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Banking on Contrast  -   Gen-Y & Gen-U




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Indian banking system has been progressing rapidly and today it is one of the vibrant and strongest banking system in the world with over 76000 branches with a business of above 100 lakh crores catering to the needs of 400 million client base (Current and Savings) spread across the country. Banks are paying focused attention to enhance the value of all stakeholders leveraging technology and new business/revenue streams. The growth rate is expected to be higher than the present on account of strong GDP growth of above 7% & rising income levels; high disposable income coupled with high savings rate i.e. above 30%; increased thrust on infrastructure and rapid globalization of Indian corporate and large presence of Young Population with expected increase from existing 64% to 80% by 2030.


The increased economic activity coupled with financial inclusion initiatives usher banking habit among the masses and likely to add another 800 million accounts in the ensuing years. The future banking is likely to herald around two distinct segments viz., Gen-Y (Gen Next) and Gen-U (Unbanked).


I. Gen-Y segment


The ownership of Bank customers indicates that the contribution of Household sector is dominant with 2/3rd of deposits and 1/5th of advances. Majority of household (retail) customers belongs to Middle / Silver-line age group known as Gen-X and this segment will soon be approaching retirement and their financial prospects seem less rosy as they will begin drawing from their savings. The demographic profile of the country clearly indicates that 70% of population of the country is under below 35 years age group known as Gen-Y and this segment is likely to grow with increased pace and emerge as potential business source for the banks. The composition of Gen-X & Gen-Y among Bank customers is estimated around 80 & 20 respectively. The distinct features of Gen-Y are:


Ø      Gen-Y has excellent earning potential and bankable. This segment relatively well educated, skilled and far more entrepreneurial than earlier generations and they have high expectations about their careers / income flows and maintains a work-life balance. They believe “Spend now & Save later” concept and often faces cash-crunch and look for credit card / personal loans that are simple and flexible.


Ø      Gen-Y segment is demanding and wish to deal with flexibility to fulfill their multiple needs and expects quick response with user friendly processes. They coolly move to other banks, if their demands are not met. Unlike Gen-X, they are not keen in long term or retirement products. Banks need to design products which are simple to understand and easy to operate and focus on introducing customized, personalized and bundled products to meet their financial needs.


Ø      Gen-Y extensively use technology embedded applications for communication, entertainment, information etc. Social media is the best option for the banks to interact with customers to communicate about products/services and to receive feed back. Banks can leverage or partner with other retail brands that have successful presence by co-branding or creating joint offers.


Ø      Most of Gen-Y, being single children, are used to dealing head-on with figures of authorities and are inclined to establish a familial attitude with peer groups. This segment is mobile and their choices are informed and motivated by their own experience and that of their peers. They have a strong trust in their social network and represent special features such as Independently Dependent, Practically Motivated, Socially Mindful, Financial Freshmen etc.


Seamless multi-channel banking with innovative pricing is the key factors and the early movers will take advantage in realizing the lifetime value of this segment.


II. Gen-U Segment


Though, there is impressive growth in bank’s business in the post nationalization era, still the fruits of the banking not reached to the vast segment of the population, especially the underprivileged sections of the society. 5.70 lakh villages remain unbanked and around 51% of country's adults do not have access to bank accounts. The barriers of financial inclusion on demand side are low literacy rate coupled with lack of financial literacy, low income levels, absence of collateral / assets and social exclusion. The supply side factors are distance, costs, timings, complicated procedures, sub-optimal attitude of staff and offering of inappropriate products etc. Financial exclusion is the cause to flourish informal financial markets which suffer from several imperfections such as high cost of credit at exploitative terms, loss of precious savings on account of fly-by-night operators, inordinate delays in effecting transfer of funds and settlement of accounts.


Today, the banking has become imperative to all house-holds across the country irrespective of their social and financial status and expects minimum financial services from the banking system. The recent Financial Inclusion initiatives of the Government to cover around 73000 villages of above 2000 population through Branch banking or Business Correspondent is going to transform the banking landscape to greater extent within couple of years.


The envisaged client expansion will lead to increased flow of savings to the banking system and a demand for retail and personal banking services. As per PWC report, around 3 lakh crore government subsidies/welfare amounts will be routed through banks once UID project is in place. Major chunk of prospective customers are likely from unbanked/under banked population whose awareness towards banking is low and it warrants the banks to pay special attention to spread customer education through financial literacy and awareness programs.


