The global retail banking industry is not out of the woods yet, stated a report by the Boston Consulting Group (BCG). It added deposit margins were being squeezed by low rates.
In a scenario in which competition is increasing and fees are under pressure from regulators, banks that generate sufficient margins on their assets to compete aggressively for funding would be the ones that gain.
The report stated, “In developed markets, revenue growth is stagnant (at best), and credit demand is weak. So, re-pricing is a must.”
Saurabh Tripathi, partner BGC India, said in a departure from global business trends, Indian banks focusing on the retail sector recorded better growth. Also, non-banking financial companies had become active and had expanded significantly.
Innovation, a new business model and technology adoption were crucial for Indian financial players to grow in the retail banking space, he added.
According to BCG, there has been a shift in the roles of products and channels. In instances of this change, the study explored areas like banking relationships with customers, savings accounts, cards and loans, mortgages, branches and the online, mobile, call centre and the ATM channels. On banking relationships with customers, the report stated earlier, such a relationship with customers was not considered profitable. However, today, it is the retail banking sector’s sine qua non. Similarly, earlier, credits and loans were sold as standalone products or cross-sold to deposit and mortgage customers with thin margins. However, today, they are crucial sources of margin, the report added.
The online channel had also evolved into a primary convenience option focused on high-volume activity, the report stated. However, it added the branch network remained the primary channel for acquiring and deepening relationships. “The focus is on high-touch transactions and high-value customers,” it stated.
