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Customisation key to banks survival: McKinsey

Debjoy Sengupta

Asian banks including those in India will lose business unless they learn to tailor their services to individual needs instead of "one-size-fits-all" product, according to a report by consultancy firm McKinsey.

The survey on personal finance services covers 400 middle and upper-income households in ten Asian countries including India.

The report said that the days when a bank in an emerging Asian country, specially India, could thrive by offering the same service to all customers were passing.

Growing number of individuals were seeking financial services tailored to their specific needs, especially in more profitable banking products and few local banks had the skills to maintain a lead in such a marketplace.

The report said, "To fight on, these banks will have to follow the path taken by financial institutions in developed economies and manage individual customers, customer segments, products, and channels in ways specific to them."

Till date, though most banks still offered a "one-size-fits-all" service, they managed to hold their own against competition from foreign banks and companies specialising in credit cards and investments. Holdings of financial products had in fact increased.

The average high-income Asian consumer owned 3.2 of them in 2001, up from 2.7 in 1998, although this was still less than half the number held by comparable consumers in the United States.

People in general were more willing to borrow and to search for higher investment returns, particularly to finance their retirement.

Meanwhile, the proportion of individuals who said they were interested in planning their finances had sharply increased, from 44 per cent in 1998 to 57 per cent in 2001. Most had yet to consult a professional, suggesting another opportunity for banks.

Dwindling loyalty was a major source of worry for Indian as well as Asian banks, especially among affluent customers.

More than half of the consumers who opened accounts in 2001 did not do so at their primary financial institution-a sign of growing dissatisfaction.

These institutions should use segmentation to identify the differences between groups of potential customers and to decide which groups could be served best and most profitably.

There were a few basic categories of customers. There were 'simplifiers' who disliked complexities of modern finance and wanted someone to make things plainer.

'Advice seekers' also preferred one-stop shopping, but, unlike 'simplifiers', were highly receptive to advice and to more sophisticated products and services.

'Self-directed planners' were the most open to remote sales assistance and did not demand live service. 'Fickle shoppers' had accounts in several banks and cared little for advice.

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