Banks are beginning to treat digital channels as mainstream options rather than alternative mechanisms for customer service. IT heads at banks are focusing on strengthening these channels to sell financial products and acquire customers. By Heena Jhingan
Digital platforms are critical for banks as a staggering volume and frequency of daily transactions are executed electronically. As per a BCG study, by 2015, $350 billion in payment and banking transactions in India could flow through mobile phones, compared with about $235 billion of total credit-and debit-card transactions today.
Digitization will lead to an overall reduction of operational costs and transactional overheads. Front-end transformation solutions ranging from customer interaction management right up to channel innovation, put the customer in the driver’s seat, enabling the bank to grow its customer base and offer an enhanced portfolio of tailored services. Technology results in sustainability and continuity in the progressive amelioration of service quality, anytime and anywhere banking, focused product delivery, cross-selling and multi-channel touch points.
Services like distance banking, branch free banking, client-empowered demat accounts, virtual banking, etc. have started to come into play. Indian banks, across the spectrum, have also begun taking initiatives to enhance the services covering these areas.
ATMs have established themselves in India in the past decade. In some other parts of the world, ATMs are ready for the leap to a new form of Video Teller Machine, a remote banking system that allows bank customers to complete sophisticated transactions remotely through online consultation with an expert from the bank. These systems integrate videoconferencing technology, document scanners, card readers and printers to support rich communication between the customer and the specialist.
According to Gowri Mukherjee, Group Head – Digital Marketing, Standard Chartered Bank, Internet banking, given that it has been there for over 12 years now, is by far the most mature among the new channels and is already an important channel for customer service with over 50% of all of SCB’s transactions being conducted though online channels.
“Our mobile offering, Breeze Mobile, is compatible with over 700 handsets and allows smartphone users to bank with us through a rich user interface and has a strong banking capability set. Since its launch about a year back, we have seen significant growth in mobile usage with close to a 50% increase in active customers in the last six months. We are experimenting with social media and the initial response has been promising. Our India Food Explorer Facebook page with over 600,000 followers is one of the largest bank operated social properties in country,” she claimed.
She said that social media had helped the bank engage with consumers in a more directed, personalized and relevant manner. “In addition to building our presence on social networking sites (SNS), we also monitor and respond to feedback posted online across blogs, SNS and consumer forums. We are also leveraging social media for consumer research as it provides a platform for direct consumer feedback in its purest form and gives us the ability to build needs based banking solutions. We expect to build on each of these channels over the next twelve months.”
Agreeing that the online channel had grown from an alternate channel to the largest originator of customer initiated transactions over the past five years,
Mobile usage has also boomed in the last few years and the bank expected that the penetration of data plans would drive usage further. Accordingly, it has put in place both a mobile Web site and an app that allows customers to access a wide range of banking transactions while on-the-move.
Over half of India’s 1.2 billion population is yet to be covered under the formal banking system. There are at least 120 million Indians connected to the Internet and 898 million mobile subscribers in India, 292 million of whom live in rural areas, indicating a strong adoption of the mobile phone as a channel for communication. However, there are only 240 million bank accounts and 88,000 bank branches resulting in more than half of Indian households, 110 million altogether, not having access to banks as they do not have a bank account. Clearly the penetration of banking services is much lesser than that of technology channels such as mobile and online. Instead of setting up brick and mortar branches this presents an ideal opportunity to use these alternative technology channels as a means to deliver banking services both cost-effectively and immediately. As banks are integrating channels in order to ensure the accuracy and integrity of transaction data, there is a growing demand for technology to support these channels.
Understanding media and business needs
Each of these channels has a different role to play for both the consumer and the bank. The banks therefore have to be careful while planning their strategies for each of these channels.
Online access almost eliminates the need for a customer to physically walk into a branch giving him the convenience of doing all of his banking from his desk. For the bank, this translates into cost savings as also the opportunity to engage the customer at a time when he is more amenable to receiving messages from the bank. A mobile phone app/site, on the other hand, puts the bank in the customers’ pocket allowing him to transact on-the-go. It also allows the bank to migrate a previously physical customer segment to a digital platform, something that might not have occurred with Internet banking given the relatively lower penetration of the Net in India. Social platforms permit better engagement bringing the bank closer to its consumers.
Online and mobile are both banking transaction enablers but they are used quite differently by customers and, therefore, the approach for both has to be different. The migration path for customers may not be linear i.e. online to mobile. In fact, given the mobile penetration in India, a large part of the population may well migrate directly to mobile from offline channels.
“Investments in online and mobile are largely towards widening the transactions offered and educating customers on how to use these to drive adoption. On the social media front, the investment is toward enhancing the customer engagements. Here, an appropriate focus on developing both channels to meet consumer expectations may translate into independent management of the channels,” said Jain of HDFC Bank.
