Innovate & flourish

NEW INITIATIVES

Banks are going all out to introduce an element of novelty in their customer service, says Shriya Bubna

In July this year, K C Chakrabarty, chairman and managing director of Chennai-based Indian Bank, read Management Challenges for the 21st Century by Peter Drucker, the management guru who believes that business growth and expansion can be best driven by alliances and partnerships, not so much by mergers and acquisitions or new wholly owned outfits.

Two months later, on September 16, he was on a plane to Mumbai, to be joined there by B Sambamurthy, chairman of Mangalore-based Corporation Bank, and K N Prithviraj, the chairman of Delhi-based Oriental Bank of Commerce, both of whom, having bought the idea, flew into the country's financial capital the same day.

At a press conference, the three musketeers, hands raised high in the air, ushered in their strategic alliance to stay afloat in an increasingly fish-eat-fish world of banking. At Rs 1,47,079 crore, the total asset size of the three banks is only marginally bigger than the Rs 1,45,267 crore of Punjab National Bank, and decidedly dwarfed by the State Bank of India's asset base of Rs 4,60,00 crore.

Yet, the three together stand a better chance to survive, flourish and, innovate. For, innovation is increasingly emerging as the beacon of hope for most.

While the alliance is all new, innovation has been pervading all types of products and services for some time. Today, if a ship loaded with goods arrives at the Vizag port, the goods can be unloaded immediately, thanks to a technology that integrates a bank's system with that of the port. Earlier, the unloading took a week.

Very soon, a car loan would be a combination of a loan and an overdraft facility. If a customer wants a loan to buy a Honda Accord, Rs 5 lakh would be extended on an instalment basis and Rs 10 lakh on an overdraft basis.

"The overdraft process could replace the instalment process in procuring loan products," says V Vaidyanathan, executive director of ICICI Bank. The paybacks are high in terms of customer loyalty. "If you don't innovate, you can't charge any premium on your services," explains Nicholas Winsor, the head of personal financial services with HSBC India.

Two years ago, HSBC gave customers the option of either paying back the loan in equal instalments or making higher front-end or back-end payments. The customer could even decide on the nature of the interest rate "" floating or fixed.

"Customers used to feel that the bank was in total control and they did not have any say in the business process... This product offered them flexibility," points out Winsor. My Terms Credit has come to account for about 90 per cent of HSBC's personal loan sales.

Extending the concept to home loans, the British bank introduced a flexible product earlier this year which gave the customer the option to increase or decrease repayment amounts by up to 15 per cent in a given year.

Dutch bank ABN Amro allowed its home loan customers to pay lower interest rate at the initial stage and shift to the market driven higher rates later when the bank launched its mortgage product a few years back. The verdict is unanimous: Innovation creates customer value.

"This is especially so in the case of foreign banks, which have fewer branches than a public or private sector bank," says Murali Natrajan, regional head, consumer banking, India & Nepal, Standard Chartered Bank.

A few years ago, Standard Chartered launched Parivaar account, in which individuals could maintain zero balance if the family members collectively kept the minimum balance.

Credit cards have seen the maximum innovation, with a plethora of banks offering cash-back offers on various purchases.

A proposed chip-based credit card by UTI Bank would allow merchant establishments such as Pizza Hut and grocery shops to customise offers for cardholders.

The SBI Cards-GE Money combine is planning an instant earn-and-burn programme on the Tata card platform, in which rewards points earned on a purchase can be redeemed the next moment for a cup of coffee or a bowl of noodles. HSBC India has all its offers on one core card; the customer needs to carry just the one in the wallet.

However, some see limited scope to innovate at the core. KVS Manian, group head, retail liabilities and branch banking, Kotak Mahindra Bank, says there is space for innovation on the fringes. The bank allows customers to buy and redeem mutual fund units online and through phone banking.

HDFC Bank allows Reliance Mutual Fund unit holders to redeem units at its ATMs. For its small business and professional customers, Citibank hosts exclusive deals and discounts through service partners such as DHL, Fortune Hotels and Hewlett Packard. Citibank, whose Suvidha account started a decade ago is seen as a landmark, allows electronic transfer of the image of a dollar cheque received from the US instead of physical transfer. With internet emerging as the favoured banking tool for many, banks are beefing up security.

The possibilities are endless. The way mobile phone services provider Hutch manages payment made through myriad channels by its customers across 16 circles is a case in point.

As the form has been expanding its subscriber base from a growing list of locations and payments are being collected from its own shops, franchisee shops and means such as e-bill pay, Citigroup is ensuring that Hutch's different collection processes run as seamlessly as possible.

However, at this point in time, even the most innovative products remain structured. Soon, we may see on-the-spot innovations by bankers at the counter to keep their customers smiling.

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BEST FOOT FORWARD

Maximum innovation is seen in credit cards. Standard Chartered Bank earlier this year introduced a lifetime 5% cash back offer on all fuel purchases and payment of telecom bills. ICICI Bank went ahead and offered up to 100% cash back as a festival offer for card purchases

Citibank electronically transfers the image of a dollar cheque received from the United States instead of physically transferring the paper cheque. This reduces the time taken to clear the cheque from 21 days to 7 days

The biometric card, launched by ICICI Bank in association with Financial Information Network and Operations, uses thumb impression to identify the client and offers multiple financial products

In villages where it does not have a branch, ICICI Bank has tickers displaying commodity prices

Citigroup has set up infrastructure to facilitate banking of cash collected, which accounts for 70% of Hutch's monthly collections, and cheques from various collection points through its correspondent banking relationships across India