The term Alternate Delivery Channel (ADC) generally used for Alternate Service Delivery Channel (ASDC)

or Alternate Banking Channel (ABC) in the Banks for its services to the customers. Channel means the
system of intermediaries between the producers, suppliers, consumers, etc., for the movement of a
goods or service.
The augmented competition and rapid acceleration in trade & business, acquiring, and releasing
technology has put all populations under a continuous technical revolution. Their advancement is no
longer measured by their strength and readiness, but rather by their technological competence.
Technology has given escalation to a new, peaceful furnished service named ‘Channels’.

A channel is a gateway for execution of a service. A channel can be an office, media, tool, or an
application; it can be manipulated by human interaction or through a systematic front-end interface.

The ‘Alternate Delivery Channel (ADC)’ approach emerged as a result of a pressing need to ensure
proper handling and communicating of scattered services, products, and/or commodities that were
previously not following a systematic process flow. ADCs have evolved gradually and adapt to serve
consumer needs at their convenience. ADC serves as an alternate to complement the existing delivery
channels. At this stage, it cannot be considered as a replacement to the existing structured delivery
channels, but rather as an advanced interface to leverage the use of any service that is also being
offered through conventional channels. For more than 20 years, ADC has proven its ability to meet
consumer’s expectations by ensuring accuracy, convenience, and timeliness in service 24/7.

In the banking sector, Alternate Delivery Channels are channels and methods for providing banking
services directly to the customers. Customers can perform banking transactions through ATM / POS /
Multi-functional Kiosks, contact the bank’s Call Center for any inquiry, access the digital Interactive Voice
Response (IVR), perform transactions through Internet Banking, and even on smartphones through
mobile banking, etc. These channels have enabled banks to reach a wide consumer-base across
geographies.

ADCs ensure the smooth flow of regular transactions and provide banks with higher profits with lower
operational expenses and transaction costs. “Channelize through channels” is the new paradigm for
banking today, which in earlier times relied solely on the branch network – where expanding the
business meant adding more branches at high establishment costs.

The evolution of ADCs has changed the dynamics of the branch network. The traditional branch

services  which included,

One of the growing tools of ADC is the invention of mobile banking or m-Banking, which is now even
changing the dynamics of ADC. With inclusion of thousands of mobile applications, mobile banking
applications are now also becoming the part of the regular services provided by the bank. Customers are
now expecting m-banking as a default service from the banks. Social Media has also set new standards
and articulation in ADC, which is fully dependent on technology and its gadgets and will eliminate the
entire need of any human interface. Social Media would create an environment of competition among
international banks to acquire more customers and better business opportunities and, of course, by
maintaining the highest level of security to ensure risk-free interaction.

As the chart below indicates consumers (U.S.) are indicating an increasing preference in both mobile and
internet banking. These numbers will likely continue to grow year-over-year.

Development of main channels:

⇒ ATM: During the 1990s, the number of active units in Europe rose by a staggering 50%. Originally only
used to withdraw cash, the ATM has evolved to support a wide variety of services, including deposits
and account details. To counteract the impersonal impression of the so-called “hole in the wall”, the
Spanish bank BBVA has developed its “future ATM”, an innovative touch screen interface with
customized shortcuts to reflect individual user requirements.

⇒  Telebanking: The first call center was launched in 1983 in the U.S. by MCI. This marked a shift by
many organizations towards centralized customer service centers, often with an automatic reply service
(IVR) incorporating voice recognition systems. However, despite these efforts away from personal
interaction, the majority of call center activities still involve human representatives, particularly when
dealing with transactions.
⇒ Online banking: Another channel to emerge in the 1990s but one which still showed low penetration
by the end of the decade. Initially used to present an institute’s marketing platform, the websites are
now enjoying a new lease of life as a door to the world of 24-hour online transactions. Some countries
even prefer the instant access to online account information and transactions to that offered by
traditional banking, as confirmed in a survey conducted at the end of 2009 by the American Bankers
Association (ABA).

⇒ Mobile banking: This channel is relatively new but is already showing steady growth. Used in its early
stages as a push/pull tool for information text messages, cell phone banking now supports personal
account access and is forecasted to become the new mobile payment method or “digital wallet” of the
future.

⇒Social media: Recent years have seen social media creeping up alongside cell phone banking. Banks
feel the need to counteract the impersonality of our digital age by offering customers greater contact on
a perceived one-to-one level. Although most social media platforms still rely heavily on
marketing content, the trend is firmly set towards development of more interactive services.
On September 2010, the New Zealand bank ASB opened its first virtual branch on Facebook. This offers
personal banking-related advice from 10 am to 6 pm, Monday-Friday but does not support actual
transactions. While the options on this channel are still limited, this is indeed the first step towards
utilizing a high potential and increasingly popular platform.

Impact of ADC
Alternative channels are taken as a cost saving method that can be used to reach a large number of
customers especially the low income market segment for business sustainability. Bringing the retail
hours of operation of each branch in-line with historic consumer traffic patterns can have a significant
impact on a financial institution’s bottom line. Channels like the ATM and Internet Banking enable banks
to reach a wide consumer base across geographies with little effort. Alternative banking minimizes the
cost of transactions, saves time, minimizes inconvenience, provides up-to-date information, increases
operational efficiency, reduces HR requirements, facilitates quick responses, improves service quality
and minimizes the risk of carrying cash. Banks can attract more low cost deposits by adopting alternative
banking channels innovation. Customer deposits are cheap sources of funds thus it enable banks to
maximize on interest spread, which results higher profitability.

Alternative banking channels are faced with risks including performance risk, financial risk,
and operational Risk among others. Alternative delivery channels are prone to issues including
Customers‘ reluctance to use electronic interactions for wealth management decisions, Cyber-attacks on
portals, Server maintenance in order to support high traffic and unauthorized access and fraudulent
transactions. These occurrences can have a negative effect on the financial performance of the banks.
Convenient Banking
Convenience is defined by the simplicity of design and the ability to access or open and manage
accounts online or with a mobile device. Actually convenient Banking means ANYTIME, ANYWHERE, ANY
DEVICE convenience in accessing and managing his / her own Bank account.
Few years’ earlier physical convenience mattered tremendously. Most customers banked with financial
institutions right down the street. As recently as a decade ago, it was the only way to easily deposit
money or get a loan. Today, consumers can open or expand relationships with a range of financial
providers all over the world. Banking can now be ‘local’ to digitally engaged consumers worldwide.

This increased digital convenience poses a challenge for banks that have previously based their value on
being part of a ‘local’ community. Today, local banks publicize their superior customer service and
attention to community causes.

A paradigm shift to ‘global convenience’ is the new mentality that all banks need to grip if they want to
flourish in the digital age. Consumers are all embracing brands that provide the ability to open and use
accounts 24/7/365 without visiting a ‘local’ branch.