Banks have various means which they increase their profit base.

Below are some of

the method adopted by the management of financial institutions at branch level.

1. Target marketing given to all staff and not just the personnel in the
marketing department.
2. Aggressive marking with targeted areas and time table. This sometimes
stretches to weekends (Saturdays) in the form of awareness or publicity.
3. Staff motivation or incentives given to the ones meeting and surpassing
targets.
4. General staff appraisal.
5. Excellence customer service is the basic idea behind profitability. You can
attract millions of bank customers and not get the improved patronage
when they are not given the expected services. Ten dissatisfied customers
relates to losing hundreds of patronage.
6. Banking standard should not be compromised for anything less or more.
7. Zero tolerance for sharp practices from banking personnel and customers.
8. Internal and external auditing every now and then.
9. Training and retraining of staff.
10. Catching up with modern method and discarding archaic banking system.
11. Having the right policies and ensure strict compliance.
12. Having daily, weekly, monthly and annual expense benchmark.
13. Recycling of documents and still useful process and tools.
14. Having banking and customers security consciousness all the time.
15. Strong policies should be adopted with flexibility or exceptions.
16. Productive expenditure.
17. Corporate marketing, operations, standard and attitude must not be
undermine.
18. Bank must put into consideration wear and tear of assets before
procurements are made.
19. All purchases must be evident with source documents. Eg, transport
allowance, hotel and accommodation allowance, stationeries, etc must be
retired within given period by staff involved.
20. Security must be provided for bullion van in and out.
21. All assets, (human and capital) must undergone or be covered by insurance
policies.
The Traditional Banking Function:

1. The creation of money through credits and grants to credit worthy

customers. (Performing loan with the right collateral securities)
2. The sales of shares and securities in the Money Market.
3. Acceptance of funds on demand and term deposit accounts and customers
valuables. Eg, vital documents.
4. Charges and commission on deposit and withdrawals and standing order
payments or instructions done on behalf of banking customers.
5. Equipments leasing and advisory services provided to banking clients.
6. Import and export duties.
7. PTA AND BTA (Personal and Business Travelling Allowance) for individual
and business class provided for traveling banking customers.
8. Inter Bank borrowings (Call Money.)
9. Advisory services provided to the State and acting in the authority of
governments, etc
 It is just like any other Business Model where the profits are generated at the base
level, mostly,

So is the case with the Banks also. Almost all the profits come from the Branch Itself,
whether it is a Service Branch/Corporate Branch/Loan Processing Centers or Forex
Branches.

Main business of the banking is accepting deposits and lending it. And by lending it,
the bank earns the profit. However, nowadays there are varieties of tasks that a bank
perform and that has increased the profit level.

To increase further, the stressed assets could be managed, recovery could be made by
using services of DRT and SARFAESI etc. And most importantly by bringing in more
and more new businesses with more focus on low cost deposits (CASA).

Also there are so many charges which the banks (Generally, Public Sector Banks) do
not collect, such as charges for;

· Change in Account operation mandate

· Change in authorized signatories

· Statements of accounts (It’s not collected generally small rural and semi urban
branches)

· Inquiries related to old entries (More than 12 months old)

· Failure of carrying out standing instruction

· Conversion of Account from Inoperative/Dormant to Active (yes it’s chargeable).

And many more such services, there are charges laid down for almost everything that
is done in a Bank. However, in practice the charges are not levied for everything.

Practicing the levy of these charges may increase the profit but it may also have an
adverse impact.

At branch level profit can be increased through expenditure reduction and increased
income. Expenditure reduction can be made through proper application of interest
rates and at correct periodicity. Leakages should be curbed and carried forward. Rates
of interest as per Head Office guidelines should be correctly applied in advances and
deposit accounts. Unnecessary miscellaneous expenditure, telephone and electric bills
should be curtailed. Fee based income should be increased through Bank Guarantee,
merchant banking and treasury business.

Measure of branch level profitability differs from bank to bank and also differ over
time. It depends on banks’ policy which is dependent on banks’ goals and objective.
Banks’ policy may be exercised through ‘Transfer Price Mechanism’ and other KPI
(key performance indicators).
 Depending on banks’ policy, bank may promote low cost deposits like current and
savings deposit or may be retail loans.

