- The document discusses recommendations for digitizing banking services based on a comparative study of digital and branch banking. - A survey found customers prefer digital banking over branches due to convenience and time savings. Key implementation factors are infrastructure, data management, analytics, and user interfaces. - The recommendations include creating an integrated customer database, origination systems, independent processing support, and data repository to power customized digital products and services.

2. DIGITAL V/S BRANCH BANKING – A COMPARATIVE STUDY AND
RECOMMENDATIONS FOR DIGITIZATION
Xavier Institute of Management Bhubaneswar

3. Executive Summary
Background
Benefits to Stakeholders
Engagement Overview
• SWOT Analysis of Branch and Digital
• PEST Analysis
• Primary Research to derive
important factors for customer
banking experience
• Plan for going digital and
requirements for the plan
• Digitization Roadmap
Survey Results
Implementation Roadmap
Way forward
Banks need to redefine their business
models to keep up with digitization to
enhance customer experience. 50-
70% higher levels of primary banking
relation with customers is possible
through digitization. Globally, around
78.8% of customers having positive
banking experiences believed that
their banks take care of their needs.
• For Customers: Positive Customer
Experience, Enhanced Trust,
Convenient, less time consuming
• For Bank: Reduced Costs, Increased
Revenues, Broader Customer Base
• For Society: Greater financial
inclusion, technological innovation,
less costs of banking
Develop Strategy for Digitization,
Develop systems and governance
procedures for implementing
digitization strategy, engage
customers at digital touch points, use
data analytics to gain deeper insights
into customer needs, develop
customized products/services
Aim for total digitization within 3-5 years.
Gradual digitization of processes will
reduce costs which could be re-invested
in newer technologies.
Enhancing customer experience should
be the primary motive.
Banking
• 71.8% respondents most often use
Digital Banking
• Time Constraint, Convenience,
Regular Updates are important
factors to consider.

4. BANKING INDUSTRY HIGHLIGHTS AND PROJECTIONS
Robust Asset
Growth
• FY 13 Total Asset Size: USD 1.8 Trn
• FY 12 Total Asset Size: USD 1.5 Trn
• FY 10 Total Asset Size: USD 1.3 Trn
Credit off-take
growth
• FY06–13, credit off-take CAGR =
22.8% (USD 991 billion)
• FY 14 Estimated credit off-take =
USD1140 billion
Deposit
growth
• FY06–13, deposits CAGR = 21.2%
(USD 1274.3 billion)
• FY 14 Estimated deposits = USD
1452.7 billion
High ATM
and Rural
Penetration
• Estimated ATMs per million
population to rise from 85 to 170
• Banking connectivity has
increased from 67694 to 211234
villages in 2013
Sources: Planning Commission, RBI,
Aranca Research

5. SWOT Analysis for Branch Banking
PERSONAL
TOUCH
EASY TO
ACQUIRE
GOODWILL
MORE MARKET
PENETRATION
BETTER
GRIEVANCE
REDRESSAL
STRENGTHS
CUSTOMER
WAITING TIME
MAINTENANCE
EXPENSES
DOCUMENT
MANAGEMENT
FIXED TIMINGS
FOR OPERATIONS
BRANCH LIQUIDITY
ISSUES
WEAKNESSES
RURAL BRANCHES
SELF SERVICE
BRANCHES
MSME SECTOR
MAY PREFER
OPPORTUNITIE
S
DIGITIZED
TRANSACTIONS
MORE INTERNET
ACCESSIBLITY
NBFCs
TECHNOLOGICAL
OBSOLESCENCE
THREATS

6. SWOT Analysis for Digital Banking
QUICKER
TRANSACTIONS
LOW MAINTENANCE
COSTS
EASY DATA
ANALYTICS
ANYTIME, ANYWHERE
LATEST TECHNOLOGY
STRENGTHS
NO PERSONAL
TOUCH IN SERVICE
DEPENDS ON
INTERNET
ACCESSIBILTIY AND
LITERACY
SECURITY AND
PRIVACY
INCREASED
EMPLOYEE TURNOVER
WEAKNESSES
NEW DIGITAL
PRODUCTS/SERVICES
PROCESS
INNOVATION
THIRD PARTY
PARTNERSHIPS (EG: E-COMMERCE
STORES)
CUSTOMIZED
CUSTOMER SERVICE
CONSUMER-SPECIFIC
PRODUCTS
OPPORTUNITIE
S
TECHNOLOGY RISK
CONSTANT
UPGRADATION OF
TECHNOLOGY
THREATS

