The Digital Transformation Next: Redesigning Financial Services
Technology experts from leading banks share details of digital transformation journeys during the pandemic, customer-centric products and collaboration with fintech’s at Finnoviti 2021:
Sunil Soni, CIO, Punjab National Bank
During the pandemic, the major challenge for banks was to remain connected with the people. Mostly, the bank provides financial and non-financial services to its customers, so during the covid lockdown period we at Punjab National Bank focused on providing essential services to our customers through digital channels running in the shape of applications.
We divided our customers i nto 2 segments. One, people who would like to have the financial services and financial transactions, but it was difficult for them to come out due to the scare created by covid and two, the other customer segments which were not facing financial needs.
During the l ockdown, we started to reach out to interior locations where people require our services. Business correspondence are extended arm of our
bank, they reach out to the public at large and they do the financial activities in a very secure and safe manner. In larger cities, people were careful in attending to their financial activities and were reaching out to the vending places where financial activities can take place.
We can reach out to the customers and fulfil their needs. So, our digital offerings were available to our external customers and we were also ensuring that our staff members reached out to different physical locations to continue their work. So, probably these strategies worked and we were able to sail through the crisis successfully without many casualties and major problems in our services.
There are two ways at looking at this scenario. One is the government support, and the other is extending our services. We are in a business where competition synchronizes with other service providers like fintechs, whether they contribute as an individual, or whether as an organization to extend their services to reach to a maximum number of people or customers. We are also focusing on what type of products that can be offered to the customer as per the current analysis of the data. We have created partnerships with various educational institutions, which are now fintechs. These are some of the changes seen over the last one year and bank is pushing it from all the fronts.
Fintechs can do a lot of research and digging which is not core to activity of the banks. For example, finding out the credit score or finding out the credit history of a person, who is not onboarded in the banking setup. So, essentially if you look at doing a lot of research or doing a lot of activities this is where fintechs are coming up as an alternate and they are offering the business service model to the banks. Banking as a service is also emerging, however, much depends on the regulator to open it up.
Topendra Bhattacharjee, Head Digital, RBL Bank
From RBL Bank’s perspective, there are 3-4 areas that we need to work faster. While we are well placed in the entire digital space, there is something that needs to be organized, because we live in the hybrid scenario, in which you have branch access
and digital channels. In the post covid scenario for 4 to 6 months people never stepped out of their houses, while branches were open. So, we had provided everything on their premises and it was a challenge for us. The availability of the channels was critical and therefore we must build our infrastructure.
RBL Bank has increased its work around multiple other channels. For example, WhatsApp banking was immensely popular because migration and customer onboarding on WhatsApp are amazingly simple. There were basic things available for the customers like checking balance and figuring out basic transactions. We have to get them organized and developed at that point of time. We have worked on how to onboard a customer without meeting him. NPCI supported the cause by introducing video KYC.
RBL Bank has a full-fledged account opening process, which is available online. So, customers can onboard through Aadhaar KYC OTP and PAN verification.
From the banking perspective, we are the early adopters of neo-banks. NPCI is a front runner in the connected banking space with UPI and Aadhaar through API where the entire start of service came in. We are very well connected in this partner ecosystem.
Fintechs have a major role in specific customer segments. For example, the frontend is managed by fintech companies and the back-end managed by us. We are forwarding various microservices to banking systems on their front-end. It has been a starting chapter for us in this avatar and extending the reach in this format is economical for us.
Manish Shah, EVP-Digital Channels, Kotak Mahindra Bank
When the pandemic started having its impact, the first thing for us at Kotak Mahindra Bank was to devise a system to conserve things. How do I conserve or protect our partners, employees, and customers? How can I ensure data security? How can I enable people to work from home? The branches were open, there was a need to keep fewer people in the contact centers. Some employees were without laptops, so how do we set up things for them? How do I check a customer’s security data? All these were big challenges for banks. The customer believes in using the products, which are already available for them. There are several digital initiatives by the bank and the government has also helped us by introducing digital tools like video KYC and e-sign, and digital payment methods. As a bank, we realize that we should use whatever is available to us like mobile banking and WhatsApp banking to increase customer usage. We said that you have the option to go to the branch; if you don’t want to, then 85-90% of the transactions can be completed online. Before Covid, most of our customers like HNIs, NRIs, corporates, small-town people were laggards in the adoption of digital methods. We find that these people do not want to go to the branches now. We have started to look for new products, processes and areas, etc, and this has become the new norm for us.
