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. A key behavioural shift in the new normal has been in online banking and payments. Consumers are adopting digital or contactless payment methods that don’t require physical contact with external surfaces. Wallets that once were filled with cash are making a place for contactless cards.
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 through cloud based solutions 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:
Adopting cloud based solutions for better customer experience
Higher digital engagement has been directly proportional to the 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.
The 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 online banking initiatives and they can do this by coupling their legacy model with cloud based solutions. This will help banks increase their digital customer base, and thus revenues. The process of cloud in banking is to digitally transform the banking business without having to incur a lot of cost burden and keeping their legacy model intact. Banks can get the leverage to provide consistent services to their customers across different cities and monitor all their information irrespective of their location.
Evolving from physical to virtual banking
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 the 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.
Investing in robust API-first infrastructure
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. Cloud native 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. With API coupled with modular architecture, banks can launch products within 60 days time frame, become mobile ready, increase customer engagement and also offer a secure banking experience with Super PIN and card control features.
Staying focussed on customer experience
Convenience and 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 and embracing cloud based technologies will help banks adapt quickly to meet the changing needs of the digital demographics.
Murali Nair is president-banking at Zeta. The views in this article are his own.