Building a successful digital-first omnichannel bank
Achieving excellence in omnichannel customer experience is both imperative and a huge source of competitive advantage in the world of digital banking. Here are four fronts that banks need to act on simultaneously to achieve a successful digital-first omnichannel banking.
By Puneet Chhahira, Global Head, Marketing & FinTech Engagements, Infosys Finacle
Digital is disruptive, pervasive, and transformative. The ubiquitous digitization of our world that has upended businesses and organizations across all industries has had a transformative impact on the financial services industry – reshaping the whole customer-experience ecosystem and legacy business models.
The crisis ushered in by the pandemic has further heightened the level of urgency for digital transformation, proving to be one of the positive outcomes of the pandemic. That said, banks are still moving at a slower pace than desirable. This is corroborated by the findings of the Infosys Finacle Efma ‘Innovation in Retail Banking’ 2020 report1 – only 7 percent of the 700 banking executives interviewed believe that their organization has deployed digital transformation at scale and is reaping the desired results. The remaining 93% are at different stages, with the highest being 49%, confirming that the digital transformation is partially deployed and is delivering as expected.
Constantly evolving, omnichannel banking in the digital age means that banking must be accessible on all the channels of discovery and value delivery, including mobile, internet, chat, voice banking, and smartwatch. The next step is to embed financial services so deeply within customers’ lifestyles that they are virtually invisible; examples include integrating peer-to-peer payments within social channels, consumer loans within e-commerce sites, or “buy now pay later” features. A roadmap for getting there could possibly look like this:
- Reimagining the business model:
The vertically integrated pipeline business model in financial services – bank manufacturing its products, matchmaking products with its customers, and distributing through its channels – is breaking apart and giving way to distributed platform-business models. There is tremendous evolution happening across this linear value chain. Let us look at each of these layers individually.
Today, some of the most progressive banks globally are platform businesses that aggregate a wide range of financial and non-financial products from various providers. They are transforming their product portfolios by:
- Creating game-changing joint products with other banks/FinTechs/digital giants – Apple partnered with Marcus by Goldman Sachs (and Mastercard) to launch Apple Card
- Embedding non-financial lifestyle products into their journey such as hotel, flight, cab, event bookings, movie ticketing, among others
- Collaborating with third parties in delivering competing products such as higher interest-paying deposits or a unique lending proposition- Paytm has joined forces with IndusInd Bank offering high value fixed deposits and with ICICI Bank to offer digital loans.
On the channels’ front, banks look to offer aggregated products and services not just through their own channels but also through API-led distribution on third-party channels, apps, non-bank channels such as smart home automation devices.
Given the fragmentation happening across these layers, a bank can choose to focus on a platform-business model in one of the three ways:
- Be a banking manufacturer that makes best-in-class products that it sells through various self-owned and third-party channels. For example, bank leveraging third party channels to sell their credit products
- Be a banking marketplace that offers a combination of self and third-party products. For example, Starling bank from the UK offers a marketplace providing services from best-of-breed partners in the area of accounting software, wealth management services, pension accounts, among others.
- Offer banking on a platform by providing products and services to Neo-banks to set up new businesses. For example, Telefonica Deutschland, a mobile telecommunications company, launched O2 banking – a mobile-only bank account built on German bank Fidor’s platform. It enables transactions through mobile, offers small instant loans and better mobile data plans.
- Reimagine customer experience for the open banking world
Customers today are spoilt for choice. They are highly demanding, impatient, and would not hesitate to switch from their preferred brand after just one bad experience. The rapidly unfolding digital trends have further pushed the envelope on customer engagement: in the past 20 years, banking transactions have gone from 50 percent in-branch to 95 percent digital self-service channels. Customers are unwaveringly shifting to platforms owned third-party channels of the open economy. In India, for instance, over 85% of the open payments transactions (UPI-based payments) are recorded by non-banking players like Google Pay, Phone Pe, and Paytm.
Another emerging trend is embedding banking into the primary journeys of the customer. For example, a car financing journey will commence not when the customer needs a loan but when the customer is considering buying or upgrading a car. For instance, DBS participates in the customers’ primary journey by operating successful marketplaces for used cars, property, travel, and utilities. This also extends to business banking, where leading banks are integrating their services through popular ERP solutions.
Finally, on the roadmap to customer-centricity, leveraging modern technologies such as AI, mobile, open-APIs, augmented and virtual reality will play a determining role in delivering experiences that are a lot more personalized, contextual, and outcome-oriented that customers will prefer.
- Turning Data into Competitive Advantage
Data is the key. It is driving the success of both Big Tech and FinTechs in spaces traditionally occupied by banks. For example, Google’s foray into autonomous cars is driven by their success with maps. Banks need to move from traditional interest and fee income models to data-led monetization models – lest other digital platforms do the same and eat the market share. They must look beyond segment-based offerings and pricing to customer-specific offerings and pricing. For instance, loans can move from uniform lending rates to individual pricing.
They must leverage the power of big data and advanced analytics to anticipate customer behavior and requirements and use these insights and other data, such as location and payment preferences, to push contextual, personalized offers at scale.
- Drive ubiquitous automation to reset the industry benchmarks
Automation is a critical competitive strength. Digitisation has radically altered the cost-efficiency in banking. Simply compare the cost-income ratios of the top 1,000 banks, 50 percent on average, with the 40 percent of digitally advanced banks and 30 percent of digital-only banks to understand the cost pressures the incumbents are facing. In a world where digitization has become the default, incumbent financial institutions would thus need to double down on their automation journeys to reset the benchmark – operate at a higher level of efficiency, increase the ability to price well, and ability to drive sustenance.
Technologies such as RPA, cognitive automation, API, blockchain, cloud, etc., will help drive automation and operate at a much efficient level. With enhanced cognitive technologies, banks will be able to progress into an environment where processes with machines and software at either end would bring up the possibility of autonomous banking. Customer service will almost entirely move towards self-service channels supported by smart assistants, where required, or we will witness an era of near-zero back-office where smart machines manage the entire processes. Think of automated banking tasks driven by google assistant. Or self-driving cars paying for fuel themselves. This will enable the delivery of smarter services.
Achieving excellence in omnichannel customer experience is both imperative and a huge source of competitive advantage in the world of digital banking. Banks need to act on all four fronts in parallel to achieve a successful digital-first omnichannel banking.
- EFMA, Infosys Finacle: Innovation in Retail Banking 2020 – https://www.edgeverve.com/finacle/efma-innovation-in-retail-banking/
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