Why retail banking will continue to flourish in India

Corporate banks have witnessed plenty of setbacks in the past few years while retail banking services have continued to thrive profitably in the Indian financial market. How does the provision of individual transactional accounts and mortgages benefit fund houses more than business banking?

Retail vs Corporate banking

The political influence on the Indian finance market is immense. Constant and dramatic changes in policies over the past have destabilized the revenue influx from big money investments. Demonetization and the implementation of GST caused a major disruption in business sentiment. Moreover, the Feb 2018 framework on asset quality by the Reserve Bank of India took away the arbitrage that the borrowers in the corporate segment were enjoying. However, the financialization of common savings has let the retail-oriented banks gain share despite these developments. Rural demand is also picking up.

Market research reports show that, although FQ18 results are notably better for the corporate banks compared to the recent past, the weightage of retail-oriented banks has continued to increase steadily, guaranteeing a better return on the investment by funding institutions. Corporate banks have seen a bad loan recovery and thus do not have an attractive valuation.

The profitable retail banking trends 2018

It is also evident that the current day personal banking services are not up to the mark. The key banking industry trends that the retail banking sector plans to implement for an increased profitability include:

• Elimination of friction from the customer’s journey

Customer experience ratings is an important parameter to judge various services on. So, retail banking services are seeking methods to eliminate a majority of problems that a customer faces between approaching the bank for a financial service and availing it. The workflow is being optimized and the ethos to put the customer at priority is being adopted increasingly.

• Integration of technology

Technology has enabled an accelerated growth of many sectors of the market and is expected to contribute efficiently to the rise of financial institutions as well. More retail banks are looking to use technological tools like AI, big data analytics, and cognitive computing. Digital transactions are gaining acceptance at an increased rate. Firms that offer retail banking services are also looking at the employability of IoT, block chain technology, etc.

Fintech start-ups that have begun to gain traction are also expected to be approached for partnerships from banking service providers.

• Adopting a multichannel delivery model

The integration of technology allows the banks to adopt a multichannel delivery approach. They can place their services on online platforms more efficiently. This will serve the increasingly digital customer base better. It will also bring customer relations into focus in the brick and mortar presence of the financial institutions thus guaranteeing a better service.

• Increasing responsiveness to regulatory changes

Data protection laws, digitization of cash and many such advancements have tightened the regulatory framework. But these regulations are also highly prone to change. Forward-looking banks must thus devise mechanisms to anticipate risks. 

While the progressions in Indian regulatory affairs are dynamic, they encourage innovation and the adoption of newer methods. The banking and technology centers of innovation are shifting eastward from developed nations like the US and Europe. With a lower vulnerability to changing rules and powered by technology, the retail banking sector in India will thus continue to thrive ahead of the corporate banking sector.