CAIIB RB Unit 3 - Applicability of Retail Banking Concepts and Distinction Between Retail and Corporate/Wholesale Banking

The most common strategies are end to end outsourcing, predominant outsourcing, partial outsourcing and in house sourcing.

Regulatory prescriptions are one of the major determinants of outsourcing or lack of it in these banks.

In some foreign banks, both front and back end operations are outsourced and in some banks, the back end operations are outsourced while the front end operations like sourcing of HNI clients are done through captive resources.

The four broad classifications as envisaged by Boston group were defined based on the technology and customer interface capabilities of the banks and are

(i)   Horizontally Organised Model
(ii)  Vertically Organised Model
(iii) Predominantly Vertically Organised Model
(iv)  Predominantly Horizontally Organised Model

Horizontally organised model is a modular structure using different process models for different products offering end to end solutions product wise.

Vertically organised model provides functionality across products with customer data base orientation and centralised customer data base is used across products.

Predominantly horizontally organised model is mostly product oriented with common customer information for some products. In predominantly vertically organised model, common information is available for most of the products.

In most of the PSBs, horizontally organised model is the standard norm. New private sector banks generally follow a vertically organised model.

As a part of overall segmentation game plan of the bank, branches are classified as Resource Centres, Profit Centres, Priority Centres and General Centres to have a clear business focus.

This concept is an effective business model for PSBs with large network and useful for focused strategies and already getting implemented in some public sector banks.

Liability products are offered to retail banking customers basically under three spaces - Savings Accounts, Current Accounts and Term Deposit Accounts. Product differentiation among these accounts is best achieved by adding different value propositions. (from a plain vanilla account to a value enriched account.)

Retail asset financing is a major component of retail banking model of banks.

Not all PSBs are in the credit card business since it is a big volume game and needs process efficiencies.

In the development process, geography is not given importance but type of branch and centre and business potential are given due importance.

Banks adopt different process models for retail asset products.

The common form of process models are Centralised Retail Assets Processing Centres where all the retail loans sourced at the branches and marketing team are processed at a single point and assets are financed through that centre or processing alone done at the centre and financing done at the branches.

Opening of account, issue of Pass Book, Cheque Book, ATM Card/Debit Card, PIN Mailers for the Cards are the stages in the tangibilisation process.(Centralized Processing)

Process time is a major differentiator in the efficacy of retail banking operations. Process Time is business sensitive and customer sensitive.

Stand alone pricing for different products and services is the basic structure.

Regarding  Price Structuring quantum and volumes are two important determinants.

Structuring also involves price bundling where a holistic pricing is offered across a specific bundling of products and services so that the total price proposition is attractive than the stand alone pricing for the individual products of the bundle.

This structuring is a cross selling strategy to entice the customer to avail more products so that profitability per customer is enhanced.

The technology models basically adopted by banks are In House Models, Outsourced Models, Partially In House and Partially Outsourced Models.