Digital innovation has completely overhauled many core banking operations, bringing to the fore unprecedented new-age solutions. Much of this can be attributed to integrating IT infrastructure in retail banking, which is growing daily. Banks now leverage leaner models and organisational structures, all in a bid to better cater to the consumer.
Customer experience aside, the digital transformation brought on fair pricing, transparency, improved turnaround times, and more. Naturally, legacy players operating on the older playbook are unlikely to survive in this digital-first world. Thought leaders have been clear about this need, stating that building a team of high-quality product developers is imperative now more than ever.
Sanjiv Bajaj, Chairman and Managing Director, Bajaj Finserv Ltd., has also highlighted how crucial adopting digital banking technologies is. “We are seeing a significant adoption across different aspects of the digital world, even in financial services (which is a heavily regulated sector) …Institutions, especially incumbents, will need to adopt digital as a way of life.”, he says.
Read on to learn about the four anticipated changes that digital transformation will bring to banking.
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Revolutionised Engagement Models
Digital is the new reality of the banking industry, and to thrive in this new environment, banks need to engage differently with their customers. In fact, this is the need of the hour, and data suggests that 79.3% of millennials are interested in digital banking. So, institutions must upgrade simultaneously and digitise their services to cater to the demand. Experts have suggested that banks prioritise a retail business section and develop a digital platform around the value chain.
As platform-based business models will take over, it is expected to bring a new internal disruption in the industry. Under such circumstances, banks will have to forego revenue in some areas (like commissions on the trade of securities, transaction fees, etc.) to achieve faster scaling in the future.
However, this isn’t to say that the physical bank will no longer exist or be needed. Some still prefer the physical branch for banking, but digital is the future. Customers interested in the digital experience want the benefits that come with it. This often includes lower costs, better transfer speeds, and more.
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Adopting a More Customer-centric and Personalised Approach
As part of their digital transformation strategies, banks need to overhaul their operating models to be more customer-centric. For this, they will need to listen to what their customers say, understand their pain points, and present solutions specific and more personalised to their needs.
This would include building a relationship that resembles a customer partnership rather than the transactional relationship that banks traditionally have with their customers. Data found that 46% of customers think of a personalised banking experience that caters to their niche needs, such as avoiding fees.
For others, it can mean customisable support options or other such provisions during economic downturns. In any case, people are looking for more than just run-of-the-mill personalised finance management solutions. Here, the opportunity lies in advanced money management solutions.
Digital banking can allow this by leveraging artificial intelligence and machine learning to personalise the experience. This goal can be achieved through meaningful services like:
- Investment advisory
- Automated bill management and savings tools
- Personalised budgeting solutions
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Automated Banking
Automation and adoption of robotics for core banking solutions is the next big global trend. There’s no denying that the modern customer wants more, for less, especially for their effort. This claim is backed by Sopra Steria’s Digital Banking Experience report found that 58% of people agreed that digital banking was the preferred route.
Naturally, this goes beyond simply monitoring and accessing basic banking functions. The modern consumer wants digital banking to handle core processes in the background and be intuitive. This is clear because there’s a market for automated money-saving and budgeting tools.
Thought leaders make it clear that AI and ML are the core disruptive technologies here and have a lot of untapped potential.
Besides the consumer’s benefit, automation is catching on in digital banking simply because it is the shortest path to success. Case studies found that automation in banking has the potential to:
- Improve CAGR by 15%
- Improve process accuracy significantly, up to 98%
- Increase customer service efficiency by 50%
- Lower operational costs
Compliance is also another factor, and automation solutions are making it much easier to stay compliant.
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Beyond Mobile is the Next Big Step
Mobile services are now a mainstay in most industries, and these primarily started out to ease communication. Mobile solutions propel digital banking, and this enabler has been the foundation for many new-age service providers, so much so that 75% of users between 15-24 years of age used mobile banking as a primary route in 2021.
Eight in ten bank account holders in India have already opted for mobile banking solutions, pointing to a shifting trend. Financial institutions are aware of this and are moving beyond smartphones. For this, thought leaders and developers from the banking industry are now hinting at more expansive technologies like augmented reality (AR), the Internet of Things (IoT), and virtual reality (VR).
These not only enable a more streamlined engagement value chain but also work to integrate with newer touchpoints. Here, alternate devices like wearables and entirely autonomous devices like smart glasses or embedded microchips have huge potential and could redefine digital banking.
Many of the digital pioneers in India are already keeping up with the curve and working toward empowering the sector. A new banking ecosystem is in the making, and the fintech leaders need to have a mindset of adaptation to stay relevant. However, these changes are not limited to retail banking alone. Other players will also be required to redesign processes and operations, all while ensuring everything stays aligned with regulations.