Are banks the new FMCGs?

Today’s banking has radically changed from what we used to do when we joined banking sector in 80s. Banks have not only automated their accounting and processes, but they are also using advanced tools such as artificial intelligence, robotics and business intelligence by using complex algorithms on big data available to them.

Many young bankers. who join banks expecting to be sitting on counters and executing transactions are sorely disenchanted when they observe that all the activities and transactions such as account opening, issuance of cheque books, updating of passbooks, addition/deletion of names of the account holders, handling of instruments such as demand drafts, letters of credit, bank guarantees etc are handled from the back end by back offices and that their primary activity is business development and cross selling. Many join banks in non sales roles because selling is not their forte but very soon they learn that there’s no escaping from selling!

However, the word cross selling needs further elaboration as it entails three parts – selling of the bank’s own products such as credit card, debit card, travel card, fixed deposit, recurring deposit, home loan, auto loan, personal loan etc, up selling like offering higher variant of Savings account, debit card, credit card to an existing customer and selling of third party products mainly insurance and mutual funds.

The first form of selling is eminently understandable and it must be encouraged. Banks should deepen their engagement with their customers by offering other products that they have in their bouquet lest the customer may go elsewhere and the customer may be lost to a competitor. The second form viz. Up selling is also not totally undesirable, if the up sell is offered to the right customer and not to just let an undeserving customer use freebies that generally come tagged with higher variants. Later on when the customer is charged for having availed of freebies without matching conduct, there’s noise, commotion and complaint.

The advantage of the above two forms of selling is that banks offer their own products and the staff is well seized of their adjunct features. The chances of mis selling are zero in the first form and stray in the second form.

The problem arises when the banks try and aggressively push third party products under bancassurance arrangement with insurance companies and and also mutual funds to their customers. First of all, the Bank staff have very basic and sometimes absolutely no knowledge of these products , but they are under pressure to generate leads. Although, banks have robust processes of seeking customer’s feedback on the insurance product before actual issuance of the policy, many a time these processes are shortchanged, especially when the customer is home maker, geriatric or inadequately qualified. Also, return on MFs are linked to market and when returns on these investments are not what the customer was assured of by bank staff, there’s noise and complaint.

My take is that banks should have full suite of all the products in their bouquet, but exercise discretion and caution in the third form of selling. Instead of front life staff, virtual RMs, RAs ( insurance company staff deputed to the bancassurance partner ) and dedicated specialised RMs should be encouraged and all necessary disclosures and information be shared with potential customers on their registered mail ids and banks’ websites. Staff will be relieved of undue pressure of incessantly pushing products of which they have scant knowledge or aptitude to sell and customer will buy the product required in his/ her own discretion, killing all the noise around this glaring problem of mis selling.

3 thoughts on “Are banks the new FMCGs?

  1. Sir ,a very appropriate Write Up.But it all boils down the respective Bank’s Management team i e does it wants to have the motive of only making profit out of these Third Party Sales or it believes in a Win Win situation,where both the purchaser and the Seller Benefit.Ironically the larger segment of the Banks fall under the first category.May be going forward the scenario may change.Thanks

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