Retail Banking

Presented by : Dr. Rajnish Kataria

Delivery Channels
The six main channels used for the delivery of banking services.
The channels are:
1. Branch Banking
2. Mobile Banking via Bank van
3. ATM Channel of Banking
4. Mobile Banking or Phone Banking, Tele-Banking
5. PC Banking, Self Service Banking
6. Internet Banking, Online Banking, E-Banking.
7. Debit Cards & Credit Cards
Branch Banking
• A branch of a bank is a place, office, unit where all banking
operations are done under the single roof. People go to the
branch for their banking requirements. This is the most
popular and therefore most important channel of the Bank.
• It is a place where customers can visit personally and can
make use of different kind of services and banking products in
one place. In case of any difficulty the customers are able to
seek advise of the bank staff, remove their all doubts, get their
all clarifications about banking operations.
• Branch in fact is a place that serves as a channel of sales and
services and bank employees can play vital role of customer
satisfaction with smile. The branch is a channel that can boost
the image of the entire bank by developing personal relations
with customers and enhancing the customer relationship
management of the bank.
 Branch Banking
• Extension Counters:
• The Extension Counter is a part of Branch Banking. Whenever any Branch
deals with some huge Business House, A big Institution or Organization may be
Government or Private it has to perform banking transactions in Bulk. In
addition to keeping the accounts of such big houses, branch has to provide
banking services to the staff of these organizations which may run in
thousands in number. Other ancillary services are also required to be provided
by the branch.
• In case such organizations are not located very near to the branch the dealing
branch opens a counter in the premises of such organization to facilitate the
easy access to banking requirements and deploys some staff on such Extension
Counters. The business conducted by these extension counters is always on
behalf of the main branch and is taken into the account of the branch itself.
• In other words the counter functions like a mini branch and provides all
banking services either on the counter itself or through the main Branch.
Previously banks were required to obtain license from RBI for opening
extension counters. Now, no RBI permission required.
Mobile Banking via Bank van
• In the era of stiff competition every bank want to reach to
maximum people to enhance their customer base. In this
process some of the banks have started Mobile banking
services. A mobile van is equipped with necessary equipments
and a few staff members are assigned the duty on such vans.
• These vans roam about the local area in order to provide door
to door service to its customers. But in such a system very
limited banking services are provided. The main services
include receipt and payment of cash only. Some ancillary
services like balance enquiry, cheque collection are also
provided.
ATM Channel of Banking
• ATM is known as Automated Teller Machine. Before the introduction
of ATM in 80’s the people were familiar with one teller only. A
human being sitting behind the cash counter and making cash
payments or receiving cash from customers. For cash transactions
one was required to go to the teller physically and that too within
the working hours of the bank. The invention of the ATM has
changed the entire scenario.
• Now you can withdraw money 24 hours a day without going to bank
through an ATM installed in a nearby place. It has provided
customers an option to access the banking services beyond the
regular banking hours. ATM is a machine for receiving and
dispensing cash round the clock. In its initial stage it was able to
dispense cash only without able to perform any other function.
ATM Channel of Banking
• With advancement of technology the present time ATMs have been
equipped with multitask technology and can perform following services:
• i) Cash withdrawal,
• ii) Cash Deposits,
• iii) Balance Enquiry,
• iv) Providing mini statement,
• v) Deposit cheques, and
• vi) Fund Transfers.
• Some more advance ATMs provides services like paying utility Bills,
Recharging Mobile services, Cheque Book requests. Etc.
• The services from ATM can be availed only after one applies with the bank a
request to issue him an ATM card. On receiving the request bank issues an
ATM Card. This card carries a Personal Identification Number popularly
known as (PIN). This number is generated by the computers of the bank at
random. Only the customer and nobody else knows this number.
Mobile Banking or Phone
Banking, Tele-Banking
• Like ATM it is another electronic banking Channel which provides
round the clock 24 hours banking for the customers. You deposit
some amount in cash or through cheques a SMS shall flash on your
mobile informing that such and such amount has been credited in
your such and such account.
• Likewise the moment any withdrawal is made from your account a
similar message shall be sent on your mobile. This phone banking is
one part that banks are doing themselves to keep their customers
updated about the transactions of their respective accounts.
• On the other part customers can approach to their banks and
request for using the Phone banking or tele-banking. The bank shall
enable its customers with their computerized system of IVR. This IVR
technology is known as Interactive Voice Response which automates
interactions with telephone callers.
Mobile Banking or Phone
Banking, Tele-Banking