Build, integrate and manage layers
Banks have been running each channel in a silo or bolting them on to existing systems. Rather, they need to create a common channel framework, as newer channels are likely to emerge in the future. This would need the right organizational support structure and an appropriate reward structure to be shared across teams.
Banks have to get out of point-to-point solutions and look for a mature and fungible enterprise wide architecture. A single service will be consumed across different channels and maintain process and data integrity for the end customer and the bank.
“The ideal state should be that a customer should be able to do channel hand offs seamlessly. A customer should be able to utilize any channel to get things done,” he said.
Most Indian banks use standard off-the-shelf products for CBS. However, they liked to use customized solutions at the front end for the alternate channel, depending on how they would like to connect as a brand with the customers and this is where they like to be more experimental.
Mukherjee of Standard Chartered reasoned that, “The core banking system is the same and all these channels at the end of the day have to connect into our core banking system in the most seamless, state free way. What will differentiate each of these channels is how well they individually improve the quality of consumer engagement without losing out on consistency.”
Haragopal M, Global Head, Finacle Infosys, said, “Customers today prefer to conduct their bank transactions using their mobile handsets. India has over 898 mobile subscribers and nearly 90% of those phones are capable of handling basic financial transactions. Whatever solution a bank picks should be able to work on a variety of mobile devices, platforms and access modes, seamlessly integrate with disparate host systems,” he said.
Building an ecosystem
As the banking sector is still growing in India, service providers have a role to play in this space. They can empower banks with the latest tools and technology infrastructure to improve reach, build cost-efficiencies and deliver the convenience of on-the-go banking services.
“In many cases, service providers are with banks for a specific channel program. Both banks and service providers need to sit down at a business strategy level to shape up the larger business framework to deliver an end-to-end channel strategy road map to be able to exploit these channels,” commented Sunil Tandon, Head – Non Voice Services, Tata Teleservices.
Leveraging channels
Alternate channels have definitely proved their ability to enable higher volumes of sales while reducing the cost of delivering services.
Ravi Jagannathan, MD, emudhra, said that Indian banking had reached the point where it was starting to adapt to new channels. “It is therefore important to develop a strong and secure ecosystem that needs to be secured at both the hardware and the software level,” he said.
G Ramachandran, Deputy GM-IT, BPR and Management Information systems, Bank of Maharashtra, was optimistic that Indian customers were ready to use alternate banking channels. It is a bank’s job to ensure standardization around security and compliance.
“The alternate channels for banking help in extending the boundary of banking. A bank has to sell through alternate channels. While the alternate channels like ATMs are an expense for the banks, PoS is a means of income and banks have to strategize to turn the expense into an income, or compensate the expense on one channel by earning revenues on the other. Building on IT infrastructure is the only way out,” he noted.
Indian banks have success stories to share when we talk about the adoption of fresh channels. One of these is these is SBI’s Green channel initiative at branches for paperless and quick banking transactions. Around 28% of the bank’s transactions in 2010-11, mostly deposits, were made through alternative channels, including mobile phones, the Internet, ATMs and green-channel banking.
Similarly, ICICI Bank’s ‘b2’ branch-free banking offers information through a single interface to facilitate banking transactions over the Internet. It offers facilities like an e-wallet, which can be used for online purchases and to pay utility bills as well as direct access from Facebook.
About a decade back, most customers were uncomfortable in purchasing investment products over electronic channels or the phone; they would rather meet a financial expert or analyst in person before coming to a decision. However, that is not the case any longer. The Internet and mobile channels have provided customers with the option of wealth management products, a convenient mechanism to update their portfolios and receive information.
The new channels have opened up a lot more opportunities like Axis Bank’s online approval of car loans and Standard Chartered’s credit card approvals.
Future perfect with new channels
New channels have carved out a niche for themselves and are here to stay. Banks will have to keep abreast with technological advancements coming in these areas.
Harish Veligandla, Consultant, Capgemini Consulting India, observed that the customer-experience in digitization included making the customer touch points channel agnostic.
“The industry’s dependence on interactions across its ecosystem makes it imperative for banks to examine ways to leverage social media. Banking executives can use advanced CRM tools and SQL platforms to analyze data from the profile of customers’ social networking sites for better decision-making during portfolio management, as well as while handling priority accounts. Besides, they can also study customer searches and purchase decisions to deliver better service and ensure loyalty. The implementation of BI tools can be instrumental in updating the information available with the bank and also streamlining information flow across departments. Cloud-based platforms now make scalability far easier for banks,” he said.
Banks are also gearing up to empower mobile phone users by developing services around Near Field Communication, a short range, wireless technology. It is time that all banks learnt to treat these channels as mainstream, as many of the larger ones already have, rather than just alternate channels and accordingly invest in innovation and keep pace with evolving technologies.
heena.jhingan@expressindia.com