Gen-Y & Gen-U segments are likely to trigger increased business volumes in the following areas:


Ø      The declining dependency ratio and increased urban middle class are the triggers for the increased flow of savings to the banking system and a demand for retail banking services. The existing branch banking scenario is likely to be replaced with online banking (Mobile, Internet and Debit/Credit Cards) in a big way. The contribution of retail loans to GDP stands at 6% compared to 15% in China and 24% in Thailand. This provides ample opportunities for banks to tap mortgage loan segment besides vehicle and personal loan segments. Affordable housing is need of the hour and banks need to focus on this area, however, this would require a great deal of technological and financial innovation.


Ø      The consumption boom may lead for higher demand for food products viz., milk, meat, eggs, fruits, vegetables, pulses etc., which warrants supply augmentation. This can be achieved through expanding farm production activities coupled with encouraging entrepreneurs to set up agro based industries. Next Generation belongs to the millions of Young Entrepreneurs of the country.


In order to handle the growing business, banks need to focus attention on the following important areas:


I) Information Technology: Core banking has changed the face of banking by offering value added services through alternate delivery channels. The networked platform has enabled the banks to provide Triple “A” services viz., Any Time, Any Branch and Any Where to the customers. However, the full power to use the information to be more productive and make better decisions still remains unrealized. The next revolution offing is Mobile and Internet Banking, which is likely to cover 20 to 30% of total transactions in the ensuing years.


At present, majority banks have been adopting decentralized model in handling credit portfolio where as it warrants specialized skills to ensure credit quality through centralized approach. In the vibrant financial environment, banks are dealing with plethora of risks on account of diversified activities. Further, the technology embedded environment fraught with more operational risks than yester years, which need to be addressed with holistic approach.


II. Human Capital: The dearth of human assets is going to be the major challenge as 80% of existing staff (6 lakh) would attain superannuation within a span of next ten years while at the same time the industry would need another 6 lakh additional manpower to handle the increasing business volumes in the ensuing years. The future banking space demands the total transformation in the area of recruitment, training and deployment of staff on account of the following:


Ø      Comprehensive product knowledge and orientation towards customer service is a prerequisite for frontline staff that is expected to possess normal educational back ground with positive approach.


Ø      Marketing is another important area as it plays a vital role in taking the bank’s name to the market for brand building and business development, which demands young and energetic preferably fresh graduates.


Ø      Rural Banking has immense potential for business development where as the present recruitment policies are in favour of persons hailing from Urban/Metro areas, who normally may not prefer to work in rural areas, causing a hindrance for smooth banking operations in rural areas. This may be addressed by adopting suitable models to attract local talent.   


Ø      In order to meet the global standards and to remain competitive, banks will have to recruit specialists in various fields such as Treasury Management, Credit, Risk Management, Foreign Exchange, IT related services, HRM, etc.


Multi tasking is in vogue among Public Sector Banks, where the branches deal with wide range of products/services; and unable to handle the same to the desired level. It is imminent to refine the existing business models and explore the possibility of introducing verticals such as Resource Mobilization, Credit Marketing, and Ancillary Services for optimum use of resources. Further, there is a need to revisit rural banking and focus attention on cost effective business models to reach the masses. Strategic alliances/partnerships with reputed players will be the order of the day for business development and profit maximization.


Way forward


Handling burgeoning Gen-Y & Gen-U segments and meeting their diversified needs is really a daunting task for banks. Nevertheless, it is an opportunity to improve business volumes and enhance the value of all stakeholders. Banks need to adopt “High Volume – Low Margin – High Profit” concept leveraging Technology and Human Capital to remain competitive in the present fierce dynamic environment.





*[Mr NSN Reddy, who is working as Chief Manager, in Andhra Bank has B,Com, CAIIB, PGDBM (NIBM) qualifications to his credit and has over 32 years of Banking experience]

Important Notice :  [The articles written by authors contains only the academic view of the writer and purely for discussions and updation of the knowledge of the bankers.   The views expressed in the articles may not at all be subscribed by the organisation where the author is working and / or]



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