With the advancement of disrupting technologies, from mobile wallet to social media, tablets, Augmented
Reality (AR), Virtual Reality (VR) and ‘de-banked’ digital consumer, one argues if banking is a place we go to, or rather something we do. Bill Gates, former chairman of Microsoft, surprised many, saying, ‘Banking is necessary, banks are not’, while addressing the impact of digital technology on payment systems.
The Royal Bank of Scotland has defined digital banking as ‘banking on the move’. Hence, the essence of digital banking encompasses a few promises for customers like accessing balance, managing accounts, transferring money instantly and pay bills, becoming paperless – hence save and print up to seven years’ worth of PDF statements – through iBanking, staying in control of standing orders and direct debits, setting up a savings goal and keep a close eye on progress, and switching on text alerts to keep track of accounts on the move. Barclays, the most pioneering bank in Europe, introduced video banking allowing customers to interact face-to-face digitally. With increasing use of QR code, mobile based commerce is getting momentum, and talk about frictionless banking. Banks have started to exploit the advancement of Near Field Communication (NFC) in tapping customer presence for offering services, or allowing touch-less authorisation for card-based payments.
Axis Bank has come up with its Augmented Reality (AR) feature within its mobile app which lists all the dining destinations, property lists, shopping centres, bank ATMs, branches and many other things not only as a location on GPS but also in real life pictures along with distance and even directions. Commonwealth Bank of Australia (CBA) customers are now pointing their smart phone cameras at residential properties to bring up property details, recent sale prices, and information on local neighborhoods. This is a convenient way for their customers to get an insight into estimated monthly payment amounts on CBA mortgage loans and insurance. The app covers 95 per cent of residential properties in Australia, and averages 20,000 property searches per week. The DBS Bank, 29 per cent of which is owned by Singapore state investment company Temasek Holdings, wants to be along with customers even as they think about buying a property, and with its Home Connect, one of the 19 mobile apps the bank has to this date, is just a start on what the DBS plans to offer over the next couple of years to meet the shifting demands of younger customers. Now we hear about insurance payment based on driving pattern, using telematics technology – the integrated use of telecommunication and informatics.
So, digital transformation is profound and accelerating transformation of business activities, processes, competencies and models to fully leverage the changes and opportunities of digital technologies, and their impact across society in a strategic and prioritized way, with present and future shifts in mind.
The payments industry is in the midst of a seismic shift, and Millennials – those born approximately between the mid-1980s and 2004, also known as Generation Y – are leading the change, accounting for 55% of all mobile payments. Millennial Disruption Index predicts around 73% of Millennials are looking to new offerings from Google, PayPal or Apple rather than from their local banks, whereas 33% say they won’t need a bank at all in the near future Digitisation has been changing Europe’s societies and economies for more than two decades, and this evolution is accelerating. The transformative powers of artificial intelligence, big data, Internet of Things, mobile and blockchain technologies are on course for a fourth industrial revolution. This development is overwhelmingly for the good, improving living standards, and comfort. Here in Bangladesh, one doesn’t need to travel far but to open our government portals, which has revolutionised our approach in dealing with government agencies. This is certainly praiseworthy.
Therefore, digital transformation, its disruptive impact on people, whether we like it or not, has started to change our behaviors, and is way bigger than we could imagine. Many of us conduct our financial affairs online, never finding time or the need for visiting a bank branch. For a Bank, its drive on digital transformation requires new breed of digital-savvy, people centric, visionary leaders.
“Banks think in channels, but customers don’t”. It means looking inward, changing organizational beliefs and habits to facilitate clients and drive digital innovation. Most banks today want to become digital banking leaders after all, that’s where the customers are. And for much of the past decade as digital banking has taken hold, most leading traditional banks have incorporated strong digital strategies. However, the most important step for them requires a drastic, profound reset of how they should react to customer needs, meaning, and thinking customer first, rather than by channel.
The spread of mobile banking is creating what we call new “golden rules” for retail banks, as they seek to meet customers’ expectations in banking products and services. While developing a digital vision few things matter more than achieving simplicity. Mobile requires smart, visual, and easy-to-use interfaces and services. The key point to remember is to be “always connected.” It is hard to keep up with the speed of innovation but banks must try to keep pace with new technologies to ensure customer loyalty and to reduce attrition.
Making products fully digital is clearly the future. Opening an account will soon be done without visiting a branch. In the very near future we will have digital KYC and will not have to rely on customers paying visit to branches, and filling up the form, every now and then. The next step is probably going fully paperless. There must be a conscious effort to avoid paper-based formalities and practices in operational processes and transactions. In a nutshell, the key to developing a successful digital strategy for a bank is to endorse client centricity, open innovation, and organisational flexibility.
Client centricity requires a focus on customer experience coupled with an in-depth examination of the role of branches. Banks need to be attentive in order to meet customer expectations. Banks should also embrace cutting-edge technology platform, accompanied by cross-functional teams for studying customer behaviors.
We need to rethink the role of branches. It also means changing habits and incentives of branch people. The digital transformation requires a digital mindset, shying away from traditional brick-and-mortar concept, and embracing digitised customer’s behavior. The hard part is to develop soft skills for branch people, as changing mindset isn’t easy at all.The digital marketing manager along with a creative IT department must be engaged in innovations, while the bank stands agile in meeting needs of the digitised customers.
Still, the biggest hurdle, it seems, is changing mindset of traditional banks, from product-centric view to a client-centric one. Deutsche Bank in Germany experimenting cashless outlets as
customers don’t need to visit a branch for money. Goldman Sachs, who’s Chief Executive Lloyd Blankfein has been saying for years that Goldman, founded in 1869, is more of a cutting-edge technology company than a grey-haired investment bank, was recently honored by Fast Company as one of the most innovative companies in finance.
Most European banks have been on the digital journey for years now, but that journey is only halfway through. Operating agility and cultural changes are next on the agenda for the market’s digital transformation. So CEOs are predominantly looking for critical role for chief cultural transformation officers (CCTO), who will initiate and lead the conversion of the digital vision. For local banks, selling digital vision to stakeholders and support from management, however, is the biggest challenge.