BFSI VISION | Alternate Channels


Girish VS

Managing Editor, BFSI Vision

An Alternate to Alternate Channels

The recent ad where a harried man searching for a SBI bank branch, finding it in his pocket- his mobile - brings out the ubiquity of alternate channels. Customer 3.0 is supposed to be the wireless customer – used to banking on the mobile, tab or any other mobile device. A whole new gamut of technology enabled channels have emerged – and banks have embraced them to reduce costs and improve service. Alternate channels are at the core of the bank’s strategy – to get people to move from branches to other channels.

Not sure how logic works in banks – recently RBI allowed banks to charge for use of ATM – an alternate channel preferred by customers for withdrawing. And banks promptly levied a service fee for the sixth transaction onwards from their customers for using their ATMs. Two things happen – one cash holding by individuals will increase – people will prefer to withdraw in bulk and keep it at home to avoid the transaction fee, leading to a reduction in deposits in banks or they may visit the branch for transaction – which will push up costs. Either way I do not see the benefit.

Which brings us to the question – how can a bank shift a customer to use these alternate channels. I remember senior banking professionals tell me – you cannot shift a customer – the customer will choose the channel. If so, how do banks justify the investments in these channels?

One way out would be to use pricing for services – price the higher price channels – like branch contact a higher service fee. And hope more people will migrate to the lower priced channels. If so, the current practice of slapping a charge on the ATM usage does not make sense.

For a while we focused on internet – but with internet penetration still low, it is proving a damp squib. Mobile banking, on the other hand, is still to find the kind of acceptance that its promise holds. Two developments hold promise – one is the IMPS from NPCI for micro payments – we can now pay for a bus ticket using mobile – and the other is the mobile wallet. If banks develop mobile wallet, which can be synced with the customer’s account in real time, we may see customers using the mobile for payments. This will reduce the load on mobile, be cheaper for the banks and safer for the customer. But hopefully, banks will not levy a service fee up front.

The way we are being charged – we may soon need an alternate to alternate channels!