Before the novel coronavirus in 2020, most banks were already in the process of making the transition from physical to digital banking that enabled customers to bank without going to a branch. The pandemic came as a wake-up call that galvanised the banking industry into action. For the first time we are seeing all forces come together to make this opportunity almost tectonic in size, speed and impact. Almost overnight, banks strengthened their digital capabilities and focussed on customer convenience, experience and trust.
While the banking industry has kept abreast of the race to change during this crisis – with speed and alacrity – it will continue to build on the successes of 2020 and significantly increase investment in digital banking in 2021, particularly in semi-urban and rural India. With contactless banking gaining momentum, banks will focus on providing a wide range of products across payments, savings and loans in the new normal.
Standards and protocols such as IMPS, UPI and QR are lowering the cost of innovation and services. The availability of Open Stack infrastructure with public-private partnership and accessible and low-cost emerging technologies such as video, voice, AI and IoT are accelerating the speed of innovation and enabling innovative customer journeys. Lastly, customers are empowered with a consent-based data-sharing framework including share E-Sign, E-KYC, DigiLocker and Aadhaar.
Here are some of the significant trends that will impact digital banking positively in 2021:
Contextual and personalised: With the increase in the adoption of artificial intelligence and machine learning in banking services, banks will be able to provide customers with meaningful insights about their spendings and savings. The major advantage of personalisation and contextual offering is that it makes your offer much more accessible. Personalisation allows banks to unclutter offers to their customers, thereby eliminating a choice overload. It improves decision making, helps prevent fraud and leads to a hassle-free and cost-effective experience for the customer. The key here is curation of products recommended in the consumer journey to improve availability.
Balancing the physical and virtual worlds of banking: One of the insights from my experience in digital banking is that the Indian customer thrives on DIFM (Do it for me). Without human touchpoints, customers feel a disconnect or an incompleteness in the delivery of services, especially in banking in spite of top-notch UX being made available. Until last year, banks relied on some level of face-to-face interaction with individuals and businesses, but all that changed following the pandemic. A ’tech-and-touch‘ model, which is a combination of voice and digital, is fast emerging. More so, with the democratisation of technologies such as video calling, chatbots, vpn etc., scaling of this hybrid model is inevitable, as adoption of digital channels and remote banking keeps growing.
Cybersecurity 2.0: Building trust in digital channels and transactions is paramount, while with every new channel comes a new set of vulnerabilities. Complexities and sophistication of cyberattacks such as malware, spoofing, phishing and DDoS attack are growing by the day. Digital fraud management strategies are evolving too. Banks today opt for a multilayered approach in cybersecurity. Multifactor authentication layered with risk-based access, behavioural biometrics and AI-driven anomaly detection, which is invisible to the customer, ensures a fine balance between secure banking and customer experience. This is followed by end-to-end encryption across the omnichannel framework. While we still rely on identified 2FA in the frontend without compromising customer experience, banks are working overtime to ensure invisible tracking of multiple non-traditional variables to ensure safety of digital transactions and building trust with the customer.
Open banking: While banks strive for a consistent, intuitive and frictionless digital banking experience, open banking is reshaping financial services. Open banking drives collaboration between banks and fintechs, supports innovative and better products and experiences for customers. In the past decade, the India Stack has set digital banking services into a higher orbit giving fintechs and banks innovative ideas of collaboration to co-create products on Open Stack APIs across banking micro services. We are seeing many B2B2C (consumer) and B2B2B (merchant) models emerging where the first ’B‘ is the bank and the second is the fintech. These partnerships extend the reach for banks through fintechs without having to invest heavily in brick and mortar offices within this dynamic environment, while staying compliant, managing costs and maintaining security and trust. On the other hand, the consumer facing Fintechs create innovative interfaces with great customer experience to engage and grow its customers. For some it augments its current product offering while for others it adds a new revenue stream.
Digital banking was here well before the pandemic. However, ever since India faced the twin realities of social distancing and work from home, digital banking has become a necessity rather than a choice. As I see it, the banking industry will move in two directions in 2021. One, banking services will be more integrated with advanced technologies, and two, banks will expand their presence pan-India. While brick-and-mortar branches will still be around, banks will also offer specialised services instead of traditional services that one can now perform at the click of a mouse.
(The author is Head – Digital Bank, Direct Channel and Analytics, RBL Bank)