The Changing Digital Landscape in Banking
From the time people handed over stones for safekeeping to the first organised bank in Venice, to where they stand today, banks seem to evolve continuously. Hopefully, for the better.
Today, a branchless bank is considered the epitome of Digital. But is it really so?
In this context, it is important to note that the concept of ‘Digital’ evolves consistently. What was Digital yesterday is not digital today. And, what is Digital today, will not be digital tomorrow. The same holds true for the concept of banks – it is about the essence and not the form.
New concepts of banking are evolving. Payment Banks, Crowd Sourcing, Branchless Digital Banks are the buzzwords today. Some say that the Brick and Mortar Banks that we know and relate to, will not exist in the future, however, this is not necessary. While the concepts of Branchless Banking will continue to grow, we cannot discount the Branches; after all they have made banks what they are today. Therefore, both need to co-exist.
In Europe and the US, where banks have been more traditional, concepts of Cloud based Core Banking Systems, App based banking, Analytics for sensing the mood of the customer and engaging him appropriately, are gaining more and more importance. A lot of parallels are being drawn with other industries, while such concepts are implemented in the bank. Many concepts are also driven by the demographics, geographical spread and other tertiary factors. For example, MPaisa gained traction in Kenya, unlike anywhere else in the world, because of the financial inclusion and a vast majority of unbanked population.
In India, the recent Demonetisation conjured an increase in the use of online wallets, interbank money transfer and card payments. However, the Unified Payments Interface (UPI) by the National Payments Corporation of India (NPCI) has been one of the most celebrated. The service has reached out to millions engendering virtual identities for payments revolutionizing the Indian banking landscape. Robotic Process Automation, Business Analytics and Artificial Intelligence are the future game changers with many Banks adopting increasingly sophisticated technology in their operations.
Since the line between commodities and the so called White Collar Banking is diminishing, it is probable that tomorrow Starbucks may open a bank and compete directly with Citibank. However, if Starbucks can become a Bank, why can’t Banks become Starbucks? That is, a place where people come, meet and greet and also do banking. Further, banks have the advantage of a huge captive set of customers from all strata of life, unlike a Starbucks. But what would happen to the Brick and Mortar Real Estate? They, too, will undergo transformation.
Therefore, a branch of the future will have places where people can sit, read books, and have a great coffee. For banking, there are no longer tellers, you have ATMs. For expert advice, you have conferencing facilities with a central pool of SMEs. Leave that aside, even customers of banks can act as SMEs for providing advice to subjects beyond banks SMEs as well.
A bank’s customer, walking into any branch would be identified through facial, RFID recognition and greeted by a bot, who may have knowledge of what the customer requires depending on analytics of the past transactions and ongoing service requests. Having made him comfortable with a nice cup of coffee, he may be introduced to like-minded individuals for a casual conversation or engaged with an SME. These may be regulars who visit the branch every day for no particular reason.
If we look at the case of Touch Bank, It is a truly branchless bank specialising in Credit cards. It has a TAT of delivering a fully operational Credit Card in a matter of 3 days to any customer across Russia. During these three days, a customer applies for a Credit Card via a Broker App, the request gets processed along with KYC, Credit Checks, doing a risk profiling and finally printing the plastic, dispatching it and it being received in even a remote location in Russia.
This is a technological marvel in itself.
Whether Banks will stand the test of competition and evolving customer expectations is a question only time can answer, however, what holds true today is that banks still revolve around branches, while actively leveraging the new concepts of SMAC, RPA and other evolving technologies.