Redefining customer experience in digital banking

In the last couple of years, the footprint of physical bank branches has already reduced and replaced by ATMs for most the fundamental/basic banking tasks such as withdrawals and the deposit of cheques etc.

The traditional concept of banking branches will, in all likelihood, diminish in the next couple of years and overall, banking will drastically remain transformed. Let me give you an example of a few factors that are acting as catalysts in driving this change.

Customer demography
Generation Z is becoming one of the major banking consumers/customers and they expect services and products to be available anytime and anywhere.

They want businesses to be customer-centric and offer customized products. This expectation is true for banking as well. For my 9-year-old son, the definition of a bank is an ATM, mobile banking and credit cards.

For this generation, the concept of currency in paper form and hence the traditional role played by banks (as a safe reservoir) doesn’t exist.

Cashless Economy
Many governments across the world are encouraging cashless transactions to control corruption and the misuse of cash funds.

Today, you can transfer money between person-to-person, pay your bills and pay for your purchases, physical or online, using digital wallets or mobile applications based on open banking platforms such as UPI in India.

I have experienced this firsthand in our company cafeteria, where I pay for tea/coffee via mobile, using platforms like Paytm or TEZ (Google Pay), rather than paying cash even for small amounts.

Even the use of cheques, bankers’ cheques, demand drafts or paper equivalents of cash has drastically reduced, as cashless transfers are near instant and geography-agnostic. In fact, the popular Monopoly board game, which was used in my childhood to teach us about currencies etc., has also introduced currency-less transactions to adapt to the reality of a cashless economy.

Shared Economy:
Airbnb or Uber are examples of leaders in the sharing economy, who have changed the tourism or taxi industry across the globe.

This sharing economy will further drive changes in banking and will massively boost the growth of non-bank organizations.

For example, if you need a loan, rather than approaching traditional banks, you can now reach out to shared economy marketplaces where investors will lend the money at better rates as compared to banks and disperse the money in a much shorter duration.

Technology Advancements:

 Wearables: The penetration of wearables such as the Apple watch or Fitbit allows ease of collecting biometric data such as fingerprints, iris verification or face recognition to establish unique identification of customers and authenticate them for banking or payment services.

A good example of this is the Aadhaar-based authentication in India.

Wearables are also used for cashless payments for shopping.

Human-Machine interaction: Innovations in the field of artificial intelligence (AI), machine learning (ML) and neuro linguistic programming (NLP), has enabled the two-way communication between humans and machines. Humans can now communicate with machines by voice.

Alexa-powered Amazon devices are a great example of the same.

Near-Field Communication: Mobile devices are replacing wallets and purses as well. Along with digital wallets, they are using NFC to enable payments. Fintech startups are also working on enabling payments using connected cars.

For example, the payment for your coffee in a drive-through café could soon be done via your connected car.

Blockchain: Blockchain technology is the backbone of cryptocurrencies and is a distributed ledger technology, which will change the way banks work with each other.

Globalization requires customers (B2B or B2C or P2P) to transact in multiple currencies across borders.

Banks currently charge high service fees for foreign currency transactions and this is one area where startups are exploring the use of DLT technology to transfer the cross-border money quickly, securely and at reduced costs for the customer.

Innovation in FinTech

All the above, seemingly disconnected, yet driving, factors, will influence the role that banks will play in the future. Accessibility to smart mobiles and the Internet has already changed the way people manage their day-to-day cash transactions.

Advancement of technology in these two media will transform the way money moves from one party to another. The sooner the banks adapt to the changing expectations of consumers as well as adapt to the new technological advancements, the quicker they will secure their future as moneymaking businesses.

This change will include not only technological transformation but also human transformation where big banks may shed their extra flab moving towards robot-enabled services.

By 2020, banks shall have a very small footprint of branches and these branches will play more of a role of experience zones as compared to the current transactional role that they play.

The shared economy, digital money and auto authentication by face recognition and wearables will become mainstream and help fintech technology companies to provide more customized and connected experiences for customers.

(The author is General Manager, Digital Business, Mindtree)