Marketing in Banking

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Marketing in Banking

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INDEX

SR.

NO.

DESCRIPTION Pg no.

1. The Financial System 4

2. Origin of The Word BANK 5

3. Definition of Bank and marketing 5

4. Finance and banking in India 6

5. Users of Banking Services 6

6. Meaning of Marketing 6

7. Evolution of the marketing concept 6

8. Marketing and Competition 8

9. Marketing Concepts Its application toBanking

9

10. Meaning of Bank Marketing 10

11. Market Research in Indian Banks 13

12. Increasing Importance of Marketing in BankingIndustry

16

13. Market Segmentation 19

14. Marketing Mix for Banking Services 27

15. Strategies for Segmentation 21

16. Marketing Mix for banking services 27

17. Strategies for effective bank marketing in India 28

18. Technology in Banking 4319. Conclusion 60

20. Refrences 61


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Chapter 1

THE FINANCIAL SYSTEM

The financial system consists of variety of institutions, markets and instruments that

are related in the manner shown in the below figure, it provides the principal means

by which saying are transformed into investment. Given its role in the allocation of

resources, the efficient functioning of the financial system is of critical importance to

a modern economy. Financial manager negotiate loans from financial institutions,

raises resources in financial marked and invests surplus funds in financial market. In

very significant way he manages the interface between the form and its financial

environment.

Financial System placed a very important role in the development of a country.

Through Financial System, entire money or money equals are channelized in such a

way so that each sector of economy like industry, agriculture and services can be

developed rationally. Financial sector development is the locomotive force for

economic development of a country.


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Chapter 2

ORIGIN OF THE WORD BANK

According to some economists the word Bank has been derived from the German

word BANC which means a Joint Stock Firm while others say that it has been

derived from the Italian world BANCO which means a heap or mound.

There is still another group of people who believe that word bank has been derived

from the Greek work BANQUE which means a bench. In the olden days, Jews

entered into money transactions sitting on benches in a marked place. When a

banker was not in a position to meat his obligations, the on which he was carrying on

the money business was broken into pieces and the was taken as bankrupt. Thus

both the words Bank or bankrupt are said to have origin from the word Banque.

Definition of Bank

According to Oxford English Dictionary, Bank is, An establishment for custody of

money received from or on behalf of, its customers. Its essential duty is the payment

of the orders given on it by the customers, its profit mainly from the investment of

money left unused by them.

Banking Regulation Act, 1949 (Sec. 5(c)), has defined the banking company as,

Banking Company means any company which transacts business of banking in

India. According to Section 5B, banking means the accepting of deposit of money

from the public for the purpose of leading or investment, which are repayable on

demand or otherwise and are with drawable by cheque, draft, order or otherwise.

Different economists, banking professionals and authorities explained their viewpoint

regarding bank or commercial bank. It has been rightly said by A.K. Basu that a

general definition of a bank or banking is by no means easy, as the concepts of

banking differ from age to age, and country to country.

Finance and banking in India


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India is a vast country, before 1947, undivided India was equal to Europe excluding

Russia in its area. It is situated in south of Asia. In spite of a part of Asia, it is

separated from it. It is separated by Himalayas in North India. India has vast oceans

in South, East and West. Due to its vastness it is also called sub continent. That vast

country has given different names in different times. In Vedic period, it was called

Arya-V-arat. In Bir period and ancient period, it as called Bharatvarash. Perhaps

due to fame of king Bharat, it was called Bharatvarsh. Greek called it Indus on the

name of river Sindh. Iranians called it Hindu. Chinese travelers called it Tienchu and

Yintu. Ipsing called Arya Desh and Brahmrashtra. Bible has called it Hoddu. In

medieval period, it was called Hindustan and Hind. European called it India. After

Independence, it is return as Bharat Ganrajya or Indian Republic in Indian

Constitution.

Evolution of the marketing concept

The Role of marketing in the banking industry continues to change. For many years

the primary focus of bank marketing was public relations. Then the focus shifted to

advertising and sales promotion. That was followed by focus on the development ofa sales culture.

Although all the elements of the marketing concept customer satisfaction, profit

integrated framework, and social responsibility will remain important, customer

satisfaction must receive the greatest emphasis in the years ahead.

The chief concerns of most bank executives still focus on legal and regulatory

issues, according to most surveys. Community banks are particularly concerned with

eliminating barriers that give unfair advantages to financial services competitors,

such as credit unions. However, another concern pertains to technology: keeping

nonblank competitors out of the payment system.


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Bankers Identify Near-Team and Long Term Concerns

1991 2015

Maintaining profitability

Credit Portfolio ManagementService Quality

Regional Economy

Cost Management / Expense reduction

Declining Earnings/ more failures

Market / customer focus

Capital adequacy

Stock market value

Industry Overcapacity

Service quality

Maintaining profitabilityMarket / customer focus

Operations/systems/technology

Credit portfolio management

Productivity improvement

Investment to stay competitive

Stock market value

Asset/liability management

Electronic Banking

When this gateway system was first proposed, access to the Internet was very new

and few banks had the resources and knowledge to set up their own direct-access

lines for customers. Customers have shown a growing interest in online banking

services, and banks have responded by quickly putting in place proprietary sites on

the World Wide Web and offering PC banking.

Within the next five years, 93 percent of community bank executives surveyed say

they plan to offer telephone banking, and 79 percent plan to offer PC banking.

When asked which technology holds the most potential for the future, bank

executives identified call centers first. As customers continue the transition the

transition into a high-tech world in which they want information and answers more

quickly and accurately than ever before, call centers offer the ideal bridge. With 24-

hour access to either automated information or live operators, customers do

everything from check their accounts to apply for a loan. Bank executives also

identified PC banking as having the most promise for the future, followed by Interest

access and broad function kiosks.


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Chapter 3

MARKETING AND COMPETITION

In view of the declining profitability and productivity of the banking sector and

extremely low rate of profit percentage, the determination of the financial health of

the system requires drastic remedial measures not only to build up investor

confidence but also to combat competition from all over. It is time that the pros and

cons of the oncoming banking era are properly understood and advantage taken of

various opportunities. This will require an efficient marketing approach to bank

management in which target markets will be tackled successfully along with effective

satisfaction levels and in which the usual basic elements product, pricing,

promotion and distribution will be taken care of in a proper format of an efficiently

working marketing organization.

The nationalised banks must face competition from private banks, non-banking

financial institutions, foreign banks and others. The competition is in the fields of

deposits and credits, foreign trade, consumer credit and miscellaneous banking

activities. The competition will benefit customers and force the banking system to

raise its productivity, minimize expenses, and remain sensitive to evolving issues.

Narasimham Committee Reports while recommending internal autonomy long with

compliance with prudential norms suggested rule-based credit policies, fiscal

balance and a gradual movement towards liberatlisation.

To deal with the competition from foreign banks, the Indian banks should go in for

diversification and extension of services as well as expansion of products and

business. Economic freedom and innovative spirit have contributed greatly to thesuccess of the market-oriented financial sector in the Western countries. Directed

credit and investment has done just the opposite. Interventionism is not necessarily

bad provided it is associated with a committed leadership. Indian financial sector had

for more than four decades, neither full economic freedom nor a well disciplined

interventionism so that it cost operational flexibility as well as functional autonomy

both of which were concerned with profitability performance and related factors.