7. PEST Analysis for Digital Banking
Political Economical Social Technological
• Government’s
Pradhan Mantri Jan-
Dhan Yojana
Programme
• SEBI includes NEFT and
RTGS as payment
modes for dividend
and other cash
benefits
• RBI has simplified the
rules for credit to
exporters
• GDP on the rise
(expected CAGR 7%
over 2012-17)
• Increase in lending to
self-employed women
(USD 31 bn in 2010 to
USD 43 bn in 2012)
• 30-50% higher cross-selling
of products than
traditional banking
models.
• Digital banks can have
a cost-income ratio
advantage of around
10-15% over traditional
banks.
• More than 50%
customers worldwide
are thinking of
switching or are unsure
of staying with their
bank in the next 6
months
• Globally, around 89.4%
of Customers having
positive banking
experiences also trust
their banks.
• Number of people
using net banking rose
to 7% in 2012
• India’s working age
population estimated
to grow at 3.01% CAGR
over next 5 years
• Data Analytics
• Big Data
• Cloud
• Indian banks devoting
around 15% of total
spending on
technology
• Estimated 9.8%
increase in spending
on IT products and
services for Indian
banks
• Tele-density in rural
India up to 40.8% in
February 2013 from
<1% in 2007

8. Benefits of Digital Banking
Faster, secure
processing
Instant High
Quality
Information
Faster response times, Reduced cost
for delivery, Higher self-service rate
Wide range
of products
Effective customer acquisition,
Interactive client education
Price
transparency
Lean channel
structure
Streamlined
governance
Integrated IT
infrastructure
Enhanced
revenue
model
External Benefits
Internal Benefits
Multichannel
Integration
Improved, digitally enabled
risk analysis and
compliance tools
Increased wallet share,
lower Opex, revenue
growth
Digital tracking of client
interactions, leveraging “big
data”
Multichannel
Integration
More product and
service customization
BENEFITS OF
DIGITAL BANKING

9. Primary Research Results
Research Details
• Sample Size: 103
• Survey Method: Internet Survey
• Analysis: Discriminant Analysis with 9 variables (SPSS used)
• Two Groups: Use Digital Banking Often (coded as 0) and
Use Branch Banking Often (coded as 1) • Only 17.1% of variation in discriminant scores not
explained by differences between two groups.
Indicative of a good model
• The variable Convenience has the highest
discriminating power and is the most important
factor that people consider when choosing
between digital and branch banking.
• 100% of the cases have been classified
correctly using the 9 independent
variables. Indicates an excellent model
for prediction.
• Time Constraint, Convenience,
Regular Updates are important
factors to consider for digital
banking.

10. Transformation of Business Model
Traditional Business Model
Extensive documentation and paperwork
involved when financing a customer’s
purchase
Core business takes place at branches
Act as a medium between customer and
third parties from whom the customer is
buying
Branch help desks for more insightful
assistance and personalized service
Digital Banking Business Model
Financing is hassle-free, available to
customer anytime, on the spot through
mobile, laptop etc
Core business takes place digitally, branches
are there for specialized operations
Partner with third parties from whom the
customer buys to influence his/her purchases
Provide personalized service digitally by
harnessing the power of call centers, social
media and data analytics

11. ING Vysya’s Current Structure
BANKING BUSINESS
WHOLESALE RETAIL PRIVATE
Corporate and
Investment Banking
Banking and Financial
Institutions
Emerging Corporate
Financial Markets
Retail Deposits
Retail Assets
Business Banking
Agricultural and Rural
Banking
Private Bankers
Advisory Desk
Capital Market
Operations
Credit Desk
Compliance and
Products
In such a model, the segments in each business line work in silos. Customer and product
information are usually not shared between segments which leads to repetitive processes of
customer data collection, verification, risk attribution etc. Moreover, products in each
segment are designed on the basis of customer information gathered from that segment
only. This stutters innovation.

12. Plan for Implementing Digital Banking
The plan for going digital is to first integrate activities across
segments. The objective is to reduce duplication of business
process and products by doing away with repetitive
processes that are common to various segments.
The primary objective of the digital model would
be to create value from customer information.
Instead of focusing on pre-designed products, the
focus should be on the customer and to design
customized products on the basis of consumer
data.
What to
consider for
going digital?
Infrastruct
ure
Data
Content
Mgmt.
Analytics
Third Party
Partners
User
Interface at
Touch
points
Integrated structure
for easy storage
and distribution of
data.
Master Data
Mgmt., unified
reporting and
integration of data
BI, content lifecycle
analysis, product
evaluation
Real-time data analysis
on the basis of
customer, product,
channel etc
Partnerships for client-facing
processes,
gamification, mobile
applications
Unique and consistent
user interface for a
better user experience

