How do you see banking today? Is it different from what your parents experienced in their heydays?
Well, we do see a change now. Rather we don’t see a bank now. Most of the banking transactions can be done elsewhere. You want to withdraw money, go to an ATM. You want to pay your driver, use internet banking transfers. You want to know your bank balance on the move, use mobile banking App. You want to take a loan, apply on-line and the bank representative comes to meet you. Not to mention your credit card that eliminates the need of having cash or cheque on you while shopping.
Gone are the days of visiting the bank and waiting in queues for services. Gone are the days of cheque books and pay-in slips. Gone are the days of passbooks and tokens. Gone are the days of waiting for days for receipts and payments. These are convenience banking times. You can set-up automatic payments of your bills. You can receive your corporate dividends and tax refunds directly into your bank account. You can get e-statements of your bank and demat accounts.You can invest your money electronically. And all this in an instant with pretty sophisticated safety and security.
Banks today are competing heavily with each other. They are offering better deals on housing loans. They are offering credit cards to anyone who answers those tele-marketing calls. And there are incentives and freebies for those who are already their customers.
There is a paradigm shift. Our parents visited banks then; but banks are reaching customers today. Paper documents and original signatures were the basis of any transaction then; but passwords and PINs are the authentications today. Banks grew by branches then; but volumeis the growth today.
So how do you see banking of tomorrow? Is it going to be different from what it is today?
The first major challenge of future banks will bechanged competition. There won’t be banks competing with banks. The latest threat to banks isthe financial technology companies. These companies have an edge in the internet, mobile or social media technologies. And they have strong backing of venture capital funds. These companies focus on business areas like crowdfunding, asset management, credit scoring, working capital management, etc. Some examples are Paytm, IndiaLends, mSwipe, Policybazaar and Freecharge. The backbone of these businesses is technology and they cater to the niche that they know well. The costs of delivering their services are very low compared to the full-fledged banks.
The second challenge to banks tomorrow will be their new customers - the millennials, that is the generationwhich reached young adulthood around the year 2000.Theycomprise the largest population segment in many emerging and developed countries today. They use online tools and start savings much earlier than the previous generation. They demand a radically different style of engagement. They want to be in control. They have access to more information than ever before and often make their buying decisions much before actually connecting with the provider of their choice. They make decisions based on advice from their social circles. They expect the highest level of service that it is consistent and seem-less, across all touch-points they choose to access.
Third challenge will be hugely complex and expensive risk management. Banks will be increasingly catering to global clientele and will be exposed to significantcounty risks, political risks and exchange rate risks. There are elaborate regulatory compliance requirements in most countries that the banks will have to fulfill. Customer litigation, too, is seen increasing over past few years. Conduct issues like benchmark manipulation, mis-selling, cheating on taxes, foreign exchange manipulation, etc. have to be managed.
The banks of tomorrow therefore shall be focused on three key priorities: Digital, Compliance and Customer bliss.
Today’s customers expect round the clock availability, real time fulfilment and flawless engagement. They want bank applications to be intuitive, instantly learnable, easily upgradeable and secured. They expect to be recognized and want banks to offer them only the products and services that are relevant to them. Only a strong state-of-the-art technology infrastructure would cater to these needs.
Compliance will be a still bigger thrust area in the future. It will ensure business continuity. But it will mainlyreduce chances ofwrong publicity and damage to brand image. The millennials are very sensitive about these aspects and any negative news published on social media would lead to a big chunk of thecustomers moving to the competition.
The third and a very important focus area for the banks will be the customer joy. Millennials expect the right service and the right product, at the right time and atthe right price. Banks need to anticipate their needs and offer them relevant products and services that are not complicated.Historically banks have been very product centric businesses and their internal systems and external selling have focused on what they have on offer. The banks’business philosophywill need to completely change to deliver what the customers want and when they want it, and in the manner they expect it. This is a huge transformation, but is essential for the banks’ survival.
It is going to be very interesting to see how the banks are coping up with these challenges and transforming themselves. The banking canvas is expected to be very different in the coming years. There are going to be new types of specialized banks, like payment banks; and banks catering to different segments of the society. There will be several innovative banking services, and channels to deliver them. Governments too will modernize the regulations to monitor banking sector.Clearly the entity that will benefit from all these changes is the customer and the society as a whole.
The millennials are sure going to have a gala time.