7% account holders in India use net banking: study

As many as 7% of account holders in the country are using the Internet for banking transactions, while branch banking has fallen by a full 15 percentage points, according to a report by global management consultancy McKinsey & Company.

"Use of the Internet for banking has seen a massive rise in the 2010-11 survey, taking the overall number of bank consumers who use the Net to close 7% of the total bank account holders -- a seven-fold jump since 2007 -- even as for the first time in the past 13 years, branch banking has come down by a full 15 percentage points during the same period," McKinsey & Company India partner and head of its retail banking services Renny Thomas said.

Thomas was talking to reporters after releasing a McKinsey India personal financial services survey 2011 here today. The percentage of online users of banking transactions was just about 1% in the agency's 2007 survey, Thomas added.

The survey is the result of one-on-ones with nearly 20,000 Asians covering the mass, mass-affluent and the affluent consumers across 13 markets, of which the largest survey pool was from India at 5,000 because of the sheer diversity of this market, Thomas said.

The survey is based on the number of times in a week respondents visited bank branches or used Internet for carrying out transactions.

In 2007, the number of times Indian respondents visited bank branch for doing transactions was 0.58 while the same in 2011 was 0.49, showing a fall of 15 percentage points.

Branch usage has dropped by 27% on an average across Asia between 2007 and 2011, while usage of the Internet and mobile banking have increased by 28% and 83%, respectively, says the survey, which was also conducted across the Asia-Pacific region.

When it comes to digital banking, the survey said, "India leads growth in Asia in mobile and Internet usage for banking. While there was a 15% decline in branch usage here, the growth in usage of the Internet and mobile banking has almost tripled."

"For the first time since we started this survey in 1998, we see a marked shift away from using branches as a main channel for interaction in many markets. This is a fundamental shift in consumer behaviour, and has significant implications for banks. The scale of branch network is a less decisive factor for capturing customers now," Thomas pointed out.

The survey also highlights a number of changes in consumer mindset when it comes to accessing financial services after the global financial crisis.

The worst casualty is loyalty as there is a full 40 percentage point drop in loyalty since 2007, though 95% are seemingly satisfied with their main banks, says associate partner Jatin Pant.

The average number of banking relationships across the country rose 19% from 1.4 in 2007 to 1.7 in 2011, while the average percentage of people willing to shop around rose 15, marking a greater willingness of consumers to vote with their feet and engage with a broader variety of financial institutions, the McKinsey survey said.

"While the consumers say they want to consolidate their banking relationships, they continue to shop around because banks are not delivering the products and services, such as frontline services, that can lock them in," it said.

When it comes to financial planning too, there is a marked progress with the percentage of consumers using financial planners soaring from 14% in 2007 to 43% in 2011, while the percentage of consumers willing to take risks on capital growth rose by 20% to 44%, up from 24%. At the same time, the survey says, dissatisfaction too rose with their financial planners.

"On an average, only 51% are satisfied with their financial planners in 2011, as compared to 73% in 2007," said Thomas.

Source: Business Standard