Bank brands must adapt in India

19 August 2011

NEW DELHI: Banking brands are facing a range of challenges in India, as loyalty levels fall and consumer habits change rapidly, a study has found.

McKinsey, the consultancy, surveyed bank account holders in the rapidly-growing economy, and revealed the number of branch visits have declined by 15% compared with 2007.

By contrast, the amount of people using online banking tools on a weekly basis has climbed 130% in the same period, and similar services on mobile phones posted a 338% surge.

Overall, 7% of individuals with a bank account now use the web for this purpose, a figure which stood at just 1% in the 2007 analysis.

Renny Thomas, a McKinsey partner, told Daily News & Analysis: "The scale of the branch network is becoming a less decisive factor than before in capturing customers' 'share of wallet.'"

Despite the rise of digital channels, some 97% of Indian customers still visit physical branches, according to the research.

Elsewhere, McKinsey reported 95% of respondents are broadly happy with their financial services provider, but loyalty has still declined by 40%, and the willingness to recommend a company has also decreased.

At present, the average account holder has 1.7 banking relationships, up from 1.4 in 2007, and the proportion of customers "shopping around" has increased by 15%.

Customer service and staff quality are among the main characteristics valued by Indian consumers, supplanting price at the top of their list of priorities.

"While Indian consumers say they want to consolidate their banking relationships, they continue to shop around because banks are not delivering the products and services, such as frontline services, that can lock them in," said Thomas.

The number of customers keen to do business with local banks also rose from 75% to 95% between 2007 and 2011, suggesting multinational operators will need to adapt their strategies.

Data sourced from Daily News & Analysis; additional content by Warc staff