While banks are hugely invested in forging new and innovative ways of customer acquisition, very little thought seems to be going on to improve customer grievance redress mechanisms, said RBI Deputy Governor Rajeshwar Rao.
“This seems very odd for a sector that prides itself on being a service industry. We definitely wish to see more serious thought and intent emerging from the boards and top executives on the quality of grievance redressal instead of just monitoring TAT (turnaround time) and MIS (management information system) on complaints,” Rao said.
A key element of protecting customers is to provide them with an efficient, prompt and cost-effective grievance redress mechanism. However, efforts by banks to provide timely solutions have not kept pace with the explosion in technology and products, he added.
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Rao was speaking at FIBAC 2023, jointly organised by FICCI and the Indian Banks’ Association (IBA).
He said that banks should also look to bring in “greater empathy into their services, products, and operations,” such as providing safe and friendly tech-banking to senior citizens, people with special needs, and those that are technologically challenged, among others. Further, banks must ensure that their access points — branches, websites, and applications — are user-friendly and convenient for customers with special needs.
“From the regulatory side, we are taking up these subjects more vigorously in our interaction with the industry, but there is also a need for cultural and attitudinal change within the fraternity that I would like to emphasise,” he said.
The traditional banking business model needs to pivot to address this evolving paradigm. Another important transition that is underway is changing consumer preferences. While this customer-driven evolution is often slow, it’s mostly definitive and non-reversionary. The future generation of customers is likely to consume financial services in the same way that they consume other products and services, and banks may have to be prepared to make that transition.
End of an era?
The entry of new-age players and fintechs has changed the banking landscape and has warranted the need for continuously redefining regulations and the regulatory frameworks to support innovation and ensure financial stability while protecting customers.
At the same time, the innovations and collaborations need to be well thought out, risks properly analysed, and mitigation plans put in place before offering them to customers, Rao said.
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“Banks will continue to be the primary drivers of India’s growth story, but the trajectory that the banks will adopt during this transition will determine how the banking landscape will look in the next decade,” he said.
Over the next decade or so, banks will need to transition from a sectoral approach to an ecosystem approach and partner with NBFCs and fintechs. Further, the future of banking is going to be “hyper-personalised” and banks may have to shift from isolated service provisions to hyper-personalized embedded banking to give way to customer preference-based verticals rather than business segmentation. In addition, the traditional break-up of assets and liabilities may likely undergo drastic changes from the current focus on just loans and deposits.
“The often-repeated pitch is that all the banks of the future will actually be technology companies also undertaking business in banking. While it’s difficult to be certain that this will indeed be the case, it is likely that the era of exclusiveness in providing banking services by banks is over,” Rao said, adding that banks will learn to have to operate as a part of the larger ecosystem with a good number and variety of non-bank players in the mix.