Ex: Branch may get more compensation from HO for deposits in current
account….thus if branch has more CASA deposits, its profitability increases.

Also, it is important to keep NPA (Non Performing Assets) very low as also keep
other running / administrative cost as low as possible.

Bank will disseminate this information and generally KPIs are discussed when
budgetary exercise is underway when message on banks’ priorities is passed on to the
regional heads and branch managers.

Five strategies for growing revenue

1. Change the customer acquisition model. Historically, banks used direct mail to
generate inquiries and branch lobby management to drive sales. ...
2. Change the customer conversation. ...
3. Expand relationship depth. ...
4. Utilize data analytics to improve fundamental product economics. ...
5. Diversify services.

While Banks are getting more and more pressure from customer’s increasing demand,
highly competitive market and strict regulations – in the current environment,
understanding customer behavior, attitudes and requirements is more vital than ever for
banks’ strategic thinking, operational planning and day-to-day customer treatment,
according to Ernst & Young.

What Banks can do?

1. Product Bundling and Relationship Pricing – Banks need to think beyond ‘one-
size-fits-all’ strategy to cater to customer’s increasing demand. Customers also will
leave an institution for another based on getting the services they want and the
best price available for it, so relationship pricing and product bundling become
ever more important. Banks should look at products and pricing based upon a total
customer view and respond to the value that customers bring to the bank across
the spectrum of rates, fees, features and services. Many banks are now-a-days
bundling identity theft alerts and credit score reports with a checking account
which provides increased account sales because of the attractiveness of the
bundled features.
2. Cross-lob data sharing and building a 360 degree Customer View - Though
there are many challenges in integrating cross-lob data like extracting data from
multiple disparate systems, existence of duplicate records in business
 applications/ databases and data sharing impediments due to opt-out policy/other
regulatory requirements, it is crucial to have a 360 degree view of customer which
will help to get a holistic picture of a customer’s demographics, engagement, need
and preferences. This knowledge enables organizations to precisely target
products and services to current customers, ac quire more profitable customers,
reduce marketing costs, improve customer satisfaction and maximize lifetime
value.
3. Sophisticated customer segmentation is the key to cater to individualized needs
and should be based on standard banking metrics – tenure with the bank, number
of accounts, balances of accounts and loans, frequency of interaction with the
bank, channel preferences along with psychographic (values, attitudes, lifestyles),
behavioral (usage rate, price sensitivity, brand loyalty, and benefits sought) and
demographic variables (occupation, income, and family-status).
4. Real time cross –selling/up –selling - Banks can use real-time events and deep
customer insight to offer cross-channel marketing campaigns where “moments-of-
truth” (wedding, home purchase/sale, new job, stock transactions, etc.) are acted
on as a way to deepen customer relationships - to determine the next best action,
be it an offer, channel, message, piece of content etc . The more customized
product/service offering, the higher are the barriers to switching banks.
5. Innovative Reward Design - In today’s hyper-competitive market, banks need
to move beyond a “one-size-fits-all” reward model particularly for the most
profitable clients. They need to design a system which let profitable customers
enjoy premium benefits and redeem rewards points easily and in various ways (for
gift cards, merchandise, events and experiences, or cash). Celebrity Cruises has
joined with MBNA America Bank to create a comprehensive rewards credit card
offering both cruise and non-cruise vacation benefits, including travel,
merchandise and cash rewards. According to Celebrity, the Celebrity
Rewards(SM) WorldPoints Visa(R) credit card is designed for people seeking
ways to balance their work and leisure time. Capital One‘s innovative ‘Purchase
Eraser’ unique rewards redemption feature provides consumers the ability to erase
the cost of previous travel expenses using their reward miles.
6. Automating customer care – In the digital age, customers demand more self-
service options and any-time, anywhere service. So expanding customer self-
service, case management, dispute management and event-based decision-
making can be perceived as better customer care, while lowering operational costs
and increasing effectiveness. However, banks should continue to make compelling
offers as incentives for customers to use lower cost channels.
7. Digital Revolution – Well…it might just be feasible that what social media is really
doing today is more than socializing the web. It might be possible that this drive
