Mr. Jasal Shah is the spokesperson and the CEO, Managing Director of Markelytics and Velocity MR.
India’s banking and financial services sector is in the middle of a digital revolution. Just look at the number of digital payment apps available for download on your smartphone. From newspaper vendors to your milkman, many service providers are open to receiving payments via apps. Money transfer is smooth and efficient, and banking is more consumer-centric than ever before. Banks and financial institutions can no longer dictate to customers or act standoffish; today it is about offering a personalized experience to customers when they want and how they want it. This means, banks and institutions need to transform their back-end operations as well, and no longer function in silos. They can’t afford to miss out on the digital channels even though they could have traditional banking methods.
Looking back, Indian financial service institutions and banks have come a long way within the span of a decade. In 2009, the concept of a wallet meant the leather one you had which came with credit or debit cards apart from cash. Ten years back, there was no concept of a unified payments interface or UPI for instant fund transfer between two bank accounts via mobile. Also, speaking about internet banking, in 2010-11, according to a McKinsey Study, 7 percent of bank account holders were using the Internet for transactions. This was a seven-time jump from 2007 when it was a mere 1 percent!
Over the last ten years, the Indian consumer has been slowly exposed to the smartphone, where he or she can buy anything at the touch of a button. The rise of the digital natives, those who are comfortable in the digital landscape, and are comfortable engaging with brands and businesses online has also ushered in a new way of life. Personalization, service at the doorstep and a sense of immediacy — consumers are used to these when they order a meal or book a show. They have begun to expect similar experiences on the banking front as well.
There’s been a huge digital thrust in Indian banks and financial institutions, and online banking users are predicted to touch the 150-million number by next year, according to a report titled ‘Encashing on Digital: Financial services in 2020’, brought out by The Boston Consulting Group (BCG) and Facebook.
Also, consumers now choose to bank on their mobile phones or make transfers via payment apps. Mobile banking and online banking are slowly coming to mean the same thing. Government policies and vision seem to have played a role in giving cashless transactions a huge fillip. For instance, the unified payments interface or UPI is seeing huge growth, with many local and global players entering the scene. A 2018 Credit Suisse report forecasts that the digital payment market in the country will touch US$ 1 trillion, come 2023. RBI data, released by National Payments Corporation of India shows that UPI transactions exceeded the Rs 1-trillion mark in December 2018.
RBI data also shows that credit and debit card transactions fell by 4 percent from October to November 2018. Even payments using RTGS or real-time gross settlement have gone down by 7.6 percent in November 2018 compared to the earlier month. This is telling — UPI and app-based money transfers are indeed gaining momentum.
Thrust from the central bank and government
Demonetization of certain denominations in 2016 by the government led to a shift from cash to cashless, adding to the digital transformation move among financial institutions. From time to time, the central bank has also released certain guidelines aimed at boosting digital transactions in the country. Recently, the RBI has announced that there would be inter-operability among m-wallets in the near future, to boost ease of carrying out digital transactions. Also, the central bank mandates that any global payment company will have to store transaction data of its Indian customer base at local servers to ensure privacy and safety. While it’s too early to comment on the success or the six progress of payments bank envisaged by the RBI, the government-backed India Post Payments Bank is slowly gaining traction. The future will see collaborations between banks and finch companies for greater financial inclusion.
We must not lose sight of the fact providing enhanced customer experience is at the heart of any digital transformation. Understanding customers’ pain points and concerns can help banks and financial institutions achieve that. Indian banks are taking to the omnichannel approach to providing a seamless customer experience. They are also employing self-serve, 24×7 available chatbots and intelligent assistants to help with queries on banking. Machine learning and AI have been gaining widespread acceptance among Indian banks and financial institutions so as to offer tailor-made solutions and personalized recommendations on a certain product/service to customers. Customers also share user experiences via online reviews, ratings and social media, which can be tapped into by banks to enhance user experience and even develop better products.
