The use of technology and liberalization and the deregulation process initiated by the Indian government in the early 1990s has completely changed the traditional way of banking. Now, in India banks are moving towards the concept of financial supermarkets, where the customer can get the full range of financial services. This article attempts to address the problems and prospects of banks becoming financial supermarkets in India. The prospects are very bright, especially in the insurance, personal credit and agriculture business, but banks still need to develop their technology and penetrate into the retail segment before they can make the concept successful.
We are living in a world dominated by the new idea economy, where customers are quality, time and price conscious. They are seeking products and services that help them simplify and take control of their lives. Financial institutions and banks, which are important pillars of any economy, cannot ignore the changing nature of the customers. The method of fulfilling all the financial needs of a new type of customer at a single place has led to the concept of "Financial Supermarket".
The benefit of this is that customers get all the services under a single roof, saving transaction costs and time cost. Banks, on the other hand, can leverage the branch networks to cross-sell different products, thus, saving transaction costs. More than that a bank can use its existing expertise in any one type of financial service in providing the other types; it entails less cost if all the functions are performed by one entity, instead of separate specialized bodies.
Universal banking in the US has an altogether different story. The Glass-Steagall Act of 1933 erected a wall between commercial and investment banking by prohibiting commercial banks from conducting security-related businesses andvise-versa. For more than half-a-century, this piece of legislation shaped a segmented financial system in the US, unlike the universal-banking system in countries like Germany and Japan. |
