Banking industry is the most important industry for the health of any economy and hence is the most regulated. Without a sound and healthy banking system, an economy cannot function smoothly. In the past one decade, the definition of banking sector has been completely transformed. Banks have moved from being just a place of deposits and withdrawals to way more. This can be attributed towards the growth in technology and it soon being adopted by the banking industry to stay abreast with the changing environment. Thus because of changing times, changed demands of customers and the aim to provide better services with reduced costs, the banking sector has tremendously transformed itself in all means keeping the main aim of fulfilling customer requirements with achieving least operational cost.
Like any other business institution, the banking industry also works with the aim of achieving its targets and has a set of well-defined objectives, the main being customer satisfaction and cost reduction. In the way to fulfillment of these comes a no.of challenges. Some of these are mentioned as under:
Cost per transaction
: In today’s money driven world, where millions of transactions tale place every day, there is a need to identify the cost center and there by estimate the cost of each unit of work.
: To provide exactly what a customer wants by optimizing the product and services portfolio and hence smoothening the customer experience.
Single customer view
: Focusing on one and every customer through better CRM processes and fulfilling their requirements.
New products and services
: With the changing times, the demands of customers have also been transformed which calls for a different type of products to be provided other than the traditional services by the contemporary banking system. The increasing competition has led to many innovations and the crisis of 2008 has also caused changes in the sentiments of people towards the financial institutions. Thus one of the main objectives of the banking sector now is to come up with better products and services, both in terms of requirement fulfillment and personalization from the perspective of customers, including profit-making and customer satisfaction from the perspective of banking institution.
Digitalization of Services
: With the advent of technology in every sector, the banking sector also couldn’t remain untouched by the same. The systems of banks have taken a toll and now the focus is on digitizing the services and increases the reach of the banking services to even the remote places. With the same view in mind, mobile banking, internet banking etc… are the new definition of banking services. More and more customers are subscribing to mobile and internet banking services and availing the easy access benefits and various associated incentives.
Segments of customers
: With digitization done for self-access ease of customers done, banks also need to focus on that segment of customers which are “branch lovers”. Hence it becomes important that this segment of customers must also gain from digitization. This can be made possible only with the digitization of services at the bank branches as well. A research by the EFMA and McKinsey divides customers into four categories based on the manner they access their banking services.
- Self- Directed
- ATM/Card users
- Branch lovers
Making customer-friendly processes
: When on one hand, the cost reduction is one of the key aims behind digitization, along with this comes a need to make the processes both online and in branches customer-friendly to have the full benefit of digitization.
Big Data issues
: With the increased no.of transactions and operations spread across the geographical boundaries, a lot of data is generated which needs to be managed well for achieving efficiency and smooth operations.
: The main aim of digital marketing is to simplify the customer service processes and that can be achieved only with understanding the scope of digitalization and how it can be matched with needs of customer. Talking about improving services for customers, banks like AXIS, ICICI & HDFC are all set to launch contact-less cards (debit/credit cards) which will allow customers to transact without the need to swipe the cards
In spite of these challenges banks are growing at a fast rate along with their effort to digitize their services. Digitization has been focused only in the front-end services till now. The next step has to be digitizing the back-end services as well. Because of this mismatch, customer experience is often than not disturbed by the poorly managed back-end processes.
In this scenario, cross-functional processes become very important as those are the ones that can cause a good customer experience or a one that can lead to losing customer confidence all together. The main challenge that stands in the face of retail banks today is to link the unconnected, isolated processes such that a smooth customer experience can be delivered.