Thursday, March 12, 2009

Opinion: Banks and Revenue Leakages!

What do you and me as individuals do when the going gets tough economically? Double check our telephone bills? See if we used them more than we should have; check if there is a better plan out there with better rates which was not so important before? Weigh whether to use your car or public transport now depending on the need to use. Make sure that you bought groceries and vegetables at the best rates that were never so important since you loved the place you shopped more than the value. Double check all the rebate coupons that you never cared to check on before. There are two keys things that I am talking about, one is controlling the overhead costs or expenditures and the second is plugging the leakages that existed before but you cared less. I believe similar to this, banks in today's environment will have to closely consider performance metrics like costs, profitability of product and revenue leakages. Measurement of costs and product profitability are in practice today, but is there systematic way of identifying revenue leakages and fixing the same? Revenue leakages could be of various types like a lost opportunity to price right, not able to monitor the customer SLA’s, losing transactions due to system in efficiencies or unable to recover from customers due to in adequate processes. Sudhir talks about revenue leakages in banks today at various stages of a relationship life cycle in his published paper 'Revenue leakage an opportunity calling' (Published link 1, Published link2) . I agree ! ...Read more

Monday, March 9, 2009

Views: Banking for the unbanked - contd...

To continue on product innovations, to reach newer segments of the banking market i was thinking about telecom. Why there is such an explosive growth(in terms of reach to common man) in telecom industry versus a hindu rate of growth when it comes to traditional banking.

I am not talking about the 20% growth in revenues the banks are making by doling out home loans and credit cards to the consuming public at various interest rates. I am talking about parallel's to pre paid cards, small recharge tickets available at the beedi shops, life time free incoming facilities, bundled products like land line + internet + IPTV, etc that is making telecom companies add 3-4 million subscribers month on month. Is it that the need for a common man to have banking facility is minimal when compared to his need to communicate? I think the answer to this is the way we understand customer segmentation. Unlike the uniformity in need to communicate, the need to have banking services varies widely across the customer segments. i.e. the needs of student, economically backward person, middle class, high net worth individual, NRI all are extremely different. For a middle class or economically backward individual, availing these facilities is still an inhibition. An individual wanting to buy something online for a better deal has very limited options today unless he has a credit card. He either has to pay through cheque, or make a DD, pay when he receives the item in a few cases etc  which are not very convenient options when compared to paying through a credit card. I think a parallel to innovation in telecom in this case would be pre paid currencies available across small shops. If an individual wants to buy something he could top up his account with any bank with a pre paid card available in shops and use it to buy online or through mobile shopping. The balance left could be credited to his account in the bank. Even a small pan walla would use those cards to do cash deposits in bank using his mobile without having to walk into the bank or waiting for a cash collection agent! 
...Read more