How can Digital Transformation reshape India’s banking services?

Digital Transformation is Economic Transformation For All

In a pandemic-driven world, the impact of digital modernization in the banking and financial sectors has been unprecedented in recent times, far exceeding what a CEO could achieve otherwise. Not only have bank visits decreased to near zero in the last 18 months or so, but call volumes to call centers have also decreased significantly. On the other hand, the pandemic has accelerated the pace of digital transformation in the banking and finance industries.

Digital adoption in financial transactions is one of the major changes that have impacted the sector. Contactless payment apps like Apple Pay, Samsung Pay, and Google Pay have now become standard, universal payment methods.

This trend in banking behavior is expected to continue not only among existing digital users, but also to attract new users to online and mobile banking. According to a FIS Pace pulse survey, 68 percent of Indians use online or mobile banking, and 51 percent intend to continue using it. In the fiscal year 2021, the country recorded over 40 billion digital transactions worth more than a quadrillion rupees.

Digital transformation is a key industry differentiator.

Consider a small bank where digital collection was virtually unheard of until recently. It has now increased the size of its entire collection infrastructure to approximately 1.5 million touch-points. Customers can now walk up to banking services or BC outlets and make a payment, which is then credited to their bank accounts.

The e-commerce or direct online marketing channel is expected to grow by more than 60% for a relatively new insurance company, with 17 percent of customers coming in through digital channels, which is unheard of in other Asian markets. The company now has a 65 percent digital penetration rate and close to an 80 percent digital adoption rate, as well as the ability to write large sum assured values with no documentation.

Reliance on digital channels

Banks and financial institutions are no longer concerned about expanding their physical presence. Banks and financial institutions’ mindsets are shifting away from branch network expansion in order to add more customer access points. According to Head of Marketing at Commercial Bank of Dubai, they are interested in investing in electronic kiosks and digital channels (mobile) to reduce costs (incurred through operation and maintenance of physical channels) and engage customers by providing them with 24-hour financial services so that they can transact at their convenience.

This changed environment in which banks and financial institutions are meeting the dynamic demands of consumers has three aspects:

  1. Customer acquisition (onboarding new customers)
  2. Involving newly on-boarded customers
  3. Customer retention

While the last function has always been backed by the virtual world, the first two have been accelerated by the pandemic.

Trading, insurance, and securities are all undergoing transformations

Customer onboarding in the BFSI industry has equaled the annual numbers observed during non-pandemic years in the post-pandemic years. Digital growth has fueled the acquisition of new customers, and the figures are mind-boggling. What was 30-40% pre-Covid has now increased to >90% as a result of seamless customer experiences, transparent communication about services and offerings, and the ability to select the offerings that best meet one’s needs. Customer engagement is also increasing dramatically. According to SVP and Head of Digital Banking at IndusInd Bank, prior to Covid, 40-50 percent of requests were coming in through the digital channel; this has now increased to 70-75 percent.

Because of the ease of trading online, the stock market has gained more than 10 million customers this year.

A leading online trading company has seen a significant increase in the number of customers migrating to digital platforms: from 70% of customers (pre-Covid) to 96% of customers delivering more than 90% of revenues digitized.

With first-time investors joining the fray, mobile trading has emerged as a key growth driver for the investment sub-segment. According to Bloomberg, mobile trading in India will have surpassed internet-based trading in cash markets by October 2020. Mobile trading now accounts for 23.4 percent of all trading, making it the second largest contributor.

Consumers in the insurance industry responded to the global epidemic and the trend of digital transformation faster than the industry. During the pandemic, online consumer searches for life insurance increased by 80% in India.

While the growth in search queries for term insurance is around 5-6 percent, pandemic-induced demand increased search queries for classifications by 80 percent! And this was a one-of-a-kind trend in India, with customers concerned about their families looking for insurance. According to the Head of Product Management at Max Life Insurance Co. Ltd., the average life cover sold per policy in the industry has increased by 18%.

For one large firm, online business is expected to grow by 60%, owing to digitized servicing and tracking customer journeys, as well as an increased concern for well-being. This insurance company has invested heavily in digital service education and training for its 6,000 agents spread across 12,000 branches. To ensure adequate voice quality on telesales engines, the insurer has also invested in a cloud-based dialer and a cloud-based CRM, while all information security protocols are followed.

Small finance banks the new way forward to engage better with customers

Small finance banks are also experiencing a digital push. Customers and bank managers interacted frequently in these banks’ traditional high-touch model. However, these banks have now decentralized their call centers and implemented cloud-based call centers. This has improved the banks’ interactions with their customers.

At its peak, a small bank reported 40 percent digital collections, which have since stabilized at 15-20 percent. This is a huge accomplishment that will result in significant cost savings.

Process Optimization

These technological trends have compelled BFS firms to reduce their documentation and invest in digital service training for their employees. The key here is to optimize internal processes by developing a Robotic Process Automation (https://automationedge.com/) roadmap, automating processes to reduce reliance on humans, and establishing a system-driven process that begins with operations and extends to other bank functions. Financial institutions have also benefited from multichannel digital servicing via conversational bots and WhatsApp.

Customer: The core of Digital Transformation

Customers are changing, and BFS companies cannot afford to fall behind. They are competing with the experiences offered by Amazon, Flipkart, and Zerodha. The takeaway here is to consider the entire customer experience rather than just the app.

Experts in the field recommend the AECCC model. This model’s key takeaway is to keep the customer at the center of all digital transformation decisions.

Access: Consumers should be able to access products and services digitally 24 hours a day, seven days a week. Banks and other financial institutions can now convert logins to transactions thanks to product accessibility and easier access to services. The proportion of customers interacting on mobile versus those logging into mobile apps has increased by 57%. This has resulted in increased revenue, – the digital the entire ecosystem in terms of customer-centricity and usability. Companies must also improve the exit perspective of customers in order to ensure that they return when the need arises again.

Engagement: Companies must engage with customers in ways that go beyond simply providing a service. The previously mentioned trading company has collaborated with financial technology brands to ensure that the entire orientation and training process is completely digital, reducing process delays due to human interference and verification. Customers can complete the entire journey in 3 minutes 42 seconds and trade in 5 minutes after regulators arrive and set up an end-to-end digital infrastructure, and the process is completely paperless.

Content: Customers should be provided with relevant content in order for them to remain loyal to the brand. Let us return to the local bank. It employed a solution that allowed it to connect with a diverse range of clients (HNI or individual) via video. It is also investigating the advantages of a video and an on-premise remedy for interacting with customers and verifying assets and processes prior to disbursing the loan. The bank is also implementing real-time customer segmentation, in which customers who haven’t transacted digitally but would like to do so are sent appropriate communication to nudge and help them transition from being physical customers to digital natives. The bank is also working to reactivate the use of digital channels among users who have abandoned digital repayment methods.

Customization: It is critical to reach out to each customer with unique offerings. For example, the trading company has an engagement module built in that can personalize customer experiences. Mobile app daily logins have increased 2.5X due to product personalization, and the average revenue per transaction per customer on the mobile app has increased by 28%.

Collaboration: Companies must ensure that brands collaborate with customers on new offerings and that new products are created for each customer. This is digitally possible.

(Reference: https://www.cxotoday.com/cloud/reshaping-indias-banking-services-through-digital-transformation/)

The banking and finance industry is on the verge of a paradigm shift, which will necessitate a complete overhaul of marketing processes and perspectives, as well as a shift from digital economy to digital transformation and from campaign customization to product personalization.

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Author : Animish Raje