Digital banking: A key part of the new normal
In the global financial scene, about 80% of Indians have banking links, which is considered healthy. However, with nearly 48% of these accounts inactive, India’s banking population remains limited. This suggests that the expectations of ‘Gen alpha’ will drive the banking sector’s evolution in the following decade.
Some banks take two or three days to furnish account holders with a chequebookcentre, which seems inappropriate in an era when groceries arrive in hours and meals arrive in minutes. Banks are slowed by the weight of multi-layered decision-making, distant operations, and antiquated systems.
Customers expect their banks to provide two important services:
- The nationwide lockdown, along with many firms’ work-from-home policies, has shifted banking access from the physical to the digital realm. A noteworthy trend is that roughly a third of bank account customers are prioritizing transaction simplicity as their top criterion. In this climate, it’s encouraging to see the market welcoming additional service providers like NBFCs and FinTech firms.
- The industry will be controlled by firms with best-in-class pricing for their value-driven clients because of the shift in demography towards Gen Z and Gen alpha users, who are price-sensitive. As a result, banks face a strategic decision that is tough to make because some clients are tech-savvy and well-informed.
Some private entities, NBFCs, and FinTech firms are leading the charge in the digital banking industry (the latest being Neobanks). The industry has been undergoing a fast transformation, and banks must make a concerted effort to modernize their digital strategy to keep up. In this situation, banks have been investing in digital assets and capabilities to provide better service to their consumers.
Some key considerations for banks as they embark on their digital journey:
- The ability of each customer to adapt to digital developments varies. Not all client categories have the same demand for digital technology adoption. A target segment’s demands and experience-related expectations must be considered while creating digital products.
- Customers should be allowed to use digital assets as customer service centres. AI, machine learning, and robotic process automation (RPA) solutions can help make this a reality. According to Accenture researchers, digital assets should be backed up by digital operations to create a smooth customer experience.
- API-driven partnerships are gaining traction as the digital revolution progresses. Banks will save not only money but also market share if they invest in time.
- A customer requires digital service just as much as a physical location nearby. To complement each other, banks demand creative physical and digital tactics.
- To retain the depth of banks’ relationships with their customers, digital innovations must incorporate an underlying notion of personalization.
Banking institutions may use the potential of digitization to their advantage as they chart their growth path. Investments in this field are frequently regarded myopically through the prism of return on investment (ROI), even though they are an important part of every financial institution’s survival toolset. Today, cost reduction is critical to profitability, and banks have recognized that digital initiatives are driving this transition.