Academy of BFSI,

New Gen customers & State-run Banks in India – A Mismatch?

As at the end of April 2020, there are 12 State-run banks in India, a number that was 27 not long ago. They have mammoth 85,123 branches which are 75% of branches of all banks in India.

Similarly, they have a total of 1,23,699 ATMs, which again is a huge 64% of the total ATMs in India. We have not reckoned Foreign Banks set up in India which is negligible in contrast

Almost all the 12 banks have a vintage of more than a hundred years and are from British Raj. They are presently serving the third generation Post-Independence Indians and have missed the young Indians

Regional Rural Banks, (RRBs) as at end of April 2020 is 45 in number and boast of 15,000 branches all over the country. They are also State-controlled Banks

1.1. Reach of Private Sector banks – The canvas

There are Twenty-two (22) Private sector Banks in India with a span of 69,295 branches in India. A few old generation Banks like LVB, KVB, TMB have a matching vintage with that of State-run Banks, but most were born only 25 years ago.

A small number (10) of Small Finance Banks and eleven (11) payment banks were Inducted into the system about 5 years ago

1.2 Population in India at present – The matrix

Reckoning the population figure to be 130 crores,   80 crores of Indians have Bank accounts as per Global Findex Database study published in April 2018. In this, ‘Jan Dhan’ accounts alone constitute 33 Crores.

It is succinct from the above that financial Inclusion is yet to reach its goal and a vast swathe of Bankable population, especially in rural areas, of all age groups are waiting to be onboarded. We have more Mobile phones than bank accounts in India today!

Let us now look at the population mix of India

1.3 Population Mix of India

Population in 2019 stood at 135 crores. As per Wikipedia, 67 crores (50%) of the population are below the age of 25. And 86 crores (65%) are below the age of 35.

This is a very significant feature and economists call it as a demographic dividend. It is precisely about these segments our article will evolve

1.4 Who is Generation – Y?

Generation –Y or otherwise referred to as Millennials are broadly defined as the people born between 1982- 2000. In today’s date, they are in the age group of 20-38 years of age making them one of the most important target demography for the banking industry.

1.5 Who is Generation-Z?

Generation -Z or otherwise referred to as Post-millennial is broadly defined as the people born between 1995-2009. In today’s date, they are in the age group of 11-25 years of age making them the early adults.

1.6 Why do these segments matter to Banks?

As per a report released by Deloitte India in association with Retailers India group, millennials are the chief wage earners of India constituting more than 34 per cent of Indian population and having a lion share of 46 % of working-age populations, which is estimated to increase to about 65% by the year 2021.

Whether it is young entrepreneurs or young IT professionals, second-generation businesspersons, salaried class or young farmers, millennials are already becoming the driving force for the economy and banking sector is no exception.

The millennials have a different set of values and attributes than other generations. The millennials are a tech-savvy generation. They are better educated than their predecessors are, have lesser familial monetary commitments, are more economically active and have more spending power.

The prior generations had financial priorities like shouldering parents’ financial responsibilities, getting married, starting a family, planning children’s education and wedding, saving rather than spending. However, millennials have the luxury of being financially independent without much financial legacy baggage. Hence, their goals are different.

1.7 Profile of Gen-Y and Relevance to Banks

Banking for millennials

Millennials are an apt-moniker for a generation that has grown to challenge banking norms. Hence, to attract and retain millennials banks have to consider the transforming demands of the new generation.

Demand for Convenient banking

Millennials are more likely to consider the alternative to traditional brick and mortar banking and are more demanding of digital technologies when compared to Gen X ( born between 1965-1980s) and boomers (born earlier to 1965) generations. They expect things to be faster, smoother and comfortable. The expectations from banking sectors by the Millennials can be gauged from the results of a study conducted by The Financial Brand in 2019 as shown below:


Personalised management and product marketing

Here is the chart depicting the Financial Goals of a typical Gen-Y gentleman

The millennials expectations of the financial products are not going to be very different from earlier generations. The difference is not in ‘what’ but in the ‘how’ and ‘where’. The young customer will expect the products to be delivered in a tailored mode, in an easily accessible platform, in a form they can easily understand and control.

Millennials need loans, insurance, mutual funds, investment plans, tax saving plans and other traditional financial products. Compared to Gen –X, Gen-Y is more open-minded to investment options. They invest in Mutual Funds and shares even when their parents tell them not to. At the same time, they invest in FDs and traditional insurance plans to avoid conflict.

So, inadvertently they are diversifying their portfolio. They are in an age of abundance of data and need a trusted guide to decipher the myriad of information. Hence, they will choose the bank/Fintech company providing smart portfolio planning and management and this has to be provided to them without them personally visiting the branch.

Bridging the financial literacy gap with Social Media/Forums

There is a large fraction of millennials who are not adept in financial planning and saving. They need helpful online guidance and practical banking solutions.  Millennials do not tend to call customer care or visit a branch when they are in need of information. They tend to go online, explore social media, watch videos on the topic, ask friends or interact with a Chat-bot. Properly targeted ads and content can go a long way in gaining the loyalty of the millennials.

Customer lifetime value higher than previous generations 

Gen-Y has higher disposable incomes and lesser responsibilities. They are demanding in the service and technology needs, which can be costly for the banks. Yet the lifetime value with the increasing income of millennials and open-mindedness for financial instruments can be rewarding for the banks getting ahead of the curve in capturing them as the customer base. Also, Gen-X, which is now getting to some degree comfortable in online banking, is relying heavily on Gen-Y for their online decisions and having a loyal millennial customer can end up bringing an older family member to its customer fold.

          Global strides in this direction

The millennials are already impacting the banking industries abroad.

