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Biplav Panda - TCS

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Profiting through Instant Gratification

31 July 2014  |  1878 views  |  3

The idea of offering results ‘right now’ is becoming a competing differentiator in various industries.  Examples are galore: same-day delivery in retail industry, immediate booking of cab through mobile apps, live streaming of cricket matches, immediate blood sugar checks, among others. These strategies have helped organizations  in other industries enhance customer stickiness through technology-led service delivery. The users of all these services are also banking customers, who certainly expect the same level of customer experience. Are the banks prepared?   

The regulatory pressure has put a dent on the interest income of the banks. Margins are under stress. Therefore, non-interest,  fee-based income is seen as an alternative that can keep  bank’s investors happy. To achieve this, banks need to attract more customers, nurture the existing customers, and ensure stickiness. Is that happening? Many banks would argue that this is a constant work-in-progress. If you counter question: why do you lag behind other industries in customer-focused innovation in terms of instant gratification? The answer would be instantaneous - We are a regulated industry.   This is probably the root cause of the delta. Banks are actually delaying their innovation in the name of regulatory pressure. On the contrary, the current regulatory landscape promotes technology to safeguard customer’s interest.  

Most customers visit banks in a state of distress or to fulfill an aspiration. However, many a times, banks have lost the opportunity to realign their strategy in understanding and profiling categories of customers and offering contextual products without (or with reasonable) time lag. Instances are there when bank’s own customer, with positive credit score, in a state of medical distress have had to wait 3-4 working days for a personal loan disbursal. In such scenarios, they have fallen prey to unregulated moneylenders. This is definitely a lost opportunity for the bank.  

As per the co-founder of Flipkart, a fast-growing Indian e-commerce provider, “In India already 70% of internet consumption today is happening on mobile. In China it's less than 50% and in US even lesser at 30%.”  In a recent blog, Forrester  has identified that mobile apps, customer analytics, and digital engagement systems are the key investment priorities for Indian banks. The banks should see this as an opportunity. If banks are able to leverage the available digital technologies and vet customers based on analytics, it will not be far when banks can offer instant gratification to customers. In a digital and connected world, time lag in service-delivery is certainly not an option. Additionally, these steps would help banks in lowering miss-selling and also bring that much needed loyalty. It’s high time banks realize keeping customers loyal is the only avenue to profitably monetize banking relationships.

The views expressed here are solely those of the author in his private capacity

TagsMobile & onlineRetail banking

Comments: (4)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 01 August, 2014, 20:21

Banks have been offering credit cards for decades and nothing beats that product as a tool of instant gratification. What's stopping a "bank’s own customer, with positive credit score" from using a credit card to instantly tide over "a state of medical distress" instead of waiting for "3-4 working days for a personal loan disbursal"?

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Biplav Panda - TCS - Bangalore | 02 August, 2014, 06:34

The discussion here is about the time lag in product delivery - how much time does a bank take to roll out a credit card or a personal loan?

Customer digital behaviors are fast changing, and in parallel digital technologies are fast evolving. Banks should leverage this milieu and not delay their innovation strategy and catch-up with other industries to offer contextual products, same day of the next day.   Instant Gratification should be seen as a differentiator.

I agree if you have a credit card you can use it at will. But, credit card comes with a credit limit – a factor that may not help in an acute health issue. The down side is that this is probably the most miss-sold product in India. 

 

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Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 02 August, 2014, 13:56

I knew that credit card was subject to aggressive selling. With unsecured outstandings and recovery rigamarole galore in India, I don't believe there's any mis-selling involved in credit card. But, taking your opinion at face value, instant gratification of personal loans would be an egregious case of mis-selling, especially in the context mentioned by you: Customer is under medical distress of self or loved one, their judgment is impaired, they could enter a hospital not because they can afford it but because of emotional reasons and the possibility of getting an instant personal loan.

To me, it doesn't make sense to compare delivery periods of products as diverse as book from an ecommerce company and personal loan from a bank but, if that's what this discussion is about, delivery period depends on tenor of relationship (one-off vs. long-term), ticket size (small vs. large), AS-IS situation (doesn't matter how many other books the customer owns vs. does matter how many other loans the customer has already taken, etc.), demand-supply equation (unlimited supply of books vs. limited supply of money to lend), and so on. While channel does have a role to play, no company that expects to make a profit and build a sustainable business can afford to deliver instant gratification for all products just because the digital channel enables them to do so.

There was a time when I could step out of my office in the then Bombay and jump into a cab in a minute and be on my way. Today, I need to download and install a mobile app, register myself, book a cab, give directions to the driver, suffer from anxiety about whether he's going to arrive on time, etc. Even today, I can visit / call my neighborhood grocer and have goods delivered instantly. For all the power of digital channel, default delivery period of ecommerce companies is 4 business days, which can go down to 1 day at an extra delivery charge. These are just two examples where brick-and-mortar delivers instant gratification whereas digital does not.

Of course, it's the nature of a product like a credit card to carry a certain credit limit. Nothing stops a person with a good enough credit rating to get multiple credit cards and enjoy cumulatively high enough line of credit to tide over a medical distress - instantly. (Besides, hospitalization insurance products exist for precisely this scenario). What's more, even ecommerce companies have a credit limit - it's precisely zero.

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Hitesh Thakkar - Payments Consulting Network - Mumbai | 04 August, 2014, 14:37

Reading your post reminds of update from Amazon going for Predictative Analytics for it's supply chain ( In Short: Based on past purchase history data, Amazon website interactions metrics ( Many more parameteres) Amazon can prediect next 'probable' purchase of good and move it next to nearest depot even can deliver it as 'Surprise' to you).

It's good to know such innovations and many more as suggested in your blog but, it all depends on making business case for Digital Banking services. We all witness that, as customer touch points and demography had widened to Social media, mobile devices and more. Banking services needs to be in such space in the form of old products available on new media as well as new products on new media.

Remote Cheque capture (RDC) is best example of Old services on new media or BBVA - Simple (Mobile only bank) are some of the prevailing models being used as new media and new services and welcomed by the customers. Ofcourse more such products will keep coming.

Again let us remember purchasing retail product on e-commerce site and it's security considerations are utterly different from banking services. Recent survey for Brits reflected the same as more than 60% respondent felt safe with Biometric authentication as additional factor for mobile transactions. Recent US CERT alert on POS Malware is another example of new challenges being faced in this space.

There is McKinsey report on Digital bank with  insight on issues faced by banks in Europe, US, Ocenasia and Asia regions for the digital banking services. It gives lot of pointers on new products and services that can be thought of.

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Biplav Panda

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TCS

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