‘How banks are using digital platforms to leverage retail (How every transaction is becoming an opportunity) customers for their benefits-Way forward’
By Oscar Martin
“Digital” is the new buzz word in banking, but what does “Digital” really mean from a banking context – It is about making services so smooth and seamless that it actually becomes invisible to the customer. However, despite all the automation that digital can achieve, “customers and their needs” still form the core of any digital initiative.
McKinsey research shows that in Asia, mobile and Internet channels for banking services are increasing on average of more than 35% in the past three years. Correspondingly, there is a drop in branch usage of 27% across Asia. In HDFC Bank one of the leading private sector banks, for financial year 2014-15, 63% of all its transactions were conducted through digital channels. In Asia, the number of potential digital-banking consumers is expected to grow by over 200% to approx. 1.7 billion by 2020, and in India as well it is expected to grow by a similar percentage to approx. 450 million by 2020.
Leveraging on Digital Platforms to enhance Products and Services – Most retail banks in India are in the initial stages of the digital banking journey, and have been primarily focused on adding to the existing products and services offerings using new technology enabled services to increase the convenience and value for customers (e.g. mobile banking, mobile apps, e-wallets and personal financial management (PFM) tools).
Other digital channels such as video and chat functions for personal advisory services, crowdfunding, peer-to-peer payments and social investing are not mature as yet. The next level of maturity will encompass complex services by banks based on insights from various sources i.e. social networks, mobile devices, apps and internal data. An AT Kearney global retail banking survey shows that 95% of banks surveyed are improving their offering with new value added services, and over 80% of banks surveyed are working hard to simplify/ rationalise their core product portfolios.
Achieving Omni channel experience – Today’s customers want omnichannel services, access to information and ability to communicate on their terms. This change is leading to the traditional branch based model being replaced by an integrated channel approach that allows customers to conduct banking seamlessly across various channels. For example in India, banks will need to enter into tie ups with e-commerce players (i.e. Flipkart, Snap Deal etc) and financial product aggregators (i.e. Bank Bazaar.com) to provide customers with options.
Banks have started seriously focussing on providing multiple sales and service channels as point of purchase decisions have shifted upstream. Banks need to offer advice and recommend products when the customer is considering a buying decision. Branches cannot compete with digital channels for advice since digital services can be delivered anytime, anywhere. And with customers doing most of their purchase related research and banking between 9 pm to 11 pm on weekdays and Sundays, no channel is more suitable for advisory services than digital. For example, IndusInd Bank has launched a “Video Branch” available on its website/ mobile app allowing customers to communicate with bank staff through a video call. Today customers no longer rely on the single view of the relationship manager/ advisor, and will obtain inputs from blogs, social networks and public feedback forums.
Digital Platforms can enable better Customer Engagement/ Experience – One of the biggest advantages of digital channels, is its ability to provide real time data and information to banks to enable servicing customers better and ultimately improve revenue streams. Banks are beginning to analyse product usage trends to identify product changes to achieve this objective. For example, analysing customer spending patterns can enable banks to have an understanding of the customer’s frequent purchases and through tie ups e-commerce players can provide relevant offers, thus ensuring utilization of banks payment channels.
Integrating Digital Platforms with Retail Customer Acquisition and Lending Processes – Banks are looking to digitize the customer acquisition/ KYC processes to ensure no lag in conversion of leads. With the availability of biometric technologies and Adhaar Card, banks can digitize the customer acquisition process. Fingerprint scanning linked to the Adhaar Database coupled with a camera can complete the KYC process. Similarly there has been digitization of the banks retail lending processes. For example, HDFC Bank has launched a 10 second paperless instant loan plan for existing customers where users can simply log into their bank account via net banking or mobile banking and avail of this loan at a click. This will allow existing customers to have a pre-approved loan amount available to them anytime, anywhere.
Digitization is not just about Front end Functionality – One of the reasons why retail banks still lag in digitization, is possibly because digital transformation is currently more with a focus on improving front end functionality. However what is needed is the integration of front end and back end processes to ensure true digitization actually happens. If one of the back end processes is slow, this will definitely have an impact on other processes and consequently on overall customer experience and possibly loss of revenue which should be the big focus of retail banks.
Having said this one thing is certain, banks will become more digital – it’s only a matter of time.
The author is Director – Financial Services, Protiviti India.