Emergence of flexible distribution channels for financial products: Electronic banking as competitive strategy for Banks in India

In India, with competition heating up in the banking industry and the increase in the number of private and foreign banks in the post liberalization era, all players in this market are gearing up their supply chain management processes for better customer acquisition and retention. Most of these new private sector banks and the foreign banks are handicapped by the lack of a strong branch network as compared to their public sector counterparts to distribute their products or services. In the absence of such a network, the market place has seen the emergence of a lot of innovative services by the players to increase their market share and reduce their cost of service delivery through direct distribution strategies of Non-Branch Delivery. All these are using “homebanking” as a the key “pull” factor to wean customers away from the well-entrenched public sector banks.

Technology is enabling banks to provide the convenience of “anytime-anywhere” banking to increasingly demanding customers. Banks are now reengineering the way in which their services can be “distributed” to their customers. The earlier brick-and-mortar branch is no longer sufficient, technology is now taking banks to the homes and offices, 24 hours a day, 365 days a year through ATMs, phone banking and PC banking. Therefore, the financial supply chain is undergoing a fundamental strategic change. In this paper, the four major category of players, in the Indian banking sector, i.e. Public Sector Banks, Private Sector Banks, Financial Institutions like ICICI and IDBI, and Foreign Banks have been studied to identify competitive strategies followed by each to get into the Non-Branch Delivery Business. Developmental Banks, Rural Banks and Co-operative Banks have been left out of the scope of this study, since this is not their area of focus.