Thursday, December 27, 2012

Cross-selling,wherz it headed?

As calendar year 2012 is paving its way for newer dateline, brokerages and analysts are busy coming up with their top 3 recommendation of the year. ofcourse, noone really cares after six months what happend to those calls except for the analyst whose prediction might have earned some money to his clients, most of them are overlooked in the heap of stock calls.

But as I was checking out the entire list, I came across the fact that a few brokerages have a buy on those same banks. Now I wont take the names of those specific banks, because that means i have to approach them, send questions and i don't think they have the time to respond to personal blog queries…anyway, So getting to the banking part, these are private banks which are invariably the banking behemoth of the three or top five....with decent loan growth and an increasing non performing asset (NPA) blot on their books.

This certain bank, has been making waves with regards to its aggressive approach and branching out into various other things than its core banking operations.
Then there is another one, which undertook heavy downsizing during mid 2012 and had a fancy name to the entire process.. similar to the name of an animated movie where fish is trying to find his son....

These banks are now heavily dependent on the concept of "cross-selling".. cross selling is basically the front line person in the bank trying to convince you to buy various products like insurance/term plans/ they rarely try to sell mutual funds as it is not really a favored topic for banks/ new savings accounts/personal loans/car loans/deposits et al. Basically the person's job when hired was to look after only the counter or do something else which has now become an ancillary job.
According to banks cross-selling is all about reducing its expense per customer on cost of operations..basically why pay your employee for just serving the savings account of X…add loans/credit card/insurance/ every other product for consumption and help grow business.

But the problem that I see when I visit my bank is that the pressure of cross selling has hit the ceiling, I see most of my banking friends trying to stick some or other products to each of us.

Infact, the pressure is so high on these various levels of managers to meet their targets that I see them buying their own insurance or term plans because they have to meet targets. Now selling insurance or various other plans to some new customer is fine, but my concern is when these people are buying these products themselves or making their friends and family buy them. ofcourse the bank has no problem with it because they are more interested in how many policies were sold and how much margin they made on it, the problem begins when the person is unable to meet his earlier targets...ofcourse the person cannot sell the same thing every year to same people, customers are wary of buying any new product which they do not understand and how it works and there is not much you can do while doing your existing main work. Also the lure of capital markets for retail investors have gone up in last few years and larger chunk of insurance business stil lies with LIC. Even though some insurers tried giving out free pressure cooker or some other offering for buying their policies, people are still trying to stick with the old gun. And the old gun is busy spending the vault’s cash on government’s disinvestment program.
As the pressure mounts on either some fizzle out of action or your chances of promotion looks bleak…

Ofcourse it is not just one bank's story every other bank is upto the same gory story. But my concern is till when can this system sustain itself?
Of course India is a huge country and there is an untapped potential etc etc, but from where I see it the cracks are already there and it won’t take much time for it to rumble into ashes. Lets not forget 2008’s story so soon with the advent of credit card defaults everyone stopped giving out credit cards and personal loans. One hilarious example being banks don’t give credit cards to journalist..and I don’t know any journalist who does not have one credit card…

Home loans are not going up, car sales are down which easily indicates drop in car loans, personal loans are something i have no idea about but I am sure even they are in how are these banks which have lined up aggressive growth plans looking to grow? Has someone ever asked them what their new portfolio sales look like?if yes what are they? I don’t know how the future of people doing the cross selling looks like, but I really feel bad for them….

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