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INDEX
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Bank Marketing
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According to some economists the word ‘Bank’ has been derived from
the German word BANC which means a Joint Stock Firm while others
say that it has been derived from the Italian world ‘BANCO’ which
means a heap or mound.
There is still another group of people who believe that word bank has
been derived from the Greek work ‘BANQUE’ which means a bench.
In the olden days, Jews entered into money transactions sitting on
benches in a marked place. When a banker was not in a position to
meat his obligations, the on which he was carrying on the money
business was broken into pieces and the was taken as bankrupt. Thus
both the words Bank or bankrupt are said to have origin from the word
‘Banque’.
DEFINITION OF BANK
Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking
company as, “Banking Company means any company which
transacts business of banking in India”. According to Section 5B,
“banking means the accepting of deposit of money from the public for
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The chief concerns of most bank executives still focus on legal and
regulatory issues, according to most surveys. Community banks are
particularly concerned with eliminating barriers that give unfair
advantages to financial services competitors, such as credit unions.
However, another concern pertains to technology: keeping nonblank
competitors out of the payment system.
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When this gateway system was first proposed, access to the Internet
was very new and few banks had the resources and knowledge to set
up their own direct-access lines for customers. Customers have
shown a growing interest in online banking services, and banks have
responded by quickly putting in place proprietary sites on the World
Wide Web and offering PC banking.
When asked which technology holds the most potential for the future,
bank executives identified call centers first. As customers continue the
transition the transition into a high-tech world in which they want
information and answers more quickly and accurately than ever
before, call centers offer the ideal bridge. With 24-hour access to
either automated information or live operators, customers do
everything from check their accounts to apply for a loan. Bank
executives also identified PC banking as having the most promise for
the future, followed by Interest access and broad function kiosks.
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To deal with the competition from foreign banks, the Indian banks
should go in for diversification and extension of services as well as
expansion of products and business. Economic freedom and
innovative spirit have contributed greatly to the success of the market-
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MARKETING CONCEPTS
BANK MARKETING
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After enquiring with all the public and 14 private sector banks whether
they had undertaken any market research studies. The following
board areas of market research were considered for the study:
(a) New service development,
(b) New service product acceptance,
(c) Research and development of existing financial service,
(d) Bank images study,
(e) Measuring bank’s advertising effectiveness,
(f) Measurement of market potentials,
(g) Market research of competitive service products,
(h) Customer’s opinion study,
(i) Customer profile study, and
(j) Market share analysis.
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The various other factors which have led to the increasing importance
of marketing in the banking industry are categorized as follows:
Government Initiatives
The Indian economy embarked on the process of economic reform
and various policy measures initiated by the government resulted in
the increasing competition in the banking industry, thereby
highlighting the importance of effective marketing. The Narasimhan
Committee Report evidence of the Government’s desire to ‘re-
regulate’ the banking industry so as to encourage efficiency through
competition. The Government initiatives include:
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Foreign Banks
Foreign banks offer stiff competition to the Indian Banks and with their
superior services and technology offer them a competitive advantage.
Thus Indian Banks have to effectively apply marketing concepts to
attract customers.
Social Environment
Increasing Urbanization, Education and Awareness: The higher
literacy level, migration to urban areas and higher awareness due to
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the boom in the mass media have important implications for the retail
banker. He needs to be conscious of the fact the increasing proportion
of people are aware of financial service and are, therefore demanding
and expecting higher quality services.
Technology Development
Modernization of Technology has facilitated the introduction of new
banking services as to attract new customers. An example of this is
the ‘Automated Teller Machines’ or the facility of ‘Any Time Money’.
Also in foreign countries, banks are experimenting with money
transmission at Point of sale, e.g., petrol station linked with banking
network.
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Some of the women are housewives and therefore they have different
need and requirements whereas some of them are working ladies
having different needs and requirements.
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The formulation of marketing mix for the banking services is the prime
responsibility of the bank professional who based on their expertise
and excellence attempt to market the services and schemes
profitably.
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If the banks rely solely on their established services and schemes, the
multidimensional problems would crop up in the long run because
when the well established services/schemes would start saturating or
generating losses, the commercial viability of banks would of course,
be questioned. The banking organizations relying substantially on a
profitable scheme and ding nothing for new scheme likely to get a
profitable market in the future is to face is to face a crisis like situation.
It is in this context, that we find designing of a sound product portfolio
essential to an organsition. We can’t deny that the product portfolio of
the foreign banks is found sound since they keep their eyes moving.
The innovation, diffusion, adoption and elimination processes are
taken due care. The public sector commercial banks need to innovate
their service and this makes a strong advocacy in favour of analyzing
the product portfolio.
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The fourth stage draws our attention on analyzing the cost on the
basis of a cost-benefit analysis and the fifth stage before launching is
test marketing which is found instrumental in minimizing the risk
element. And finally, we find commercial launching. The Reserve
Bank of India is also required to make the regulations liberal so that
the pubic sector commercial banks get an opportunity to make their
services or schemes internationally competitive. The unfair practices,
illegitimate steps should be checked but fair practice should
essentially be promoted to make the business environment
conductive.
