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Reshaping India’s Banking Services Through Digital Transformation


In a pandemic-driven world, the level of digital transformation in the banking and financial sector has been unprecedented in recent times, much more than what a CEO could have accomplished otherwise.

In the last 18 months or so, not only have visits to banks dropped to almost null, even call volumes to call centers have reduced considerably. On the other hand, the pandemic have spurred the pace of digital transformation across the banking and finance sector.

Among the major changes that have impacted the sector is digital adoption in financial transactions. Contactless apps such as Apple Pay, Samsung Pay, and Google Pay have today become standard, universal modes of payment.

This trend in banking behavior is not only expected to continue among existing digital users but will also bring in new users in the fold of online and mobile banking. According to a FIS Pace pulse survey, 68% cent of Indians use online or mobile banking, and 51% people said they will continue with the mode. Over 40 billion digital transactions, worth more than a quadrillion rupees, were recorded in the country in the financial year 2021.

Digital transformation, a core differentiator in the industry

Let us take the case of a small bank where the digital collection was virtually unheard of till recently. It has now ramped up its entire collection infrastructure to about 1.5 million touchpoints. Customers now walk up to the payment banks or BC outlets to make a payment and credit it to the bank accounts.

For a relatively new insurance company, the e-commerce or direct online business channel is expected to post growth in excess of 60%, with 17% of customers coming in through digital channels, again something unheard of in other Asian markets. The company now boasts a 65% digital penetration and close to 80% digital adoption with the ability to write large sum assured values with zero documentation.

Enhanced reliance on digital channels

Banks and financial institutions are no longer stressed about firming up their brick-and-mortar presence. There is a visible change in the mindset of banks and financial institutions as they move away from branch network expansion to add various customer access points. They are keen on investing in digital kiosks and digital channels (mobile) to reduce costs (incurred through maintenance and operation of physical channels) and engage with customers, by providing them 24×7 access to financial services so that they can transact at their convenience, points out Sandeep Poduval, Head of Marketing, Commercial Bank of Dubai.

There are three aspects to this changed environment in which banks and financial institutions are meeting the dynamic demands of consumers:

1) Sourcing customers (onboarding new customers)
2) Engaging onboarded customers
3) Retaining customers
While the last activity was always supported by the digital medium, the first two functions have been turbocharged by the pandemic.

Transformation in trading, insurance, and securities

In the BFSI industry, post-pandemic, customer onboarding across certain months has equaled that of the annual numbers noticed during the non-pandemic years. Sourcing new customers have been powered by digital growth, and the numbers are mind-boggling. What was 30-40 percent pre-Covid has now increased to >90%, thanks to seamless customer experiences, transparent communication about services, and offerings, and the option to select the offerings of one’s needs. There’s huge growth in customer engagement as well. Pre-Covid, 40-50% of requests were coming in through the digital channel; it has now reached 70-75%, says Raveesh Bhatnagar, SVP and Head of Digital Banking, IndusInd Bank.

Thanks to the convenience of trading online, the stock market has onboarded more than 10 million customers this year so far.

A leading online trading company has seen a huge jump in the number of customers jumping on to the digital platforms: from 70% of consumers (pre-Covid) to 96% customers delivering more than 90% revenues digitally.

Mobile trading has risen as a key growth driver for the investment sub-segment with first-time investors joining in the fray. A Bloomberg report says that, as of October 2020, mobile trading in India had overtaken internet-based trading in the cash markets. The share of mobile trading has reached 23.4%, emerging as the second biggest trading contributor.

In the insurance sector, consumers responded faster than the industry to the pandemic and the trend of digital transformation. There was an 80 per cent growth in online consumer search in India for life insurance during the pandemic.

While the growth in search queries related to term insurance hovers around 5-6%, the pandemic-induced demand drove the growth in search queries for categories by 80%! And this trend was unique to India, with consumers concerned about their families looking for insurance cover.

The average life cover sold per policy in the industry has gone up by 18%, according to Vaibhav Kumar, Head of Product Management, Max Life Insurance Co. Ltd.

For one large insurance company, online business is expected to post a growth of 60 per cent, driven by digitized servicing and following customer journeys, coupled with an increased concern for wellbeing.

