Govt's digital push, rise of investment platforms to diminish growth of RMs

Relationship managers or RMs, in the past decade or so, have been the cornerstone of every private bank’s revenues. They sell almost every financial product—from fixed deposits, mutual funds and insurance—and also offer advice. But if the smoke signs on the horizon materialise, there’s evidence that could all change.

The government-led digital push for banks has resulted in most lenders opening fewer and smaller sized branches which logically results in fewer RMs. Industry reports point to the number of internet connections nearing 500 million and millennials are prone to doing business digitally as opposed to walk-ins. The widespread availability of broadband and related services across the country means that being smartly-connected is no longer an amenity exclusive to big city dwellers. Lastly, market regulator – the Securities and Exchange Board of India – is putting pressure to segregate mutual fund (MF) advice from distribution.

Slower growth on the anvil: Ravi Narayanan, HDFC Bank’s country head for branch banking and retail trade forex business, says expansion has moderated in larger cities for a couple of reasons – digital platforms and banking enable customers to transact without a physical bank presence, especially for salaried profile customers and second, the ramp up on expanding in non-metros, second-tier semi-urban and rural areas. In addition, the existing banks at metros have been overhauled to reduce teller space and create a more casual lounge environment where customers can interact with RMs to get specific information. 

While that’s great for customers, the slowdown in branch expansion means Narayanan won’t see the number of RMs at his branches grow as fast anymore. “While the number of RMs doubled in the last five years, there has been an advent of technology and preference among certain customers to use technology to interact with RMs,” he adds. For example, HDFC Bank, has a platform called Gyaan Line built by Senseforth Technologies, which also built their website’s chatbot Eva, HDFC Bank officials say, adding that the Gyaan Line which is based on artificial intelligence and machine learning dispenses related information to RMs to help service clientele better.

Narayanan says he has around 7,500 RMs at HDFC Bank catering to some 4 million accounts. ICICI Bank declined to provide overall specifics but has between 12 and 15 RMs in a branch at a busy suburb like Bandra, says Anup Bagchi, executive director with ICICI Bank. Ritesh Pai, chief digital officer at Yes Bank, says their company has around 2,000 RMs servicing 2.5 million accounts.

That could translate to an average of  a 1,000 clients per RM which even allowing for some overlap on group, family or bundled accounts forms a large volume of personalised service for any one person to deal with. Which is why HDFC Bank is increasing programmes around their virtual RMs, off-line RMs and engaging customers through video chats and phone systems. Read between the lines, RMs will progressively be operating out of call centres. Bagchi goes on to add that for ICICI if RMs handle between 100 and 200 clients each then in the future “that number could easily go to 500 accounts per RM, along with the support of technologies like video-conferencing etc.”

Pai, like HDFC Bank, says that Yes Bank has also resized its banks to be 500 square feet large as opposed to the typical 2,500 square feet and so not only will the role of the RM diminish in time but in smaller cities banks, it may altogether leapfrog the friendly RM phase and jump straight to digital platforms to handle accounts. API-led banking, e-KYC norms, are all aiding that.

Ravi Kushan, managing partner of consultancy Roland Berger India, says that generally financial institutions tend to use RMs as their main sales force. His point, and rightly so, is that there’s a conflict of interest when people who offer advice, then sell those because they lean towards those on which they can generate better commission, than in the client’s interest. Then there’s also the matter of performance bonuses that are linked to such targets. 

Regulatory hurdles: Which is why the Securities and Exchange Board of India’s (SEBI) January 2018 paper pushes for advisors to do away with concealing any potential conflicts of interest. That means that banks, corporates, NBFCs and so on will not be permitted to distribute financial products directly or through a holding, subsidiary, or associate company. While finer points in that paper remain to be spelled out, the big picture implication is that private account holders would need talk to two separate professionals for investment and account servicing. Sebi’s 2013 paper had warned investors to deal with registered advisors only. 

Yesterday's RM

  • Personalised service with human interface 
  • Larger banks need bigger teams of relationship managers, requiring more real estate at branches
  • RMs offer one-stop shop service

     
Future RM

  • Service representatives will augment technology as part of consumer connect, using video conference, digital platforms
  • Data-backed service will mean one RM will be able to service five times the present accounts
  • Smaller banks will need smaller RM teams
  • Advent of external e-commerce platforms will reduce RM service offerings

What is emerging is a scenario where dissatisfaction with RMs is growing due to lack of personalised attention, while self-service technologies are growing more sophisticated. Customers have and will continue to migrate to buying/servicing without human intervention and buying directly from institutions.

Technology rules: Meanwhile, technology has brought about a revolution in self-service, Kushan says, pointing to internet/mobile channels for servicing and sales fulfilment  emerging chat bots for queries, upcoming robo-advisors for mutual fund recommendations and execution; sophisticated back-office capabilities developed by the Reserve Bank of India and exchanges to allow online execution and third party marketplaces for comparing products and rates. He’s not wrong. Platforms like Fundsindia.com, scripbox, and policybazaar.com, loantap.com, lendbox.in, lendingkart.com, etc, are already cutting out the intermediaries and offering products directly to the consumer. The result — lower cost and higher returns — at least in principle. For ICICI’s part at least, Bagchi welcomes the entry of such platforms, saying “market competition brings out the best in an industry.”

Does that mean the RM will be a thing of the past entirely? Pai, for one disagrees as he points to two truths. One is that the maturing of automation and robotics is at least a decade if not more away and second the biggest differentiator for traditional banks is that at least in principle, they embody trust and a place and a name that you can identify and connect with, if all else fails. What he does agree with is that the RM as we know it will change and become a nameless, faceless extension of your bank, augmented with technology and equipped with all the information necessary to treat you in the same way as an RM who’s dealt with you for years.
  
Last year, HDFC Bank’s Ira (intelligent robotic assistant) showcased in its Kochi branch was an interactive humanoid that greeted customers and helped guide them to relevant counters. That may be a sign of things to come.