Why the future is phygital

By Eric Megret-Dorne, Head of Card Issuance Services and Service Operations at Giesecke + Devrient

 

Digital banking has become increasingly ingrained in people’s everyday lives. Today, 73% of people globally use online banking at least once a month. Traditional bricks-and-mortar banks, which have long relied on the in-person experience with customers, are now having to step up their offering. With new ways of working blurring the work-home boundary, banks must ensure a fast, seamless connection between face-to-face processes and virtual customer experiences.

However, this does not mean that physical and digital banking are in competition with each other. In fact, many continue to use physical bank cards, with 1.12 billion in circulation in 2021, which provides the basis for digital payments and offerings. As a result, the benefits of digitalisation should converge with the comfort of physical touchpoints to create a holistic, “phygital” experience.

The path to phygital

Banks are accelerating their digital transformation strategies to keep up with the fast pace of fintech innovations. To meet the changing needs and preferences of customers, the payment world is leveraging new technologies to create personalised experiences through a range of different channels.

While the digitalisation of banking has been underway for quite some time – particularly for younger generations – events such as the Covid-19 crisis forced banks and customers of all ages to use digital tools and processes to compensate for branch, office, and call centre closures. With branches worldwide typically operating at reduced capacity due to social distancing requirements, consumers embraced online banking to avoid both the virus and potentially long queues.

However, some consumers still enjoy physical touchpoints, meaning a digital-only approach won’t suit everyone.

Striking a balance

It’s all about options – consumers now want to freely switch between traditional and digital channels without being forced into one. But how can banks achieve this phygital balance? One way is to equip physical channels with digital capabilities, so that online tools can augment the physical experience. For example, personalised bank cards with a bespoke design can be activated digitally, offering customers an extra layer of convenience. Having to wait for a new PIN to arrive in the mail is a common bugbear for consumers, so bringing card activation processes into the digital ecosystem will ensure a more seamless experience.

Greater automation in the card issuance and activation process enables the benefits of digital to be integrated into the physical banking experience without being intrusive. For instance, self-service kiosks empower customers to print their own cards, reducing the time between acquisition and card issuance, while still allowing for in-branch expertise if needed.

The personal touch

Phygital strategies also give banks a range of valuable data insights that can help them better serve their customers. This includes data on purchasing behaviours and habits, which can then be utilised to improve banks’ offerings and unify the physical and digital brand experience. Using omnichannel data helps to build a hyperpersonalisation strategy to provide real-time services.

In this way, digital solutions help banks maximise their user experience. Whenever a consumer interact with a bank, it creates data and behaviours. With fragmented databases, legacy systems and real-time data created by interactions with third-party partners through Application Programming Interfaces (APIs), it is not always easy for banks to streamline this data from different sources. By understanding patterns in that data and behaviours, banks can tailor and personalise unique experiences for each and every user.

Where security meets innovation

With big data opportunities abound, banks should be mindful of their consumers’ security concerns. Customers are now demanding much more transparency when it comes to how information is stored and collected. At the same time, they still desire greater personalisation via digital methods. Therefore, any successful phygital strategy requires a robust digital security to ensure customers have the same peace of mind as when they complete physical transactions.

To close the gap between innovation and security, banks should utilise tokenised infrastructure, which ensures the safe provision of payment credentials and securing of customer payments across all touchpoints. This is particularly important as regulations such as PSD2 and SCA demand strong authentication requirements.

The use of a token greatly enhances the consumer experience. For example, it allows for card details to be automatically updated for subscription services upon the expiry of an existing one, avoiding any service disruption.  Multi-factor authentication can also ensure an additional layer of security, as it combines a password with verifiable human biometrics such as fingerprints or facial recognition.

Best of both worlds

Every consumer has unique preferences when it comes to banking. Therefore, banks must evolve by bringing both physical and virtual touchpoints into a ‘phygital’ world. Only a phygital approach can meet the needs of all end users – whether they favour an in-person experience, an online one, or a blend of the two. The holistic data insights, personalisation opportunities, and optimised security ensured at every touchpoint are also critical in building future-ready banks.

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