Marketing concepts


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Its application to Banking, when we apply marketing to the banking industry, the

bank marketing strategy can be said to include the following

i) A very clear definition of target customers.

ii) The development of a marketing mix to satisfy customers at a profit for the

bank.

iii) Planning for each of the source markets & each of the use markets (A

Bank needs to be doubly market oriented it has to attract funds as well

as were of funds & services.

iv) Organization & Administration.


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Chapter 4

MARKETING IN BANKING

We define bank marketing as follows: Bank marketing is the aggregate of functions,

directed at providing services to satisfy customers financial (and other related)

needs and wants, more effectively and efficiently that the competitors keeping in

view the organizational objectives of the bank. Bank marketing activity. This

aggregate of functions is the sum total of all individual activities consisting of an

integrated effort to discover, create, arouse and satisfy customer needs. This means,

without exception, that each individual working in the bank is a marketing person

who contributes to the total satisfaction to customers and the bank should ultimately

develop customer orientation among all the personnel of the bank. Different banks

offer different benefits by offering various schemes which can take care of the wants

of the customers.

Marketing helps in achieving the organizational objectives of the bank. Indian banks

have duel organizational objective commercial objective to make profit and social

objective which is a developmental role, particularly in the rural area.

Marketing concept is essentially about the following few thing which contribute

towards banks success:

1) The bank cannot exist without the customers.

2) The purpose of the bank is to create, win, and keep a customer.

3) The customer is and should be the central focus of everything the banks

does.

4) It is also a way of organizing the bank. The starting point for organizationaldesign should be the customer and the bank should ensure that the services

are performed and delivered in the most effective way. Service facilities also

should be designed for customers convenience.

5) Ultimate aim of a bank is to deliver total satisfaction to the customer.

6) Customer satisfaction is affected by the performance of all the personal of the

bank.


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All the techniques and strategies of marketing are used so that ultimately they induce

the people to do business with a particular bank. Marketing is an organizational

philosophy. This philosophy demands the satisfaction of customers needs as the

pre-requisite for the existence and survival of the bank. The first and most important

step in applying the marketing concept is to have a whole hearted commitment to

customer orientation by all the employees. Marketing is an attitude of mind. This

means that the central focus of all the activities of a bank is customer. Marketing is

not a separate function for banks. The marketing function in Indian Bank is required

to be integrated with operation.

Marketing is much more than just advertising and promotion; it is a basic part of total

business operation. What is required for the bank is the market orientation and

customer consciousness among all the personal of the bank. For developing

marketing philosophy and marketing culture, a bank may require a marketing

coordinator or integrator at the head office reporting directly to the Chief Executive

for effective coordination of different functions, such as marketed research, training,

public relations, advertising, and business development, to ensure customer

satisfaction. The Executive Director is the most suitable person to do this

coordination work effectively in the Indian public sector banks, though ultimately the

Chief Executive is responsible for the total marketing function. Hence, the total

marketing function involves the following:

a) Market research i.e. identification of customers financial needs and

wants and forecasting and researching future

financial market needs and competitors activities.

b) Product Development i.e. appropriate products to meet consumers

financial needs.

c) Pricing of the service i.e., promotional activities and distribution system

in accordance with the guidelines and rules of the

Reserve Bank of India and at the same time

looking for opportunities to satisfy the customers

better.


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d) Developing market i.e., marketing culture among all the customer-

consciousness Personnel of the bank through

training.

Thus, it is important to recognize the fundamentally different functions that bank

marketing has to perform. Since the banks have to attract deposits and attract users

of funds and other services, marketing problems are more complex in banks than in

other commercial concerns.


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Chapter 5

MARKET RESEARCH IN INDIAN BANKS

After enquiring with all the public and 14 private sector banks whether they had

undertaken any market research studies. The following board areas of market

research were considered for the study:

(a) New service development,

(b) New service product acceptance,

(c) Research and development of existing financial service,

(d) Bank images study,

(e) Measuring banks advertising effectiveness,

(f) Measurement of market potentials,

(g) Market research of competitive service products,

(h) Customers opinion study,

(i) Customer profile study, and

(j) Market share analysis.

In response to the inquiry information was received from 17 banks. Out of these

banks, 14 are public sector banks and 3 are private sector banks. Two nationalized

banks and two private sector banks informed that they have not conducted any

markets research studies.


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Information regarding Bankwise Market Research Studies

Bank Title of the MarketResearch Study

Remarks

1. Allahabad Bank

2. Bank of Baroda

a. Survey on Customer Service

b. Marketing of deposits and

allied services to non-residents

customers opinion (1958)

Not formal report

prepared.

MP Ranade: BMP

Thesis.

3. Canara Bank a. Marketing research study for

two new deposit schemes

(1989)

For internal use

only

4. Central Bank ofIndia

a. Market survey of customerservices

b. Marketing deposits

(Customers)

Conducted by thestudents of BITS,

Pilani. For internal

use only service

(1986)

5. Indian Overseas

Bank

a. Potential areas for future

business expansion

For internal use

only

6. Oriental Bank ofCommerce

a. Study of customer service inOBC with special reference to

metropolitan branches (1989)

R Upendran MBPThesis

7. Punjab National

Bank

a. Sample survey on customers

responses (1987)

b. Sample survey on customer

service (1988)

c. Study on deposit linked

housing loan scheme (1982)

For internal use

only

For internal use

only

Formal Report

8. Punjab and Sind

Bank

a. Study on customer turnover

(mail questionnaire based

study of customers who have

closed their accounts) (1989)

b. Changing Profile of Punjab and

Sind Banks Customers and

their expectorations, a survey

For internal use

only

J S Kalra:

BMP Thesis


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based study (1988)

9. State Bank of

Bikaner

a. A survey on customer service,

level of customer satisfaction

and customer expectations(1998)

For internal use

only

10. Syndicate Bank a. Evaluation Study on the quality

of customer service (1989)

b. Marketing of bank service with

special reference to branches

in Bombay city of Syndicate

Bank-customer service (1979)

For internal use

only

K M Kanath

BMP Thesis

11. Union Bank of India a. Customer responses (Opinion)

survey (1988)

For internal use

only

12. UCO Bank a. Customers opinion study

(1989)

For internal use

only

13. United Bank of India a. Report of the survey on

customer opinion (1987)

b. Improvement of customer

service in a metropolitan

branch (1979)

For internal use

only

K P Ramesh Rao

BNP Thesis

14. Vijay Bank a. Report of the customer service

survey (1988)

Formal Report

15. Karur Vysya Bank a. Study on the image of the bank

(1989)

Undertaken by a

Consultant


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Most of these market research studies were conducted for internal use and no formal

reports were prepared. It is important to note the subject or issue researched by the

bank. The most important subject for market research in terms of the number of

studies conducted, is the customer service / customer profile opinion studies. Few

banks have conducted even more than one customer service / opinion studies.

