Retail Chronicles- November 2022

CONTENTS

TYPES OF RETAIL BANKING

Broadly speaking, there are three main retail bank types They are commercial banks, credit unions, and certain investment funds that offer retail banking services All three retail bank types work toward providing similar banking services

WRITERS

Disha Choudhary | Dr Anshu Sharma | Prithvi Keshwani |

JUNIOR DESIGN TEAM

Ishika Rastogi | Shreyas Singh | Vasu Gupta |

SENIOR DESIGN TEAM FUTURE OF RETAIL BANKING

The future of retail banking technology will focus a lot on improving customer experience in contactless payments, data security, and retail services

CONSUMER LENDING AND CREDIT CARD IN RETAIL

The retail industry has also benefited from the availability of such a mechanism that helps consumers purchase goods and services immediately as and when the need is felt Improvisation in credit lending framework and regulation has made the environment conducive for NBFCs and banks to capitalise on this opportunity

TRIVIA QUIZ

Abhishek Jain | Hrishikant Mane | Mansi Vora | Ruttwick Bowlekar | Yash Bhojwani | Yuti Talati |

EDITOR

Aayush Ghildiyal

TYPES OF RETAIL BANKING

Disha Choudhary

Individual customers rather than corporations are served by retail banking, commonly referred to as consumer banking or personal banking. Individual customers may manage their finances through retail banking, acquire credit, and safely deposit funds. Retail banks provide checking and savings accounts, mortgages, personal loans, credit cards, and certificates of deposit (CDs).

The gap between the interest rates banks charge on loans and the rates they pay on deposit accounts is known as the interest rate spread. Throughout several economic cycles, the dispersion varies considerably In periods of strong economic growth, the spread is typically larger These institutions are able to make more money thanks to the wider dispersion.

In contrast, during periods of economic distress, banks can need to cut loan interest rates in

Commercial banks

Commercial banks, which provide a broad variety of consumer banking services, are one form of retail banking Certificates of Deposit (CDs), savings and checking accounts, credit and debit cards, etc are examples of typical services. Commercial banks are for-profit organisations that make money via transaction fees and interest rate spreads

Giving savings accounts greater interest rates may encourage customers to keep more money in them. In consequence, the approach could result in less consumer involvement in the capital markets.

Commercial banks receive a large portion of their income through transaction fees. These expenses include transfer costs and other fees for financial services, as well as often occurring charges on credit cards. Commercial banks may charge premium pricing without suffering from significant demand erosion since they virtually have a monopoly on the market.

Due to the fact that credit unions do not view transaction fees as a source of income, they are also quite modest. They are typically seen as services that may be provided inexpensively.

Cooperatives and Credit Unions

Credit unions are a different category of retail banks (or similar cooperative institutions) Similar to commercial banks, they provide services typically on a smaller scale Depositors are stockholders in credit unions, which are not-for-profit organisations Credit unions thus experience less pressure to make a profit This implies that companies often provide higher rates on deposit accounts while charging lower rates for loans.

But there are some drawbacks to credit unions as well Credit unions are substantially smaller organisations and don't have a significant physical presence Customers who prefer inperson banking services will probably be put off by this Additionally, credit unions use less sophisticated technology than banks, which lessens the security of their online banking services Additionally, compared to commercial banks, credit unions employ fewer people and are open for fewer hours.

Retail Banking Products

Savings accounts 1.

It is a pertinent retail banking example pertaining to fundamental deposit accounts to secure money with a respectable interest rate, sometimes known as "interest-bearing accounts." They set aside the money for immediate needs and typically impose withdrawal and transfer restrictions on cash.

These bank accounts provide quick and easy (and sometimes limitless) cash deposits and withdrawals for recurring payments These accounts, sometimes referred to as "Transactional accounts," provide debit cards for online bill payment and shopping Though they offer less interest than savings accounts, they nevertheless exist

This savings account maintains a fixed capital balance for a preset period of time and receives interest payments from the issuing bank Consumers receive both the principal amount and the interest when they cash their checks. CDs are a safer and more conservative investment than stocks and bonds, offering lower opportunity for growth, but with a nonvolatile, guaranteed rate of return

3. Debit Cards

They are bank-issued payment cards for cashless purchases that deduct funds right from the checking account They are also known as ATM Cards Customers may use them at Automated Teller Machines, and they connect directly to the bank account Debit cards are easier to get if you have poor credit as long as the bank lets you set up an account, you're in and you don't have to apply for them, as you do with credit cards Nor do you pay annual fees

5. credit cards

Credit cards are instruments for borrowing money from banks for online purchases with a set credit limit To prevent credit risks, cardholders must pay back the whole amount plus any applicable interest either by the due date or in a timely manner

FUTURE OF RETAIL BANKING

Dr. Anshu Sharma - MBA

Banks have been the heart of the economy for many decades Retail banking which is also known as consumer or personal banking, is the plethora of services that a bank offers to the general consumers, rather than the different multinational companies, organizations and other banks, which comes under wholesale banking Services include all the saving and credit transactional accounts, loans, and cards. In this era of transformation of different consumer sectors, retail banking is also gaining pace by incorporating different trends to fulfil the needs of the general public more effectively.

There has been a significant impact of COVID-19 on the psychological approach of the consumers availing different services The Pandemic acted as a catalyst and accelerator, which also lead to digitization of banking at larger banks with a number of maximum transactions going digital and more customers incorporating themselves with digital budgeting and planning apps, as well as other digital investment solutions

The retail banking industry is undergoing a significant change from a straight looking business to a more customer centric and technology driven one. Evolution of different trends are shaping the real future of the industry towards a more progressive one One of the most important is data-driven decision making When we talk about the finance sector, major factor that affects the decision making process is data, but with increase in the amount and quality of data banks have started using advanced analytics to make more effective decisions This data then can be used to diagnose and analyse the potential risks earlier, can help regulators at different banks or any other financial intermediaries to detect fraudulent activities and also improving the overall experience of the customers.