• Services provided through Phone banking are limited like:
• 1. Asking for account balance,
• 2. Status of a cheque deposited for collection,
• 3. Request for cheque book or statement of account,
• 4. Record stop payments, and
• 5. Information on bank products.
• Off course enquires relating to banking services are also
attended.
• In case of Mobile banking a set of text messages or SMS can
be used. Bank balance, cheque status, status of loan
applications can be obtained through this system. As already
stated the banks send SMS on mobile to keep its customers
informed about any type of transaction in their accounts.
PC Banking, Self Service
Banking
• The internet banking as known today has gone through many phases of
development. In each phase it was known by different names. In its initial
stage in early 80s it was known as Home Banking means the banking
transactions that can be done while sitting at home. During contemporary
period it was also known as Self Service banking.
• Initially the customers were able to perform some routine banking functions
at home. For availing home banking services telephone or cable
connections were required and transactions were performed with the help
of a terminal, keyboard and a monitor (TV or PC).
• With the help of this facility customers were able to access to bank services
like inquiry of account balance, moving funds between accounts, payment
of bills and buy/sell investments or securities. All this was done by the
customers themselves on their own system while sitting home, office, or
work place.
• But now the internet banking or online banking has changed the entire
scenario of banking industry throughout the world. From luxury it has
become necessity. Banks are no longer confined to branches only, it has
become a world wide phenomena.
Internet Banking, Online
Banking, E-Banking
• In India, all banks have their own websites for the
purpose of offering banking services on the internet.
• Most of the public sector banks have very large network
of their branches and good number of them are located
in far flung remote areas and they face lack of
connectivity. These banks have very large base of
customers. Some are still following old dated and
traditional type of application methods and are not
flexible for change.
• Providing infrastructure for starting internet banking to
wide spread network of branches in one go may not be
possible. But it is really creditable that these banks have
done much and are now near to a stage when all will be
web enabled.
• As per RBI planning the banks were to enabled for internet banking in
three levels:
• 1) The basic level service in which the bank’s websites disseminate
information on different products and services to customers. It may receive
and reply to customers’ queries through e- mails. It is also known as
Information Only Service which provides general purpose information like
interest rates, branch location, bank products and their features etc.
• 2) Simple transactional websites which allow customers to submit their
instructions, applications for different services, and queries on their account
balances. They do not permit any fund based transactions on their account.
It is also known as Electronic Information Transfer system which provides
specific information like account balances, transaction details, statement of
account etc.
• 3) The third level of internet banking services offered by fully – transactional
websites which allow customers to operate on their accounts for transfer of
funds, payments of different bills, subscribing to other products of the bank,
and to transact purchase and sale of securities. It is also known as Fully
Electronic Transactional System.
• This system requires high degree of security controls as it comprises
technology covering computerization, networking and security, inter-bank
payment gateway and legal infrastructure.
Payment system in banking
• ECS (Electronic Clearance Service)/NACH (National Automated Clearing
House) handles bulk and repetitive payments(both on credit and debit
side).
• NEFT is deferred net settlement system. Processes one to one and one
to many retail payments. Hourly batches. Charges removed by RBI.
• IMPS (Immediate Payment Service) is a 24*7 and real time operating
retail payment system; Fund transfers can be initiated from mobile, ATM,
Internet banking and branch.
• RTGS processes high value interbank payments as well as retail payments
above Rs 2 lakhs per transaction. Charges removed by RBI.
• RTGS and NEFT payment messages are carried interbank through a
propriety network(WAN) called INFINET operated by IDRBT (Institute for
Development & Research in Banking Technology), which is the
technology arm of RBI.
• National Financial Switch (NFS) is the largest network of shared
automated teller machines (ATMs) in India. Processes interbank card
payments originated from ATMs.
• RuPay is a domestic card network, It processes card payments originated
through POS and online merchants
DEBIT CARDS & CREDIT CARDS
 FEATURES OF DEBIT
CARDS
 Plastic card
 also known as a bank card or check card
 Uses
 ATM
 Point of sale
 Types-
 Some cards may bear a stored value with which a payment is made
 while most relay a message to the cardholder's bank to withdraw funds
from a payer's designated bank account
 Ways in which debit card transactions are processed
 EFTPOS (also known as online debit or PIN debit) sign req
 offline debit (also known as signature debit) pin req; a delay of 24 to 72
hours before the amount of a purchase is debited from the account.
 Electronic Purse Card System
ADVANTAGE

