[sbinews] Data to delight - A new age bank branch ( By Aditya Puri, MD, HDFC Bank. Courtesy: The Hindu)

  • From: "Rajendra S. Pai" <rajendra.pai@xxxxxxxxx>
  • To: <sbinews@xxxxxxxxxxxxx>
  • Date: Wed, 28 Jan 2004 09:16:24 +0530

Data to delight - A new age bank branch
(Aditya Puri -MD, HDFC Bank. Published in The Hindu dated 26-01-04
Clearly, the traditional model of branch banking has undergone a sea change.
Branches have moved on from being primarily service-oriented to sales and
service outlets, with the focus on cross selling, says Aditya Puri.

The new model of branch banking will require frontline employees to be
empowered to make preferential offers to customers.

THE CUSTOMER walks into the branch to deposit some cash. He finishes his
transaction and walks over to the personal banker's desk for an account
detail query. Not only does the personal banker resolve the customer's
query, but is in a position to cross-sell product and service options which
the customer could avail of, at preferential rates, based on his account and
transaction history.

Welcome to the new-age branch of the modern bank, a one-stop financial
supermarket to fulfil all the financial needs of the customer.

Clearly, the traditional model of branch banking has undergone a sea change.
Branches have moved on from being primarily service-oriented to sales and
service outlets, with the focus on cross selling.

However, a change in mindset and focus above is not enough. For the new
model to succeed, the front-line employees have to be empowered enough to
take important decisions and make preferential offers to customers in an
instant. This would depend on the quality of information that the personal
banker at the branch has at his/her fingertips. It is also necessary that
the information be consistent across all branches and other direct access
channels like ATMs, PhoneBanking, MobileBanking and NetBanking, throughout
the country. Customers today have become more demanding and expect 24-hour
access to their accounts at the bank through these various channels.

In order to fulfil the requirements of the bank's employees as well as the
customer, centralised processing with a data warehouse is a must. At HDFC
Bank, the management embarked on this journey when it implemented the data
warehousing solution, which enables the managers to have a holistic view of
all relationships of the customers, helping the bank understand them and
their requirements better.

The bank always had the data required to make informed decisions that would
help it meet its business objective. Yet collecting and analysing this data
was a lengthy and cumbersome process. It was stored in disparate sources and
the task of compiling and analysing this took a lot of time. What was
required was a system whereby the business teams could easily analyse
customer transactions and banking behaviour in several permutations and
combinations and make it available to customer-interfacing staff.

Data base

Thus, the first step was to create a data warehouse that would eliminate the
time-consuming hurdle of working with disparate sources. The warehouse pulls
information from different transaction systems and customer interface
channels, and centralises it in a single database.

The bank can now know how many products a particular customer avails of, how
frequently he uses the product, the transaction characteristics and his
banking behaviour. The bank can also know the profitability of the customer
which is critical in offering preferential pricing so that relationships can
not only be sustained but ever enhanced. The profitability metrics are used
extensively in service differentiation. Certain profitable customers are
given "preferred'' status in service deliveries and pricing. The bank can
now know which channels the profitable customers use so that it can step up
its investment in those channels.

In addition, the bank is now in a position to undertake database driven
marketing efforts based on the banking behaviour of the customer. If he has
used his card in an apparel shop, send him customised mailers incentivising
him if he spends more in certain apparel shops or marketing programmes to
merchants who facilitate usage of the bank's cards on the bank's terminals.

Aid to risk management

On the retail risk management front, the warehouse offers immense
decision-making capabilities. It provides a single platform wherein all
lending activities are grouped together to help the bank understand the
customer profile closely for each product. It also helps the credit manager
in optimising the risk-reward ratio. It also helps the business in
identifying newer segments and cross-sell opportunities so as to expand the
business with low risk high reward ratio.

The solution on one hand helps provide marketing inputs on product
positioning and customer characteristics, while on the other it helps gauge
the quality of the bank's appraisal mechanism by providing the behaviour of
customers on the bank's books as well as the credit quality of the lending

By capturing the data on the lending portfolio across branches and products
at one place, the data warehouse is able to look at the clientele across a
host of parameters, to gather valuable information on:

* Factors that influence the business trends and pattern of various products

* Factors that contribute to the performance of each product vis-a-vis the

* Customer behaviour

* Credit risk of lending portfolio

Undoubtedly, going ahead, initiatives like these when implemented centrally,
will be key to better customer service and consequent success. To use an
analogy, it is like dropping a pebble in still water - a single act but the
ripple effect affects the whole surface and beneath, though that remains
unseen. Similarly, the data warehouse is one initiative, but the effects are
far-reaching and substantial. The ripples enable the bank to understand its
customers and their requirements better, empower its branch employees help
it make prudent business decisions all leading to higher customer

However, it must be emphasised that this is not a quick-fix solution. It is
a long process that calls for total connectivity of all branches, all
offices, all channels across the bank network. And, most importantly, it
calls for the right attitude. Decreasing costs will, in the future, lead to
technological parity among major players. Then, the differentiating factor
would be how you derive maximum value from available technology so that it
best serves both, the bank and the customer.

(The author is Managing Director, HDFC Bank)

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  • » [sbinews] Data to delight - A new age bank branch ( By Aditya Puri, MD, HDFC Bank. Courtesy: The Hindu)