Dawn of the digital...

After World War II, the countries that were deeply engaged in war, whether or not they suffered major damages, are the ones progressing the most today. The pain of war and the possibility of its recurrence, kept them agile and ‘on their toes’. There is a similar war-like ‘opportunity’ today, and it concerns our beloved banking industry. Most analysts seem to acknowledge rather openly that there are major forces around us, that are redefining today’s banking arena, creating a war of sorts in this space:

1. Preferences of customers have undergone a massive shift, based on the new-found power in their hands due to technology revolution of last two decades in the personal computing space. They are overly demanding no doubt (‘they’ includes ‘we’), but most times validly so (not just because ‘they’ includes ‘we’!!).
2. Technology revolution on its own has brought the high-end computing machinery and refrigerator-sized storage spaces into commoditized clouds, making entry and exit costs of new technology way lesser than before. Those who can spend more are going for private options, while those who can’t, are settling rather comfortably, in public clouds (security concerns notwithstanding).
3. Competition has multiple faces today – telecom companies, search engines, fintech start-ups, banking consortiums, social media companies, utility companies, device manufacturers, e-commerce companies – all those are ‘new synonyms for banks’ (Oxford Dictionary to take note).
4. Margins are under constant scrutiny after recent depressive economic cycles and Profitability is a challenge in price-conscious customer segments expecting high-end service nevertheless.

It is evident that BANKING will stay, but BANKS may not have the sole right on it. It’s pretty much like what mobiles did to cameras, watches, calculators, radios and now…televisions! These revolutionary forces are pushing our (otherwise lethargic) banking industry to rethink its strategies towards achieving sustainable & profitable growth. These forces are questioning the very relevance of banking in its current form. These times are calling for pervasive innovation in all aspects of banking – be it in the form of new-age digital channels, innovative bundling of products and services, flexibility in processes, creating exhilarating and immersive experiences for customers/partners or deploying ‘wow’ infrastructure in place of ‘dull’ branches.

This is indeed the dawn of the DIGITAL BANKING AGE.

The massive proliferation of digital channels, over the past decade or so, was the first symptom of this digital age & the world has moved on from there. Today’s banking is not just about ‘banking on digital channels’. It is about ‘how to keep banking relevant and contextual in today’s digital world of its customers’.

"Customer’s digital world is significant; banking has to somehow fit in."A major need for today’s banks is the ability to refresh their business models dynamically, in order to be a major player in their customer’s digital world. A key question is how can banks succeed in staying relevant in this new paradigm. Well, there are two ways to look at it – “play to your strengths” and “add more strengths to your play”.

1. In recent past, banks have indeed invested and experimented with a lot of new technologies and game-plans. Those investments and infrastructures are relevant in a great way today, provided they RENEW the utilization of such investments. Play to your strengths!
2. Further on, there are areas where banks are seeking to invest more and making up their minds when/how to do so. These are the NEW trends that define the banking industry of today. Invest and add more strengths to your play!

Let us see some examples of this duality of RENEW and NEW being practiced by certain entities making visible progress on the ground. Disclaimer – All these cases have been picked up by secondary research and may be true to the extent of correctness of such content on the internet.

“Play to your strengths” – RENEW approach to Digitization:

ELIMINATE silos, be customer-centric and omnichannel

• Citibank US & Asia – made branches interactive using touch panels and video-conferencing.
• Discover US – launched direct bank for deposits & lending.
• Westpac Australia/NZ – enabled responsive banking from wearables to smart TV (with Samsung).
• American Express US – deployed traditional banking, gamification and live event streaming over television.
• HSBC UK – launched First Direct, a direct bank in UK.
• Raiffeisen Europe – launched Zuno Bank, a direct bank in Europe.
• HDFC India – launched highly machinized digital branches, with staff size of 2.
• SBI India – launched SBI-INTOUCH branches with all services from sign-up to servicing, handled digitally.
• ICICI India – launched direct bank in 2008 with limited/no branch access.

EXTEND existing offerings, innovate more

• Bancorp US – owns a company ‘Elavon’ for virtual merchant mobile POS.
• CBW US & Fidor UK/Germany – adopted Ripple payments to bring in more simplicity, finality and transparency to domestic/cross-border payments.
• Westpac Australia/NZ – established payment-as-a-service platform with Verifone.
• American Express US – launched re-loadable prepaid charge card with mobile app.
• Wells Fargo US – enabled voice and face biometrics for corporate portal and mobile app.

MONETIZE channel investments, up-sell & cross-sell

• HDFC India – launched 24 X 7 instant personal loan for existing customers.
• ICICI & Axis India – launches non-banking partners’ offers for existing customers.

HELP customers manage their monies, be a trusted advisor

• HDFC India – launched Chillr app for cash/card-less penny payments management.
• Westpac Australia/NZ – pushes retail offerings to SME(s).
• Bancorp US – provides friendly dashboards for account management.

“Add more strengths to your play” – NEW approach to Digitization:

DIGITIZE the sales experience

• Commerzbank Germany – launched mBank Poland & sells loans entirely on smart phones, skype, kiosks and boutiques (read branches) that use Kinect technology.
• BNP Paribas Europe – launched Hello Bank, a digital bank in France, Belgium, Italy and Germany.
• Scotiabank Canada – launched Tangerine, a digital bank in Canada.
• Barclays UK – launched Atom UK (digital-only bank), established feature-store (on the lines of google play-store or apple iTunes), deployed voice-recognition.
• TD Bank, Westpac Bank and CBW Bank – partner with Moven, mobile-only bank for automated personal financial management (can allow payments using mobile number, email and/or facebook).
• Green Dot Bank US – launched Go Bank, a mobile-only bank (can allow social or paypal payments).
• BBVA Spain – launched Simple, a mobile-only bank (can allow online or physical money transfers to payees).
• Starling Bank UK – being the first fintech bank in UK, it doesn’t require a pure-play banking partner (unlike Moven).
• Emirates UAE – launched Gamified app for prizes, tokens and points; brands bank-as-a-home (with kitchen, drawing room et al offering different services).
• Jibun Bank Japan – Mobile-only bank.
• HDFC India – launched specialized digital branches, with Gamification, dream walls and remote experts.

DECIDE based on data

• mBank Poland – analyzes customer activities when they are not using internet or smartphone, to make contextual offers.
• Fidor Bank Germany & UK – determines interest rates based on ‘likes’ by applying social analytics.

EMBRACE cooperation and coopetition

• Santander Spain – offering peer-to-peer loans with Funding Circle.
• TD Bank Canada – incubates fintech start-ups.
• Standard Bank South Africa and Sberbank Russia – supported Moven (a mobile-only bank).
• Fidor Bank Germany & UK – provision to buy and sell bitcoins.
• Barclays UK – works with Post Quantum (for cyber-security), Safello (for blockchain), Stockfuse (for gamification).

ESTABLISH social ecosystems

• Fidor Bank Germany & UK – has a round-the-clock facebook presence and also sponsors social interest groups for specific customer segments.
• TD Bank Canada – sponsors social communities for specific interest groups in research, exploration and development.
• Citibank US – established exclusive social page for women entrepreneurs.

ESTABLISH business platforms

• BBVA Spain – acquired Madiva (Big Data fintech) to provide analytical capabilities to a shared ecosystem.
• Alibaba China – worked with an SME-focused affiliated bank, to launch MY Bank, for direct lending via online channel.

Reminds me of a famous dialogue from a recent Bollywood flick, loosely translated in English as – ‘When goals are achieved by adding friends, then why make enemies in achieving them’. That’s probably the mantra for banks to succeed with today’s banking – collaborate and win collectively.