ATM withdrawal + shopping(POS)

Keeps your money safe; two step security= insert/swipe card->
enter PIN
Keep track of transactions
lost /stolen cash is gone forever, a lost/stolen card can be reported
to the bank.
If the card has a major payment processor logo then it
can be used as a credit card
OD facility
DISADVANTAGES

• Training is needed
• Difficult to maintain spending limit
• ATM may be off-line or out of cash
• Fees charged on ATM transaction
LOST OR STOLEN CARD

• The customer should contact the card issuing

bank immediately on noticing the loss / theft of the
card and should request the bank to block the card
• Issue of duplicate ATM debit / credit card – Insta Debit card
without name only in savings account. Insta card Issued over the
counter – it will get active in 24 hours after submitting the
request
BLOCKING OF DEBIT CARD
• Customer gives the request -CRF
• Signatures verified
• Blocking done in bank branch
• Issue of duplicate cards – replacement cards
• Some banks issue card over the counter – it will get active in
24 hours after submitting the request
• KYC Compliance - Id and address proof
FAILED ATM TRANSACTIONS

• Recredit the customer’s account within 7 working days

from the date of complaint
• Banks have to pay compensation of Rs. 100/- per day for
delays in re-crediting
• If complaint is not lodged within 30 days of transaction,
the customer is not entitled for any compensation for
delay in resolving his / her complaint
• The security of the debit card shall be the responsibility of the bank
and the losses incurred by any party on account of breach of security
or failure of the security mechanism shall be borne by the bank,” RBI.
CREDIT CARDS
• A credit card is a payment card issued to users (cardholders) to enable
the cardholder to pay a merchant for goods and services based on the
cardholder's promise to the card issuer to pay them for the amounts so
paid plus the other agreed charges.
• The card issuing bank creates a revolving account and grants a line of
credit to the cardholder, from which the cardholder can borrow money
for payment to a merchant or as a cash advance. In other words, credit
cards combine payment services with extensions of credit.
• A credit card issuing company, such as a bank or credit union, enters
into agreements with merchants for them to accept their credit cards.
Merchants often advertise which cards they accept by displaying
acceptance marks – generally derived from logos – or this may be
communicated in signage in the establishment or in company material
(e.g., a restaurant's menu may indicate which credit cards are
accepted). Merchants may also communicate this orally, as in "We take
(brands X, Y, and Z)" or "We don't take credit cards".
PARTIES INVOLVED
• Cardholder: The holder of the card used to make a purchase ; the consumer.
• Card-issuing bank: The financial institution or other organization that issued the credit
card to the cardholder. This bank bills the consumer for repayment and bears the risk
that the card is used fraudulently.
• Merchant: The individual or business accepting credit card payments for products or
services sold to the cardholder.
• Acquiring bank: The financial institution accepting payment for the products or services
on behalf of the merchant.
• Credit Card association: An association of card-issuing banks such as Discover, Visa,
MasterCard, American Express, etc. that set transaction terms for merchants, card-
issuing banks, and acquiring banks.
• Transaction network: The system that implements the mechanics of the electronic
transactions. May be operated by an independent company, and one company may
operate multiple networks.
• Affinity partner: Some institutions lend their names to an issuer to attract customers
that have a strong relationship with that institution, and get paid a fee or a percentage
of the balance for each card issued using their name. Examples of typical affinity
partners are sports teams, universities, charities, professional organizations, and major
retailers.
• Insurance providers: Insurers underwriting various insurance protections offered as
credit card perks, for example, Car Rental Insurance, Purchase Security, Hotel Burglary
Insurance, Travel Medical Protection etc.
BENEFITS TO CARDHOLDER
• The main benefit to the cardholder is convenience. Compared to debit cards and
checks, a credit card allows small short-term loans to be quickly made to a
cardholder who need not calculate a balance remaining before every transaction,
provided the total charges do not exceed the maximum credit line for the card.

• Different countries offer different levels of protection. In the UK, for example, the
bank is jointly liable with the merchant for purchases of defective products over
£100.

• Many credit cards offer rewards and benefits packages, such as enhanced
product warranties at no cost, free loss/damage coverage on new purchases,
various insurance protections, for example, rental car insurance, common carrier
accident protection, and travel medical insurance.

• Credit cards can also offer a loyalty program, where each purchase is rewarded
with points, which may be redeemed for cash or products. Research has
examined whether competition among card networks may potentially make
payment rewards too generous, causing higher prices among merchants, thus
actually impacting social welfare and its distribution, a situation potentially
warranting public policy interventions.
Billing cycle of credit card
• The billing cycle for a credit card or any type of monthly account
is the period of time between billings. For example, a billing cycle
may start on the 1st day of the month and end on the 30th day
of the month. Or, it may go from the 15th of one month to the
15th of the next.
• Billing cycles are varying lengths, ranging from 20 to 45 days,
depending on the credit card and the issuer.
• During the billing cycle, any purchases, credits, fees, and finance
charges are posted to your account and added or subtracted
from your balance.
• At the end of the billing cycle, you are billed for all unpaid
charges and fees made during the billing cycle. Any activity on
your account after the billing cycle ends will appear on your next
billing statement.
• Your credit card payment due date is generally about 21-25 days
after your billing cycle ends.

