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Banking, to an outsider, is the business of trust. Banking, to an insider, is the business of cross sell. Given that the cost of selling a product is more if it is sold to a new customer in comparison to that for an existing customer, banks go all out to sell multiple products to their existing clientele. The sheer number of calls that you receive every day from your branch, relationship manager or call center is the topic of many lamentations and probably as many hilarious memes.
A couple of years before the calendar displayed Y2K, Wells Fargo Bank famously rolled out their mantra “Go for Gr-eight”. The logic was sound – sell 8 products per customer -this will save cost, generate more revenue and build stickiness which in simple terms means that customers will find it difficult to leave since they are connected to the bank through various linkages. With ruthless execution the model began delivering results with the retail bank racing ahead on profitability from being ninth in the list to topping the charts as the most valuable bank in the US. As against the industry average of a little more than two products per customer, this bank registered an average of more than six. Investors were singing praises, other banks attempted to implement the model, consultants began quoting this as a game changer model and as with any “good practice” it was imported into the Indian banking system. The new generation banks were the ones to quickly adapt the model since their branches were positioned as sales and service outlets and they did not have to contend with convincing unionized workforces. Over a period of time the public sector banks also joined the bandwagon albeit at a slower pace. Meanwhile in the US, the much-vaunted global model was beginning to develop cracks. Employees began gaming the system, transgressions received punitive action but the model was persisted with, without examining the root cause of these mis selling cases till 2016 when the scandal broke. It emerged that 2.1 million phony deposit and credit card accounts were set up and the regulator slapped a $100 million fine. Certain lines from the investigation report of the Office of Los Angeles City Attorney are chilling and also ring a bell closer to home. To quote “Managers constantly hound, berate, demean and threaten employees to reach these unreachable quotas. Managers often tell employees to do whatever it takes to reach these quotas. Employees who do not reach their quotas are often required to work hours beyond their typical work schedule without being compensated for their extra work time, and/or are threatened with termination.” Some of this might seem familiar to folks working in the financial services sector in India and one can only hope and pray that our model does not topple over.
The purpose behind stating the unintended consequences of a well-intentioned model is not to question the purpose of cross sell or advocate for removal of incentives – both topics having been debated adequately by experts. This is a plea to the regulator to empower the customer by offering them the choice – that of porting their account to any bank, retaining the account number. More than a decade back, RBI had proposed the idea which was probably ahead of its times. Today with the National Payments Corporation of India (NPCI) having demonstrated its capability in seamlessly executing more that 640 million UPI transactions in a day, what stops us from exploring the usage of this platform towards integrating our bank accounts. The inertia that bankers put forth in terms of different banks having different numbering patterns for accounts can be overcome through generation of virtual account numbers on the NPCI platform. Similarly existing payment mandates for EMI, SIP, Bill Pay etc. can be migrated onto the NPCI platform. The immediate impact of such a move would be better customer service and reduced charges both of which are the need of the hour. The mobile number portability move showed us these benefits till water found its level in terms of equally good or bad service given the limited number of service providers. With the government signalling willingness to provide approvals for new banks on tap as well as small finance banks queing up to become universal banks, empowering the customer to switch banks seamlessly could trigger the next wave of customer centric reforms we are waiting for. The question is: If not now, then when?
These pieces are being published as they have been received – they have not been edited/fact-checked by ThePrint.