Increasing importance of marketing in banking industry

The various other factors which have led to the increasing importance of marketing

in the banking industry are categorized as follows:

Government Initiatives

The Indian economy embarked on the process of economic reform and various

policy measures initiated by the government resulted in the increasing competition in

the banking industry, thereby highlighting the importance of effective marketing. The

Narasimhan Committee Report evidence of the Governments desire to re-regulate

the banking industry so as to encourage efficiency through competition. The

Government initiatives include:

Deregulation of Interest Rates

The bank may reduce their Minimum Lending Rates so as to attract customers

(individual and corporate). Such reduction in lending rates reduce the spread

between the deposit rates and lending rates, i.e. the banks margins would decline

and they would have to increase their volumes or provide attractive services so as to

maintain profits. This calls for bank marketing.

Increasing Emphasis on Bank Profitability:

With the Narasimhan Committee Report, banks have been directed to improve their

efficiency, productivity and profitability. Banks are required to be self-sufficient. In

fact, the report has adopted the BIS standards of capital adequacy (though in a

phased manner).

Foreign Banks


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Foreign banks offer stiff competition to the Indian Banks and with their superior

services and technology offer them a competitive advantage. Thus Indian Banks

have to effectively apply marketing concepts to attract customers.

Entry of New Private Banks

In the early 90s new competition emerged in the form of new Private Banks, who

brought along with them a high technology-based banking matching with

International Standards and have made a significant dent in the banking business by

capturing substantial share in the profits of the banking industry.

Reduction of Statutory Liquidity Ratio:

With the Governments aim of reducing the SLR to 25 percent, the banks will have

surplus funds for which they will have to attract users.

Social Environment

Increasing Urbanization, Education and Awareness: The higher literacy level,

migration to urban areas and higher awareness due to the boom in the mass media

have important implications for the retail banker. He needs to be conscious of the

fact the increasing proportion of people are aware of financial service and are,

therefore demanding and expecting higher quality services.

Increasing Urbanization, Education and Awareness: The higher literacy level,

migration to urban areas and higher awareness due to the boom in the mass media

have important implications for the retail banker. He needs to be conscious of the

fact the increasing proportion of people are aware of financial service and are,

therefore demanding and expecting higher quality services.

Decline in Traditional Indian Values (Borrowing as Taboo), Rising Consumerism,

Rise in the Percentage of Working Women.

Technology Development

Modernization of Technology has facilitated the introduction of new banking services

as to attract new customers. An example of this is the Automated Teller Machines

or the facility of Any Time Money. Also in foreign countries, banks are


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experimenting with money transmission at Point of sale, e.g., petrol station linked

with banking network.

Credit is Easier to ObtainGrowing Importance of Non-Banking Financial Institutions: Fixed

Deposits being offered by the NBFCs are very attractive for the public, because of

the wide gap of interest rates offered by banks on term deposits and that offered by

the NBCSs. further, they offer a variety of specialized services to their customers so

as to attract and retain them.

Disintermediation: The increasing role of capital markets in mobilizing funds is

reducing the importance of banks as intermediaries. Companies are directly

approaching the savers through the capital markets. Mutual funds help in attracting

the small investors who do not want to take much risk.


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Chapter 6

MARKETING CONCEPTS ITS APPLICATION TO

BANKING

When we apply marketing to the banking industry, the bank marketing strategy can

be said to include the following:

i. A very clear definition of target customers.

ii. The Development of marketing mix to satisfy customers at a profit for the

bank.

iii. Planning for each of the source markets and each of the user markets (A

bank needs to be doubly market oriented its has to attract funds as well as

users of funds and services).

iv. Organization and Administration.

Consumer Behavior and Segmentation

Need for segmentation

Philip Kotler has described the dilemma of the seller (especially, a seller dealing with

masses, e.g. banks) as follows:

How the seller determines which buyers characteristics produce the best

partitioning of a particular market? The seller does not want to treat all customers

alike nor does he want to treat them all differently.

Banks deal with individuals, group of persons and corporates, all of whom have their

likes and dislikes. No bank can afford to assess the needs of each and everyindividual buyer (actual or potential).

Segmentation of the market into more or less homogenous groups, in terms of their

needs and expectations from the banking industry, provides a solution to this

problem.

This involves dividing the market into major market segments, targeting one or more

of this segments, and developing products and marketing programs tailor-made for

these segments.


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In the first segmentation, the market is divided from a unitary whole, to groups of

buyers who might require separate products and marketing mix. The marketer

typically tries to identify different segments in the market and develop profiles of

resulting market segments.

The second step is market targeting in which each segments attractiveness is

measured and a target segment is chosen based on tits attractiveness.

The third step is product positioning which is the act of establishing a viable

competitive position of the firm and its offer in the target segment chosen.

In the process of segmentation, the market can be divided into major segments

which are gross slices of the market, or into smaller specially formed segments,

otherwise known as niches. Niche customers have a specific set of needs which the

markerter tries to address. While a market segment attracts several competitors, a

niche attracts fewer competitors and therefore, a company should clearly define its

target segment and devise strategies to target the customer, so that it has a

competitive advantage in the segment.

These concepts can be applied in personal banking by an Indian Bank. Traditionally,

Indian Banks have not had any conscious strategy for selecting customers from the

personal banking area, apart from some banks which have a geographic

concentration strategy such as concentrating on a particular region or state. These

banks will have to segment the market on certain basis, and identify market

segments or niches which they want to cater to. For example, a bank like SBI may

not be able to cater high income groups (say, managers, professional, NRIs, etc.

who earn above Rs. 4,00,000 p.a. and who want a higher quality of products /

services and who are willing to pay for them), as the services required by such a

profile of customers are entirely different from the kind of products / services SBI can

offer.

Initiation of Segmentation in India


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Station Bank of India was the first Indian Bank to adopt the concept of market

segmentation. In 1972, it reorganized itself on the basis of major market segments

dividing customers on the basis of activity and carved out 4 major market segments,

viz. Commercial and Institutional, Small Industries and Small Business Segment,

Agriculture, Personal and Services Banking. The objectives of this scheme were:

Deeper penetration and coverage of market by looking outwards.

Adequate flexibility of organization to accommodate growth and rapid change,

Delegation of work for releasing senior management for more futuristic tasks.

Criteria for Segmentation

Segmentation in a right fashion makes the ways for profitable marketing. This helpspolicy planner in formulating and innovating the policies and at the same time also

simplifies the task of bank professionals while formulating an innovating the strategic

decisions. The following criteria make possible rig segmentation.

An important criterion for market segmentation the economic system in which we find

agricultural sector, industrial sector, services sector, household sector, institutional

sector and rural sector requiring of weightage while segmenting.

Agricultural Sector: In the agricultural sector, there are four category rise since the

needs of all the categories cants be identical.

The mechanization of agriculture, the improved or scientific system of activation, the

help of nature, the magnitude of risk, the availability infrastructural facilities influence

the level of expectations vis--vis the needs and requirements. The banking

organization are supposed to know and under stand the changing requirements of

different categories of farmers.


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Industrial Sector: The banking organizations subserve the interests of the industrial

sector. The large-sized, small-sized co-operative and tiny industries use the services

of banks. The expectations of all the categories cants be uniform.

The banking organizations are supposed to have an indepth knowledge of the

changing needs and requirements of the industrial segment.

Services sector: It is an important sector of the economy where the banking

organizations get profitable business. The two categories of organizations such as

profit-making and not-for-profit making are found important in the very context.

