Indian banks defining the future of banking
IBMs strategic research unit, the Institute for Business
Value, recently released a study called Banking 2015: Defining the Future of
Banking. Worldwide, total financial services revenue is predicted to experience
compound annual growth of 7.1 percent between 2000 and 2015, from $2 trillion
to $5.6 trillion. In the Asia-Pacific region, IBM predicts a growth rate of
about 7.6 percent.
The study forecasts trends in banking for a unique insight
into the competitive forces that bankers will face in the next 10 years. It
highlights the emerging business and technology innovations and societal trends
that will propel and shape the industrys transformation.
According to the survey, the five key trends that will determine
market success in 2015 are customers taking control, niche competitors, a new
workforce, regulated transparency and sharp focus on technology.
Sanjay Sharma, Corporate Head, Technology, IDBI Bank believes
that business, whether banking or otherwise, has to be customer-centric.
Agrees Sharad Bishnoi, Assistant Vice-president, Head, Business
Process Re-engineering Group, HDFC Bank, Banking services require a high
level of customer engagement and understanding of the requirements for a quality
value proposition. These factors can be sustained long-term by adopting a customer-centric
Similarly, transparency and accountability from regulation
and compliance are also growing. Sharma points out that banks dealing with the
US customers need to comply with international regulations such as Sarbanes-Oxley,
and the Indian ones from RBI and Clause 49.
The survey goes on to predict that market changes will pose
growing challenges for conventional banks. Sunny Banerjea, Global Banking Leader
for the IBM Institute for Business Value says, By 2015, we will live in
an intensely customer-centric market dominated by global mega banks and densely
populated by specialist financial services providers. Technology will also drive
fundamental changes in workforce disposition, which will have substantial follow-on
effects for productivity, efficiency and profitability. These trends are already
evident but as they become entrenched, there will be profound changes in the
competitive drivers of global banking.
Sharma feels that over time banks will focus on specialising
in key segments. The survey suggests that banks must identify target business
areas. It will be essential to maximise operational efficiency and counter nimble
new market entrants by partnering with specialist providers.
Keeping with the future trends, the study identifies a number
of value-added options for products and market innovation. These are mortgages,
RFID, service packaging and customer integration.
Says Bishnoi, Service packaging and customer integration
have started already and I believe will only increase in future. Basic products
in banking being limited in number, added flavours and value additions are gradually
coming to the forefront. Two of the most critical aspects will be: packaging
more customised products to suit a customer need and customer integration leading
to better portfolio managementat a more granular level.
However, Sharma feels that it is the mortgage and RFID segments
which are more promising. Though mortgages have operational complexities
they are innovative products for customers. For instance, customers can avail
of different cash-back offers. Similarly, RFID also has great potential to leverage
business. Banks can utilise this technology to understand customers needs
and for issues such as customer authentication.
According to Swarup Choudhury, Director, FSS, IBM, each bank
must decide on a strategy that fits its customers needs. Banks will
need special strategies to cater to a far more discerning and controlling customer,
He predicts, Banking customers will demand more advocacy,
personal security and control in their banking relationships. Banks will source
products and services from many specialised and best-in-class service providers,
including independents and other banks providing white-label products and services.
They will partner actively with providers to improve their capabilities without
locking up their own capital and their ability to address changing demand cycles.