The Customer Segmentation In Indian Banking System Business Essay

The Customer Segmentation In Indian Banking System Business EssayAbout cardinal decades ago, when offstage players started rolling out their assistants, the state-run cusss, who had in their grip almost entire sell customers in India, sensed it could be the beginning of a change, but in all resemblinglihood never realised it would come with so much force and hit them hard. And they sure had no idea that after moving at an elephants pace for so m either decades, they might be forced to change quickly and probably beyond recognition. The arrival of private fixs, and in a limited way the external tills, changed the way gutterting was done in India. They changed retail customers expectations and the preferences and now in a fiercely competitive space, e rattling bank wants to get a handle on the rapidly changing consumers taste and raise its service to retain and gain the market shargon.Our study conducted on educated middle-class working professionals in new-sprung(prenomin al) Delhi offers an insight into how todays customers atomic number 18 picking their banks and ending contacts with those, which fail to satisfy them. The surveys watchings underline the traditional work such as prompt and courteous services at branches are s bank important for bank customers. The study clearly highlights that customers value banks with bigger entanglement of branches and ATMs as they consider it more reliable.Customers do prefer to maintain an account with a bank where their family members already have one. They also put a premium on a twine of so-called new range of services lower call waiting and the ability of the customer care staff to quickly understand their problem and connect them to the right executive.A nonher raise outcome was that most customers had more than one bank account and thus could pick bank for specific services.Introduction India is on the path to become a global economy. Financial Institution specially banking industry plays a reall y important part in Indias growth. Banking in India originated in the last decadesof the 18th century. The oldest bank in existence in India is the State Bankof India, a government owned bankthat traces its origins backto June 1806. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formallytook overthese responsibilities from the then Imperial Bank ofIndia.After Indias independence, the ReserveBank was given broaderpowers. In 1969 the government nationalized the 14 largest commercialbanks another sextet banks were nationalised in 1980. Currently, India has 88 scheduled commercial banks(SCBs)- 27 public spherebanks,33 privatebanks and 38 foreignbanks. They have a combined network ofover 53,000 branches and 17,000 ATMs network.Banking In India can be divided into three distinctive time period as set forth below.Pre-Nationalization Era Private banks with somebody holding were present in pre-nationalization era and Lockout of Banks were the reality in those days. With very little security regulatory mechanism Banks were functioning as discrete assets and there is very little presence of consumer services and security of assets.Post-Nationalization Era With the backdrop of large no of incident regarding lock out of banks, Central Government had to take a drastic step and they had done the same by nationalization of Banks. Due to involvement of the Government, credibility of banks increased many fold and banking as a sector has started to grow in India. Due to very low or no competition at all government owned banks had started to function like noncompetitive services with very little focus on customer services.IT-enabled era After 1991 private banks with sound security mechanism were again allowed to enter into the banking segment. ICICI Bank, axis Bank, HDFC Bank started their operation with state of the art IT infrastructure, which enable them with better service delivery and meet consumer expectation. Following the same tre nd and due to Government polity Government owned banks like SBI, PNB, BOB had also started providing customer services through IT enablement. Due to approximately recent development like non-regularization of interest stride some banks had also gone ahead and started to offer differentiated product to make the banking more interesting. Recently government has started to think for allowing business houses for having the banking license. This can authentically be a game changer for Banking industry as more no of bank will open and try to fetch customers from the competitors with focus on customer preferences.As far as the customer segmentation in Indian Banking system is concerned, it is divided into three broad segments.Corporate B2B transactions are covered in this segmentMid-Corporate Transactions with SME is considered under this segment.Retail Small individual customers are covered under this segmentThe opening of the banking sector to the private players and Indias rapid eco nomic growth in the past decade has dramatically changed the financial sector landscape in the country. The keen competition brought customers to the centre-stage something unimaginable till about two decades ago when the state-run banks held monopoly and customers convenience was barely on their agenda. The power has now clearly shifted from banks to the customers, as private players scrambled to gain market address by raising service level, introducing innovative products and deploying technology at an unprecedented scale to woo customers. The expansion of foreign players, though limited, raised the consumers expectation and fuelled only competition.To match the private players, leading state-run banks initially, followed by regional banks, have raised the game and now probably every player is willing to give an fort and a leg to get an insight into the consumers behaviour.We have limited our research to educated working middle class