Banking Framework: How the Banks work.

In this article, you will learn the basic framework in which a bank works. The framework that I have introduced is a very generic model adopted in almost all banks. However, there are exceptions where some banks deviates from the standard I have proposed based upon their operational scale, business needs or regulatory requirements. To start with, please find below a diagram that defines the banking framework in three broad layers.

1. CHANNELS

Channels are the modes through which customers interact with a bank. There is a gamut of instruments that a bank deploys to allow customers to place their banking needs. 

1(a) Branches

A branch is a place where a customer can directly come and use the banking facilities like deposit, withdrawal bill payments, account opening/ closure etc. This is the oldest and most conventional channel of Banking. A branch is located in secured premises and placed at strategically locations so that a bank can reach out to each and every customer in the market.

1 (b) Electronic

This mode of channel has brought a revolution in banking industry. This includes a number of different areas that all have the common theme of the customer dealing directly with bank software rather than bank people like internet banking, ATMS's, Point of Sales (POS), credit and debit cards, online banking, emails etc. There are lots if innovations going across the globe in electronic channels for banking. 

Taken together this is a very important and growing element of service delivery for banks because it can lead to Straight Through Processing (STP) – i.e. without staff manual intervention – this is seriously low cost for the bank and any place- any time banking for the customers.

1(c) Phone

The way the Financial Services Group handles phone calls, both incoming and outgoing. It includes call centers call routing, telesales and interactive voice response as well as computerized response to “push buttons” on the handset. This is another fundamental area of service delivery for banks.

1(d) Mail

Customers still send thousands of letters a week to large financial services organizations and conversely financial groups send millions of letters a week out (statements, letters, etc). The inbound mail is usually a service trigger. The outbound mail (e.g. a credit card statement) is often the principle window for the customer onto the bank’s activities with errors and corrections usually very visible.

1(e) Tied Sales Force

A sales force that works only for the Financial Services Group (or more usually a part of it). They can be employed by the Group or be independent and / or commission only. Normally they are not relevant to service delivery but can be an escalation point for customers with complaints. In the banking area the Relationship Managers that deal with business and high net worth individuals often get involved in service delivery by being the “first point of contact”.

1(f) Brokers and Agents

These salesmen are independent of the bank and work on behalf of multiple Financial Services groups. Although important in service provision in some areas such as insurance, they are not material for service provision in banks at the moment. In the future, this may change (e.g. the use of Post Offices as banking services outlets).

I will update this article to cover the information about other left over banking framework elements.