PROMOTION MIX
In the formulation of marketing mix the bank professionals are also
supposed to blend the promotion mix in which different components of
promotion such as advertising, publicity, sales promotion, word-of-
mouth promotion, personal selling and telemarketing are given due
weightage. The different components of promotion help bank
professionals in promotion the banking business.
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managers should stress on the main features of the services and the
expected benefits of these services.
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The RBI has to be more liberal so that the public sector commercial
banks make decisions in the face of changing business conditions.
There is no doubt in it that the commercial banks bear the
responsibility of energizing the social marketing, they are also
supposed to bear the social costs. It is also right that the foreign
banks have been found making the business environment more
competitive. These emerging trends necessitate a close look on the
pricing problem. The policy makers find it difficult to bring a change
since the regulations of the RBI make things more critical. The
expenses are not regulated by the RBI and the banking organizations
are forced to increase the budgetary provisions. The sources of
revenue are regulated which complicates the task of bank
professionals. This makes it essential that the Reserve Bank of India,
the Government of India and the banking organizations thing over this
complicated issue with a new vision.
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THE PEOPLE
Sophisticated technologies, no doubt, inject life and strength to our
efficiency but the instrumentality of sophisticated technologies start
turning sour if the human resources are not managed in a right
fashion. Generation of efficiency is substantially influenced by the
quality of human resources. It is against this background that a
majority of the management experts make a strong advocacy in
favour of developing quality people and late, the people management
has been include dint he marketing mix of organizations is general
and the service generating organizations in particular.
Not only the public sector commercial banks but almost all the public
sector organization and albeit other government departments, of late,
have been facing the problem of quality people resulting into
inefficiency, deceleration in the rate of overall productivity and
profitability or so. The front-line staff are rough and indecent, the
branch mangers are helpless and even the bankers have been found
involved in the unfair practices. The public sector commercial banks
need to assign on overriding priority to the development of quality
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The foreign banks and the private sector commercial banks reward for
efficiency and at the same time also demotivate the inefficient
bankers. This helps them in improving the efficiency of even the
inefficient people. The development of human resources makes the
ways for the formation of human capital. Incentives, of course, inject
efficiency and the organizations offering more incentives succeed in
motivating the people.
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All the above systems should be “client-based systems” and not “line-
of-business systems” since these would provide better marketing and
service to clients, facilitate cross-selling and customerization of
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schemes and hence, a better packaging for the product. This would
help Indian banks “thing customer”.
The spread of the bank in Indian rural and semi urban areas are
highly different from state to state and region to region. Many states
have fewer networks of bank branches in the rural areas. Under such
scenario different marketing approach for different areas is required. If
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the bank follows the same marketing strategy for all areas the
success would be difficult.
Marketing approach for urban area: The urban areas of India are
developed taking into account all parameters of development. The
level of income of the people, the literacy rate and level of education
as well as awareness of the people about rights of the customer are
higher than that of the rural and even semi urban areas. Thus here for
effective bank marketing different approach is necessary than that of
rural areas.
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to customers. Moreover the most important benefit for the bank is that
it is useful to increase the fee based income of the bank. Financial
sector passing from lower interest rate regime at present and added
to this the process of disintermediation is affecting the main and the
traditional source of income for the banks i.e. interest income. All
banks are striving hard to increase their fee based income to improve
their bottom line. Universal banking can help the banks here
positively.
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Banks need t develop some scheme which would attract them to bank
with. For loans and advances products which are suitable to tarmers,
small traders, small scale agro based rural industries are already in
existence. Banks need to see the how value addition can be mad to
these existing scheme. Banks also needs to tie up with Non
Government Organisations and various Self Help Group for different
types of loans, micro financing etc. This will help the bank for building
good image and reputation in the rural areas over and above the
business. Another potential area which can be explored by the banks
in the rural area is retail banking. With the steady increase in the
income of the rural people there is ample scope for retail loan
products like housing loans and loan for consumer durables.
Conclusion:
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TECHNOLOGY IN BANKING
Technology is proving to be a vital tool in enhancing banking activities
around the globe. The advent of ATMs, and Internet Banking are key
pointers to this. The role of an information system can in no way be
underestimated. The expanding role of information systems have
aided banks achieving Anytime, Anywhere and Anyhow banking. The
improvement in telecommunication infrastructure is redefining the was
banking is being conducted.
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While today each and every bank touts ‘The customer is King’ mantra,
it was a quite a different story not so long ago. Customers patronizing
PSU banks were greeted with the typical ‘babu’ culture, where getting
even a cheque encashed used to take ages. Customers had to adjust
their schedule to the bank and very rarely was it the other way
around. A person in a city like Bombay usually had to wait for a
weekend to deposit a cheque, because by the time he reached home,
the bank would have closed. Today, while the timings of banks have
not changed drastically – banks have become more customer –
friendly. Now power has shifted into the hand of the customer.
