Mobile Operators, FMCG sales & marketing companies etc have already taken the route long back for spreading their roots in the far fetched 600,000 villages of the India through
• mom-n-pop stores
• Dairy owners
• Agriculture input sellers via prepaid and revenue share model.

Thus, dividing the risks and returns between the stakeholders of the distribution channel and also spreading the burden of investment required for circulating inventory.

Banks need to redefine themselves
Now, banks need to re-define the paradigm and spread their roots deep to sustain their foot for long in a country with majority of population living in rural & semi-urban areas.

Past Scenario
In past, regulatory restrictions and control in banking industry kept competition at bay. Customers were satisfied with one branch and restrictive timings. Easy comparison of products & services was not possible hence customers were not able to make informed decisions.

Current Scenario
In present times, the needs and expectations of customers are changing as quickly as the competitive landscape. Customers are demanding seamless, multi-channel sales and service experiences. With the regulator opening new doors to non-traditional players, NBFC and service-providers are looking for opportunities to invade this space or to redefine it through disruptive innovation. The result is forcing banks to examine a more balanced, integrated approach to the customer experience and move beyond simply meeting their profit and growth goals to delivering complete solutions.

Bankers have long envied retailers for their ability to develop and navigate channels and their responsiveness to customer needs. In my view many financial institutions have embraced similar strategies, they often fail to deliver strong results – particularly in terms of cross-sell rates and customer retention. For most banks, the branch presently dominates their distribution approach, while other methods of interaction such as direct channels and alternative face-to-face (F2F)
outlets are less important and not well integrated.

Shift in Customer Expectation

With shift in customer expectation, need-of-the-hour is to rapidly transform the retail distribution landscape for banking services from a branch-dominated paradigm to one of integration and balance among multiple channels. Branches will still play a vital part in this new equilibrium, but they will be very different. As business via other channels evolve, banks will increasingly behave like traditional retailers, focusing more on sales and complex service opportunities. Also, technological advances will improve the ability of various channels to fulfill their potential as a source of banking sales and service with higher convenience at lower costs. Alternative Face-to-Face (Business Correspondent/Facilitator-(BC/BF)) channels will also emerge as strong, viable distribution options in this new landscape because people will still value personal interactions. An integrated customer focus will become critical across all these channels as demographic shifts usher in a new — and highly discriminating — breed of customer.

Banks will face some tough strategic decisions in adapting to this new environment.

Need of the hour for banks: Revitalize their bank branches

1. At a minimum, banks need to determine how and when to revitalize their branch, the existing primary channel for most, How to draw customers in and to address their changing expectations.

2. Consider how to develop and expand non-branch channels to be competitive in attracting, serving and retaining customers.

3. Look for cost-effective ways to make their channels more integrated and customer-focused.
Highly Competitive Scenario: With the competitive door continually ajar, existing banks are constantly under threat.

Several other industries have chosen to enter banking services including, but not limited to, retail brokerage firms; life insurance companies; property and casualty insurance companies; health care insurance companies; and retailers and e-commerce companies forming their own BCs/BFs.