What are the things you do in your everyday life? Think of the activities that work as a routine for determining your everyday lifestyle. It can be shopping, going to work or studying. How about banking? Can this be a part integrated in your lifestyle? If you go back to the history of banking, you will find how simple structured banking existed; even a few decades back. To be specific, banking was something limited to the transaction of money; it actually served the purpose of money savings and small term trades; however the image has just turned out to be the very opposite today. Today, it has control over literally every aspect of our day to day life. In developed countries, banking is done on digital platforms where they existed within the fingertips of their customers where they are having access to information and other services through online portals. It’s more of a lifestyle itself.
The history of banking:
How has it evolved over time?
Being influenced by the up-to-date technology, consumer behaviors, habits etc. the bank has to chase for a desired platform from where it can ensure the optimum level of services. Nevertheless, technology runs faster; that’s why banks often fail to keep pace with it. At the very beginning, a bank’s activity was just like a particle compared to today. As time goes, the concept of a bank is getting broad to broader and the finishing line might never come. “Safe keeping” and “savings” of money and valuables brought the concept of banking. Some people started the practice as profession. Thus bank appeared. As money piled up, bankers started to lend it to needy people, and got a basic banking structure. Then banks started issuing letter of fund transfer (hundi). In the 16th century bank entered into the modern phase. Banking industry has been in a relaxed position for decades with low customer turnover, good personal relationship and not much intervention of regulators. With the pace of time, things got inverted.Technology era started, customer behavior changed,expectation stepped up, and customers are now making decision much faster and have access to a plethora of offers leaving financial institutions straggling for customer loyalty.
Entering the tech arena is a must
To ensure existence, banks have no option but to enter in to the ‘tech arena’. As the first step, banks should ensure “banking at anytime and anywhere” for which banks should have “ultrafast response time”, and omnipresent advisors. Banks have to prepare their proposals more lucratively for customers to ensure their own survival. So, banks have to keep themselves on 360 degree analysis, with a stupendous pace. Time allows no more for “customers to come” even no more for “door step banking”. In fact, drastic change already appeared through focusing on digital banking. It brought a vast level of modernization. It includes cards, ATM, mobile apps, internet banking and so on. At this digital edge, how can a bank get the best of it? Banks mostly focused primarily on corporate customers where large loans, treasury and trade finance are the main products. Later some of them didn’t want to put all their eggs in a single bucket so they focused on small and medium enterprises. They split funds and designed their products to attract SME’s. Others thought individuals are potential and thus retail/consumer banking was born. Different types of recurring deposit schemes and consumer credit schemes already got huge popularity in Bangladesh; in fact a few banks got their financials in a solid state only because of huge number of retail customers they have acquired.
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What can be some of the lucrative services?
Under these consumers banking finance, banks are offering very lucrative products and services to their customers such as attractive savings schemes to keep your money, affordable long term home loans, car loans, easy EMI for household products i.e. television, refrigerator, air conditioner, etc. education loan, tourism and holiday packages, finance for marriage, medication and health care loan, going abroad for work- this sector is a very prominent one for having finance. Tax Payment is a troublesome matter for most of the consumers. So, banks create the arrangement to manage it suitably. If you want to earn more, bank is there to help bringing your money from different sources (Uber/Amazon etc.). Now you also have mobile wallet for smart buy/sale. Banks have stepped up to fulfill the need of passport payments and BRTA fees payment. Mobile top up, utility payment, credit card, emi, Wasa, electricity, internet, cable TV network, day care center, telephone (t&t), tuition fees all have been covered and our banks seem ready to go totally omni-channel! By Payment integration with E-commerce, F-commerce and M-commerce you can earn and spend more efficiently. You can also ensure safety and security of your valuables, documents etc. by availing locker facility provided by your bank. All of the above are the existing features of consumer banking. Consumers earn and banks can help raise their earnings. If they save, banks can assist them for the best. In fact, next generation banks will cover each and every aspect of a consumer’s modern life. It will be a lucrative as well as a more viable platform for a bank. Banks will be ever present to the customers through easily accessible technology like mobile, internet etc. Banks will provide fund or service or both on an issue which will make consumers’ life better and easier than ever. There will be an enjoyable and constant bonding between consumers and the bank.Simply put, for securing a consumer’s earning banks will guide, assist, help, finance and provide services. And that is exactly what lifestyle banking is.
How far can life style banking go?
As of now, banks are deciding the product for customers, but next generation customers will take decision by themselves. They will decide how much to save or how much to spend, which product to take or not to take. They will have access to personal portals given by the bank where they will have access to all of the financials as well as opportunities. Customers will be the managers of their own portfolio. These portals will show customers’ account aggregation presenting savings, loans, insurance, stocks and every other customers. And the portal will also present with all the financial offers to choose. A customer will take control of his own portfolio. Banks will chalk a line/boundary for the customer of how far he can get credit, time or insurance. Now-a-days customers are being connected for most of the day. Your life is seldom on pause,except when you’re asleep. Anyone can now order pizza from Foodpanda and pay from home using his/her smart phones. Latest updates of Bangladesh-New Zealand Series can also be viewed using mobile TV or just by clicking on the ‘ESPN Cricinfo’ as you ride the elevator to the office. When you shut down your computer at work, you open tablets to catch up on your friends’ plans for the weekend.