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HDFC Bank, is the other big player from the banking industry which
has aggressively used ATMs to its advantage. Says Mudit Saxena,
vice-president for retail marketing and head of Net Banking at HDFC
Bank, “The average per-day transaction at an HDFC Bank ATM is
350-400, with some ATMs recoding as many as 700 transactions per
day”. Other tech savvy banks like UTI Bank and ABN Amro Bank
have also become extremely aggressive in installing ATMs.
In the case of UTI Bank, the ATMs have added a fillip to the bank’s
customer base. Says V K Ramani, president for IT at UTI Bank, “Form
the first year of ATM installation, we have seen a surge in our
customer base. Currently, we have 647 ATMs servicing a base of 1.3
million customers. Over 90 percent of cash withdrawals are done
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customer bites the bait, it not only reduces the work load, but also
translates into huge cost savings.
Says Lars Nyberg, chairman and chief executive officer of NCR, “India
is undoubtedly the hottest market for ATMs today. Our decision to
manufacturer in India is to accelerate supply to the local market.
Initially, the manufacturing facility in Bangalore will have a capacity of
produce 8,000-10,000 ATMs per year. “The potential of the Indian
market has prompted NCR to design at ATM specifically for the Indian
market.
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Internet Banking
The other important delivery channel, from a bank’s perspective &
Internet banking. The adoption of Internet banking by the bank’s
customers is important since the costs per transaction are even lower
than those of an ATM. A net-based transaction costs the bank only
around Rs. 4. Thus, banks are trying to get customers to switch over
to this mode of banking registered users for Internet banking in India
at over two million currently.
Private banks like ICICI Bank, HDFC Bank, UTI Bank and ABN Amro
Bank have seen a steady surge in the number of users registered for
Internet banking does not require physical infrastructure, thus saving
on prohibitive real estate costs.
Roadblocks
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Says Shende, “The compelling restraint for the user is the fear of
security breaches. As long as the perceived notion that the Internet is
not a safe place to conduct financial transactions prevails, large scale
adoption will be challenging.” In addition, the low penetration of PCs
and access to the Internet are crucial issues which act as roadblocks
in the adoption of Internet banking.
MOBILE BANKING
What’s M-Banking?
M-Banking allows a customer to request for account balance, cheque
books, cheque status, demand drafts, and banker’s cheques as well
as stop payments, make fixed deposits enquiry and transfer bills
online. HDFC customers, for instance, can pay their Max Touch and
BPL Mobile both provide cellular services – Bombay State Electricity
Supply, and Maharashtra State Electricity Board bills. Says Shyamlal
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Is it Better?
M-banking is no different from Net Banking, in fact it has many
limitation. You still cannot transfer fund from one bank to another and,
given the high air-time charges, it works out much more expensive
than Net Banking. And for the mobile phone to access a site, the
contents must be in Wireless Markup Language.
Once the mobile users’ population grows, access rates will fall,
allowing customers to use more air-time. By then, the Reserve Bank
of India would also have put its own gateway in place to do online
what it does today on paper.
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one more delivery channel which will increase in the future is the
deployment of call centres. For instance, looking at the cost
effectiveness of call centres, ICICI Bank has commissioned the
country's biggest call centre in the banking sector (1,100 seats) in
Hyderabad. This is to be followed by a 600-seat call centre in
Mumbai)
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banks discover the marketing power of ATMs, one would see a trend
where ATMs would be used to deliver products of other vendors as
well. ICICI Bank has gone one step further by allowing devotees of
Tirupati to offer payments to the temple at Tirupati temple through
their ATM.
Says Chopra of ABN Amro, "The next five years will see a marked
shift, wherein customers will show a preference for non- branch
delivery channels. Also, the large number of customer calls will also
necessitate use the of toll free numbers.”
Who knows, the next time you go to deposit your cheque, you just
might fill in 'Virtual' in the space reserved for 'Branch’.
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Products like debit cards, flexi deposits, ATM cards, personal loans
including consumer loans, housing loans and vehicle loans have been
introduced by a number of banks.
Public Sector Banks like SBI have also started focusing on this area.
SBI plans to open 100 new branches called Personal Banking
Branches (PBB) this year. The PBBs will also market SBI's entire
spectrum of loan products: housing loans, car loans, personal loans,
consumer durable loans, education loans, loans against share,
financing against gold.
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used; more & more banks are outsourcing services. ICICI bank was
the first among the new private banks to launch its net banking
service, called Infinity.
Products like debit cards, flexi deposits, ATM cards, personal loans
including consumer loans, housing loans and vehicle loans have been
introduced by a number of banks.
Public Sector Banks like SBI have also started focusing on this area.
SBI plans to open 100 new branches called Personal Banking
Branches (PBB) this year. The PBBs will also market SBI's entire
spectrum of loan products: housing loans, car loans, personal loans,
consumer durable loans, education loans, loans against share,
financing against gold.
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CASE STUDY
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