Sachin Londhe, Founder & Director, Datamation
In the Indian banking scenario, 70-80% of development work is done by the vendors. Indian banks are more innovative, they face challenges like how the system is going to move into a completely new era, customers’ experience is changing, there are a lot of demands coming up from the business side. How to manage the demand takes time to market, few banks have started adopting the technology DevOps to help in complete digital transformation using automation.
Before covid my team used to sit in a large private bank’s offices to understand the requirements. But nowadays everyone is working remotely, and we are facing difficulties in understanding their
requirements because to understand the domain we need technical expertise and the alignment is taking time. Today there are multiple vendors, and you are still passing on the requirements and getting the delivery to the bank’s project environment to give benefits to customers.
The structured and unstructured data needs to be presented using machine learning and AI. Things are changing every day. To bring the culture of transformation is a challenge and there are many technologies in the market. You need people to adopt these technologies. Culture is a key part in digital transformation and banking as a service needs a cultural change.
Vaibhav Joshi, CDO, Equitas Small Finance Bank
There are many things that are not allowing a bank to become completely digital. For example, to open current accounts, some processes are still physical. So it does not matter how much you automate, in the current account there is always a combination of physical and digital. India has a variety of demography, geography spread, and variety of customer bases. There is a combination of urban and rural. Hence phygital is here to stay. India has 4 million BCs, who help customers do banking in an assisted way. Banking services like remittances micro-ATM, Bharat Bill Payment System happen in the phygital mode.
I believe that banks just do not have to become technology process companies. On the contrary, they should create their use cases around API banking, neobanking. Banks need to understand what the customer wants and then render
products for the customer. Banks should be different from fintechs. The moment a bank tries to put the fintech shoes, it will automatically become a fintech. In the case of collaboration between a bank and a fintech, the customers are owned by the bank and not the fintech. Banks also need to learn to create customer-centric products and use fintechs only for technology or distribution or for both.
Ashish Ahuja, COO, Fino Payments Banks
The digital transformation from the organization perspective should be culture-driven, it cannot be a project-based conversation like a digital day of the week or digital month, because then you are not building culture. Large banks carry legacies around them, there should be a paperless journey for the customers governed by laws and regulations. The product and the technology team must come out differently.
This is where the transformation comes. They must pick up the projects where they can map the customer journeys and one size does not fit all.
In 2016, in our application to the RBI, we had mentioned that we will be having a phygital model, our access points will be physical because the customer who earns Rs800,000 is our core customer and he is not ready for 100% digital transformation.
From the customer journey perspective, we need to ensure that all the tools are available because customers are aspirational in their terms. Nearly 92% of our merchants use Facebook Twitter, LinkedIn, Instagram and Snapchat, which means if you are socially active then you are ready for adoption of all these mediums depending on your suitability and convenience. Likewise, a bank must give choices to the customers and let the customers travel their journey.
Neo-banking is for specific customer experience; a neo-banking concept does not exist in India, because there is no banking license for this type of banks. Today, a neobank is essentially a fintech that requires a bank or a financial institution at the back because the bank is a regulated entity and it is required for regulatory purposes.
Fintechs can be used to reach out to the customers where financial institutions are not able to reach. Banks need to think they are creating competition or collaborating for something better. It is good to collaborate with the fintechs which have use cases. They should have a good distribution reach either physical or digital.
Some answers need to be answered like who owns the customer finally, who is responsible in case of liabilities. Can you bring out the contractual agreement? What if a fintech can apply for a bank license? In that case, the customer may not be yours tomorrow.