The banking organizations need to identify the changing needs and requirements of

the services sector. With the frequent use of information technologist and with the

mounting pressure of inflation and competition, we find a change in the hierarchy of

needs.

Household Sector: This is also constitutes an important sector where different

income group have different needs and requirements. in below figure we find thedifferent segments of the household sector.


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Household Segment: The high income group, middle income group, low income

group, substance level group and marginal income group have different hierarchy of

need which influence the level of their expectations.

Gender Segment: In the gender segments, we find male and female having

different needs and requirements. The banking organizations are supposed to

identify the level expectations of both sexes.

Some of the women are housewives and therefore they have different need and

requirements whereas some of them are working ladies having different needs and

requirements.

In the profession segments, we find different categories of professions an therefore

we find a change in their needs and requirements.


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The technocrats, bureaucrats, corporate executives, intellects, white and blue

collar employees have different needs and requirements and therefore the banking

organizations should know their expectations.

Some of the organizations are known as cultural organizations, some of them are not

forprofit making, some of them are philanthropic and some of them are related to

trade and commerce. The emerging trends in the social transformation process

determine the hierarchy of needs.

Markets segmentation thus simplifies the task of understanding the

customers/prospects. The bank professional find it convenient to formulate and

innovate the marketing mix of world class which simplify the process of excelling

competition.

In the Indian perspective where we find agrarian economy contributing substantially

to the transformation of national economy, it is pertinent that the banking


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organizations assign due weightage to the rural sector of the economy where we find

tremendous opportunities.

The urbanization is likely to gain the momentum and villages, outskirts of big towns

and cities are to be developed on a priority basis. Almost all the organizations are to

get tremendous opportunities there. The marketing resources if of innovative nature

would make the ways for capitalizing on the same profitably.


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Chapter 7

MARKETING MIX FOR BANKING SERVICES

The formulation of marketing mix for the banking services is the prime responsibility

of the bank professional who based on their expertise and excellence attempt to

market the services and schemes profitably.

The bank professionals having world class excellence make possible frequency in

the innovation process which simplify their task of selling more but spending less.

The four submixes of the marketing mix, such as the product mix, the promotion mix,

the price mix and the place mix, no doubt, are found significant even to the banking

organizations but in addition to the traditional combination of receipts, the marketing

experts have also been talking about some more mixes for getting the best result.

The People as a submix is now found getting a new p lace in the management of

marketing mix. It is right to mention that the quality of people/employees serving an

organization assumes a place of outstanding significance. This requires a strong

emphasis on the development of personally-committed, value-based, efficient

employees who contribute substantially to the process of making the efforts cost

effective. In addition, we also find some of the marketing experts talking about a new

mix, i.e. physical appearance. In the corporate world, the personal care dimension

thus becomes important. The employees re supposed to be well dressed, smart and

active. Besides, we also find emphasis on Process which gravitates our attention

on the way of offering the services. It is only not sufficient that you promise quality

services. It is much more impact generating that your promises reach to the ultimate

users without any distortion. The banking organizations, of late, face a number of

challenges and the organizations assigning an overriding priority to the formulation

processes get a success. The formulation of marketing mix is just like the

combination of ingredients, spices in the cooking process.


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The Product Mix:

The banks primarily deal in services and therefore, the formulation of product mix is

required to be in the face of changing business environmental conditions. Of course

the public sector commercial banks have launched a number of polices and

programmers for the development of backward regions and welfare of the weaker

sections of the society but at the same it is also right to mention that their

development-oriented welfare programmes are not optimal to the national socio-

economic requirements. The changing psychology, the increasing expectations, the

rising income, the changing lifestyles, the increasing domination of foreign banks and

the changing needs and requirements of customers at large make it essential thatthey innovate their service mix and make them of world class. Against this

background, we find it significant that the banking organizations minify, magnify

combine and modify their service mix.

It is essential that ever product is measured up to the accepted technical standards.

This is due to the fact that no consumer would buy a product which contains

technical faults. Technical perfection in service is meant prompt delivery, quick

disposal, presentation of right facts and figures, right filing proper documentation or

so. If computers starts disobeying the command and the customers get wrong facts,

the use of technology would be a minus point, and you dont have any excuse for

your faults.

Product Portfolio

The bank professional while formulating the product mix need to assign due

weightage to the product portfolio. By the concept product portfolio, emphasis is on

including the different types of services/ schemes found at the different stages of the

product life cycle. The portfolio denotes a combination or an assortment of different

types of products generating more or less in proportion to their demand. The quality

of product portfolio determines the magnitude of success. It is excellence of bank

professionals that help them in having a sound product portfolio.


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We find the composition of a family sound, if members of all the age groups are

given due place. Like this, the composition or blending of a service mix is considered

to be sound, if well established and likely to be profitable schemes are included in

the mix. It is against this background that a study and analysis of product portfolio is

found significant. The bank professionals are supposed to perform the responsibility

of composing the same. A sound product portfolio is essential but its process of

constitution is difficult. An organization with a sound product portfolio gets a

conducive environment and successes in increasing the sensitivity of marketing

decisions. The banking organizations need a sound product portfolio and the bank

professionals bear the responsibility of getting it done suitably and effectively.

If the banks rely solely on their established services and schemes, the

multidimensional problems would crop up in the long run because when the well

established services/schemes would start saturating or generating losses, the

commercial viability of banks would of course, be questioned. The banking

organizations relying substantially on a profitable scheme and ding nothing for new


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scheme likely to get a profitable market in the future is to face is to face a crisis like

situation. It is in this context, that we find designing of a sound product portfolio

essential to an organsition. We cant deny that the product portfolio of the foreign

banks is found sound since they keep their eyes moving. The innovation, diffusion,

adoption and elimination processes are taken due care. The public sector

commercial banks need to innovate their service and this makes a strong advocacy

in favour of analyzing the product portfolio.

Designing an attractive package:

In the formulation of product mix for the banking organization, the designing of

package is found important. In this context, we find packaging decision related to theformulation of a mix of different schemes and services. Developing an attractive

package required professional excellence and therefore, the bank professionals are

required to be aware of the different key issues influencing the formulation process.

What the package should basically be or do for the particular target. We re aware of

the fact that a number of schemes and services are included in the service mix of

bank product and all the services or schemes cant be preferred by all. Of course we

find some of the public sector commercial banks now evincing stage. This makes it

essential that a bank manager thinks in favour of developing a package. The

importance of packaging cant be underestimated considering the functions it

performs and the effects which we witness in the process of attracting and satisfying

the customers. In addition to other aspects, it is also pertinent that a bank manager

is familiar with the package developed by the leading competitive banks since this

would help them in innovating the package. It is an important component of the

product mix and a bank manager while formulating or designing a package needs to

assign due weightage to the formulation process. While developing a package, it is

essential that the packages offered are efficacious in establishing an edge over the

packages of competitors. Thus needs and preferences of the target market in

addition to the packages offered by the competitors need due weightage while

designing a package.

In the designing process the bank professionals can make a package, an ideal

combination of both, the core and peripheral services. The main thing in the process


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is to make it profitable, convenient and productive to the customers so that they

prefer to transact with the bank. For the bank professional, it is an important

persuasive efforts that helps in increasing the business even without developing or

innovating the services or schemes.