Before going to bed, you check the fitness monitor app to find out how many steps you’ve taken that day. These examples illustrate the lifestyle we currently have and banking service is also getting smart so that it can fit right into your busy, digital life, as easily as texting a friend. For example, the new model of smartphone/tablet that you wanted is finally on sale, and you must buy it today. But first, check the balance in your
account using SMS or internet banking service to see your balance in seconds. You and your colleague decided to go and buy gift together for the wedding reception of one of your junior colleague. Your colleague bought the gift, but you don’t have any cash in your wallet to pay him back. But you can use your mobile banking account to transfer fund immediately to your colleague and can get instant SMS notification in your mobile. You are planning to have an exciting trip with your friends to Chittagong hilly areas during the next vacation. So, you want to start watching your spending, set a budget and save some fund for the trip. All these functionalities can be monitored 24/7 using your banking dashboard. So, using analytics on the lifestyle of customer, banks can let the customer pick and choose what he or she wants and, based on those choices, they can be offered incentives, discounts or rewards. How far bank’s efficiency goes? How will they define the boundary? Banks will analyze the customer’s socio-economic status, behavior, transaction history and finally based on advanced analytics, the boundary will be defined. Banks also have to analyze on the consumers’ requirements and money mindsets. Business intelligence and analytics are already in place for helping design such financial services of the future.
Product bundling: another tempting offer
To discuss product bundling let’s look at ‘value meal’. So what is a value meal? In simple terms, the combination of various items from the menu offered at a discounted price is a value meal. Usually customers are attracted to value meals due to their cheaper price and the ability to get more for a better price, rather than buying each product individually. Likewise, banks will also provide a package of products with some sort of encouragement for doing so, to their customers; from where value will be derived from a discounted price, additional non-price benefits or other rewards. The value should vary based on application of each of the product or service within the bundle. Simply put, “the more you bank with, the more value you will get in return”. Therefore going to the next level can bring big advantages. Let’s see how advantageous it can be. The digital market: bundling non-banking products Banks can color to customers’ lifestyles and needs by presenting them with nonbanking products. For instance, banks have begun to offer Credit-Shield premium with every credit card transaction. Banks can also discover lifestyle bundles with cable connection and internet services in association with a car loan and its insurance. So, why these value-added services should be taken into consideration? It is because banks can produce additional revenues from existing customers by offering these services. Bank customers can have a single location to purchase several products and services. And most notably, customers will start to update and personalize their non-banking products or services regularly.
Besides, permitting customers to modify their experiences, and by allowing banks to offer suitable products and services based on customer data, it can increase their share, produce additional revenues and make their customers stick to them. Some critics say that ‘banks should do only banking not ‘e-Commerce’ or ‘m-Commerce’. On the other hand, others think that due to digital transformation and disruption of technology, customer behavior and expectation have been changing rapidly. For example, now-a-days we don’t see long queue at bank branches for paying utility bills or ‘FlexiLoad’ at the agent outlets, rather a huge portion of these bills are now paid using telecom operators, internet or mobile banking. So, it is the convenience, service quality and ease of payment which is turning customers to chose their new mode of payment. This means that the traditional or legacy banking is being replaced by disruption of technology which is ultimately enhancing the boundary of banking service. So, the key for banks in retaining market share and customers is to beat the disrupters at their own game, and they can achieve this by becoming a disrupter themselves, and by rethinking their digital strategy. Under this circumstance, the banks should focus on analyzing customer experience, exploring omni-channel delivery model, making mobile/internet as the key growth channel etc. Digital transformation has now become a pressing necessity rather than an option and it begins with an understanding of digital consumer behavior, preferences, choices etc. Digital disruption is already taking place in the financial services sector and the rapid speed of the changes that are occurring is likely to increase still further in the near future. Meanwhile, fintechs are developing a range of different strategies as they seek to tighten their grip upon the market. Banks currently view fintechs as both competitors and partners, depending on the areas in which they are operating. For example, in lending, fintechs are usually regarded as a partner: banks see them as a method of helping to funnel business their way. However, in the payment space, fintechs are viewed as competitors. This space has always been seen as lucrative for banks and a large number of fintechs are disrupting it and are carrying out a lot of these payments at a much lower cost. They are, therefore, becoming a threat to that revenue stream for the banks. The other challenge is that this paradigm is shifting and so banks need to look at how they can generate other sources of revenues. There is actually no way out; banks should happily welcome this fact and should be prepared to take advantage of this disruption and the perfect timing for it is ‘now’. The number of bank customers has grown significantly during the last two decades and as it has emerged, their lifestyles and behaviors also evolved. This customer lifestyle evolution has made innovations in financial products and services delivery a necessity, not an option. As a result, banks are now designing financial products to be in line with current social and business realities and are ensuring that these product innovations along with technological revolutions will meet the rapidly changing choices and lifestyles of today’s customers.