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The Hunt For The NextGen Account

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The banking sector has been an important, and significant, enabler in India’s march from the Hindu rate of growth to the near double-digit growth in recent years. Banking services are found to have a first-order impact on (a) the rate of long-run economic growth, primarily by affecting the allocation of capital and (b) the distribution of income, primarily by affecting the earnings of lower-income individuals. As India aims for sustained and equitable growth, new opportunities and challenges will emerge alongside. While banks will continue to tap opportunities emerging from the existing clientele, it is more important that they rise to the challenges emerging from a new class of customers — a result of rising incomes and changing demographics — whose demands and needs will be different from those of the existing large pool of clientele. One such set could be classified as NextGen, essentially those at the beginning of their working life, or just about to enter this life-stage. This generation is tech-savvy, seeks convenience and customer service excellence, and is characterised by diversified savings and investment needs and a low loyalty connect. In addition to this category will be the segment comprising the hitherto poor but bankable class who will be the first in their family to enter the banking system. Though this category is as aspirational as NextGen, it does not have similar means.....

Is Indian Banking Ready For The NextGen Consumer?
Many commercial banks in India are offering a whole gamut of value-added services. These services are being offered more through alternative channels. By doing so, banks are releasing some of the resources from branches and redirecting them to provide technology-intensive services to customers. We are witnessing an increase in the use of cards (debit, credit) across various delivery channels like ATMs, points of sale, Internet transactions, etc. About 7 per cent of account holders in the country are using the Internet for banking transactions and, at present, mobile banking constitutes about 0.1 per cent of transactions. Clearly, much more needs to be done, and at a faster pace.

NAINA LAL KIDWAI: HSBC’s country head and executive director on the Asia-Pacific board. She is senior vicepresident of trade body Ficci and a member of the Industry Task Force, the Indo-German Consultative Group and the Banking Working Group of the Financial Sector Legislative Reforms Commission. An MBA from Harvard Business School, she received the Padma Shri in 2007 for her contribution to trade and industry

Since the social media will be a platform of choice for the NextGen, banks will have to utilise their social media presence to enable real-time customer feedback and also to launch new products. To provide a superior customer experience, banks will have to bring change within the organisation as a first step: build awareness and commitment across the organisation, redesign critical processes, change frontline mindsets and behaviours and align the performance management system to embed change within the organisation. Frontline staff need to build personal awareness and insight about the customer.

Banks need to develop dedicated and new strategies to understand and meet the demands of this segment. While some banks have already started strengthening their market intelligence to capture market feed on a real-time basis, they will all need to focus on customised products and services with attractive packaging and flexible pricing to engage the NextGen consumer effectively. Partnering with other reputed brands in this consumer segment is another way to cater to this segment: for example, banks partnering with car dealers in an effort to extend one-stop access to finance. Crucial in this mix will be strategies like relationship-based pricing, incentivising consumers to buy more from the same brand and timely launch of appropriate products to stay tuned into this new customer set.

The received wisdom from the financial crisis is that finance enables growth but unfettered finance can be destabilising and may cause enduring pain. Following this, a host of reforms — change in ownership, regulated playing fields, etc. — have been constructed to contain systemic risk without sacrificing innovation.


MODERN OUTLOOK:As new technologies transform consumer’s demand pattern, industry players need to innovate products and processes (Bloomberg)

No doubt, the environment in which banks operate and compete today is different to that existing prior to 2008. But what has not changed is the purpose and need of banking. Banks provide a channel of savings for households and funds to borrowers. The basic banking function remains the same. Individuals and organisations need bank accounts and services that enable them to safely hold cash and make transactions. They need access to credit — in forms ranging from micro-credit to massive corporate loans — to enable investment and advancement. Individuals, businesses and institutions need to protect themselves against a range of risks that cannot be borne by either the individual or the organisation. Customers need savings and wealth vehicles in which to invest their money and they need periodic advice on their financial situation and on appropriate products and services.

However, banks need to come up with products which the consumer needs and demands. Given the pace at which new technologies are shaping the NextGen consumer’s demand pattern, industry players need to match the supply by innovating their products and processes. This NextGen customer has certain distinct qualities and traits, as we mentioned earlier, which need to be factored in. More importantly, the consumer has umpteen choices and is very picky about his/her banking provider. As a result, serving him/ her is not merely an extension of the current business model. For enduring success, banks will have to develop new ideas, innovative products and processes, quality service delivery with a focus on customer retention, etc. They will need to create value in new ways by harnessing the opportunities and effectively rising to the challenges. The next decade of Indian banking will be won by those who can decisively capture the NextGen consumers.

Nair is former CMD of Union Bank of India as well as Dena Bank. Excerpted from Section 1, Chapter 5 — ‘Banking for the NextGen’

(This story was published in Businessworld Issue Dated 27-08-2012)