Product Development

In almost all the services, the development of a product is an ongoing process. The

banking organizations also need to develop new services and schemes. We cant

deny that the development of product specially in the banking services is found

diffcult since they dont have any discretion, however they can do it, of course in a

limited way. By minifying, combining, modifying and magnifying, the banking

organizations can give to the services or scheme a new look. The regulations of the

Reserve Bank of India, no doubt stand as a barrier but professionally sound

marketers make it possible even without violating the rules and regulations. The

banking organizations in general have been found developing product by including

some new properties or features. Generally we find two process for the development

of product. The first process is found proactive since the needs of the target market

are anticipated and highlighted. The second process is reactive and in this context

the banks respond to the expressed needs of the target.

Proactive Process

In the pro-active process, we find product to market needs. This makes it essential

that the branch managers are aware of the changing needs of the target market.

There are six stages for the development of the product, such as idea generation,

screening of the concept, assessing of market potential, analyzing the cost, test

marketing and final commercial launching. The bank professionals have to be careful

at all the stages so that whatever the services or schemes are developed are found

instrumental in getting a positive response. The customers and competitors help

bank professional substantially in generating a new idea. The screening of the

product concept focuses on the process of narrowing down the list of the ideas

generated to a small number of concepts.


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The assessment of market potential is the third stage in which we find scanning of

the market potentials at the apex level. The branch managers can assess the

potential sin their command areas.

The fourth stage draws our attention on analyzing the cost on the basis of a cost-

benefit analysis and the fifth stage before launching is test marketing which is found

instrumental in minimizing the risk element. And finally, we find commercial

launching. The Reserve Bank of India is also required to make the regulations liberal

so that the pubic sector commercial banks get an opportunity to make their services

or schemes internationally competitive. The unfair practices, illegitimate steps should

be checked but fair practice should essentially be promoted to make the business

environment conductive.

Promotion Mix

In the formulation of marketing mix the bank professionals are also supposed to

blend the promotion mix in which different components of promotion such as

advertising, publicity, sales promotion, word-of-mouth promotion, personal selling

and telemarketing are given due weightage. The different components of promotion

help bank professionals in promotion the banking business.

Advertising

Like other organizations, the banking organizations also us this component of the

promotion mix with the motto of informing, sensing and persuading the customers.

While advertising, it is essential that we know about the key decision making areas

so that its instrumentality helps bank organization both at micro and macro levels.


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Finalizing the Budget

This is related to the formulation of a budget for advertisement. The bank

professionals, senior executives and even the police planners are found involved in

the process. The formulation of a sound budget is essential to remove the financial

constraint in the process. The business of a bank determines the scale of

advertisement budget.

Selecting a Suitable vehicle

There are a number of devices to advertise, such as broadcast media, telecast

media and the print media. In the face of budgetary provisions, we need to select a

suitable vehicle. The latest developments in the print technology have made print

media effective. The messages, appeals can be presented in a very effective way.

Making possible creativity

The advertising professionals bear the responsibility of making the appeals, slogans,

messages more creative. The banking organizations should seek the cooperation of

leading advertising professionals for that very purpose.

Instrumentality of branch managers

At micro level, a branch manager bears the responsibility of advertising locally in his

/ her command area so that the messages, appeals reach to the target customers of

the command area. Of course we find a budget for advertisement at the apex level

but the business of a particular branch is considerably influenced by the local

advertisements. If we talk about the cause-related marketing, it is the instrumentality

of a branch manager that makes possible the identification of local events, moments

and make advertisements condition-oriented.

Public Relations

Almost all the organization need to develop and strengthen the public relations

activities to promote their business. We find this component of the promotion mix

effective even in the banking organizations. We cant deny that in the banking

services, the effectiveness of public relations is found of high magnitude. It is in this

context that we find a bit difference in the designing of the mix of promoting the

banking services. Of course in the consumer goods manufacturing industries, we


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find advertisements occupying a place of outstanding significance but when we talk

about the service generating organizations in general and the banking organizations

in particular, we find public relations and personal selling bearing high degree of

importance. It is not meant that the banking organizations are not required to

advertise but it is meant that the bank executives unlike the executives of other

consumer goods manufacturing organizations focus on public relations and personal.

Personal Selling

The personal selling is found instrumental in promoting the banking business. It is

just a process of communication in which an individual exercise his/her personal

potentials, tact, skill and ability to influence the impulse buying of the customers.

Since we get in immediate feed back, the personal selling activities energies the

process of communication very effectively.

The personal selling in an art of persuasion. It is a highly distinctive form of

promoting sale. In personal selling, we find inter-personal or two-way communication

that makes the ways for a feed back. There is no doubt in it that the goods or

services are found half sold when the outstanding properties are well told. This are of

telling and selling is known as personal selling in which an individual based on

his/her expertise attempts to transform the prospects into customers.

Dynamics of Personals Selling

The dynamics of personal selling are found instrumental in activating the selling

activities. Sales preparations are considered most crucial for the actual sales. Pre-

sale activities and post-sale services cant be left neglected to improve the marketing

activities. The customers may be interested in knowing the main features of the

services, how a particular service would help them, rationale behind the technical

services and proof in regard to its uses. The pre-sale activities would bring the

positive results, if preparations are adequate.

Some of the customers are found highly aware of the developments, they are found

well informed. On the other hand, we also find other category of customers who are

in dark. Here, the branch managers are expected to match the level of awareness of


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customers. As for instance, Mr. A goes up the matrix but Mr. B has not enough time

for the branch managers. The branch managers are supposed to prepare a synopsis

of their sales talk. Not surprisingly the highly aware customers are found in

apposition to make independent decisions and know all about. While selling to the

less aware customers, the managers should stress on the main features of the

services and the expected benefits of these services.

Sales Promotion: It is natural that like other organisations, the banking

organizations also think in favour of promotional incentives both to the bankers as

well as the customers. The banking organizations make provisions for incentives to

the bankers and call the bankers promotion. Like this, the incentives offered to the

customers promotion. There are a number of tools generally used in the different

categories of organizations in face of the nature of goods and services sold by them.

The gift, contests, fairs and shows, discount and commission, entertainment and

travelling plans for bankers, additional allowances, low interest financing and

retalitary are to mention a few found instrumental in prmoting the banking business.

As and when the banking organizations offer new services and schemes, the tools of

sales promotion are required to be innovated. This is with the motto of stimulating

the new and old customers. An important thing in the very context is the changing

needs and requirements of customers/prospects. The bank professionals been

outstanding task of studying the competitors strategies which would help them in

intiating the process of innovation. Here it is important to mention the promotional

incentives to the customers would focus on decision related to the selection of a tool.

There are a number of considerations to streamline the process. The bank


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professionals are supposed to study the market conditions and make necessary

suggestions, especially regarding the incentives.

It is a blending process and bank professional have to be sure that whatever

provisions, they make are fulfilled on priority basis. More incentives more efficiency

or vice-versa conditions more efficiency, more incentives motivate bankers

substantially.

