The digitalization wave has been sweeping through every area of industry and the banking sector is no exception. While adapting processes to the digital era might have been only an option previously, they have very quickly evolved into an absolute necessity when it comes to banking. Besides the fact that the number of digitally-savvy people are steadily increasing, the rapidly transforming technological changes mean that they present a number of opportunities as well as challenges for banking operations when it comes to digitalization. Since banking institutions have the pressure to stay ahead when it comes to the innovation curve, they have also had to face significant internal as well as external challenges when it comes to digitalization.
Fintechs are growing
One of the major external challenges that banks face is the rise of Fintechs (financial services technology). The Indian fintech software market is expected to reach USD 2.4 billion by 2020 from the current USD 1.2 billion, according to NASSCOM. Payments have been revolutionized by players including paytm, mobikwik, freecharge and investments now has policybazaar. The challenge for banks is to innovate and enhance their digital capabilities so that they can collaborate and compete with the Fintechs and also leverage their strengths. Digitalization in this scenario will have to be innovative, in-depth and exhaustive.
Challenges lie within banks
One of the approaches that is usually used when it comes to digital transformation in banks is one that involves relooking at all the processes and visualizing them with digital technology. Typically involving radical changes, these include tactics such as doing away with paper-based forms and anticipating a customer’s needs before it is expressed and so on. Another approach is to conceive of a complete digital bank outside the traditional bank that anticipates the competition in advance and works to defeat it. However, no matter which approach is used the key challenges when it comes to digitalizing operations in retail banking have to do with organizational resistance and resistance from people involved in the processes.
While banks in India are at different transitional stages to becoming full-fledged digital banks, there are very few case examples, if any, of large banks making the shift from conventional to digital banking. One of the biggest hurdles is that banks tend to be already invested in existing processes and systems and often conceive of digital as an addition to existing channels. However, to truly become a digital bank, an entirely new approach to customers, employees, products and processes is required. In this process, work profiles within the bank will get reconfigured and old roles might disappear while new ones emerge. The daily processes of banking will also need to go through a significant transformation. For example, a chief digital officer whose role would be to work closely with the business, operations, marketing and technology team would become an essential profile to oversee and lead the process.
The demand for a seamless digital experience
An overview of the current scenario in the country would help to understand the urgency to digitalize banking operations. According to PwC’s report Future of India: The Winning Leap, internet access in rural areas is growing at the rate of 58% annually. Another startling statistic shows that education level doesn’t necessarily correlate to becoming a digital user. The report states that while 200 million Indians have studied beyond Standard VIII in schools, over 250 million Indians have accessed the internet. Being the third largest market of internet users in the world, with two-thirds of its population being under the age of 35, India’s citizens with their rapidly changing lifestyles seek convenience, choice and greater flexibility. The growth of banking is therefore closely linked with the digitalization of their infrastructure. Retail banking customers tend to expect the same digital experience, choice, empowerment and ease that they have in industries such as travel. While retail banking has certainly made strides in the digital experience, there is a long way to go to make the process seamless for customers.
According to the PwC global survey on digital banking conducted in 2013, bank CEOs anticipated that the number of customers accessing banking services through traditional branch channels will decline by over 25% by 2016, and the number of customers, using mobile channels to conduct transactions will jump by 64%, during the same time period. Some of the key challenges that retail banking still struggles will include poor user experience, disconnected information and a paucity of interaction possibilities when it comes to self-service digital banking.
Of paper trails & messy processes
Integration is still largely missing that connects the back end to the front end, leading to slow reaction time and broken processes. There are some customer interactions that are still incredibly slow because they go back to a paper trail. And operational processes need to be able to adapt quickly to any external change. The need for an omni-channel approach in this case is imperative so that costs can be reduced, efficiency increased and customers can be served in a consistent manner. The opportunity here is for banks to look at the overall customer cycle and chart the synapses where there are significant breaks and work to bridge these gaps.
Replacing a product centric approach with a customer centric
The organizational structures within banks tend to be incredibly complex and the focus is typically on product development. This becomes an attitude that needs to shift because a customer-centric approach is necessary to hold sway in the face of immense competition in this sector. Since people have lives that are progressively turning more digital, banks need to make their presence felt in their everyday digital lives. For this to happen, both analogue and digital channels necessarily need to converge and be integrated. The customer has to be at the centre of retail banking and not the product. Data analysis and interpretation in real-time are the future of retail banking because it will enable banks to tailor products and offerings to their customers that they want and need and will not refuse.
Building warmth in digital channels
While banks strive to provide simple and customer-friendly transactional services, they must not lose sight of the fact that the even a remote channel needs to have the warmth and personability of a face-to-face exchange because going digital is far beyond being just simple, transactional behaviour. This is crucial since it relates to the customer experience and a digital banking experience needs to be able to offer an online interface and interaction that can replicate and possibly even improve on the interaction of a conversation with a person.
The baggage of legacies
Existing banks also have the challenge of their legacies to struggle with. From manual, disconnected paper-based processes to siloed data sources and complex IT systems in the back-end, when it comes to optimizing the digital experience for a customer these challenges gravely impact the execution of digitalization. Banks also have to consider their existing customers before transformation of their digital systems. The approach to take here is still being tested out. An ideal digitally-focused banking experience would be one in which customers seamlessly transition from automated servicing to a one-to-one interaction with a customer service representative, and this move is so smooth that the customer never knows whether they are dealing with a person or not.
In today’s scenario, digitalizing operations as a strategic move is still not a popular choice amongst banks in India. The need of the hour is for banks to acknowledge and work to fulfill the growing digital needs of its customers in this time of rapid change by seizing the opportunities that present themselves. Awareness and education at the decision maker level about the vital importance of digitalizing operations in banking is essential. Even when it comes to choosing software, a cursory makeover will not do. Instead, agile software such as Enterprise Tiger that can be flexible and customer-centric is needed that can digitalize core operations while integrating with other specialized software to perform various digital banking functions. From an enhanced ability to mine data and create low-cost processes to partnering with digital companies whose ethos is customer-centric and flexible, the banking sector needs to tap into the wealth of opportunities that digitalizing operations would present to them to emerge at the top in the challenging market.
Sachin Pratap Singh
Digitalization Consultant & Digital Marketing Expert
Sachin is a technologist and digitalization consultant. He is an expert in digital marketing. He consults banks, financial institutions and other enterprises in digital innovation. Currently he is working as chief product evangelist for Enterprise Tiger products.
As a communications specialist, Sridevi Padmanabhan delights in weaving magic with words. She has accomplished this with academic research, television scripts and articles for print and the web. Now, she writes about art, food and technology. When she is not writing up a storm, you can find her planning dinner parties and pottering around in her fledgling garden.