Professional Documents
Culture Documents
Submitted To: Dr. Mala Srivastava Narsee Monjee Institute of Management Studies
Submitted By: Group 4 Viplav Gupta Sachin Kamath Amey Kanekar Zoya Mehani
Contents
Objective ................................................................................................................................................. 5 Methodology........................................................................................................................................... 5 Selection of variables .............................................................................................................................. 5 Findings ................................................................................................................................................... 6 Interpretation of result ........................................................................................................................... 8 Conclusion ............................................................................................................................................. 15 Appendix ............................................................................................................................................... 16
INTRODUCTION
The retail banking landscape in India has seen major changes in the past decade. Not long ago, consumers in India performed most of their bank related transactions by physically walking into banks. Now the trend is shifting to use of computers and mobile devices. Bank loyalty is eroding with customers splitting their relationship among multiple banks. Private Banks are competing head-to-head with public sector banks. With rising disposable incomes and growing economy has spurred consumerism, and people are no longer wary of relying on credit cards or debt. Banking is a scale driven industry where profitability is achieved only once a certain mass of customer base is reached, owing to high levels of investment required to set up the business. Thus, customer acquisition becomes important in the area of retail banking. Decisions of which segment to target should be based on market demographics and rising trends. In India, following are the top 3 trends banks should be looking at: 1. The population demographics are skewed towards the mid-20s segment: India is one of the youngest nations, and b y 2016, nearly 40 per cent of the total population would be in the mid-20s. 2. Uptake of online and mobile banking: When Mobile banking features as the number one niche area for strategizing aggressive business plans in the SBI chairmans note Its a sign of things to come. Banks are seeing a phenomenal increase in the number of online banking transactions through computers, smartphones, and tablets. The highest percentage of people adopting to online/mobile banking are in the 25-35 years age group 3. Eroding Loyalty: With multibank relationships becoming the norm, personal recommendations from existing customers have become the most trusted means of acquiring customers. As the number of financial products and services offered increases, so does choice. The younger population likes to have the choice and has no qualms with multibank relationships
OBJECTIVE OF STUDY
The above trends compelled us to make look at the banking habits of young India in the age group of 20-30 years. The objective of our study is two-fold: 1. For the banks a. To identify factors which are most important to people in the age group of 20-30 years (TG) for choosing banks b. To identify if different behavioural groups exist in the TG c. Gap analysis of services offered and the expectations of the TG 2. For the consumer a. To develop a model for predicting whether public sector or private sector bank is more suitable for a new customer based on his expectations from a bank
Respondent here have rated above variables on a scale of five. We observed that some of the above things are interdependent. For example person who is inclined towards internet banking there is high probability that he would also rate ease of process as important. Such customers would be looking forward to convenience. Similarly different groups of related factors could be analyzed using factor analysis. Findings
KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square df Sig. .784 434.104 66 .000
KMO test revealed that the sample size was adequate to perform factor analysis Bartletts test revealed that the factors identified are significantly different from each other.
Descriptive Statistics Mean SMEAN(Q1A) SMEAN(Q1B) SMEAN(Q1C) SMEAN(Q1D) SMEAN(Q1E) SMEAN(Q1F) SMEAN(Q1G) SMEAN(Q1H) SMEAN(Q1I) SMEAN(Q1J) SMEAN(Q1K) SMEAN(Q1L) 4.04 4.32 4.46 3.79 3.27 3.84 3.68 4.35 4.11 3.39 3.97 4.13 Std. Deviation 1.117 .930 .936 1.030 1.036 1.096 1.151 .958 1.098 1.169 1.045 1.047 Analysis N 97 97 97 97 97 97 97 97 97 97 97 97
Three variables were rated much higher than others 1. Accessibility of branches and ATMs 2. Internet Services 3. Reliability of bank
Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings % of Total 4.160 1.118 .708 .677 Variance 34.670 9.317 5.901 5.641 Cumulative % 34.670 43.987 49.888 55.529 Total 2.186 1.665 1.660 1.152 % of Variance 18.217 13.876 13.835 9.601 Cumulative % 18.217 32.093 45.928 55.529
Facto r 1 2 3 4 5 6 7 8 9 10 11 12 Total 4.572 1.380 1.191 1.109 .899 .674 .570 .428 .363 .319 .287 .209
% of Variance 38.099 11.498 9.926 9.241 7.490 5.613 4.751 3.563 3.023 2.657 2.395 1.744
Cumulative % 38.099 49.598 59.524 68.765 76.255 81.868 86.619 90.182 93.204 95.861 98.256 100.000
The above table shows that only four factors significantly impact the variability in the responses. The four factors are explained in more detailed later.
Rotated Factor Matrix
a
Factor 1 SMEAN(Q1I) SMEAN(Q1J) SMEAN(Q1B) SMEAN(Q1F) SMEAN(Q1G) SMEAN(Q1A) .806 .760 .597 .479 .470 .561 .533 .511 2 3 4
.380
.511
.339 .708
.362 .384
Extraction Method: Principal Axis Factoring. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 6 iterations.
Interpretation of result Factor analysis gave four factors which are as follows. Factors Factor 1 Traditional Variables A. In branch service (Customer handling, waiting time, clarity of process) B. Personal relationship C. Accessibility of branches and atms A. Deposit and lending interest rates B. Processing fees C. Reliability of the bank D. Brand image/ reputation A. Ease of processes (loans, new accounts, service activation) B. Customer care service (phone/ live online chat) C. Internet service Mobile services Loyalty programs/ rewards/ cash backs
Factor 3 Convenience
Factor 4 Rewards
Thus, above 4 factors are uncorrelated and all the questions under each of these factors are somewhat explained by the that factor. Hence, the correlations between the variables is deduced or reproduced from the estimated correlations between the variables and the factors. Behavioural Groups based on factors Factor 1: Traditional This explains the behaviour wherein people want convenient traditional banking services along with ATMs. They are not so tech-savvy or heavy users of modern services like internet/mobile services.