The employment of digital technologies would mean a win-win not just for banks and their customers, but also for market research firms. Researchers will now have a wealth of data to analyze and provide sharpened real-time insights to financial brands and banks.
With the amalgamation of technology and market research, we have reached a point where we have data at our fingertips to dispose of. Real-time insights, do not just give you an edge over time but also give quality insights that will help banks and other financial institutes craft better service solutions for their customers. Even the ever-evolving market research tools act as a beacon of knowledge that every organization is constantly on a lookout.
THE LOYALTY-TRUST PARADOX AT THE HEART OF FINANCIAL SERVICES AND HOW TO OVERCOME IT
By Andrew Warren, Head of Banking & Financial Services, UK&I at Cognizant
There has long been a paradox at the heart of the financial sector – customer loyalty remains high despite overall trust in the banking system being very low. In any other sector, low trust would lead customers looking for services elsewhere. Generally, however, the major banks have been able to retain their clients despite, rather than because of, trust.
This customer loyalty does not always pay, with research suggesting consumers could be overpaying by £2.9bn in areas such as mobile, broadband, home insurance, as well as, notably, mortgages and savings. Whether the result of customer lethargy, lack of awareness of the possible cost savings or low expectations of the service banks provide, this has encouraged complacency in the banking sector.
This could, however, change as our post-pandemic reality begins to bite. People may have used the extra time from the lack of a commute to do some research and shop around for better alternatives, as well as harbouring frustrations over a perceived lack of support in recent months. Coupled with the possibility of a period of negative interest rates, we could soon be heading towards a perfect storm, where both retail giants and small local businesses start to question the value their banks actually provide.
Digital native challengers are shifting the landscape
One viable reason for the supposed loyalty consumers have towards the major banks has been the lack of real alternatives. With all of the traditional high street institutions offering services that were largely interchangeable, switching services seemed more effort than was really worth it when perceived benefits were so minimal. However, this changed with the arrival in recent years of challenger banks such as Monzo, Starling and Revolut, which continue to grow in popularity due to ease of use and better customer experience from sign-up through to their intuitive apps.
The primary advantage of the big banks is their liquidity, historical reputations and longstanding customer base. However, the agility and user-friendliness of the challengers is shifting the landscape, and the continued reliance on legacy systems leaves the traditional players struggling to surpass, or in most cases match, the innovative services and products fintechs are able to bring to the market.
Customer expectations setting a new standard
As personalisation and smooth technological integration in other sectors, such as retail, raises expectations of similar offerings across all service industries, this could soon become a key battleground for banks.
With the challengers currently looking better equipped to respond to these consumer needs, here are some of the steps banks can take to modernise their offerings and retain customers’ loyalty:
- Embracing human science – the financial sector has long favoured data science in its behavioural analysis. Almost anyone can understand basic data; it is how semiotic algorithms can be used alongside this that will reveal real insights that can be used simply to help understand people better, their fears, their hopes and their aspirations.
- Adapting to modern trends – the lockdown has, by necessity, modified and in some cases accelerated, many of the established habits of both individuals and businesses. These range from an increased adoption of cashless payments, to remote working, the propensity for saving vs investing, attitudes towards fraud and risk appetite, and loyalty. As a result, some customer journeys, which had become the cornerstone of banks’ or lenders’ strategies, will now need to be adapted. For example, products, pricing and customer treatment strategies will need to be updated, and the entire value-chain of customer touchpoints should be digitally enabled. Financial institutions will now need to ensure speed and quality of their response to this change.
- Using innovation to level the playing field – the systemic advantage the big banks have over more agile challengers is in liquidity access. It is an advantage that potentially will be scrutinised in the COVID-19 enquiries we can expect to see in the near future, particularly around the provision of the various governmental support schemes and loans for which these big banks initially had responsibility. As that advantage then reduces, the need for real innovation grows. This means building business models and deploying technology that can deliver value and differentiation. For example, the major banks have more channels than their digital-only counterparts and, therefore, more data to draw on. The result is a better focus on customer journeys, with modern cloud-based data management platforms central to this. The quantity and detail of data can play in banks’ favour, allowing constant ongoing improvements to customer communications and simplifying self-service options in an increasingly remote world. It is important that banks continue to ensure they are thinking outside the box and keeping pace with other industries that are innovating in their response to the pandemic.
