Embracing 'Digital'- A Mind-Set Change for Banks?

Kunal Nagarkatti, COO, Clover Infotech

Businesses today are mostly going digital and banks are no different. However, the term ‘digital’ remains ambiguous. First there is ‘digitization’, which is all about enhancement of the processes to ensure that work gets done fast and cost-effectively. Then there is ‘digitalization’ that helps disrupt business models, creates new ways of serving customers and generates business. As per a McKinsey report, the digital laggards in banking will see their net profit erode by 35 percent over the next few years while the banks that have adopted and successfully implemented a digital strategy will see profits rise by around 40 percent.

The customers of a bank are very active and ubiquitously accessible on their mobile phones. Most marketers have realized that the mindshare of the customer is on the handheld mobile device and it is important to contextually target the customer on a mobile device.

However, most banks in India have not changed their model of delivering solutions and services in accordance to the changing customer. Many Fintech companies have latched on to the opportunity by creating m-wallets, contactless payments, peer-to-peer lending solutions and many more. The key characteristics that have helped them gain favour with a bank’s customers are customized services, contextual nature, speed and agility of delivery and of course, customer delight through offers and discounts.

The primary focus of banks is to judiciously deploy the customer’s funds, create robust net interest margins, enhance customer’s trust in them and build a reliable organization. For a bank, it’s all about customer’s trust and it probably explains the lack of willingness to innovate. However, the thought needs to be flipped on its head for banks to lure their customer towards them and away from their Fintech counterparts.

Technology – An Enabler to Embrace Digital

Banks need to leverage technology to the fullest to embrace digitization. While the mass disruption by Fintech companies may have taken banks by storm, they still have clear advantages as safe, secure avenues for customers to park their savings. The question for banks to address is: How can they pro-actively be with the customer when he needs them the most?

For this, banks must leverage technology and implement the following:

1.Enhanced proximity with customers: With customers being omnipresent on mobile, banks need to seriously introspect and re-align their applications. Each application should be able to adapt to the mobile. Each interface ought to be responsive. Each interaction (over web or mobile) should talk to the customer and usher him towards a decision. This can happen if agile frameworks are developed and implemented. Banks should also leverage cloud to optimize IT infrastructure and create ‘as-a-service’ models to reach the customer, and other stakeholders such as vendors, employees at as many touch-points as possible on any given day.

2.Social, Mobility and Analytics for customization: Customers are present on social media sites and don’t shy away from giving opinion, feedback and reviews. Each customer is an influencer. By leveraging their social actions, feedback, suggestions, peer reviews and using the power of big data and advanced analytics, a bank can target services and solutions to customers when they need it most.

3.Automation to optimize time and efforts: Today’s customers demand convenience. Banks should automate processes to operate efficiently with minimal manual intervention. For e.g.: Bank account opening should be done through tabs, or mobile with e-KYC to save the customer from having to physically walk into the bank and stand in a queue. Further, even the form filling can be made easier by getting all details by connecting to government databases such as Aadhar.

The New Normal – More ‘Lifestyle Partner’ than a Bank

Customers may have to make multiple payments throughout the day, secure loans, make purchases – essentially, make multiple financial transactions. By leveraging technology and embracing ‘Digital,’ banks would be able to adapt to the changing customer by constantly providing him with guidance, advice, suggestions and recommendations whenever he spends. This will be the new normal wherein customers would expect banks to be their lifestyle partner and aid their purchase and spend decisions. The banks would do the following for the customers:

1.Augment convenience: A customer may make utility payments, insurance payments or some other payment every day. If the banks were to remind him of these payments and give him a one-click mobile interface to debit his bank account for the same, it would be convenience personified.

2.Investment Managers: With the deluge of data, banks should be able to gauge ideal investment options for a customer, reach out to him with advice and enable him to make good choices for investing his money.

We are seeing banks slowly, but surely, adapting to this new normal of becoming an omnipresent lifestyle partner for the new age customers. Can they overcome legacy quickly and stay relevant? Only time will tell that but it will largely depend on how well they embrace ‘Digital.’