Factor 2: Price and Reliability This behaviour is somewhat cost sensitive or value for money seeking segment. They seek processing fee free operations. Also they are careful about what are the interest rates bank offers so that they maximum monetary benefits out of the transactions. Other additional services might not be of very importance to these people. We can say that these people are pro-PSU banks. Factor 3: Convenience This explains the behaviour wherein people want most convenience and modern services. These people are likely to be least bothered about cost at which this convenience comes. They are also brand conscious.
Factor 4: Rewards This factor explains the behaviour of additional monetary benefit seeking people. They might be heavy users of services hence they want some loyalty benefits through offers or schemes of cash back or gifts. They are also inclined towards mobile services. Banks should cross sell their products in this category. People using mobile services might be interested in credit services associated with loyalty programs.
Methodology Average of rating given to all public sectors banks in question 8 was calculated on different variables. Same was also done for private mass and private premium segment. Also average score given to these different variables in question 1 was calculated. This score is basically what customers prefer. And then comparison was done to understand where these banks stand vis--vis the score that customer prefer. For example if average score on branch services for particular segment in question 1 is 3 and it is 3.5 in question 8. This means. This segments banks lag by 0.5 score vis--vis customers expectations. Hence there is a scope of improvement for them. In this manner different in the score was calculated. On some of the parameters certain segment banks are doing above expectations. In below table cells in red indicate huge need gap for those types of banks. Pink indicates small need gap and green indicates that banks are doing above expectations
Banks performance
Mobile service s
Credi t card
Interes t Rates
In Branch Service
Brand Image
Custome r Service
Youth Preferences
4.32
4.46
3.79
3.27
3.84
3.68
4.35
4.11
3.39
4.04
4.13
Internet services
Mobile services
Credit card
Interes t Rates
In Branch Service
Brand Image
Following gaps are identified from above table: 1. Our TG really feels that the credit card services of the private mass market banks should be improved. 2. Also they feels that in banks like ICICI and HDFC, deposit rates and lending rates are not matching their expectations. 3. They really feel that the in branch service and personal relationships are important to them and should really be improved across the Indian banking system.
4. Our TG is not very peculiar about the reliability of the bank they choose. This may be due to the fact that the Indian banking system had been more resilient to the economic downturns across the globe and hence people are not worried about it.
Eigenvalue is not large enough, and the present correlation of .465 is not very high.
Wilks Lambda of .784 indicates that group means appear to differ. The associated significance value of.026 indicates that the difference is not very significant.
The above can be explained in the following way: Only 25 respondents are using public banks Of the total respondents who are using public banks, 16 respondents bank with SBI. SBI is one of the more trusted public sector banks with performance comparable to mass market private banks.
Note: 9 out of the 25 public sector bank respondents were classified incorrectly. 7 out of these 9 are banking with SBI The percentage correctly classified is 73.2%. We therefore propose using this model for determining whether an individual should choose a private or a public bank based on his expectations. The above model gives a more accurate prediction of private banks then public banks. It classified private banks with 76.4% accuracy.
Conclusion
After our study on this small dataset, we conclude that the young target population is very demanding and they focus more on ease of process and services like internet banking that facilitate the ease. In addition, it was surprising to know that they still believe that the branch banking is important and in-branch service and personal relationships are important to choose a particular bank service provider. The gap analysis revealed that on various parameters, Indian banks cater to the needs as per the expectations, but there is still a lack especially with the mass market private banks like ICICI, HDFC and Axis. People feel that they do not get a value in their services as per the fees levied on them by these banks. People who bank with PSUs have little lower expectations and they were not very disappointed with the services offered.
Appendix
Survey Questionnaire Section 1: What is important to you? 1. Rate the following factors on a scale of 10 based on their importance while choosing your bank a. Brand image/ reputation b. accessibility of branches and atms c. Internet services d. Mobile services e. Loyalty programs/ rewards/ cash backs f. Deposit and lending interest rates g. Processing fees h. Reliability of the bank i. In branch service (Customer handling, waiting time, clarity of process) j. Personal relationship k. Ease of processes (loans, new accounts, service activation) l. Customer care service (phone/ live online chat) Section 2: Something about yourself 2. 3. 4. 5. What is your age? Profession Your highest level of education Where do you live? a. Metro city( population > 1crore) b. non metro city (10lakh to 1crore) c. town(population < 10lakh)
Section 3: Help us understand your perception about your bank 6. Which bank is your current primary bank? (as a major or minor) 7. Who chose this bank for you: a. You b. Your parents c. Your friends/ well-wishers d. Your employer (past or current) 8. Please rate your banks performance on following parameters on a scale of 1 to 10. (chose n/a if not applicable) a. accessibility of branches and atms b. Internet services/ c. Mobile services d. Credit card services e. Deposit and lending interest rates f. Reliability of the bank g. In branch service (Customer handling, waiting time, clarity of process)
h. Personal relationship i. Processing fees j. Ease of processes (loans, new accounts, service activation) k. Customer care service (phone/ live online chat) l. Overall Brand image/ reputation 9. How likely are you to recommend your bank to others (1-10) 10. Are you planning to switch your banking services provider in the next two years? [Yes no maybe] Section 4: 11. How often do you perform following modes of banking transaction? a. Debit card b. Credit card c. Online payments of bills d. Online Purchases e. Recharges f. Online money transfer g. Monitor your transactions/ Statement Online h. IT returns payment i. Automatic recurrent payments to third party j. Loans/ Personal Finance k. Demat Account l. Mobile banking m. Corporate Account/ Project Finance/ Business Transaction