The price mix:

In formulation of product mix, the pricing decisions occupy a place of outstanding

significance. The pricing decisions or the decisions related to interest and fee or

commission charged by banks are found instrumental in motivating or influencing thetarget market. The reserve bank of india and the Indian Banking Association are

concerned with regulations. The rate of interest is regulated by the RBI and other

charges are controlled by Indian Banking Association. To be more specific in the

Indian setting, we find this component of the marketing mix significant because the

banking organizations are also supposed to subserve the interest of weaker sections

and backward regions. The public sector commercialbanks in particular complicate

the problem of pricing.

Pricing policy of a bank is considered important for raising the number of customers

vis--vis the accretion of deposits. Ofcourse, there are a number of factors to

influence the process but it is also right to mention that the key role in the entire

process is played by the RBI. A National Consumer Survey conducted by the

L.H.Associates reveals that the quality of consumer service was one of the three top

issues and the consumers ranked the quality of their bank relationships as even

more important than the fees charged for the services. To be more specific when we

find a number of domestic and foreign banks working in the Indian economy, the RBI

bears the responsibility of making the business environment sonductive. The non-

banking organizations and foreign banks have been found attracting customers by

offering them a number of incentives. The potential customers or investors frame

their investment plans in the face of pricing decisions made by the banking

organizations. While formulating the pricing strategies, the banks have also to take

the value satisfaction variable into consideration. The value and satisfaction cant be

quantified in terms of money since it differs from person to person, keeping in view


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the level of satisfaction of a particular segment, the banks have to frame their pricing

strategies. The policy makers are required to be sure that the service offered by

them are providing satisfaction to the customers concerned. The pricing decisions

may be bit liberal, if the potential customers are found shifting ti the non-baking

investments. In this context, it is pertinent that pricing is used as motivational tool.

The banking organizations are required to frame two-fold strategies. First, the

strategy concerned with the interest and fee charged and second, the strategy is

related to the interest paid. Since both the strategies throw a vive-versa impact, it is

pertinent that the banks attempt to establish a correlation between the two. It is

essential that both the buyers as well as sellers have a feeling of winning.

The banks have to take the value satisfaction variable into consideration while

designing the pricing strategies. Mclver and Naylor opine that a marketing manager

has to regard price as a variable to be traded off against product quality and

promotion rather that as an absolute where the lowest price is not desirable.

The RBI has to be more liberal so that the public sector commercial banks make

decisions in the face of changing business conditions. There is no doubt in it that the

commercial banks bear the responsibility of energizing the social marketing, they are

also supposed to bear the social costs. It is also right that the foreign banks have

found making the business environment competitive. These emerging trends

necessitate a close look on the pricing problem. The policy makers find it difficult to

bring a change since the regulations of the RBI make things more critical. The

expenses are not regulated by the RBI and the banking organizations are forced to

increase the budgetary provisions. The sources of revenue are regulated which

complicates the task of bank professionals. This makes it essential that the RBI, the

Government of India and the banking organizations think over this issue with a new

vision.

The Place Mix:

This component of the marketing mix is related to the offering of the services. The

two important decision making areas are making available the promised services to

the ultimate users selecting a suitable place for bank branches.

The selection of a suitable place for the establishment of a branch is significant with

the viewpoint of making the place accessible and in addition, the safety and security


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provisions are also found important. The banking organizations are not free to open

a branch since the RBI regulates the subject of branch expansion but so far as the

management of branch is concerned, the branch managers have option to select a

place which is convenient to both parties, such as the users and the bankers. In the

Indian perspective, the protection to the banks assets and safety to the users and

bankers need due weightage. The vulnerable area or regions need adequate

provisions to make the branch safe. The management of office is also found

significant with the viewpoint of making the services attractive. The furnishing, civic

amenities and parking facilities cant be overlooked.

Another important decision making area is related to the offering of services. This

draws our attention on the behavioral profile of bankers. The bankers in general and

the front-line staff in particular bear the responsibility of making available the

services promised to the ultimate users without any distortion often a gap is found

generated by the front-line staff that makes an invasion on the image of bank. The

bank professionals or a manager is required to be sure that whatever the promise

has been made regarding the quality of services are not distorted. The RBI and the

different public sector commercial banks are required to manage the distribution

process intelligently and professionally. Thus, the place mix is found to be an

important decision making area which requires due attention, both at macro and

micro levels. If the banking organizations sell the promises, it is essential that the

end users get the same without any distortion.

The People:

Sophisticated technologies, no doubt, inject life and strength to our efficiency but the

instrumentality of sophisticated technologies star turning sour if the human

resournces are not managed in a right fashion. Generation of efficiency is

substantially influenced by the quality of human resources. It is against this

background that a majority of the management experts make a strong advocacy in

favor of developing quality people and late, the people management has been

included in the marketing mix of organizations is general and the service generating

organizations in particular.

Not only the public sector commercial banks but almost all the public sector

organization and albeit other government departments, off-late, have been facing the

problem of quality people resulting into inefficiency, deceleration in the rate of overall


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productivity and profitability or so. The front-line staff are rough and indecent, the

branch managers are helpless and even the bankers have been found involved in

the unfair practices. The public sector commercial banks need to assign an

overriding priority to the development of the quality people majority of the

management of the experts have realized the significance of quality people in the

development of an organization and the board rooms are also found changing their

attitudes. The first task before the banking organizations at the apex level is to over

haul the recruitment processes. While fixing criteria for selction, they need to assign

due wieghtage to the ethical values. The education and training facilities are required

to be innovated the process of identification and inculcation need to be managed

carefully.

The foreign banks and private sector commercial banks reward for efficiency and at

the same time also demotivate the inefficient bankers. This helps them in improving

the effieicncy of even the inefficient people. The development of human resources

makes the ways for the information of human capital. Incentives, ofcourse, inject

efficiency and the organizations offering more incentives succeed in motivating the

people.

Having better and co-effective control over operations

Enriching the job content of employees at all levels.

Improving the quality of decision making, a must in the fast changing

environment.

Thus, the key focus areas in which information technology can be employed are:

Automated processing of back office operations like processing of forms,

policy customerization and product slection, pricing and preparation of

quotations etc.

Computer assisted telephone and intelligent voice processing of customer call

handling, new business marketing or handling after office hours enquiries.

Image processing for documents, storage and retrieval, folder management

and work flow management for the movement of documents with the bank.

Artificial intelligence and expert systems for complex decision making like the

appraisal of the of the creditworthiness of clients designing of innovative

instruments and strategy formulation.

RDBMS for the systematic use of information which would facilitate the cross

selling of products.


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Electronic Data Interchange for company wise communication and inter

connection of systems for the benefit of both banks MIS and the customers.

All the above systems should be client-base systems and not line of business

systems. Since these would provide better marketing and service to clients, facilitate

cross selling and customerization of schemes and hence, a better packaging for the

product. This would help the Indian banks think customer.

All these would, thus, help in the effective management of time. Recourse to

mechanized systems like ledger posting, machine, cash counting machine, and

cheque sorting machine would result in reduction in the number of tedious and

routine jobs to be handled manually saving time for the people to focus on the

customer.

Strategies for effective abnk marketing in India:

Introduction: since the inception of globalization in India, banking sector ahs

undergone various changes. Introduction of asset classification and prudential

accounting norms, deregulation of interest rate and opening up of the financial sector

made Indian banking sector competitive. Encouragement to foreign banks and

private sector banks increases competition for all operatives in banking sector. The

protective regime by the authority is over. Indian banks are exposed to global

competition. Even competition within the country has increased manifold. The almost

monopoly position enjoyed by the public sector banks of India is no more existence.

