E-banking clicks over bank visits

Rahul Mehra (name changed to protect identity), 28, an assistant manager in a corporate doesn’t remember the last time he paid a visit to his bank branch although, it is near his residence.

He does all his banking transactions online. Being the preferred customer, he gets constant updates from his relationship manager who can provide him all the banking services at home as and when required.

Traditional visits to banks have declined 15% on an average, whereas, growth in usage of internet and mobile-banking has almost trebled, says a survey done by McKinsey & Company.

The weekly use of internet banking by Indian consumers has risen 130% since 2007, while mobile banking is up 338%, said the survey.

Also, 7% banking consumers have started using the internet banking, which is almost a 7-fold leap from 1% of consumers using internet in 2007.

“We see a marked shift away from using branches as a main channel for interaction in many markets. The scale of the branch network is becoming a less decisive factor than before in capturing customers’ ‘share of wallet’,” says Renny Thomas, partner in McKinsey’s India office, and a leader of McKinsey’s financial services practice in India.

Though there is a drop in the rate at which they earlier visited their branches, around 97% customers still continue to visit the branch, according to McKinsey.

While 95% of Indians appear satisfied with their main banks, they seemed more reluctant to recommend their financial institution to others, indicating declining loyalty and increased tendency to get their services from multiple sources.

“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.
Loyalty has dropped by approximately 40% since 2007.

The average number of banking relationships rose 19% from 1.4 in 2007 to 1.7 in 2011. Also, the average percentage of people willing to shop around increased 15% in the same time period.

Further, price no longer features in the top five drivers of customer loyalty. Key loyalty drivers now focus around a bank’s customer service and staff quality.

The survey also highlights Indians preference for financial planning and willingness to take risks which has considerably increased 30% and 20%, respectively. Findings further show that, Indians have expressed a preference for localised banking where people who prefer to deal with a local institution rose in India 20% (from 75% in 2007 to 95% in 2011.)

However, despite the positive planning scenario, consumers have contrastingly shown greater dissatisfaction with their financial planners.