BLOGS & OPINION | Contributed Content, India
Shekar Ganesh

Competing in 2013 and beyond, are banks READY?


Management guru late C.K. Prahalad defined Competing for future as ‘getting to the customer first for less.’ What are banks doing to get closer to their customers, especially the customers of tomorrow?

Banking industry plagued by continuing economic uncertainties, lack of consumer interest and now erosion of faith has to be content with lower growth for a considerable period in the future.

Adding to this woe, the arrival of new generation customers and with that the big shift in consumer behavior, and the extensive use of social media sites for sharing consumer preferences-that is deciding the fate of all products and services including financial service-are other factors shaping the future of the industry.

It cannot be business as usual therefore for banks attempting to prosper under these circumstances or record productivity gains through quick fixes.

Reducing fixed costs to address the chronic lag in cost-to-income ratio is not a long-term solution either.

How can banks return to the hay days of bulge bracket income?

Banks need to:

Think beyond conventional strategies; redefine competition and target market; innovate aggressively and add value to customers by eliminating waste
Actively engage customers, offer a novel experience by looking beyond the industry for value creation
Secure a firm place in the social media space to stay connected

The laid back attitude of banks is perhaps the main reason for customers defecting in favor of consumer product companies that are working hard to make their offerings simple and constantly endeavoring to improve product quality and introduce exciting new products.

Using superior data mining capabilities and sophisticated tools like conjoint analysis to understand customer preferences, they co create products that meet the hidden needs of their customers and inducing them to spend more.

What are banks doing to regain market share? What are they doing to counter the impact caused by products from companies like Apple, P&G, Louis Vuitton or Sam Sung that consume a large portion of the disposable funds and keep the customers away from banks?

That the ‘Y’ generation customers by training will spend more places severe strain on banks’ main source of funding.

Banks that generate bulk of their revenues from retail customers will need to develop new strategies for capturing a share of the consumer spending instead of merely focusing on savings, as in all likelihood tomorrow’s customers will having nothing left after spending on fixed expenses like rent, rates, taxes and mortgage as well on compelling consumer products.

This means banks will no longer be competing within the banking industry but everyone else in the consumer world and that is big call because these consumers are not excited about the seemingly ageless products from banks.

One reason among others could be that consumers don’t feel connected with banks. Banks in fact failed to assess the side effects of some initiatives undertaken to contain costs, resulting in customer alienation.

Consumer product companies on the other hand intensified actions to get intimately connected with their customers and also moved into the banking space by offering financial engineering structures for increasing product sales. (Offer of free cell phones by Service Provider against a three-year commitment).

Surely tomorrow’s customers will be hungry for new products, but persuading them to buy banking products will not be easy in the face of terrific consumer products. And because they conduct research and evaluate options they will negotiate hard or even postpone buying if they don’t find value.

Given the above scenario, the welter of regulations that grip the banking industry should not be the reason for lagging behind consumer industry in developing leading-edge products. Authorities don’t spare them either, but they don’t stop innovating.

Banks should replace products that have lost sheen with new ones that can accomplish dual objectives of saving while spending. Products have to be simple and not with complicated structures that confuse the customers, undermining the confidence needed for trusting their money with the banks.

The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.

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Shekar Ganesh

Shekar Ganesh

Shekar Ganesh, formerly a senior banker from Asia, is an independent consultant providing training to bankers in credit and relationship management. He is also a consultant for leadership and management.

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