The push for Digital Banking: Customization will win customers

In the recent Union Budget the government made a further push toward a digital-first approach, proposing to expand the scope of digital banking and take it to every citizen. It aims to make banking more inclusive with 75 digital banking units that will be launched in 75 districts, homogenizing financial services in rural and semi-urban areas. The government also proposes to integrate 1.5 lakh post offices with the core banking network to boost financial inclusion and easy access to accounts through net banking, mobile banking, and ATMs, besides promoting interoperability by allowing online transfer of funds between post office accounts and bank accounts.

As the pandemic continues in different waves and variants, customers have been forced to interact digitally with their banks and complete most of their transactions online from the safety of their homes. There has been talk of Branchless Banking for a while now, but a majority of banks aren’t there yet and need their customers to come to their branches for transactions. The pandemic has forced banks to reimagine themselves, accelerate their digital transformation and make every transaction available on digital channels. Mobile and internet penetration in the remotest parts of India has only acted as a catalyst to this digital push.

As banks increasingly work on a digital-first approach, they must remember humans are social beings yearning for the ultimate experience of human-to-human interaction even in a highly sophisticated digital ecosystem. Imagine a customer who is researching a product and has some urgent queries, or whose online monetary transaction goes awry and needs immediate assurance that their money is safe. No chatbot or well-meaning digital message can replace the experience of talking to another human being at the click of a button. Empowering customers and letting them choose a channel of interaction would be a key factor in increasing engagement and stickiness with banks.

Banks have traditionally imagined and designed their products for maximizing profitability, but today it is imperative they keep customers at the heart of their products and services. A one-size-fits-all approach needs to be replaced by tailored products catering to different generational and urban/rural demographics. Banking needs typically fall into two categories – a) what a customer aspires to, like owning a house, going on a holiday, owning a car, investing for the future etc. b) routine transactions like paying at a grocery store, paying a bill, credit card payments, tax payments, etc. While the latter needs intuitive, frictionless, and convenient services and can be completely online with human interaction required only as an exception, the former requires knowing the needs of the customer and providing tailor-made financial products aligned to their goals. Banks can do that by leveraging the following:

Building customer insight through Data and Analytics

What made some well-known startups and ecommerce companies so sought after amongst investors despite making huge losses for many years after their inception? It wasn’t just their user base, but the amount of user data they have and how they used it to understand behaviors and preferences and offer personalized product recommendations to users. In some instances, they even launched their products and offered credit lines by using customer data effectively. Banks have been around for more than a century and sit on an extraordinary amount of data about their customers. The challenge for banks is how well they use the data for building 360-degree insights into their customers’ relationship with them and offer them personalized products/services and financial advice.

Power of prediction through Artificial Intelligence (AI)

Banks have traditionally been reactive in their approach, but combining artificial intelligence with millions of transaction records they generate everyday would help shift the paradigm to accurately predicting major events in the lives of customers and proactively recommending products/services and financial advice for associated financial needs. AI-powered banks can put a truly full-service bank and personalized financial advisor in the pockets of customers.

Everything in one place, or API Banking

People have relationships with multiple banks and many find it difficult to keep track of their transactions across multiple entities. Banks can leverage API banking to aggregate financial data and design tools to help customers track and manage their finances in one place more effectively.

In summary, digital banking is the new normal and a standard offering by each bank on the street. The key differentiator for banks that will help attract and retain customers will be their ability to provide highly engaging, hyper personalized and intimate customer experiences. They say data is the new oil, so the one who can build a smart engine powered by the new oil and deliver powerful insights will win this hard-fought race.

The author Prakash Upreti is Head of Consumer and Small Business Banking Technology for India & Philippines at Wells Fargo