Future of banking in today’s digital world3 min read . Updated: 05 Aug 2016, 12:27 PM IST
Some will seize the opportunity to transform and thrive, while others will struggle to evolve
Bill Gates’s now famous statement that “people need banking, not banks" lays down the gauntlet to the financial services industry heavyweights and is a call-to-action to legions of fintech start-ups.
The notion that customers need to go to their banks to do banking is rapidly being challenged. Increasingly, digitally-savvy customers are expecting to avail themselves of financial services seamlessly as they navigate through their progressively digitized lives.
For banks this has led to a rethink of how they interact with their customers. The digital world is about relevance, about speed, about frictionless experiences. It is about transparency of security while assuring trust. These are major challenges to banks that are used to operating inside bricks-and-mortar offices.
In order to grow in the evolving digital world, banks have to be fully digital. This means more than just applying “digital lipstick" with Internet and mobile banking. It means embracing digital thinking, enabling scalability, enhancing customer analytics and delivering services directly to customers at a time and place that suits them.
Digital thinking starts with focusing on customer journeys—identifying the jobs to be done by customers that need a financial service or product, then designing human-centred solutions that facilitate these jobs in the customers’ digital world. Digital thinking also requires a change to how banks build solutions. Banks have to act more like start-ups by encouraging innovation and constantly experimenting, prototyping and rapidly iterating solutions.
Scalability means it is not enough to have a great product or service in the digital world—it also has to be able to scale fast. With over 200 million smartphones in the Indian market alone, demand for digital services can grow rapidly. So digitally-ready banking solutions have to be designed from the ground up, they have to be deployed on “cloud-like" secure infrastructure and they have to harness evolving technology such as artificial intelligence to engage with thousands of customers simultaneously.
Customer analytics is one of the areas in the digital world that is evolving fast. On the one hand it is an essential marketing and service tool. With capabilities like geolocation and the use of Big Data to analyse customers’ habits and preferences, it is possible for banks to act like the “perfect butler"—anticipate the customers’ needs ahead of time and provide offers and services that are timely and relevant. Customer analytics is also a wonderful product development tool. By embedding analytics into the fabric of banking applications, banks can see the friction points that need “oiling" in the customers’ journeys and they can even ask for feedback or enquire about customers’ preferences at appropriate times during those journeys.
Changing customer perceptions are the hardest things for traditional banks to get used to—the notion that customers would prefer the banks to come to them, rather than them going to the bank. With India leading the world in the digital identification of its citizens, the need for customers to go to banks is rapidly decreasing. India’s Aadhaar number and its associated biometric authentication capabilities are ushering in a new wave of financial service possibilities. Customers can create bank accounts without ever stepping into a branch or signing a form. Customers’ financial transactions can also now be authorized digitally, which unleashes the possibility to perform financial transactions outside of traditional banking applications such as mobile and Internet banking. Increasingly, banking services and transactions will be done as part of a broader context, such as during an online chat or while watching a cricket match on a smartphone.
The digital world is presenting some of the greatest challenges ever to traditional banks. Some will seize the opportunity to transform and thrive, while others will struggle to evolve and be left to engage with an ever diminishing number of non-digital customers.
Olivier Crespin is managing director and group head (Digibank) at DBS Bank Ltd.