- Personalising the process – technology is already helping to speed up processes and improve self-service banking operations, particularly with predictive and smart decision-making through AI and ML. The advanced use of chatbots is an example, along with increasing tailored content and interfaces in apps and on digital platforms. However, the end goal is personalisation across the whole customer journey, not only through technology but also call centre operatives who still form a critical role in trouble shooting and need an up to date view of the customer in order to be able to do their job. Technology can also help analyse how these human interactions can then become more personalised.
The major banks retain a crucial position in UK society for the support and confidence they offer their customers. However, as in so many other sectors, the coronavirus pandemic could come to be seen as a watershed moment in their evolution. With the challengers continuing to gain momentum, banks certainly cannot afford to stand still. It is the ability to have a data- and technology-driven approach, as outlined here, that can help them retain their dominance and justify customer loyalty now lockdown is beginning to lift. Should they fail to do so, we may find ourselves in a very different landscape than we do today. By focusing on the steps above, banks will start to level out the playing field.
WE NEED MORE CRYPTO COMPANIES TO IPO TO INCREASE DIGITAL ASSET SCRUTINY AND ADOPTION
Stephen Ehrlich, Co-Founder and CEO at Voyager Digital
As a publicly listed digital asset trading business, the recent announcement of Coinbase’s IPO has naturally put a spotlight on us at Voyager Digital and we welcome their move as it will improve trust, transparency and above all, adoption of digital assets. It is imperative that the crypto asset space ups its game as there’s still a great deal of scepticism and concern in respect to their legitimacy or even purpose. This scepticism comes even at a time when several well-known household institutional names have entered the space in 2020.
But there are more than just signs that the mood is changing, with even some of the die-hard naysayers starting to accept that Bitcoin and crypto assets are here to stay.
The regulators are slowly coming to the table with the introduction of new rules, for example the US’s SEC is looking to impose greater KYC (Know Your Customer) on crypto wallet providers and France, a vocal advocate of the emerging blockchain technology and digital asset space, is looking to implement anonymity measures to fight money laundering activity.
Being a publicly listed company naturally provides an extra level of transparency and today there are quite a few digital asset focused public companies ranging from Bitcoin miners, crypto investment companies and in Voyager Digital’s case, crypto brokerage firms that allow investors to buy and sell crypto.
Over the Christmas and holiday period Bitcoin has continued its stratospheric rise showing further evidence that investors are hungry for alternative assets. With traditional markets being closed for public holidays, people have had time to read, research and because crypto-assets trade 24/7 they can take action. So while many around the world will have been trying to forget the trials and tribulations of a torrid 2020 by gorging on turkey or goose and opening presents, many investors will have been buying Bitcoin.
This is a trend we expect to continue well into 2021 and beyond. As people become more accepting of the digital asset space and adoption increases, more crypto based businesses will pursue the IPO route and become public companies. This process should become a self-fulfilling prophecy, bringing a greater proportion of the space under the regulatory regimes of stock exchanges and allowing anyone to dig deep into the business, providing greater scrutiny.
But this expansion will present regulators across the globe with multiple challenges. As Bitcoin and other crypto-assets are borderless, it allows brokers such as Voyager the ability to expand quickly, providing secure trading platforms to meet the demand of wider adoption. Regulatory hurdles will be overcome though as we are already seeing forward-thinking Central Banks and established regulators embracing this new asset class and the technology underpinning them. By working with regulators, established crypto businesses and in particular publicly listed ones, can help forge the way for the industry.
The future for crypto assets, Bitcoin in particular, looks bright and we look forward to playing a major role.
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