PSBs can gain from branch network despite digital push

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Published on 24 August 2015

PSBs, India, Banks, Branches, J.D. Power, Percipient, digital channels

MUMBAI: Despite the onslaught of digital banking, public sector banks hold an advantage in their physical branch network and can reap the benefits by optimizing channels. 

According to a study conducted by JD Power and associates, an American marketing information services firm, even in a highly "digitized" banking market like the US, 75% of customers sign into a bank by visiting a branch. Also when they have a problem, one-third of the customers prefer to try and resolve it by visiting a branch. 

Speaking to TOI, Gerrit Kuyntjes, Vice President and General Manager, JD Power Asia Pacific, said even though digital channels are more efficient from a cost perspective, branches are not going to go away. 

"When we look at customer loyalty and branding branches are an important part of their experience. In the US, virtual or digital customers, who use only the digital platform have far lower loyalty rates. That means they defect much more easily, they stay with the bank shorter and it is more difficult to retain them. Banks have to be careful and cannot simply take the economic model of branch rationalization and cost efficiency," he said. 

JD Power, which is well known for its research in the automotive sector, is now expanding to cover the country's financial services industry in collaboration with Percipient, an Asia-based technology and analytics company. 

According to Navin Suri, CEO of Percipient, the banking industry has reached a stage where products are all commoditized and the only differentiating factor is customer experience and the way the bank uses data. He added that PSU banks are sitting on a gold mine in the form of their physical branches, considering that the average size of private and foreign bank branches has halved to 1000-1500 square feet and is now showing in crowds and queues. 

"PSU Banks have to only gain from optimizing their channels. There isn't anything that is going to be taken away," he said. He added that more study was required on the customer profile and transactions in order to align the branches with the other offerings of the bank.
To read the article of Times of India, please click here.

"When we look at customer loyalty and branding branches are an important part of their experience. In the US, virtual or digital customers, who use only the digital platform have far lower loyalty rates. That means they defect much more easily, they stay with the bank shorter and it is more difficult to retain them. Banks have to be careful and cannot simply take the economic model of branch rationalization and cost efficiency," said Gerrit Kuyntjes, Vice President, J.D. Power Asia Pacific.

Despite the onslaught of digital banking, public sector banks hold an advantage in their physical branch network and can reap the benefits by optimizing channels.