COVID Has Accelerated Digitization In Banking – 3 Areas Where You Can Leverage The Power Of Digital Technologies
In the last few years, banks are actively adopting digitization to improve customer experience.
From easy fund transfers to checking balance, investing in new instruments, or paying bills, digitization has made the lives of customers easy. They do not have to wait in long queues and can complete their banking tasks with just a few clicks and taps.
Digitization has also freed the bankers from routine tasks. It gives them more time to focus on human-centric tasks such as engaging with customers and growing business rather than clerical work that can quickly be done by machines and robots.The current pandemic has only strengthened the digital efforts of the banks.
The lockdown imposed in late March and the social distancing norms have compelled banks to work with a reduced workforce and work timings.This has led banks to encourage customers to transact online as much as possible.It has accelerated the speed of digital adoption.
While various areas within banking can benefit from digitization, we have identified three areas that will benefit the most from the new shift.
3 Areas Where Banks Can Leverage The Power Of Digital Technologies
- Lending: Lending has been one of the emerging areas of digitization during this pandemic. Digitizing the process is also more beneficial than traditional lending. For instance, credit approval has become faster due to digitization. The disbursal turnaround time has reduced too. Digitization has replaced time-consuming processes such as manual form filling with automated processes. Unlike the traditional processes, digitization is not restricted with finding data on an applicant’s repayment records and outstanding loans. It takes a more holistic approach by collecting more data from sources such as telecom, utility, and social media. It helps to gauge if the applicant is trustworthy.
Another advantage of digitizing the lending process is that it is cost-efficient. Traditional methods of lending would have led to high overhead expenditures due to the manual process. Digitizing the process enables the banks to reduce the overhead expenses through minimal human intervention and less manual costs. They can even leverage this benefit by making digital lending more attractive.
- Card Payments: The usage of physical cards has reduced ever since the pandemic began. Over 42% of Indians have already started making digital card payments – more than what they used to do during the pre-lockdown period. Customers find it so convenient that it might continue to gain stronghold even in the future. It’s time for banks to accept this shift and make the most of it.They must look beyond interest rates and fees, and use the data generated through such transactions to get a better understanding of customer behaviour and use that to offer more personalised, on-demand services.Another trend that’s gaining popularity is the virtual card. Virtual cards exist only in the online format and not physically. Consumers can use these cards for online purchases or trading. These cards have temporary numbers linked to the real card number. Consumers can choose to use separate virtual cards for their various online expenses and easily control their spending. It helps them meet their ends without impacting their cash flow. Bankers believe that virtual cards will be the future of card payment.
Of course, all these trends do not mean that physical cards will be gone forever. Big banks have already invested heavily in their existing ecosystem to ensure a smooth experience to the population of customers who like physicals cards and physical PINs, etc. However, they have to embrace innovation and create bespoke products and offers to engage and retain the new age of customers who are looking for seamless, sustainable virtual experiences.Banks need to future-proof digital card payments. They need to be agile and flexible in their operations to support a broad spectrum of customers.
It’s time for banks to deliver contextual and personalised experiences. One of the areas where banks will need to continue to strengthen their efforts will be the security of customer data and transactions.
- Retail Banking:Ever since social distancing became a norm, retail banks have fast-tracked their digital adoption to continue business and provide better services to the customers. Here are a few ways in which retail banks can improve their digitization journey:
- Digitise customer onboarding: The social distancing norms have restricted customers from visiting the banks to get their documents validated. This has caused delays in their onboarding process – potentially hampering the customer experience. Banks can address this challenge by enabling online onboarding. They can digitise the document authentication process so that customers can upload their documents for validation from the comfort of their home. Of course, banks need to take a risk-based approach to security through the customer’s lifecycle to safeguard customer’s data.
- Create an omnichannel presence: Banks must ensure that all their digital channels are open for customer service and for investing in new instruments. They must create a unified experience for customers across all channels and open new revenue streams through digitization.
- Communicate updates frequently: Retail banks should communicate all updates to their customers using various channels such as social media, emails, push notifications, SMS, WhatsApp, etc. The objective is to inform customers about new initiatives, changes in regulations, and other government-related information.
- Address customer pain points: The younger generation that has primarily been digital natives may not find this shift challenging. It is the older generation that has been accustomed to traditional banking that requires assistance. Banks must make efforts to encourage the older generation to adopt digital ways of banking to ensure their safety. Addressing their pain points about security and technology challenges are some ways to prompt them to opt for digital banking.
- Personalization: Retail banks can leverage the data they receive from offline and online channels and apply business analytics to provide personalized recommendations to customers.
Banks have to migrate their data, re-engineer their processes, and train their workforce to adopt digitization. It is not going to be an overnight transformation. However, banks must take steps towards digitization because this is going to become the new normal for customers.
As a survey by Deloitte revealed, even first-time users might opt for digital or hybrid (a mix of offline and digital banking services) once the pandemic is over. Hence, it’s recommended to take the first step to digital transformation.