FINANCIAL PRODUCTS IN SERVICE SPECTRUM:
Introduction:
Financial services are services that ensure the smooth
flow of financial activities in the economy. It includes
banking, insurance, stock broking, and investment
services as well as business and professional services. It
caters the need of financial institutions, financial
markets and financial instruments. It includes the
services offered by Asset Management Companies and
Liability Management Companies. It helps to raise the
required funds but also ensure their efficient
deployment. To ensure efficient management of funds,
services such as bill discounting, factoring of debtors,
parking of short term funds in market, e-commerce
and securitization of debts are provided by financial
service firms. This sector provides services such as
banking, insurance, credit rating, lease financing,
factoring, venture capital, mutual funds, merchant
banking, stock lending, depository services, housing
finance.
Characteristics of financial products/service:
1. Intangibility
Services are said to be intangible as they cannot be
seen or tasted. It is the main distinguishing feature,
since services are processes or experiences rather than
physical objects and therefore cannot be possessed
(overcome). It can be double-edged in the sense that
services are not only impalpable (intangible) but also
difficult for consumers to grasp mentally. This is due to
lack of confidence and difficulty of measuring service
value and quality. To overcome this, consumers tend to
look for evidence of quality and other attributes. For
example, in the decor and surroundings of the beauty
salon, or from the qualifications and professional
standing of the consultant.
2. Inseparability
Services are produced and consumed at the same
time, unlike goods which may be manufactured, then
stored for later distribution. This means that the
service provider becomes an integral part of the
service itself. The waitress in the restaurant, or the
cashier in the bank, is an inseparable part of the
service offering. The client also participates to some
extent in the service, and can affect the outcome of the
service. People can be part of the service itself, and
this can be an advantage for services marketers. The
inseparability of production and consumption in
services make production and marketing interactive
processes. The front-line service employees play an
important “boundary spanning role” in the production
of services, as do consumers themselves in their
capacity as “partial employees”.
3. Perishability
Services are perishable; they cannot be stored.
Therefore an empty seat on a plane, for example, is a
lost opportunity forever. Restaurants are now charging
for reservations which are not kept, charges may be
made for missed appointments at the dental clinic.
Perishability does not pose too much of a problem
when demand for a service is steady, but in times of
unusually high or low demand service organisations
can have severe difficulties. Services cannot be stored
for some future time period, hence the need for short
distribution channels so that they can be produced on
demand.
4. Heterogeneity/invariability
Because a service is produced and consumed
simultaneously, and because individual people make
up part of the service offering, it can be argued that a
service is always unique; it only exists once, and is
never exactly repeated. This can give rise to concern
about service quality and uniformity issues. Personnel
training and careful monitoring of customer
satisfaction and feedback can help to maintain high
standards.Services depend on input from both service
employees and consumers for their production; the
quality of the service output very much depends on the
nature of the personal interactions of this
parties.Makes the potential for variability in the service
performance high
5. Fiduciary Responsibility
It refers to the implicit responsibility of financial
services organization for the management of their
customers’ funds and the nature of the financial advice
supplied to their customers
6. Two-way Information
Rather than being concerned with one-off purchases,
they involve a series of regular two-way transactions
between buyer and seller usually over an extended
period of time.
7. Doesn’t involve any ownership transfer:
Usually, a service does not result in the ownership of
anything. In other words, unlike product marketing, in
financial service marketing, there is no title/ownership
transfer. One can even say that nothing is purchased
while a service is availed of; at best, what is purchased
is just the use of, or access to, the facility/service. The
buyer does not become the owner of anything.
8. Customer, a part of production process/customer
specific:
In most services, the consumer is an integral part of
the production process,as he has to be physically
present when the service is produced. This is not true
of physical products. In fact, a service situation
requires the presence of not merely the consumer but
that of the producer as well. Quite often, the consumer
and the service provider are face to face when the
service is produced. Hence, service provider –
consumer interaction becomes a special feature of
services.
9. Market dynamics:
Constantly redefines and refines products, taking into
consideration of various dynamics in financial services.