This insurance company has invested heavily in education and training its 6,000 agents across 12,000-odd branches in digital services. The insurance provider has also invested in a cloud-based dialer and a cloud-based CRM to ensure adequate voice quality on telesales engines, while all information security protocols are being followed.

Small finance banks are engaging better with customers

The digital drive is being observed in small finance banks too. These banks traditionally followed a very high-touch model, with customers and bank managers interacting frequently. But now, these banks have decentralized their contact centers and introduced cloud-based contact centers. This has helped the banks engage with their customers better.

A small bank observed 40% digital collections at peak, which has since stabilized to 15-20%. This is a huge achievement, resulting in significant cost savings.

Optimizing processes

These trends in technology have driven BFS companies to minimize their documentation and invest in training employees in digital services. The key here is to optimize internal processes through creating a Robotic Process Automation roadmap, automating processes to reduce dependency on humans, and creating a system-driven process, starting with operations and touching other bank functions as well. Multichannel digital servicing through conversational bots and WhatsApp have also helped financial institutions.

Customer is the core of digital transformation

As customers move with the times, BFS companies cannot afford to lag behind. They are competing with the experiences provided by players like Amazon, Flipkart and Zerodha. The lesson to learn here is: don’t just focus on the app but look at the whole customer experience.

Experts in the field recommend the AECCC model developed by Prof. David Rogers from Columbia Business School. The key takeaway of this model is to keep the customer at the core of all digital transformation decisions.

A for Access: Customers must be able to access offerings 24/7 digitally. Through product personalization and easier access to services, banks and other financial institutions have now been able to convert logins to transactions. The number of customers transacting on mobile versus the number of customers logging onto mobile app has increased by 57%. This has resulted in an increase in revenue, ultimately transforming the entire ecosystem from a customer-centric and usability perspective. Companies also need to improve the exit experience of customers to ensure they come back when the need arises again.

The small bank that created those 1.5 million touchpoints went on to map the latitude and longitude of the collection locations and the customers. It ring-fenced the closest collection point in a zone of 300 meters and used this to communicate the closest collection centers to the customers.

E for Engagement: Companies must engage with customers beyond just providing a service.

The trading company mentioned earlier has collaborated with fintech brands to ensure that the entire onboarding is completely digital, thus reducing process delay due to human intervention and verification.

With regulators coming in and setting up an end-to-end digital infrastructure, customers can complete the entire journey in 3 minutes 42 seconds and trade in 5 minutes and the process is completely paperless.

C for Content: Customers should be provided relevant content to keep them loyal to the brand.

Let us go back to the small bank. It used a solution that enabled it to connect with a wide range of customers (HNI or individual) over video. It is also exploring the benefit of a video and an on-premise solution to interact with customers and verify assets and processes before disbursing the loan.

The bank is also doing real-time customer segmentation where customers who haven’t transacted digitally but would like to convert to the mode are sent appropriate communication, which would nudge and help them move from being physical customers to digital natives. The bank is also focusing on reactivating the usage of digital channels among users who have dropped off from the digital repayment methods.

C for Customization: It is imperative to reach out to each customer with a personalized offering.

For instance, the trading company has an inbuilt engagement module that can personalize customer experiences. Mobile app daily logins through product personalization have increased 2.5X and the average revenue per transaction per customer on the mobile app has increased by 28%.

C for Collaboration: Companies have to ensure brands collaborate with customers on new offerings and create new products for each customer. This is possible digitally.

The small bank started the ‘Digi Buddy’ initiative wherein individuals help customers understand the nuances of digital banking and handhold them through online transactions till they get familiar with the process.

Another bank invested in creating micro-segments of users, engaging those micro-segments with personalized communication, and ensuring the same consistency of message across all channels of communication.

Businesses also need to collaborate with the right partners to provide end-to-end solutions that will transform them both internally and externally.

Focus on the entire customer journey

The banking and finance industry is on the cusp of a paradigm shift, which requires businesses to completely change their marketing processes and outlook and move from digitalization to digital transformation and from campaign personalization to product personalization.

This calls for companies to engage with customers with relevant offerings that cater to their needs and collaborate with the right partners to offer better end-to-end solutions and not piece-meal options. The core idea is to focus on the entire customer journey and to keep customers at the heart of digital transformation, so that they are satisfied every step of the way.

 (The author Raviteja Dodda is CEO & Co-Founder at MoEngage and the views expressed in the article are his own)

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