Marketing Financial Products
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Chapter 5 : Retail Banking
Retail Banking in India
The Paradigm Shift
Differences between Retail and Corporate Banking
Factors Contributing to the Growth in Retail Banking
Competition to Retail Banks
Types of Retail Banking Products
Liability Products
Asset Products
Credit/Debit Cards
Investment Products
New Product Development
Generic New Products
Banking to HNIs and NRIs
Pricing
Price Elasticity of Demand
Pricing of Liability Products
Pricing of Asset Products
Covert and Overt Pricing
Promotion
Advertising
Sales Promotion
Branding
Personal Selling
Telemarketing
Direct Mail and Direct-response Advertising
Public Relations
Distribution
Branch Banking
ATM
The Internet
Phone and Mobile Banking
EFTPOS
Direct Selling Agents (DSA)
Call Centers
Distribution Network of Alliance Partners
Cross-selling
Need for Cross-selling
Issues in Cross-selling
Chapter Summary
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Liberalization, economic growth, changing demographics, and
technological advancements have fueled the growth of retail banking in India.
The product range in retail banking includes four broad categories: liability
products, asset products, credit cards/debit cards, and investment products.
Liability products include savings accounts, no-frills accounts, current
accounts, fixed deposit/term deposits, and recurring deposits. Asset products
include all kinds of retail loans, such as housing loans, personal loans,
education loans, gold loans, loans to senior citizens, property and mortgage
loans, vehicle loans, and agricultural loans. The investment products include
investments in mutual funds, insurance policies, and pension plans. These are
discussed in subsequent chapters.
As the bargaining power of a retail customer is less than that of a corporate
customer, banks tend to charge the same price/interest rate for all retail
customers, with the exception of high-value segments (HNIs and NRIs). Banks set
the price for liability products, without the interference of the RBI. |
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Asset products are priced based on the prime lending rates set by banks for
each asset category. Overt pricing and covert pricing are the two different
approaches to pricing.
The promotion of retail banking products is done through various avenues of
promotion, such as advertising, sales promotion, personal selling, brand
building, public relations, telemarketing, direct sales, and direct-response
advertising.
The common distribution channels in retail banking are branches, ATMs, the
Internet, phone banking, and mobile banking, EFTPOS, direct selling agents (DSAs),
call centers, and distribution network of alliance partners. There are some
overlaps between the promotional avenues and distribution channels. For
example, telemarketing and personal selling may be outsourced to DSAs.
Cross-selling helps the banks to increase their sales by selling different
products to existing clients. It helps improve customer retention, reduce
the cost of customer acquisition, and enhance customer lifetime
profitability. Cross-selling also helps the customers in terms of reduced
prices, faster and easier processing, and customized products. However,
excessive cross-selling would be viewed by the customer as harassment.
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Short Case Studies / Caselets