The challenger banks (small technology-driven banks) like Monzo, Starling and Reevolut have started to acquire the young customers market in the UK and other European countries by banking heavily of digitized and accessible products and marketing.

Consumers in China have moved rapidly from cash to electronic money as means of payment.  This has been spurred by the growth of Alipay and WeChat for commerce, as an example, and followed closely by the banking sector. Multiple Fintech companies are providing innovative financial services.

1.8 Profile of Gen-Z and Relevance to Banking

They are almost a continuum of their elder brethren in Y category but do have subtle differences as below

Gen-Y Gen-Z
Prefer Facebook Prefer Snapchat and Instagram
Prefer Brands akin to their values Prefer Brands that feel authentic
Tend to be Idealistic Tend to be Pragmatic
Goes for Experiences Focused on Saving money
Born amidst Boom Born amidst Recession
Mobile pioneers Mobile natives

You may often find that most of these youngsters go for a job, work for some time to earn money and then go abroad for further studies by using the savings.

Same is the case today, for a young maiden to go for a job, earn and save the money and use the same for her marriage expenses. Both cases highlight the effort to lessen the burden of their parents and to be independent in their actions

They love efficiency and seek instant gratification. Impatient and creative they create their own paths in career and life. Obviously, they dislike conventional Banking. Even visits to ATMs are rare. They love educative entertainment, TED talks, Sudoku, Gaming and coding. In other words, completely different from the Baby boomer generation.

What do they want from Banks?

Basically, the same set of expectations as that of Gen-Y cadre. Interpersonal engagements are unknown to them.

1.9 What obtains in a typical State-run Bank branch today?

  • Legacy competencies are to the fore. Still, they pride themselves at counting cash fast or total up the columns with speed and accuracy.
  • The average age of staff here is about 45-50 years and he is lightning years behind Gen-Y/Z clients in technology and digital tools usage.
  • Luggage of the long years of past procedures and systems bogs him down and impedes unlearning and learning anew.
  • Very importantly value systems clash and there is no emotional connect.
  • Creature comforts are archaic, insipid and stale.

2.0 What do these Banks lose in the bargain?

  • Loss is enormous for the present and catastrophic for the future.
  • You are leaving out 65% of adult earning population from your business.
  • Cheques, Drafts, Physical cash and other instruments will vanish in a few years and Banking will undergo a paradigm shift.
  • Present Business model will wear off and digitization will take over.
  • So the young Indians will be doing business with these Banks.

The one exception is State Bank of India who has taken the challenge head-on.

2.1 How the Private sector Banks and SBI beat the game?

This is best explained by what some of them have introduced specially for GenY/Z clients


  • Has set up an R&D team in head office to leverage on mobile banking.
  • Launched a universal app called YONO, which even disburses contactless cash, among a plethora of services.
  • SBI-Mingle-is a product for social media platform for Facebook and Twitter to enable young generations to do their banking.

City Union Bank

  • Selfie and e-Aadhar only needed for account opening

Axis, ICICI and Kotak

  • Enables accounts to be opened through a tablet with customer staying at home/office


  • Smartwatch enabled banking; complete digital banking to SME clients.


  • Disburses cash through Points of Sale, like Malls. E-wear app product for smartwatches, employing Alexa and Google assistant for balance query handling.

DBS, Singapore

  • Peek balance product, bio verification @Coffee Day outlets


  • Ekyc, Swipe on, Instant Money Transfer and Ping pay
  • All private banks are already employing Chatbots and Robotic technology to attend to queries of customers on a 24×7 mode in different languages.

2.2 What is the way forward for State-run Banks?

Some of the suggestions are penned below. I feel all are practicable, albeit some may be in the medium long term.

  • Populate the frontline staff with the younger generation to engage Gen-Y&Z customers better
  • Get rid of Plastic cards and shift to OTP mode to reduce frauds
  • Employ better authentication like Visa Safe Click (VSC)
  • Set up a digital technology cell in all Regional offices to oversee Digital implementation and to eliminate Cyber frauds
  • Recruit young staff good at Machine learning
  • Stop the archaic training methods like slide shows and lectures and focus on skill-building inputs. For example, all the 50 plus aged staff should do a demonstration of Mobile app usages, Solve ATM-related bugs and master excel sheet and other features of Windows
  • Get into a strategic partnership with Fintech companies for retail selling
  • Introduce QR based payments
  • Mass upskilling of employees
  • Get into paperless Banking
  • Use digital signatures extensively
  • Leverage YouTube, Instagram and Facebook at every occasion
  • Catch the eye of the youth by staging CSR activities on themes dear to their heart
  • Build up courage amongst staff to move to unsecured consumer lending

2.3 Endnote

M&A that is happening in State-run Banks has very beneficial fallouts and it is ripe time for the banks to marshal their strengths to be omnipresent with the young ones of India through the use of technology.

They have a substantial rural presence like no one and can harness the rural youth of Gen-Y&Z into a mutually beneficial technology-based relationship.

And, thus lift India to the Ivy League in Banking.

About the Author

Venkata Raman

K.Venkataraman is a senior professor at Manipal Global Academy of BFSI. He is a multi-talented person – a banker, an advocate, faculty in many educational institutions. He retired as an executive from Canara Bank after serving the bank in various managerial capacities for 34 years.

Prof. Venkataraman holds an MBA in HR, and LLM besides many certification and membership in Karnataka Bar Association. He is a faculty in ICAI, Bengaluru, conducts online classes for business administration students of Sikkim Manipal University and he is a viva panel member in four universities. He also works as an IPR consultant. Since 2011, Venkataraman working with Manipal.

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