Everybody has a plan, until they get punched in the face- Mike Tyson
The above words are so right in the face of Covid phenomena that overturned every plan one has to operate. This pandemic has shaken every norm of our lives, and now the world is getting ready for new normal post COVID. The effects of this nature of the epidemic will be discerned over a period, which could run over a year or two.
The event has changed the direction of every business and forced the industry to adopt various measures to comply with changing life dynamics. The pandemic of different nature for which there is no benchmark. Covid has also widely impacted individual behavior across his personal and professional life.
Banks always had a good business continuity plan to deal with all kinds of adverse situations. But this was completely different and never imagined. The banking industry has been brave enough to tide over this period but will brace for the new world to provide zero-contact banking. Technology enablement and digitization programs at Banks helped banks, to a great extent to continue to operate and sustain. It also exposed gaps across digitization programs, which were noticed in maintaining sales numbers and dwindling cost structure. Also, banks realized that digitization programs at their shops were insufficient to go in a sustainable model in such kind of lockdown situations.
Banks would revisit their board and assess the entire digitization program to ensure the whole customer life cycle and engagement have authentic digital flavor. Digital Banking plan will be back at the board room, and entire technology & business teams will work together to ensure banking services go through a complete overhaul with full digitization. In the last few years, Banks have experienced the impact of the use of technologies on product development to customer acquisition across liabilities and assets segment.
The next phase of Digital Banking will have a completely different approach to stack together technologies and engage with businesses to drive digitization agenda. Below is the detailed list of transformation to be observed.
1. Physical trips to branches to the online mode of banking
Apart from digital payments and few services, Banks mostly continued to operate through branches esp for their sales. Fleet on the street has been core to its sales plan, and digital programs have been secondary to drive sales. Websites or even online banking or mobile banking still not designed to sell banking products other than a few standard ones like fixed deposits or investments. Mostly, channels have been used as a lead generation engine instead of driving direct sales. We will see complete integration across the product cycle to facilitate and entire sale process online.
2. Cost management will be on top of the list
Cost to income ratio has long been a critical indicator of the performance of banks. Cost efficiency and management have never been the core objective of Digital programs but more as one tick mark on the management plan. Since banks will be under massive pressure for costs for the next couple of years due to sustained challenges in business, digital programs will be designed to provide cost comfort across core functions, from sales to onboarding to servicing.
Streamlined digital programs across the customer life cycle will be vital to reducing costs substantially. It would be one of the critical factors to prioritize digital initiatives in the next phase of transformation.
3. Customer onboarding to the customer servicing model
Even servicing and relationship management have also been more in-person kind of model instead managed through digital channels. Engagement would go completely digital as earlier online platforms were more of an extension to assist, but they were far from building involved engagement. There will be engagement where one would see guided recommendations and nudges to customers to do engaged banking.
The next phase of digital transformation will see deep customer engagement managed through digital touchpoints. The deep use of technologies drives the way, and Amazon has shown the world on customer engagement with the use of technologies. One would see the deployment of digital engagement initiatives such as real-time campaign management, use of analytics, AI-enabled Recommendation services – with the option to know more and many more such programs.
Since movements will continue to face restrictions, and customers will try to avoid unnecessary travel, preference for online mode of services and banking products will be in demand.
4. Open banking adoption will be central to Digitization program within the Bank
Going forward, businesses would like to build around a collaborative relationship. Banks will be more than open now to tie up across product segments to ensure continuity of business. Partnership with Fintechs would enable Banks to be widespread in their customer reach, delivery of bundled services, better support mechanism. Partnership based business would be more critical to small banks as a limitation on their standalone operations would be detrimental to business. At the same time, tie-ups with Fintechs would help them to tide over this period. Post-COVID, multi-dimensional relationships will be evolved to address the diversification of services and the concentration of risks.
Customer choices are going through tremendous changes and be it, retail customers, or corporate users. In this condition, businesses have to continuously evolve themselves and make product realign fast to changing demands. The approach of Fail Fast and Fail Often will be more than ever critical. One would need to assess the relevancy of products and services continuously. The open banking model will enable both Banks & Fintechs to work together to rebuild the product and delivery model.
So, Open banking will not be separate agenda but tightly integrated with the revised Digital Banking Program.
5. The delivery model of Technology within the Bank
Traditionally bank processes are designed for waterfall and structured SDLC processes with a massive burden of internal compliance framework of security & change management process. Stringent procedures and traditional approach had its benefits and ensured software development is protected from the lapse.
The world has moved towards an agile and microservice architecture of the development. Amazon releases more than 10000+ changes on platform and sure; they understand security and compliance better than most. Banks would see the adoption of the next wave of technology delivery as part of their core programs. Banks would use microservices architecture, containerization, and DevOps. There would require an even wider adoption of open source technologies.
As part of the next phase of digital strategy, Banks would be more open to the adoption of cloud-based banking platforms such as Mambu, Ncino, etc.
In a nutshell, changes in personal habits and customers’ financial behavior will be part of the new normal. Banks would like to redraw digital banking programs to the suite to new norms and drive the next phase of growth through digital programs.