Process automation is another trend banks are accommodating as digital retail banking becomes the new norm . Robotic process automation and digital process automation are growing hand in hand as banks finding ways to eliminate layoffs and increase the efficiency. Some language processing algorithms are introduced helping boost efficiency by automating repetitive human reliant tasks These technologies will help the customer service sectors to assist their customer problems with solutions more easily and hassle free

Post pandemic, customers have shifted their focus on saving and investing Study reveals that around 40% of consumers are interested in exploring different saving options to protect their money from any unexpected circumstances. To cope up with this shift, financial institutions are implementing AI-powered technologies to allow users to make daily savings manually, save a part of their deposit and keep that amount over a specific period Embedded financial services is a technology in retail banking which is becoming part of everyday life as people are moving towards a more digitally driven environment.

Modern consumers believe in more personalized interactions with the banking institutions when making payments, availing loans or sharing any other personal information. That’s the reason these financial institutions are focusing more on providing their customers with a smooth user experience rather than focusing only on operations part, since a good customer support forms the base of the customer loyalty.

For starters, banks are using integrated services to keep consumers on their platforms. Also non-financial companies like Amazon can also rely on embedded services to offer loans to sellers to based on different parameters In coming future, this innovation will aid in processing payments and loans much faster and improve customer satisfaction, trust and loyalty Focusing solely on financial services is leading banks and financial institutions slowly fading into anonymity Keeping this in mind these financial institutions are merging with tech companies and other non-bank corporations to get an approachable access to resources and consumers.

In addition, banks have to function as full-scale tech companies in order to match their pace with other companies like Apple and Google. With all these trends keeping in mind these financial institutions are also focusing on improving the security standards as these institutions are most susceptible to cyberattacks. To improve the security trends more banks will have to use AI tools to detect these type of attacks Also, adoption of robust cloud solutions from different service providers will help branchless banks enforce KYC and AML regulations

The future of retail banking technology will focus a lot mainly on data related security issues, retail services offered by the banks and providing customers with a smooth experience in digital transaction services and other payment methods. Banks that portray empathy for their customers and their associates have the potential to be in the top of the game if they make a genuine shift from product centric to customer centric operating systems These transformations will mark the progress towards a more organized and effective retail financial system

Introduction

Quick consumer lending and flexi EMI options, accompanied with low cost of these consumer lending instruments act as an enabler for consumers to purchase whatever they want without having to give any second thought Improvisation in credit lending framework and regulation has made the environment conducive for NBFCs and banks to capitalise on this opportunity. These financial institutions have, undoubtedly, played a significant role in reaching out to consumers at unprecedented pace

The retail industry has also benefited from the availability of such a mechanism that helps consumers to purchase goods and services immediately as and when the need is felt than having to wait until they have accumulated enough to make purchase. We can observe that this mechanism has been a vital element of growth stories for industries like consumer electronics, furniture and decor, apparel, tourism, health and fitness, education, automobile, etc Robust and responsive systems and a well designed regulatory framework are basic building blocks of this

Consumers have a choice to stretch their budget upward because of all these financial instruments available in the marketplace These have been a key tool in achieving incremental sales values and volumes for majority of the retail businesses across above mentioned industries. Also the incentives provided by the brands in collaboration with the banks have catalysed the growth of consumer lending in the retail world. These incentives range from low cost EMIs to No Cost EMIs for longer tenure and Cash backs, making the offering more attractive. Major players in the consumer credit lending business are Bajaj Finserv, Tata Capital, Kotak Mahindra bank, HDFC bank, HDB financial services, TVS credit

One can find executives of these companies in majority of retail stores. In absence of these facilities at your retail business may make you lose major portion of your sales because a larger fraction of the customers prefer using credit cards or other paper finance options to execute their purchases Product life cycle has shortened because of all these easy lending options. This in turn helps the retail industry sustain its growth and vibrancy.

It is expected that variety of easy payments options will thrive in the future which will make it even more easier for consumers to get their hands on the latest products and technology .

TRIVIA QUIZ

Q1. A type of institution that offers basic financial products.

A. Commercial Bank

B. Public Bank

C. Bank of Commerce

D. Cooperatives and Credit Unions

Q2. Which retail banking product is also known as “interest-bearing accounts”?

A. Checking Accounts

B. Saving Accounts

C. Certificates of Deposits

D. Home Loans

Q3. What is Debit Card also known as?

A ATM Cards

B. Credit Cards

C. Forex Cards

D. Prepaid Cards

Q4. Electronic channels in retail Banking refers to

A ATMs

B Mobile banking

C. Internet banking

D. All of the above

Q5. Which of the following is not key target of retail banking?

A Customer loyalty

B Improving security issues

C. Operations

D. Smooth Customer experience

Q6. Which of the following is not a part of the embedded financial services?

A. Digital platform

B. Customer loyalty

C. Financial institutions

D. Finance infrastructure company

Q7. What has reduced because of easy lending options?

A. Product life cycle

B. Interest rates

C. Consumer disposable income D. Customer propensity to buy

Q8.What is considered to be a key tool in achieving incremental sales

A. Consumer lending instruments

B. Government schemes

C. Brands marketing strategies

D. None of these

Q9.The article talks about what all incentives

A low cost EMIs

B. No Cost EMIs for longer tenure

C. Cash backs

D. All of these

PODCAST

OF

TYPES OF RETAIL BANKING -DISHA CHOUDHARY