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Paradigm Shift for the Banking Industry : Embrace Digital or Fall Away

Customer acquisition and business growth in banking industry was quite simple in the last decade. Open more bank branches and interact with your existing customers whenever they visit the branch to sell more products. With lack of information sources, customer churn was extremely low and customers were very loyal to the bank that reached them first.



 

The Digital Shift

With the proliferation of digital mediums, the old-school way of customer acquisition has been turned upside down. ‘Go Branchless’ & ‘Take the Bank to the customer’ is the new mantra for banks. Branches are now overheads and every bank is trying to reduce spending on physical branches and going the digital way.

 

This shift in mentality has been accelerated by

  • Considerable number of people going digital and connecting to the Internet
  • Card payments and digital wallets eliminating the need for physical cash and thus reducing physical interactions

 

Flexibility & Adaptability is key to surviving the Digital Age

 

We interact with a lot of financial institutions, big and small, around the world. The established players are feeling the heat from non-traditional players like telecom operators and wallet start-ups who are trying to gain market share with their branchless experiences. The banking behemoths must be agile and quickly adapt to this changing technological landscape to out-maneuver their competition.

 

CIOs and CTOs at financial institutions are leading large digitization efforts to successfully migrate their existing users to mobile devices. With smart phones enabling digital signature, biometric identification, easy data collection through in-built sensors like camera, GPS, barcode et al and pushing content and offers to the end-user are fundamentally altering the economics of existing banking processes.

Paradigm-Shift-for-the-Banking-Industry

Embrace Digital to see a great process efficiency and high RoI

 

Many organizations are still unsure about the return on investment if they go ‘Digital’.  In the long term, the digitization project will help you go ‘Branchless’ real fast and the cost savings in running thousands of bank branches per month will be more than the investment in a robust digital technology. Moreover, mobile applications are great tools for customers and bank advisors to stay constantly connected to the bank, thus ensuring great customer & employee satisfaction which is the ultimate goal of any services organization.

 

Solving the Customer Acquisition Hurdle

 

Other than servicing your existing customers, digitization is all about acquiring new customers through the digital channel. Banking products have been traditionally “push” products; hence, “bringing a Branch” to the prospect lowers the barrier of entry and the “prospect to customer” conversion ratio is much improved. While awareness and inquiry is driven through websites and apps, the inquiry-to-customer conversion is handled by a local bank advocate who educates the prospect and signs them up as a new customer using tools loaded in his or her smart device. This hybrid model of a digital + local touch point is fundamentally altering the new customer cost acquisition equation.

 

The Cashless Push – Embrace Digital

 

In most countries, cash is now discouraged by the regulatory bodies. Cashless transactions mean improved compliance, thus increased taxation. Governments around the world are naturally collaborating with public and private sector banks helping them with their digital push. At the same time, de-regulating the sector with immense speed is allowing new entrants in the money management business. Hence, the competitive ground is also shifting.

 

According to me, the ones that will lag in this digital race will lose market share and eventually cease to exist. Hence, it is now imperative for financial institutions to invest in the digital and mobile channel for them to survive and eventually thrive in this digital age.

24 April, 2017

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