Under this development, Indian banks need to reinvent the marketing strategy for

growth.

The spread of the bank in Indian rural and semi urban areas are highly different from

state to state and region to region. Many states have fewer networks of bank

branches in the rural areas and research scenatios different marketing approach for

different areas are required. If the bank follows the same marketing strategy for all

areas the success would be difficult.

Marketing approach for urban areas:

The urban areas of India are developed taking into account all parameters of

development. The level of income of the people, the literacy rate and level of

education as well as awareness of the people about rights of the customer are

higher than that of the rural and even semi-urban areas. Thus, here for effective

bank marketing different approach is necessary than that of rural areas.


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The marketing strategy should be based on customer service and the use of modern

technology in banking. Under competitive environment for the success of the

business, better customers and retaining existing customers is possible only with

customer service. Use of modern technology in urban areas will also go long way for

marketing of banking services. Technology based services like credit card, debit

card, ATM, any where banking, internet banking and mobile banking are necessary

for urban areas. This is because it enables customer to perform banking transaction

at their convenience. Business hours of bank are also an important factor for urban

banking. India many private sector banks, especially co-operative banks and now

even some of the public sector banks have also started this practice and they find it

successful. To attract business and wholesale customers, banks need to adopt

technology based product and service which is suitable to such class of customer.

For instance, RTGS, collection of outstation cheques, issuing the cheques at par at

any branch in the country, cash management facility, DD etc are necessary. Another

strategy of effective marketing is bank need to change the focus from the traditional

banking to universal banking. In urban areas, the extend and variety if economic

activities demands that one institution should meet all financial needs of a customer.

Under such an expectation of people, universal banking would prove successful

approach for bank marketing. The term Universal banking in general refers to the

combination of commercial banking and investment banking that is issuing,

underwriting, investing, trading in securities.

For increasing customer base and retention of the existing clientele universal

banking approach is effective strategy. Universal banking offers number of benefits

to customers as well as the banks. For instance, economies of scale arise in multi

product firms because cost of offering various activities by different units are greater

than the costs when they are offered together. Moreover the most important benefit

for the bank is that it is useful to increase the fee beased income of the bank.

Financial sector passing from lower interest rate regime at present and added to this

the process of disintermediation is affecting the main and the traditional source of the

income for the banks i.e., interest income. All banks are striving hard to increase

their fee based income to improve their bottom line. Universal banking can help the

banks here positively.


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Marketing approach for rural areas:

Prior to nationalization of banks in 1969, the rural areas were virtually without

banking facilities. At that time unorganized sector was dominating in the rural

finance. After nationalization of banks in 1969 branches of the banks were startedgradually in the rural areas also. Today more than 50% branches of the banks are

found in the rural areas. However, the distribution of banks in the rural areas is highly

uneven. Here banks have to face competition with the unorganized sector. Moreover

the rural banking is highly regularized activity by the Government in India. Lending

as well as interest rate is regularized. Thus under such environment different

marketing approach is required. For effective rural marketing product development,

promotion and communication is important. All these parameters banks have to

balance with socio-economic factors prevailing in the rural areas. Bank need to

innovate product that could attract the depositors. Various loan schemes that are

suitable for them for getting funds at right time and also they find convenient to

repay. For instance traditional savings bank account may be given fixed deposit

concept that once a particulat limit of balance is reached the funds from savings

account is automatically coveted into fixed depost attracting higher interest rate.

Banks need to develop some scheme which would attract them to bank with. For

loans and advances products which are suitable to farmers, small traders, small

scale agro based rural industries are already in existence. Banks need to see how

value addition can be made to these existing scheme. Banks also need to tie up with

the NGOs and various SHGs for different types of loans and micro financing. This

will help the bank for building good image and reputation in the rural areas over and

above the business. Another potential area which can be explored by banks in the

rural area is retail banking. With the steady increase in the income of the rural people

there is ample scope for retail loan products like housing loans and loan for

consumer durables.

Marketing through customer services in rural areas is different from that of urban

areas. Here personalized banking is the success manthra for banks. Because of high

level of illiteracy people prefer to undertake banking transaction themselves. They

hesitate to depend upon technology based service. For effective marketing in rural

areas, bank should have staff with right soft skill like concern for customers problem,

positive attitude, good communication and negotiation skill. At every level of dealing


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with the customer bank need to educate them for banking activates and process. To

attract the customers from the unorganized sector most important factor is to

provide, the borrower the required finance of right amount at right time.


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Traditional banking

Gunpowder

Personalized services, time

consuming, limited access

Virtual or E-banking

Nuclear charged

Real time transactions,

integrated platform, all time

access

Chapter 8

EVOLUTION OF E-BANKING

The story of technology in banking started with the use of punched card machines

like Accounting Machines or Ledger Posting Machines. The use of technology, at

that time, was limited to keeping books of the bank. It further developed with the birth

of online real time system and vast improvement in telecommunications during late

1970s and 1980s.it resulted in a revolution in the field of banking with convenience

banking as a buzzword. Through Convenience banking, the bank is carried to the

doorstep of the customer.

The 1990s saw the birth of distributed computing technologies and Relational Data

Base Management System. The banking industry was simply waiting for these

technologies. Now with distribution technologies, one could configure dedicated

machines called front-end machines for customer service and risk control while

communication in the batch mode without hampering the response time on the front-

end machine.

Intense competition has forced banks to rethink the way they operated theirbusiness. They had to reinvent and improve their products and services to make

them more beneficial and cost effective. Technology in the form of E-banking has

made it possible to find alternate banking practices at lower costs.

More and more people are using electronic banking products and services because

large section of the banks future customer base will be made up of computer literate

customer, the banks must be able to offer these customer products and services that

allow them to do their banking by electronic means. If they fail to do this will, simply,


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not survive. New products and services are emerging that are set to change the way

we look at money and the monetary system.


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E-BANKING PRODUCTS

Automated Teller Machine (ATM)

These are cash dispensing machine, which are frequently seen at banks and otherlocations such as shopping centers and building societies. Their main purpose is to

allow customer to draw cash at any time and to provide banking services where it

would not have been viable to open another branch e.g. on university campus.

An automated teller machine or automatic teller machine (ATM) is a

computerized telecommunications device that provides a financial institution's

customers a method of financial\ transactions in a public space without the need for

a human clerk or bank teller. On most modern ATMs, the customer identifies him or

herself by inserting a plastic ATM card with a magnetic stripe or a plastic smartcard

with a chip that contains his or her card number and some security information, such

as an expiration date or CVC (CVV). Security is provided by the customer entering a

personal identification number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash

withdrawals (or credit card cash advances) and check their account balances. Many

ATMs also allow people to deposit cash or checks, transfer money between their

bank accounts, pay bills, or purchase goods and services.

ATMs are known by various casual terms including cash machine, hole-in-the-wall,

cash point or Bancomat (in Europe and Russia). The occasionally-used ATM

Machine is an example of RAS syndrome.

