Coffee with your banker anyone?

Retail banks have shifted from trying to win over more corporate entities to borrow from them, to the aam aadmi - ie. the public, who saves and spends and generally keeps the global economy in motion. In order to make banking convenient to millions of Indians, there is internet banking, banking via your mobile phone or doorstep banking. Banks have suddenly become accessible and convenient like never before. So where is retail banking headed five years from now?

Are banks thinking of going to the street as it were, are they going to the grocer, the butcher, the fruit seller or are they just sticking with people like you and me. Vice President of Citibank India, Sharad Mohan told CNBC-TV18, "The reason why we are able to extend our customer base to the outside reaches of the cities or go to newer cities, is because we have distributed technology and infrastructure. So in a conventional scenario, if we had a just a few branches and if we sourced people from around those bank branches, then we would be concentrated in only those areas."

"The very fact that phone banking, internet, mobile are verbal, we are able to reach out to a larger section of the population, who are not closer to the branches per se."

But the perception still persists that the top end banks are not really trying to get the layman. Vice President, Head of Direct Banking Channels, Rahul Bhagat from HDFC Bank disagrees and says, "We have about 600 plus branches and 55% of our branches are outside the top 9 metros. As we got out and extended our reach into the non-metros, it's not that we are going and opening branches that are any different from the ones that you have in South Mumbai or that the service support available to them is any different from a tier 1 city. So clearly there is an opportunity there and a need for banks like ours."

On the other hand, PSU banks will be able to attest to the fact that reaching out to a rural audience is a low margins game. Director of financial services, IBM, Swaroop Choudhary explains, "There is a change taking place. A lot of PSU banks are moving from being a wholesale banker to a retail banker and branding is becoming important -whether it's a icon or the right colour combination. So there is the consciousness. In terms of reach, the private sector and foreign banks have the advantage of technology and they are able to use technology to capture the urban market."

"The PSU banks need to get their act right - in terms of integrating technology and having a common customer view. So, if they do extend out, then they have established franchises which are stronger because of customer relationships. So, if they don't do that early enough, the danger is that private sector banks/foreign banks will go in and take away your customer."

Country head of Yes Bank, Ravishankar agrees, "Yeah, there are opportunities on both sides of the city, whether you are going into cities or going into metros. The point is that the rural areas have been taken by PSU banks. They didn't take in technology but they were there first. But at the end of the day, you have to have a strategy which is clearly segmented for the urban and rural population. So, if we are doing the rural side, then we'll have a customised rural strategy - a strategy which understands the rural requirement. The service strategy is going to define who comes and banks with you."

Now are banks able to see themselves as experts imparting mere advice or are they seeing themselves as services providers? Mohan says that Citibank always has a good record of service but that customer expectations have risen. Earlier, when snail mails were cool, one could write in to a bank and wait for days for a reply but now, in the e-mail era, replies have to be in inboxes in an hour or less.

He elaborates, "Our call centres have service standards in terms of how many rings you have to pick the call in, what's the time you have to talk to the customer, whether you can put the customer on hold or not. If an e-mail reaches the bank, it has to answered in two hours, if a letter reaches the bank, it has to be answered within 24 hours."

Bhagat adds, "There is a service standard and turnaround time for everything. It's a wonderful position to be a customer in today's world because it's really a customer dominated world. There is an expectation and you've got to live up to that expectation."

Since technology has changed the face of so many industries in such key ways, will it help in keeping the databases clean, as in, will the banks be able to weed out a troublesome customer who doesn't have the proper paperwork done or is falsely opening many accounts to park money in or to obtain loans?

Choudhary says, "A aggregation of the data and know your customer, KYC, norms as suggested by RBI could help. With technology, you can extract commonalities from structured and unstructured data. There are packages which are designed for anti-money laundering which will give that protection."

But he feels PSU banks need a culture change because now they can't take it for granted that people will continue to bank with them. But if they decide to really compete with private banks, then they have the privilege of not investing but still providing the service. All they would have to do is outsource service to call centres, with the expertise to do it.

All service industries need to figure out their customers comfort zone. if a call centre's automated process intimidates a customer, then give him/her a voice to talk to immediately. Similarly, having a not-so tech savvy person negotiate through what is a technological minefield, with multiple ID numbers to use, then he should be given one PIN number to check out his account details.

Another important thing is that retailers need to emulate retail stores, in the way that the stores are able to attract customers. So PSU banks may need to look at redesigning the branches, which is very much in-line with old world British and European banks, which had needed to transform, in keeping with the times. So branches are here to stay but the way they provide service will keep evolving.

Service may eventually include giving people advice about their portfolio, especially when they see cheques going out regularly from their customer's account towards a particular pension policy or insurance policy, which they know is not the right thing for the person. So, they could be just politely educated about better alternatives.

As Choudhary says that, at the Chase Manhattan Bank in midtown Manhattan, the bankers actually go to restaurants or a Starbucks with their customers and serve them coffee and over coffee, a great business relationship could develop. That's how retail banking in India is going to look like in the future - service with a smile. If it's over a cup of piping hot java, then all the better!

Written for www.moneycontrol.com