towards great usability, human interaction design, multi-touch, augmented reality,
geo-location and connectedness is actually creating a digital service platform that
could revolutionize the ability of an organization to look after customer. Banks
should try to engage consumers through digital channels and advance its
leadership in the digital space as well as expand its social media engagement on
Facebook, Twitter, Pinterest and LinkedIn. Though there can be several
roadblocks and complications – like online account opening is expensive on per-
account bass - however, prices for new delivery channels always commoditize as
usage grows. It is a myth that importance of branches will diminish as the digital
channel usage will increase on the contrary, if branches are tightly integrated with
other channels, that promote and support them and that quickly finish transactions
started there will be more successful than ever.
 8. Big Data – The big data is the new disruptive technology for changing the game.
Big data capabilities provides banks the ability to understand their clients at a more
granular level and more quickly deliver targeted personalized offers. Being able to
anticipate customer needs and resolve them before they become problems allows
banks to deliver timely, concise and actionable insight to contact center agents.
This can lead to increased sales, improved customer satisfaction and a reduction
in operating costs. Fighting fraud, financial crimes and security breaches, in all
forms, is among the most costly challenges facing the finance industry. Big data
technologies provide a scalable, integrated, secure and cost effective platform to
more quickly prevent, detect and mitigate internal and external frauds. Big Data
Benefits include: Reduced costs of fraud screening and monitoring fewer false
positives, reduced cost of fraud investigations, reduced payment fraud losses, real
time fraud detection and mitigation, optimized offers and cross-sell.
9. Multi-Channel Seamless Experience – Banks should seek to attract and retain
customers with a compelling multi-channel experience across all touch points
(branches, online, mortgage and investment advisors, etc.)Technology continues
to rapidly change the way consumers behave and interact. Virtual channels are
becoming more relevant, with the increasing penetration of high-speed Internet
connectivity and Web-enabled mobile devices allowing consumers to spend more
time online. Bank customers will not only continue to use a mix of channels, but
will use non-branch channels for increasingly complex banking transactions While
retail branches remain a core banking channel, research shows that customer
traffic is in some cases flat or declining, as customers come to rely more heavily
on digital/phone channels. In fact, online banking and call centers account for 55
percent of transactions today. This shift can be a positive development for banks,
but they must be ready to provide customers with a rich set of capabilities and a
seamless experience across all channels. Successful execution of such a strategy
has tangible economic rewards, but requires the right set of investments and
development of new capabilities.
10. Innovative Bank Branch Design - Hip, modern, and fun. That’s exactly the vibe
many of the nation’s banks are trying to achieve as they reimagining their
branches and try to lure more customers into brick-and-mortar offices. The high-
counter old teller stations and staff, who are versed in transactional banking, won’t
work in the BANK 2.0 world.Withdrawals and deposits aren’t attracting customers
to brick-and-mortar offices anymore, so banks are turning to perks like coffee bars
and yoga to keep an important gateway open.

At one West Coast bank, customers can spread yoga mat and strike a tree pose or grab
a free beer during an Oktoberfest-style celebration. Another national bank offers
macchiato at its coffee bar and couches designed for lounging. Locally, banks are
adopting Apple Store-like designs, adding concierges, and setting aside space for
community groups to meet. Bank of America, for example, recently launched what it
calls a flagship office in Boston’s Back Bay, housing in one place the variety of financial
services offered by the banking giant. Teller services are squeezed behind a column,
while private offices where more lucrative business is conducted dominate the floor
space. Capital One Financial Corp., well known for its credit cards, is breaking into the
Boston banking market with six new marketing offices called “cafes.” Scheduled to open
over the next several months, they will resemble coffee shops more than banks.
Employees will serve up java and sandwiches, along with advice on how to set up online
accounts and access other services. Modern and innovatively designed branches will
drive customer engagement and is the key to branch long-term success.
Rather than decrying customer’s increasing demand and competitive market, if bankers
can embrace the new reality – and focus on innovation, disruptive technology and
automation--- the profit will follow!!!!