13. Requirements For The Digital Model
CUSTOMER DATABASE
ORIGINATION SYSTEM
DEDICATED SERVICES
INDEPENDENT PROCESS
SUPPORT
PRODUCT MAINTENANCE
SYSTEMS
DATA REPOSITORY
Will provide front-end staff with latest
information on customers.
All front-end systems consolidated into one
origination system for product origination.
Needs extensive integration with customer
database.
Specific functionality providers to all front-end
operations. Eg: Credit Appraisal
Should be independent of customer and
product. Supports execution of processes.
Maintains originated products. Should be
capable of scaling.
Customer data and product data to be
stored separately for better analytics

14. Build In-house or Buy?
Understand digital
consumer value chain,
the solutions available
and the bank’s own
capabilities
Decide
Digitization
Strategy
Design System
for
Implementing
Strategy
Decide on the
Governance of
Digitization
Strategy
New Customer
Engagement
Implementation
of the Digitization
Strategy with
existing customers
and
products/services
Customer Data
Collection
New
Product/Service
Origination
Channel Integration, Content
management capabilities,
Value added services, Social
Media Analytics, Community
Collaboration Platforms, Master
Data Management System
Periodic Measurement and
Reporting, Roles & Responsibilities of
Governance Board, Policies and
Guidelines for regulatory compliance
and information security, Organizational
change management, knowledge
management and sharing
Full or phased implementation?
Understand resources available
in target areas, cost-benefit
analysis, competitor analysis
New Customers are
targeted and engaged
at various digital touch
points
Collect and maintain a repository of
customer data. This is a continuous process.
Data Analytics will be used to gain deeper
insights into customer needs
Develop customized
products from
customer data. Enhance
Customer
Experience
Innovate business
processes and try to
enhance customer
experience at
different touch points
Roadmap to Digital Banking for ING Vysya
Continuous
Process
New Customer
Segmentation
based on data
Segment potential
customers on the
basis of analyzed
data.

15. Products & Service Delivery After Digitization
PRODUCT/SERVICE PRESENT DELIVERY METHOD DELIVERY METHOD AFTER DIGITIZATION REMARKS
Current & Savings Bank Accounts Apply Online/Offline
Form Fill Offline
Document Verification Offline
Apply Online/Offline
Form Fill Online/Offline
Document Verification Online/Offline
Online forms can be floated whereby
customers can submit scanned copies of
documents. Online verification saves
time for the customers.
Forex Services Form Fill Offline, Transaction Offline Form Fill Offline, Transaction Offline Usually high touch service, therefore
should be concentrated at the
branches. Survey shows customers are
willing to visit branch for Forex Services
Card Origination Apply Online/Offline, Form Fill Offline,
Document Verification Offline
Apply Online/Offline, Form Fill
Online/Offline, Document Verification
Online/Offline
Online forms can be floated whereby
customers can submit scanned copies of
documents. Online verification saves
time for the customers.
Monitor card usage to gain information
about purchases.
Change of Customer Details Form Fill Offline, Verification Offline Form Fill Online/Offline, Verification
Online/Offline
Customer documentation submitted and
verified online. Saves time and is more
convenient.
Wealth Management Services Online/Offline Online/Offline Usually availed by HNIs, this should be at
the discretion of customers. However,
generally online reporting is encouraged.
Insurance Services Online/Offline Online/Offline Document verification online and
examination of underlying asset should
be at the customer’s doorsteps.

16. Research Files and References
SURVEY DATA AND FILES:
References:
• http://www.pwc.com/gx/en/banking-capital-markets/publications/digital-banking-survey.jhtml
• http://www.slideshare.net/morellimarc/report-15092014
• http://www.wordstream.com/blog/ws/2014/05/12/customer-churn
• http://www.in.capgemini.com/thought-leadership/world-retail-banking-report-2013
• http://www.executiveboard.com/exbd/about/index.page?
• http://www.livemint.com/Opinion/TOfsav5Xaj2HZhtGNASgaN/Getting-financial-inclusion-back-on-track.html
• http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/banking-in-a-digital-world/10192
• Indian Bank's Association, Indian Banking Sector 2020, Business India Aranca Research
• PWC, ‘Searching for new frontiers of growth’, Aranca Research
• Capgemini Analysis, 2013; 2013 Retail Banking Voice of the Customer Survey, Capgemini
• “DIGITAL BANKING”- Opportunity for Extraordinary Gains in Reach, Service, and Productivity in the Next 5 Years,
Boston Consulting Group (BCG), FICCI, IBA