The state of smaller players in the Indian Banking sector
Indian Banking Sector
The Indian Banking sector consists of Commercial Banks, Small Finance Banks, Payments Banks, and Co-Operative Banks. The Commercial Banks can be further classified as, Public Sector Banks, Private Sector Banks, Regional Rural Banks, and Foreign Banks.
The Big Commercial Banks of India, with a total asset sizes over 1,000 Billion Rupees (such as SBI, HDFC, ICICI, Axis, etc.) have been showing consistent performance over the past few years. However, this has not been the case for the other end of the market, which pre-dominantly consists of Smaller Private sector banks. The smaller banks have experienced moderate but inconsistent growth over the years and fade in comparison to the major players.
The primary characteristics of these banks are,
– Commercial and Private sector banks
– An asset size of less than 1,000 Billion Rupees
– Limited presence across geographies and a strong regional presence
There is a latent need in this market to catch-up with the Big players in the industry and adopt modern or upcoming Banking practices to provide an exceptional banking experience to their customers. And, as these banks are starting to realize that catering to a limited customer base will not be sustainable over the long-term, it becomes ever more important for them — to identify and expand into newer customer bases, and ensure customer attrition is maintained at a very low level.
To achieve the above-mentioned needs, these banks have now started to embrace the upcoming Trends and Digital Technologies in the Banking sector to accelerate their Growth and Transformation efforts. They have also shown signs of being open for experimentation as long as there is a proven benefit for the business and its customers.
Trends in Banking
The following are some of the key trends in the Banking sector, that will break into the mainstream over the next decade and will become absolutely necessary to be adopted by smaller banks to stay ahead of the competition.
Rise of the Digital Banking — Banks will need to place an increased emphasis on their Digital Banking channels, even more than their Physical branches. Another important focus area for banks is to ensure a near 100% availability and accessibility of services to its customers, over their Digital channels.
Integration of Banking services — As customer’s banking needs and their relationship with Banks increase over time, it is essential for banks to provide a unified channel for customers to access all their banking needs in one place. Banks will need to re-imagine stand-alone and siloed applications for an integrated banking experience for its customers.
Personalization — More and more customers have come to expect the banks to cater to their specific banking needs, instead of they themselves looking for the required banking solutions or being the recipient of irrelevant banking product advertisements. Leveraging of Digital analytics solutions also presents the banks with the ability of profiling and cross-selling to its existing customer base while also ensuring that customer satisfaction levels are high, thus reducing attrition of customers.
Scale — As larger banks expand and integrate their services across their value chains and geographies, the smaller banks are bound to lose more and more of their share in the market if they fail to meet their customers’ needs and aspirations. With the rise of the Neo-Banking models and the ability of banks to expand into territories without the need of a Physical Branch, it becomes necessary for smaller banks to embrace this model to stay relevant and competitive in the market. (Accenture, 2021) (North, 2021)
Closing Note
The smaller banks in India have been the victims of the scaling and integration efforts of the bigger players in the market, either directly or indirectly. As the Banking sector in India undergoes rapid changes, it is becoming ever more necessary for the smaller banks to embrace and adopt digitization and integration.
References
1. (n.d.). Retrieved from moneycontrol: https://www.moneycontrol.com/
2. Accenture. (2021, January 08). Banking in 2021: Top 10 trends to watch. Retrieved from Accenture: https://www.accenture.com/in-en/insights/banking/top-10-trends-banking-2021
3. North, R. (2021, March 18). Top 10 Retail Banking Trends In India You Wouldn’t Wish To Miss. Retrieved from Enterprise Edges: https://www.enterpriseedges.com/top-10-retail-banking-trends-india
