This article is an excerpt from interview of Mrs. Rekha Pillay Yadav, CEO of Sumeru Enterprise Tiger. This is the second article in series, the first being “What do you mean by digitalization in retail banking – The indian scenario.“
Interviewer – What are the paybacks or benefits for financial institution from going digital? What aspects is Enterprise Tiger addressing or it could be addressing? How would you define the benefits of digitalization?
Ms. Rekha – The benefits to the banks are cost savings and sales numbers going up (It is the top line benefit). If I would be the CEO of a bank, I would be very very keen that my customers, my topline & my revenue numbers grow.
How does digitalization help your revenue numbers grow?
The same person who took x number of hours to source a loan does it in half the time and therefore you are increasing capacity to do more. Therefore naturally if someone’s free and he /she is doing sales job, they will go and get the next customer. So your sales numbers grow.
How do the sales number go up in another way? When a customer experience improves, the customer recommends you. I will give you an example. Have you tried and buying a house and have you tried applying for a mortgage loan? If there is anything that frustrates you, it is the fact that it takes so long. It takes even the best financial institutions sitting there 10 days to process mortgage loans. I am not saying do it in one day, you are giving someone, maybe, 1 Crore-1.5 Crore or even 50 Lakhs, you want to do your due diligence. But do it faster. If you can tell someone, we will give you your home loan in 5 days, your sales numbers will grow. Because the customers that walk in to be serviced, will go up. So your sales number will increase.
So, first is, top-line. Second is the bottom-line. One of the biggest pain points for a business head in a bank is cost of acquisition. Cost of acquisition is not only the cost of acquiring the customers that you have converted, but it is the cost of trying to acquire the customers who didn’t convert. Look at it like a mathematical formula, you had 100 customers out of which 20 converted. The work you did for those 80 also is borne by this 20 that have converted. So, your cost of acquisition of these 20 customers is not the cost you spent to acquire these 20, but it is the cost of acquisition of the entire population. It is the cost of the sales funnel of 100. Simple mathematics, right? If you want to cut the cost of acquisition, you have to optimize processes for the 80, because keep in mind, those are anyways people who you couldn’t lend to. Suppose you pick this guy, who is part of 80, sooner than later in the sales funnel, can you reduce cost of acquisition? The answer is yes.
You don’t digitalize for the sake of saying – “I have gone digital”. No! You digitalize because it helps you improve your processes. So, if I can get my customer acquisition to be designed in the manner, where I can reduce the initial list of 100 leads to the optimal 80 or 60 right at the source. Then, I am able to cut the cost of acquisition.
For example, if I can get your credit score or if I can do a quick app score based on the level one information that have been filled into the application and then pass the accept/reject kind of simple communication to my front-end field staff, I would not spend anymore money on the reject cases. They get weeded out then and there. So, the cost of acquisition of 100 which the 20 are bearing, a good 40% of that would be nothing but just a simple form getting filled and you pulling his data and rejecting it off. So, just look at your numbers to see how your bottom-line reduces through digitalization.
To be continued…
P.S. Rekha has pointed out how digitization at various levels adds up to create big business impact. For a comprehensive listing of digitizations and how they all add up, you can contact us for our white paper on the bare essentials of digitalization. As the name suggests this white paper covers the essential digitalization executions you should be going for. It will give you a clear idea of how to maximize RoI today and plan for a future safe digitalization.
Mrs. Rekha Pillay Yadav
Founder & CEO, Sumeru Enterprise Tiger
Six sigma black belt, Chartered Accountant with 20 years of experience in leadership positions across Banking Domains. Previously held positions such as Head –Compliance & Control, Head – Credit & Risk. Worked for Citi, Bank of America & Arthur Anderson.