In an increasingly-digitised world, banks have for years now been reorienting their outreach methods away from purely branch-driven models in the direction of digital channels. This course of may now be getting accelerated as Covid pushes them to chop again on department leases.
The common banking buyer, too, is now averse to creating any bodily contact together with her bank. Small marvel then that banks have begun to scale back their department footprint and appear to have no qualms shifting to smaller and less-prominent places. They’ve additionally began to rethink parameters which decide location of a department.
In the previous few weeks, giant banks reminiscent of Bank of Baroda, ICICI Bank and Bank of India have both moved to or began in search of new places for a few of their present branches in components of Mumbai, its adjoining areas and Kolkata. There’s a clear drive to decrease rental prices via such workout routines.
Ramesh Nair, CEO & nation head, JLL India, stated many banks have gone again to their landlords to scale back leases. “What is happening is that they are trying to reduce occupancy costs rather than give up branches. This is something which has emerged post Covid and it is happening across the spectrum in terms of locations,” Nair noticed.
There’s extra to the phenomenon than simply price management. Department rationalisation ties in fairly neatly with banks’ long-term strategic objectives of larger digitisation. A senior official with a big public sector bank (PSB) stated most PSBs are actually concentrating on cost-income ratios of between 45-50%. For many state-owned banks, the ratio is properly over 50%. “Since digital usage has gone up so much, wherever possible and wherever feasible, banks are moving to smaller spaces. Footfalls have come down and the digital footprint has increased,” he stated.
Those that have been capable of get good offers on leases are additionally relooking the parameters dictating department growth. Virat Diwanji, group president – retail liabilities & department banking, Kotak Mahindra Bank, informed FE that whereas a majority of the lender’s present landlords have agreed to scale back rents, shopper behaviour has modified such that department planning have to be rethought. “In the pre-COVID-19 world, branch location would have been decided based on data on deposit/advances growth, socio-economic data of the geography, customer servicing requirements, etc. However, the Covid-19-led lockdown has significantly changed consumer behaviour,” Diwanji stated. The bank will proceed to observe and assess the brand new regular and can add to its geographic footprint — branches, ATMs or “phygital” branches — accordingly, he stated.
Indian banks’ expertise on this rely is in step with that of their counterparts the world over. Consulting agency Capgemini carried out a survey for the 2020 version of its World Retail Banking Report and located that 57% of customers now desire web banking, as in comparison with 49% earlier than Covid, and 55% desire banking cell apps, up from 47% beforehand. This modification in buyer behaviour has led to some banks placing department growth on maintain.
In its annual report for FY20, Axis Bank stated regardless of being targeted on rising the retail enterprise, it must put department growth on maintain. “…given the uncertainty induced post Covid-19, we may delay branch network expansion in the immediate near term even as we continue to engage in optimisation of the branch formats to deliver enhanced productivity, led by automation and digitisation of service operations,” Axis Bank stated within the report.
HDFC Bank, the nation’s largest non-public lender, has additionally spoken of the retail department banking enterprise “being re-imagined through the levers of digital paperless processes and big data analytics”. From selecting merchandise primarily based on consumption and spending patterns arrived at through the use of knowledge analytics to going utterly paperless with documentation, the bank stated its focus is on leveraging expertise to ship “an omni-channel experience.”
The growing reliance on digital channels isn’t with out its dangers, chief amongst which is the heightened menace of cyber assaults. Moody’s Buyers Service not too long ago stated the expansion in on-line banking and distant work because the onset of the pandemic have elevated banks’ dependence on digital expertise to serve prospects. It has additionally expanded their use of digital non-public networks (VPNs) and comparable functions and companies to help their distant work forces, all of those put these establishments at a larger threat of cyberattacks.
So as to mitigate this explicit problem, banks will even should undertake a stringent set of norms, Moody’s stated. Banks mitigate cyber threat via three main mechanisms. “The first is strong corporate governance, including enterprise-wide cybersecurity frameworks, strategy and policy enforcement and improved reporting. The second is risk prevention and response and recovery readiness. And the third is information-sharing with other banks, adoption of international standards and regulatory oversight,” the rankings agency stated in its report.