The coronavirus pandemic has forced the entire world into embracing a digital-first mindset. While this shift has impacted many sectors adversely, financial services continue to pull through by making their offerings accessible digitally. In fact, the Reserve Bank of India (RBI) recorded a 34% rise in the total value of online transactions (RTGS) across banks between February and March 2020.
This might be good for the financial institutions and banks, but only offering digital services will not be enough to cope with the current crisis. As the new normal continues, coupling digital adoption with enhanced customer experience will define how banks sail through the crisis and ensure long-term sustainability. From simplifying digital transactions to expanding reach through strategic partnerships, banks will have to look at ways to reset their agenda:
Higher digital engagement has been directly proportional to increase in revenue for banks, even before COVID-19. Digital focus can not just aid customer engagement, but also translates into revenue and profitability in the long run. A study on ‘Quantifying the Value of Digital Engagement' by an international bank measuring the effectiveness of digital engagement found that revenue from the digitally engaged customers increased at 10.7% compared to 4.5% for the non-digital group.
Rapid spread of the coronavirus has forced customers to use non-branch banking solutions, even those still unfamiliar with online/mobile banking. Banks now need to boost their efforts in educating customers about safe and online banking initiatives. This will help banks increase their digital customer base, and thus revenues. Remote coaching, clear communication and on-call support are some of the initiatives that can help banks achieve this goal.
Consumers are constantly evaluating their digital partners to determine how they can make their daily life easier. Banks need to take a fresh look at processes from the ground up and imagine how to better meet current customer needs digitally.
RBI has been championing the cause of digitising banking services and changing its policies in lieu of the same. Recently, RBI announced issuance of electronic cards against an overdraft facility for account holders. This has provided an additional credit facility for customers, while also opening up other revenue opportunities for banks. A few leading banks have already started digitising some of the most common customer journeys, and are reaping its benefits.
Convenience of nimble fintech solutions is gradually taking precedence among consumers. EY’s recently released Fintech Adoption Index shows that India has a 52% adoption rate of fintech solutions, ranking second only to China.
Given their legacy processes, traditional banks are not designed to think and behave like a modern tech company. For banks, a fintech partnership is an opportunity to unlock the technical capabilities of a tech company to complement their 360-degree financial offerings. Strategic partnerships also help banks engage their existing customer base with advanced, digital and user-friendly options that are already available with fintech companies.
Furthermore, banks can identify gaps in their current offerings, innovate quickly, and bring new products to markets faster, especially to cater to their customers’ urgent needs during the current crisis. Thereby, helping them retain their existing customer base while acquiring newer ones.
To keep up with the increasing competition from new challenger banks and fintech companies, banks need to provide innovative services at the same rate as their nimble counterparts do. Powerful APIs can help banks link their existing legacy infrastructure with innovative propositions. A research on ‘APIs: The digital glue of the modern bank’ by Accenture in 2019 indicates, "Banks that embrace the new API-driven open banking initiatives can expect a potential revenue uplift of 20%, while those falling behind are at risk of losing 30% of revenues to disruptive industry players."
A strong API-driven architecture at the core helps banks launch new products faster and quickly modify their offerings to meet changing customer demands. Thus, creating a vibrant ecosystem that offers customers not only choice and convenience, but also highly enjoyable and personalised experience.
Convenience & ease-of-use may have driven some customers towards new fintech products,but their trust largely remains with the traditional banks. It’s time banks leverage on this trust. Customers’ trust, combined with technological capabilities will be a huge competitive advantage for banks. Investing in tech infrastructure will help banks adapt quickly to meet the changing needs of the digital demographics.
Banks need to focus on enhancing their customer experience with relevant, convenient and personalised products/ services. Switching focus from sales and profitability to customer satisfaction will be integral to reasserting banks' positive role in the society during the current crisis.