Defining ‘Digital Banking’- Something beyond mobile-online banking

The term ‘Digital Banking’ is, and has always been one of the most miss-understood concepts in the financial world today. Ask any group of 21st century bankers and you will get more definitions than there are member of the group. And this confusion of definition is one of the reasons why there is a lack of fire and enthusiasm for the whole idea.

Many simply see Digital Banking as mobile banking or on-line banking. They see it as an add-on to existing and traditional banking services. All of these individuals focus on narrow elements, and thus they fail to grasp the essence of the bigger picture.

How can we define “Digital Banking”?

Digital Banking is the application of technology to ensure seamless end-to-end (STP in the ‘old’ jargon) processing of banking transactions/operations; initiated by the client, ensuring maximum utility; to the client in terms of availability, usefulness and cost; to the bank in terms of reduced operating costs, zero errors and enhanced services.

Let us take a moment to understand what the term actually means, and attempt to expand on the benefits that the concept brings forth,, It is beneficial to both the bank as well as the client. It is the culmination of a much larger reality which needs to be studied in depth so as to witness the complete experience.

Benefits to the bank:

Lower operating costs through;

The elimination of costly back-office processing operations,

Fewer (or ideally none) errors, Smaller branch footprint (the typical branch can become a kiosk affair, providing technology interfaces for the client to use plus the ability to deal with banking specialists via a video link). A minimum number of actual staff will be required. Concentrating banking/business specialists in a single centre, who are then available to clients via a technology link (either on their mobile, pc or via a kiosk branch).

Operating cost savings of between 20% to 40% could be achieved this way, according to industry experts. Cutting costs has the opposite effect on profits . They tend to go up.

Dumping legacy systems;

Make no mistake. One of the biggest drawbacks to going ‘Digital’ is this irrational clinging to legacy systems (developed in the 1960s and 1970s) that hold progress back. Banks plead the huge cost of making the change. They are deluded, and at times irrational. The ultimate costs of not making the change are far greater than clinging on to the past glory. 24/7 bank services and availability through your mobile, pc or kiosk branch, ‘Smart banking’ applications that allow ALL transactions to be completed from the device of your choice, from beginning to end (with clear instructions and fail safe mechanisms),

Access to a FULL range of services (savings, investments, insurance, loans, mortgages, foreign currency, etc.), New useful client services such as warnings, notifications, budgeting, expenditure analyses, savings programmes, calculators (you name it – the range is endless),

Lower charges (and therefore cheaper banking),

Banking that meets the client’s needs (not the banks).

Of course with all this data available banks should not hesitate to follow up on what their client is doing or looking at ; by e-mail, on-line chat or even by a personal phone call.It should be done like the popular American hotel grading system ‘Trip Adviser’ does today. If you’ve been checking out hotels – they follow up in days with a ‘Are you still interested in hotels in ….?’

However, somewhere along the way the concept is just simply getting lost to many bankers. To put it in simple terms, after a promising start, a digital application for a banking product or service comes crashing out of the digital world, spiraling down as just another piece of paper to be handled in just the same way as it has been done in the past. The illusion vanishes; the bubble bursts; the concept is dead. And we remain trapped in the same old inefficient, disjointed and highly expensive manual processing routine of the past.

Some banks are getting it right though and for those still on the shelf it is going to be one of the most uphill struggle to catch up when the penny (or the rupee) finally drops.

Once gaining a snippet of the overall picture, the concept of the ‘Digital Bank’ is vibrant, alive and exciting. It points the way to a future where banks can really add value and where customers can secure huge benefits in terms of bank products and services that are really quite useful.