Banking Industry Value Chain - Understanding Customers of Banks
To understand the business model and value chain of any industry, it is very important to understand the customer profile for the products and services being offered. Modern banking industry caters to different types of customers ranging from individuals to large corporates; serve diverse geographies from rural villages to cross border international operations, utilizes various banking channels like branch network and e-banking. In this article, we will help you understand the diverse customer base that will help you to understand the value chain.
The banking industry caters to a diverse clientele offering various different products and services. This article will explore who are these customers and how they benefit from the services offered. What are their expectations and what services do they expect their banks to provide. We will also see how banks try to meet these expectations and deliver on those promises. To optimize investments in customer experience, banks must deploy segment-based strategies that take care of both similarities and differences between expectations. Given below are major segments of banking customers:
• Individual Consumers
• Small Businesses & Traders
• Farmers & Rural Consumers
• Corporates and Corporations
• Banks – Domestic & International
• Governments
• Institutional Investors
• Non-Profit Organizations
• International Clients
Individual Customers
First are Individuals like you and me. We earn money and spend money. We keep our surplus with banks and take loans from banks when we need money. Bank provides various services and products for this sector including savings account, fixed and recurring deposits, car loans, home loans, personal loans, credit and debit cards, and salary disbursement accounts.
Small Businesses:
Small business houses and traders need banking services to manage their day to day operations. Banking Industry offers various products tailored to the specific needs of small businessmen and traders. Some examples are cash credit accounts, current accounts, pay orders, demand draft, payable at cash cheque books, credit, and debit card, loans for fixed assets and machinery, etc.
Farmers:
Banking plays a very important role for farmers. Apart from offering products that are available to individual customers, it also offers many products and services specifically tailored for agriculturists and farmers. The banking sector plays an important role in agriculture-based economies like India. They are one of the preferred mediums for governments to disburse various subsidies and concessional loans for farmers. Banks finance loans to buy equipment for farmers, provide financial planning and investment advice through “Agriculture Banking Specialists”, provide crop loans and production or season based loan products.
Corporates & Corporations
The banking industry is very important for Corporate or institutional clients. Companies generally have huge surpluses of money or need money to invest. Banks help them keep their surplus money or provide them with funds when they are in need of it. Funded Products provide short and medium-term funding facilities to overcome challenges and complexities faced by corporations in managing cash flows. Banking channels provide finance to manage the working capital needs of businesses. Treasury Products help to manage and mitigate business risks by providing money market and foreign exchange facilities. Foreign Exchange products deal with the money market and various investment products help organizations achieve their financial goals. Some examples of investment products are term deposits and mutual funds. They may include a range of debt and fixed income products to suit the dynamic and varied needs of customers across segments.
Banks
Banks make a lot of transactions with other banks. Many countries have “Central Banks” that is owned and managed by Governments. Banks borrow and lend money to each other. They get into consortium advances where two or more banks join together to offer credit to a large borrower. They enter into various agreements with each other to provide services in the regions where they don’t have branches.
Governments:
Businesses and governments cannot be completely self-sufficient when it comes to the availability of funds they need. They need money to operate, and banks act as intermediaries between the suppliers of funds and users of funds. Over the period of time banking has transformed itself into an important and powerful undertaking. Today the movement of capital handled by banks allows economies to grow and prosper. They maintain the delicate balance between the supply and demand of money by controlling borrowing and lending interest rates.
Institutional Investors:
Institutional investors are organizations that pool large sums of money and invest those sums in securities, real property, and other investment assets. They can also include operating companies that decide to invest their profits to some degree in these types of assets. Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, investment advisors, and mutual funds. Their role in the economy is to act as highly specialized investors on behalf of others. Many banks act as institutional investors and most of them provide a wide range of services to such investment bodies. A wide range of services are provided under this umbrella and may include assessment of investment needs, evaluation of asset structure and the liability-management requirements, cash-flow analysis, development of investment policy, portfolio-construction, custody services, portfolio rebalancing, fundraising, and philanthropic services.
Non-Profit Organizations:
A nonprofit organization are organizations pursuing a special cause, generally philanthropic in nature, and uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. Some NPOs may also be a charity or a service organization. Banks serve not-for-profit customers in a variety of ways and generally have specialized products and services for such organizations. The most common service is the collect membership and other fees on behalf of them at various locations. Many banks offer Not-For-Profit Accounts which offer the convenience of current account and also collected balances accumulated in the account earn interest like a saving bank account. Many banks provide these banking services to nonprofit organizations at a concessional or nominal cost. Specialized banking products could be available for organizations like churches, executors and administrators, and trustees.
International Clients:
Banks offer financial services, such as payment accounts and lending opportunities, to foreign clients. These foreign clients can be individuals and companies, though every international bank has its own policies, most of them offer various products and services to cater to the needs of their international clientele.
Banking products for this sector include offshore banking, savings, investments, and mortgages clubbed with a broad range of FX services including forward and spot transactions. International clients generally require offshore banking facilities to secure their money outside their country of residence or to facilitate the business activities in another country. Many banks offer accounts in all major currencies and that helps international clients protect their money against local and international volatile economic and political environments. Banking channels facilitate easier trading across international borders and provide electronic banking with access to SWIFT.
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