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7-fold rise in Net banking in India since 2007
As many as 7 per cent of bank account holders in the country are using the Internet for banking transactions, while branch banking has fallen by a full 15 percentage points, according to a report by global management consultancy McKinsey & Company.
"Use of the Internet for banking has seen a massive rise in the 2010-11 survey, taking the overall number of bank consumers who use the Net to close to 7 per cent of the total bank account holders -- a seven-fold jump since 2007 -- even as for the first time in the past 13 years, branch banking has come down by a full 15 percentage points during the same period," McKinsey & Company India partner and head of its retail banking services Renny Thomas said.
Thomas was talking to reporters after releasing a McKinsey India personal financial services survey 2011 in Mumbai on Wednesday. The percentage of online users of banking transactions was just about 1 per cent in the agency's 2007 survey, Thomas added.
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7-fold rise in Net banking in India since 2007
Branch usage has dropped by 27 per cent on an average across Asia between 2007 and 2011, while usage of the Internet and mobile banking have increased by 28 per cent and 83 per cent, respectively, says the survey, which was also conducted across the Asia-Pacific region.
When it comes to digital banking, the survey says, "India leads growth in Asia in mobile and Internet usage for banking. While there was a 15 per cent decline in branch usage in India, the growth in usage of the Internet and mobile banking has almost tripled."
The survey is the result of one-on-ones with nearly 20,000 Asians covering the mass, mass-affluent and the affluent consumers across 13 markets, of which the largest survey pool was from India at 5,000 because of the sheer diversity of this market, Thomas said.
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7-fold rise in Net banking in India since 2007
"For the first time since we started this survey in 1998, we see a marked shift away from using branches as a main channel for interaction in many markets. This is a fundamental shift in consumer behaviour, and has significant implications for banks. The scale of branch network is a less decisive factor for capturing customers now," Thomas pointed out.
The survey also highlights a number of changes in consumer mindset when it comes to accessing financial services after the global financial crisis.
The worst casualty is loyalty as there is a full 40 percentage point drop in loyalty since 2007, though 95 per cent are seemingly satisfied with their main banks, says associate partner Jatin Pant, adding the average number of banking relationships across the country rose 19 per cent from 1.4 in 2007 to 1.7 in 2011, while the average percentage of people willing to shop around rose 15, marking a greater willingness of consumers to vote with their feet and engage with a broader variety of financial institutions, says the McKinsey survey.
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7-fold rise in Net banking in India since 2007
"While the consumers say they want to consolidate their banking relationships, they continue to shop around because banks are not delivering the products and services, such as frontline services, that can lock them in," it says.
When it comes to financial planning too, there is a marked progress with the percentage of consumers using financial planners soaring from 14 per cent in 2007 to 43 per cent in 2011, while the percentage of consumers willing to take risks on capital growth rose by 20 per cent to 44 per cent, up from 24 per cent. At the same time, the survey says, dissatisfaction too rose with their financial planners.
"On an average, only 51 per cent are satisfied with their financial planners in 2011, as compared to 73 per cent in 2007," says Thomas.
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7-fold rise in Net banking in India since 2007
There are striking changes in the profile of financial planners too with more and more consumers moving away from traditional insurance channel planners to bank channel planners, although the country still lags behind other developed Asia markets in its usage of bank planners-16 per cent here compared to 28 per cent in Hong Kong, 71 per cent in Korea, and 52 per cent in Taiwan.
A unique finding in the survey is the rising demand for localised banking, thanks to the financial crisis with the number of respondents who "prefer to deal with a local institution" rising in the country India by 20 per cent (from 75 in 2007 to 95 per cent in 2011), says the survey.
This is the case in rest of Asia too, says the survey as "there is a consistent theme across Asia of the desire for the localisation of banks. Post-crisis, having a global brand may be less of a competitive advantage than before, and domestic players have just as good a chance to compete for customers as the global giants," says Thomas.