Given the recent black swan event and the lockdown that followed after it will lead to a transpicuous differentiation between banks with good digital capabilities and banks without digital capabilities. It is common knowledge that the future of the banking industry rests on the ability of bankers to provide better digital experiences to customers through great digital offerings.
The noticeable change that took place due to COVID, is that all banks started following online models. It has been an amazing transformation as banks have moved nearly all their interactions with customers to digital. FinTech companies offering banking services have already shown how to provide end-to-end digital services to the customers. FinTech companies also emphasized why all banks need to have a digital plan by showing how it dramatically improved the customer experience for them.
Challenges faced by Banks
Many banks faced challenges during COVID as operating offline took a backseat and they were relying on their existing technology to operate remotely. Banks without having the digital plan and right technology at their place struggled the most.
This is especially true when it comes to the lockdown period, where employees of banks were asked to operate from home. With their legacy systems that were not equipped to handle remote working conditions, banks were forced to adapt rapidly or close down their branches until the situation returned to normal.
Apart from this, the banks were also prompted to offer most of their products digitally as customers were no longer able to come to branches. For most traditional banks which ran on a hybrid model, this was a huge wake-up call. They are now strengthening their back-end systems and forming new partnerships in order to ensure that if such a situation arises again, their organization is ready to adapt.
It may even be accurate to say that COVID, despite wreaking havoc on the global economy, has helped banks achieve more digital transformation in the last year than they have over the past decade.
Embedding Banking into the customer Journey-
Banks are improving their existing technology infrastructure and investing in technology solutions to interact with customers digitally. Rather than providing a ‘one size fits all’ solution, banks have now customized their offerings to fit the market segments.
A great example of this is the Smart Hub by HDFC. It is an integrated merchant payment solution that acts as a single platform to collect payments from multiple payment modes.
Rapid Product and banking channels innovations:
In order to ensure that the bank’s customers remain engaged and loyal, it is vital for them to offer digital products that have been mapped to the ever-changing market dynamics.
This is what Goldman Sachs has attempted with the launch of Marcus. Marcus is an online bank by Goldsman Sachs which offers high-yield savings accounts, high-yield certificates of deposit (CDs), and no-fee personal loans. It caters to the needs of retail customers through partnerships with companies like Amazon and Apple. Apart from this, they are also planning to launch a wealth management platform called Marcus Invest.
Hyper-Personalization of Banking:
Hyper-personalization takes advantage of real-time data and cutting-edge technologies like artificial intelligence (AI) to deliver more relevant product or service information to users. It’s an approach that takes personalization as we know it a step further.
This is what ICICI has done with the launch of its millennial banking platform ‘Mine’. ‘Mine’ is aimed at customers in the age bracket of 18 years to 35 years. It offers an instant savings account, a feature-driven iMobile application that offers investment guidance to suit the demand of millennials, curated credit and debit cards, instant personal loans & overdrafts, and even an experiential branch with social engagement space.
Emergence of Platform
Before COVID, banks ran on a hybrid model with a large portion of their transactions still happening through branches. But now, the pandemic has put the digitization process of banks into overdrive. Banks are now rapidly transitioning from Legacy to a Data Layer-based infrastructure, where customer data is being shared through APIs. Contemporary technologies will play a key role in the digital transformation of banks. Technology in sync with business will make this digital transformation successful and meaningful. The following technologies will support the banks in their digital transformation journey
Artificial Intelligence/ Machine Learning:
Machine Learning algorithm-driven Artificial Intelligence systems are playing a key role in making optimum usage of the vast amount of available customer data. These systems are supporting the banks in providing personalized services to the customers.
Cloud Computing:
Cloud computing helps banks in upscaling the businesses and technology infrastructure in an expedited manner. It also helps banks to manage compliances and cybersecurity threats in an efficient manner.
Optical Character Recognition (OCR):
OCR technology is supporting the banks in the digitization of the documents and eliminating the need for manual data entry.
Robotic Process Automation (RPA):
RPA technology helps banks automate different processes. RPA supports banks by automating repetitive tasks like data entry and automation of customer service.
Application Programming Interface (API):
APIs are playing a key role in the data interoperability between banks and different FinTech & 3rd party vendors. APIs are driving the Open Banking model in banks and playing a key role in the digitalization of products and services.
The quote by Brett King, a FinTech Influencer “The number one bank in the world will be a technology company” emphasize the need for the implementation of technology solutions to offer a great experience to the customers. Going ahead, these technology solutions will support banks in their purposeful digital transformation.