Some of the advantages of ATM to customers are:-

Ability to draw cash after normal banking hours

Quicker than normal cashier service

Complete security as only the card holder knows the PIN

Does not just operate as a medium of obtaining cash.

Customer can sometimes use the services of other bank ATMs.


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Telebanking or Phone Banking

Telephone banking is relatively new Electronic Banking Product. However it is fastly

becoming one of the most popular products. Customer can perform a number of

transactions from the convenience of their own home or office; in fact from anywhere

they have access to phone. Customers can do following:-

Check balances and statement information

Transfer funds from one account to another

Pay certain bills

Order statements or cheque books

Demand draft request

This facility is available with the help of Voice Response System

(VRS). This system basically, accepts only TONE dialed input. Like the ATM

customer has to follow particular process, initially account number and telephone

PIN are fed for the process to start. Also the VRS system provides the users within

additional facilities such as changing existing password with the new desired,

information about new products, current interest rates etc.

Mobile Banking

Mobile banking comes in as a part of the banks initiative to offer multiple channel

banking providing convenience for its customer. A versatile multifunctional, free

service that is accessible and viewable on the monitor of mobile phone. Mobile

phones are playing great role in Indian banking- both directly and indirectly. They are

being used both as banking and other channels.

Internet Banking

The advent of the Internet and the popularity of personal computers presented both

an opportunity and a challenge for the banking industry. For years, financial

institutions have used powerful computer networks to automate million of daily

transactions; today, often the only paper record is the customers receipt at the point

of sale. Now that their customers are connected to the Internet via personal

computers, banks envision similar advantages by adopting those same internal

electronic processes to home use.


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Banks view online banking as a powerful value added tool to attract and retain new

customers while helping to eliminate costly paper handling and teller interactions in

an increasingly competitive banking environment. In India first one to move into this

area was ICICI Bank. They started web based banking as early as august 1997.

Types of Internet Banking or e-Banking

Understanding the various types of Internet banking will help examiners assess the

risks involved. Currently, the following three basic kinds of Internet banking are being

employed in the marketplace.

Informational- this is the basic level of Internet banking. Typically, the bankhas marketing information about the banks products and services on a stand-

alone server. The risk is relatively low, as informational systems typically have

no path between the server and the banks internal network. This level of

Internet banking can be provided by the banks or outsourced. While the risk to

a bank is relatively low, the server or web site may be vulnerable to alteration.

Appropriate controls therefore must be in place to prevent unauthorized

alterations to the banks server or web site.

Communicative- this type of Internet banking systems and the customer. The

interaction between the banks system and the customer. The interaction may

be limited to electronic mail, account enquiry, loan applications, or static file

updates (name and address change). Because these servers may have a

path to the banks internal networks, the risk is higher with this configuration

than with informational systems. Appropriate controls need to be in the place

to prevent, monitor, and alert management of any unauthorized attempt to

access the banks internal networks and computer systems. Virus controls

also become much more critical in this environment.

Transactional- this level of Internet banking allows customers to execute

transactions. Since a path typically exists between the server and the bank or

outsourcers internal network, this is the highest risk architecture and must


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have the strongest controls. Customer transactions can include accessing

accounts, paying bills, transferring funds etc.

Advantages of e-Banking

Convenience- Unlike your corner bank, online banking sites never close;

theyre available 24 hours a day, seven days a week, and theyre only a

mouse click away.

Ubiquity- If youre out of state or even out of the country when a money

problem arises, you can log on instantly to your online bank and take care of

business, 24\7.

Transaction speed- Online bank sites generally execute and confirm

transactions at or quicker than ATM processing speeds.

Efficiency-You can access and manage all of your bank accounts, including

IRAs, CDs, even securities, from one secure site.

Effectiveness- Many online banking sites now offer sophisticated tools,

including account aggregation, stock quotes, rate alert and portfolio managing

program to help you manage all of your assets more effectively. Most are also

compatible with money managing programs such as quicken and Microsoft

money.

Disadvantages of Internet Banking

Start-up may take time-In order to register for your banks online program,

you will probably have to provide ID and sign a form at a bank branch. If you


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and your spouse wish to view and manage their assets together online, one of

you may have to sign a durable power of attorney before the bank will display

all of your holdings together.

Learning curves- Banking sites can be difficult to navigate at first. Plan to

invest some time and\or read the tutorials in order to become comfortable in

your virtual lobby.

Bank site changes- Even the largest banks periodically upgrade their online

programs, adding new features in unfamiliar places. In some cases, you may

have to re-enter account information.


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E- BANKING SERVICES:

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and

insurance companies, across the country. It facilitates the payment of electricity and

telephone bills, mobile phone, credit card and insurance premium bills.

To pay bills, a simple one-time registration for each biller is to be completed.

Standing instructions can be set, online to pay recurring bills, automatically. One-

time standing instruction will ensure that bill payments do not get delayed due to lack

of time. Most interestingly, the bank does not charge customers for online bill

payment.

2. Fund transferAny amount can be transferred from one account to another of the same or any

another bank. Customers can send money anywhere in India. Payees account

number, his bank and the branch is needed to be mentioned after logging in the

account. The transfer will take place in a day or so, whereas in a traditional method,

it takes about three working days. ICICI Bank says that online bill payment service

and fund transfer facility have been their most popular online services.

3. Credit card customersCredit card users have a lot in store. With Internet banking, customers can not only

pay their credit card bills online but also get a loan on their cards. Not just this, they

can also apply for an additional card, request a credit line increase and God forbid if

you lose your credit card, you can report lost card online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up

with ICICI bank and you can now make your railway pass for local trains online. The

pass will be delivered to you at your doorstep. But the facility is limited to Mumbai,

Thane, Nasik, Surat and Pune. The bank would just charge Rs 10 + 12.24 percent of

service tax.


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5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be opened

online through funds transfer. Online banking can also be a great friend for lazy

investors.Now investors with interlinked demat account and bank account can easily trade in

the stock market and the amount will be automatically debited from their respective

bank accounts and the shares will be credited in their demat account.

Moreover, some banks even give the facility to purchase mutual funds directly from

the online banking system.

So it removes the worry about filling those big forms for mutual funds, they will now

be just a few clicks away. Nowadays, most leading banks offer both online banking

and demat account. However if the customer have there demat account with

independent share brokers, then need to sign a special form, which will link your two

accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone, every

time the talk time runs out. Just top-up the prepaid mobile cards by logging in to

Internet banking. By just selecting the operator's name, entering the mobile number

and the amount for recharge, the phone is again back in action within few minutes.

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind

of products, one can shop online and the payment is also made conveniently through

the account. One can also buy railway and air tickets through Internet banking.


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Internet Banking versus Traditional Banking

In spite of so many facilities that Internet banking offers us, we still seem to trust our

traditional method of banking and is reluctant to use online banking. But here are few

cases where Internet banking will turn out to be a better option in terms of savingyour money.

'Stop payment' done through Internet banking will not cost any extra fees but when

done through the branch, the bank may charge you Rs 50 per cheque plus the

service tax.

Through Internet banking, you can check your transactions at any time of the day,

and as many times as you want to.

On the other hand, in a traditional method, you get quarterly statements from the

bank and if you request for a statement at your required ti

Documents

Marketing in Banking