAIIB RETAIL BANKING STRATEGIES:- In this article, we are going to read about retail strategies such as tie-ups with institutions for Personal loans, Credit cards, Educational-loans, OEMs/Authorized Dealers for Auto or Vehicle loans, & with Builders or Developers for Home loans etc.
RETAIL BANKING: Retail banking is that branch of banking that offers financial services to individuals & small businesses. It is involved with numerous low-value transactions & sometimes, is also known as ‘consumer or personal banking’.
The services offered by Retail Banking are the opening of savings or current accounts, issuing credit cards, debit cards, offering housing loans, ATM services, internet banking, mobile banking, automobile loans, education loans, investment, mortgages, insurance, and stockbroking.
RETAIL BANKING STRATEGIES
There are many strategies used in retail banking such as an end to end outsourcing, predominant outsourcing, partial outsourcing and in house sourcing. While the regulatory aspects determine whether the banking services would be provided through outsourcing or not.
It’s not like banks have to outsource their operations but it is seen that some of the foreign banks have outsourced their services both front end and back end nature.
On a broad front, the Boston group has defined some of the bank models of banking on the basis of Technology and customer interface capabilities such as:
- Horizontally Organised Model
- Vertically Organised Model
- Predominantly Vertically Organised Model
- Predominantly Horizontally Organised Model
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Horizontally organised model: In a horizontally organised model, a modular structure is used for different processes and for a different product that offers end-2-end Solutions product-wise.
Vertically organised model: In a vertically organised model, Functionality across different products on the basis of customer database orientation and centralised customer database is available among the different banking products.
Predominantly horizontally organised model: This model is a product-oriented model that renders common customer information for most of the banking products.
Predominantly vertically organized model: Under this model, common information is available for most of the products.
In general, PSB: Public Sector Banks usually have a horizontally organised model while the new private sector banks in India, have a vertically organised model installed.
Under the segmentation game plan of banks, bank branches are usually classified as resource centres, profit centres, priority centres and general centres so as to have a clear focus on the business.
Segmentation game plan of banks provides an effective business model for public sector banks having large networks and is also helpful to execute focused strategies and this model is already getting installed in some of the public sector banks.
Now, we will see the different products that retail banking offers to its customers:
These products fall under three spaces that are savings account current account and term deposit accounts. While differentiation in the liability products is done by ending different value propositions in the liability products.
This product differentiation is achieved by converting a plain Vanilla account into a value enriched account.
Retail asset financing
It forms a major component in the retail banking model of banks.
Although, not every public sector bank offer a credit card because it is a big volume game and need a lot of process efficiency.
Important Topic:- IIBF CAIIB RETAIL BANKING STUDY MATERIAL 2022
PROCESS MODELS FOR RETAIL BANKING PRODUCTS
To process different retail asset products offered by banks is usually done with different process models. Some common forms of the process models for the same are written down below:
Centralised Retail Assets Processing Centres:
Under these centres, retail loans are secured at the branches with the help of a marketing team. While these retail loans are either financed at the centre or their processing is done at the centre and financing at the branches.
In centralised processing, the opening of a bank account, issuing of passbook, cheque book, ATM card, debit card, generation of PIN in, mailing the cards to the customers etc falls under the process of cannibalisation.
Process time create some major difference in the efficiency of retail banking operations as it is both, business-sensitive and customer sensitive.
BASIC STRUCTURE: CROSS-SELLING STRATEGY
In a basic structure, standalone pricing for different products and services is done. While price structuring Quantum and volume are the two most important determinants under this basic structure. Price bundling is also involved in the structuring process in which a holistic pricing range is made available across a specific bundle of banks’ products and services so as to make the pricing proposition attractive than the standalone pricing for the single or individual products in the bundle.
It is a kind of cross-selling strategy implemented to attract the customers so that they would avail a greater number of products and the profitability from the customers can be increased or enhanced.
While there are also Technology models that banks adopt such as:
- In House Models,
- Outsourced Models,
- Partially In House and
- Partially Outsourced Models.
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In house model: It’s same as what is done in liquidity management, funds collections, and in the processing of payments to various subsidiaries of global corporations.
If we take an example, suppose, a bank has four regional branches which father have 10 departments in each of the regional branch. And every branch has to prepare external accounts to maintain treasury. It adds extra expense for the business to manage all these external bank accounts and to get updates from every link in the supply chain.
But still, here are some of the reasons why in house banking should be implemented:
- Enhance Operational Flexibility
- Intercompany Transactions
- Bank Independence and Lower Costs
- Fraud Protection
Outsourced Model: In the process of outsourcing, organisation or bank delegates some of its in-house operations or processes to third parties. In the Outsourcing contract, the ownership and the control of the processes that are given to the third party to implement generally remain with the parent company i.e bank ok and the third parties are only accountable to carry out any port on the task it has been delegated with.
In this emerging Trend of outsourcing, while it still is a new concept among the Financial Institutions, a new concept of full-fledged outsourcing has already emerged. This trend is gaining popularity in Europe.
In this form of outsourcing, all the tasks such as product development, compliances, operations, establishing a regulatory infrastructure as well as IT are delegated to the third party. The only thing that remains with the organisation is the ownership and it focuses its time on the preparation of customer interface and its balance sheet.