in New Delhi a retail sub-segment that is attractive to banks because of paucity of time and resources. The surfaceings cannot be generalized for the entire country.Review of LiteratureThe Ernst Young Global Banking Consumers Survey 2011 has highlighted how customers were increasingly switching banks and preferring transparency to loyalty. The communicate said pricing was critical to customer satisfaction, although most customers had no idea how much they pay each year for services. Transparency over pricing and service promises is vital if banks are to deliver something customers value. An under-delivery of promised service was a big turn off for customers.Uppal, R. K. (2010), analysed in his study the complaints against Indian Public sector, private and foreign banks. The legal age of complaints received were against the public sector banks and the complaints were related to deposit, credit cards and housing loans, clearly showing how state-run firms were unable to raise the quality of services. The study recommends the strategy to mitigate the complaints.RBI Report, Committee on Customer Service in Banks (2011), analysed evaluation of customer services in Indian Banking History. The main objective of the study was to find existing customer services in the Indian Banking system and future roadmap on the same. Authors have emphasized on customer education, involvement of stakeholders for launching any new services, comprehensive banking regulation. Focus on technology will also become major indicator for rolling out and success of services such as Internet Banking. Performance Assurance scheme for enforcing the banks to follow strict performance guideline is also mentioned in the report. Various other improvement aspects like issuing Photo ATM card and fraud detection procedure were also listed in the report.In his research on customers preference (2012), Md Nur-E-Alam Siddique of ASA University in Bangladesh has concluded that the most important factors influencing customers in selecting a pri vate banks are speed and quality of customer services, image of the bank and quality online banking facility. The customers, however, chose a nationalized bank mainly due to low interest rate on loan, safety of deposits and convenient location, the report said.Mosad Zineldin, an Associate Professor at Stockholm University, brought forth some interesting trends in his research on bank customers preferences. The study said the price and advertising had a minor effect in a bank selection, while functional quality such as friendliness and helpfulness of staff, accuracy in account transaction management, efficiency in correcting mistakes were the major determinants of bank selection.Kannan. P., et al. (2012), emphasized in their study that service quality was an interesting field to evaluate the customer satisfaction. The main objective of the study was to examine the consumer preference towards the banking services in rural areas on the basis of (i) demography (ii) type of banks (public , private and cooperative bank). (iii) customers preferences. This study concluded that the satisfaction level of the rural customer was good. look for Methodology We have adopted Descriptive Research Design for conducting the Research. Under Descriptive Research design we have conducted cross-sectional design, where data have been put in only once from the target audience. Another important point for emphasis in the research design part is that Indian Banks segment its customer broadly speaking in three major category i.e. Retail, Mid- Corporate Corporate. For the purpose of this research project we will only consider the retail segment or the individual customer. As we have only followed the Convenience Sampling method for assemblage of data that too only for a segment of consumers, so it will not be possible for generalizing the result across the other segment.After reviewing the literature we have segmented customer preference in five key segments as shown below in the pictu re.Skill, responsiveness, friendlinessVariety, cost, suitabilityCredibility, Technological efficiencyProcesses, Rules, Waiting time, SpeedNetwork, location, phone/onlineAmong the 5 segments shown above, image and personal of a Banking System is very difficult to change. Access of the banking system is majorly related to the investment that the Bank can undertake for improving its IT backbone. Product and services are can easily be changed if the entire infrastructure is already available with the bank.Survey questionnaire was designed based on the five key factor of customer effectiveness, as shown above. Flow of the questionnaire is described in the diagram below.Questionnaire was designed in the Google spreadsheet and link of the survey was shared in the mail for the sake of convenience. Another important aspect of data collection through Google spread sheet is that, a high amount of data integrity check is already built into the system as user can not pick up any alternative othe r than mentioned in the web format.Conclusion-The research findings have brought good news for the banks. Most respondents (81 percent) are happy with customer services at banks, thereby giving the existing banks a pat on their back, while signaling that new starting motors will find it extremely difficult to find a toehold in the fiercely competitive banking market once the RBI were to issue new licences.Family again has come to the livery of the banks in India as majority of our respondents prefer a bank if their family members already have an account there.Banks with greater network of branches and ATMs are preferred over those with small networks. Customers see high value and reliability in dealing with large-network banks.Customers naturally also value lower service charges.So for any new entrant in the Indian Banking Sector has to offer low cost services to consumer for attracting them in their fold.