• This means you're not required to send payment for purchases

until the very next billing cycle after you've made them. There's a
period of time between your billing cycle end date (which is also
your account statement closing date) and your bill due date is
known as the grace period. You can typically pay your balance in
full before the end of the grace period to avoid paying interest on
your balance as long as you paid your last statement balance in
full last month.
E- Business Strategies
• The Internet and e‐commerce have changed the competitive
landscape of retail banking by eroding the barriers to entry
created by physical branch networks and by increasing the
commoditization of banking products and services.
• Retail banking was historically the domain of deposit‐taking
retail banks, credit unions, and building societies. These banks
now face competition from Internet‐only banks, branded
non‐financial firms, multinationals such as universal
bancassurers, and other specialist technology providers.
• Strategies include outsourcing Internet technology (IT)
functions, forming alliances with technology providers and
competitors, becoming a global player or a product
manufacturer, and focusing on niche markets.
Banking for the Digital Age
• The world is becoming increasingly digital with each passing day. It’s
transforming and challenging every traditional business – and
banking is no exception.
• The bank branch as we know it, with assistants behind windows and
bankers huddled in cubicles with desktop computers, is being
reinvented. Most customers now carry a bank in their pockets in the
form of a smartphone. Gone are the days when customers used to
stand in long queues in banks to deposit or withdraw their money.
Now, everything is done at the click of a button.
• New Age Banking is simply the digitization of traditional banking
procedures. Younger generations are leading the shift toward digital
banking with the growth of mobile technology changing the way
financial services are delivered.
•
Banking for the Digital Age
• According to PwC’s Financial Services Institute, almost
half of all consumers do not bank at a physical branch as
it becomes apparent modern consumers value mobile
banking more than physical branches.

• The cost of banking online is also much less expensive, so

New Age banks keep operational costs much lower. This
has meant a wave of New Age banks have risen, creating
meaningful and personalised digital banking services that
are easy to sign up for.
Mobile Wallet
• A digital wallet is the advanced equal to the physical wallet. It is a compartment
(or vault) to store digitized assets for approval. These resources gift
authorization for utilization or access to products and services.
They can be:
• -An individual recognizable proof like an ID card or a login information etc.
• -Non-individual method for validation like tickets for transport or occasions or
events and hotels etc.
• Any form of information like a password, or a digital certificate can be stored in
the digital wallet. Mobile wallets should be developed in certain way, so as to
protect the sensitive customer information stored in them.
• Mobile wallets help consumers to make in store payments, manage reward
cards, manage their debit and credit cards and pay for online purchases.
• The feature helps a business reach out to a bigger audience and get better
revenue from the business. Since a mobile wallet reduces chances of frauds
and makes payments secure, it is also considered to be a cost saving system of
payments. Mobile payments increase the expected rate of conversions as they
helping in providing customers with lucrative discounts and offers more easily.
Mobile Wallet
• A mobile wallet enables the business to enhance the experience of the user
by providing an environment where the shopping can be done along with
instant payments. A mobile wallet also enables the businesses to use this as
a differentiating factor for their business.
• The smartphone has changed the way consumers want to shop. The mobile
device has become more relevant to consumers today.
• The mobile phone has practically become the next big thing after e-
commerce. Since the mobile phone is with the consumer all the time, it has
become a huge opportunity for businesses.
• The mobile phone offers a direct real time contact with the decision makers
and makes conversions faster.
• Besides that, businesses have the option to offer and promote goods and
services according to the location of the customers.
• Mobile wallets allows the customer to store his card and other details in the
mobile device and helps in single click payments.
Advantages of a Mobile Wallet
Strategy
• A competitive differentiation for businesses
• Instant payment and higher conversion rate for customers
• The mobile device has become more significant for users today
• Mobile wallet ensures smooth transfer of payments from one party to
another
• It provides a database marketing opportunity to marketers
• Mobile wallet ensures cost savings for the business by ensuring
transparency in payments
• Since the business can reach out to a larger number of customers, the
revenue would automatically rise
• Location based services helps businesses in doing customized promotions
for their customers
• Mobile wallets also ensure security of payment for customers
• Running loyalty programs with customers becomes easier with the help of
mobile wallets