It’s almost a cliche to marvel at the rapid use of smartphones and what it means for businesses. What you need to remember is this: there has never been a better time for brands to form a closer relationship with customers. Banks, of course, are no exception to this trend and even a cursory look at the numbers would suggest that going digital is no longer a matter of choice.
In fact, digitalising important backend processes such as customer on-boarding should be a critical part of your bank’s digital strategy. Here are five reasons why banks need to move swiftly on digital customer on-boarding and other digital efforts.
Go Digital Or Perish
Traditional banks are facing stiff competition not only from other banks that are prioritising digital, but also a host of fintech players such as mobile wallet companies and tech giants looking to disrupt the banking sector.
As of February, there were at least 400 fintech companies operating in India, expected to grow their investments by 170% by 2020, according to the Reserve Bank of India. Last year, RBI also began granting licenses for payment banks – mobile-based banks offering many of the same services of traditional banks at a fraction of the cost. Post demonetisation, the use of digital wallets has gone up significantly.
That means that in order to even survive in the current environment, banks will have to urgently adopt digital processes using technology that is scalable and fast to deploy.
It’s not an exaggeration to say that unless financial institutions provide a unique experience, they are staring at a “go digital or perish” scenario in the coming years.
Unbeatable cost savings
Digital processes are undeniably cost effective and time-saving – one industry analysis by Bain Consulting said retail banks can see 20% increase in revenue and a 30% cut in costs by digitalising.
Given that digital can facilitate instant on-boarding, the cost advantages over paper-based processes is obvious. Until recently, opening an account with a bank using paper-based processes could take anywhere up to 7 to 15 days involving several bank employees at different points at the backend who would manually key in data. Digital processes can potentially free up existing bank staff to do more value-added customer-facing roles rather than mundane tasks.
With digital identities such as biometrics-based Aadhaar and eKYC, and advances in voice-enabled and biometric authentication, it’s likely that the customer on-boarding process requiring verification by visiting a bank or through a bank agent could be done entirely through digital in the coming months.
It’s not all doom and gloom for traditional banks. There is an unprecedented opportunity for smaller banks to create a level playing field using a digital presence.
In addition to cost savings, smaller banks have the opportunity to scale up and expand their national presence quickly using digital. Historically, bank expansion in India has been an expensive and lengthy affair –- it took HDFC more than two decades to establish its national presence – for example given the capital-intensive physical branch-based infrastructure needed for expansion.
It’s no secret that customers today are increasingly demanding a hassle-free retail experience and digital lends itself nicely to this expectation.
From the perspective of the customer, a faster on-boarding experience means they are less likely to defect to nimble, digital-only players. This is especially true for capturing the younger demographic like millennials and digital natives in the coming years.
The penetration of mobile phones in the rural population in India is also on the rise, giving the opportunity for regional banks to enhance their customer proposition through multilingual digital capabilities. As of March 31, there were about 473 million wireless Internet subscribers with about 31% residing in rural areas, according to government data. And that figure is only expected to rise.
With recent reports of bank fraud which has caught certain large banks at the back foot, compliance and risk management will be critical considerations for financial institutions.
Digital processes minimize the chances of human error, making compliance and risk management such as monitoring fraudulent transactions much more efficient.
Indian regulators are also tuning compliance requirements for digital and making it much more efficient. In the absence of digital, the cost of compliance will go up significantly and failure to comply will remain a risk for banks. Additionally, with the help of up-to-date information on critical regulatory compliance, risk management can become much more robust with the help of digital processes.
Overall, and as the RBI also highlighted in a recent report, it is “extremely important” for banks to innovate in the retail financial services space in tune with the changing times or face a “grave risk” of becoming less relevant for their existing customers.
So if you haven’t already begun this digitalisation journey, it’s critical to start now!
To learn more about how banks can digitalise customer on-boarding, contact us at firstname.lastname@example.org