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Retail Bank Growth Strategy 101:Catch Them When They Are Young

Posted by Raunak Mahajan on July 20, 2012

Strategy: Retail banks need to catch prospective customers early. Target individuals that are making the transition from studies to professional life and benefit from the customer loyalty that is inbuilt into the product offering(explained below). Focus Sales efforts towards Corporate Accounts because these accounts translate into Employee accounts that tend to have a longer life. Do not go for customers that adversely affect the deposit per customer to cost per customer ratio.


The Manager of  SBI, a Public Sector Bank asked me to advise him on what he could learn from Private Sector Retail Banks. Why was it that I had my accounts with  HDFC, a Private Sector Bank and not his? And this inspite of the fact that there was no differentiation in the product lines of either bank; internet banking, mobile banking and other services were all part of SBIs offering as well. So why do I not have an account with SBI?

The question was out of the blue and not at all relevant to our preceding conversation. Caught me by surprise! So I thought…the cliched response that came to my mind was aging staff, poor quality service blah blah. But then I realized that SBI had already worked on these issues and addressing them would not add much value to their growth strategy.It was not the reason I did not have an account with SBI.So I though more…Eureka!

I used HDFC as my retail banker because the first company I was employed with used HDFC to process their salary accounts. When I joined that company, my first job after college, I was proud of my first salary and with it proud of my first very own bank account. HDFC had gained a new retail customer through their corporate account with my company. And I was not the only one. Like me, all new employees had there accounts opened in HDFC to ease transfer of salaries.


Customer Loyalty in Retail Banking has increased. While some of this can be attributed to good service quality, a lot of it is due to new features such as Internet Banking, Mobile Banking, Trading Accounts etc. that are bundled in the offering. The barriers to changing one’s account have increased because an account holder who gets used to the interface of Internet and Mobile Banking of one bank is hesitant to move to another bank where he would have to go through another round of initiation with the new bank’s interface. E.g. I am so comfortable with the UI of HDFC Netbanking that I am reluctant to shift to the platform of another bank. I have my customer IDs and passwords memorized and don’t want to change the status quo with a whole new set of numbers and passwords. I love my ATM card and don’t want to deal with a new one with a new PIN.

On further discussion it was evident that SBI was not aggressively targeting Corporate Salary accounts and this is hurting not only the quantity but also quality of its deposits.

Disclaimer: Bank names have been used only for illustration.I do not intend to endorse any.





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