By Ashwini Dave, Digital Marketing Expert at Acquire
The current watershed event – the coronavirus crisis – will have a far-reaching impact on every industry. In fact, at a time when the world is fighting a fierce battle against the virus, the only winner emerging in this situation is digitalization, a strategy that has kept businesses and even the society afloat!
The pandemic has created an economic crisis that is further widened by the skewed demand and supply patterns, changing buyer behavior, and reduced mobility for people and goods. At such a time, banks, responsible for managing people’s money, credit, and facilitating payments, must upkeep their services to help people facing immediate cash requirements and uncertain cash flow. Yet, working with a reduced employee count and increased workload is not an easy feat unless financial institutions embrace digital technologies in everyday processes.
Digitalization in Banking
While the pandemic has made digitalization a necessity for the banking sector, most banks and financial institutions had already taken some strides in the direction in the past few years.
The arrival of the internet is synonymous with the rise of digital banking – starting from the introduction of ATMs to mobile banking to various money tracking apps, and more. However, this is just the tip of the iceberg. Increasing competition and higher demand for touchless transactions are pushing the banks towards increased digitalization, including the use of AI/ML for process automation, using AI-enabled chatbots and live chat for communication and the personalization of customer experience.
Here are a few ways in which banks can improve digitalization to boost profits and give their customers the convenience they demand during the times of the pandemic and beyond:
1. Partner With Tech Firms
As tech giants like Amazon and Apple foray into consumer finance, they need someone to handle the complicated banking processes at the back-end. For banks, this opens up the possibility of tech partnerships and gaining access to the strong customer base of these firms. Even if we ignore the part played by the tech giants in the financial industry, it is inevitable for banks to move beyond their core capabilities to remain competitive. McKinsey’s article points out the three levels into which the banking ecosystem can efficiently extend through partnerships with relevant tech firms.
The article also identifies the main benefits of this approach:
- Banks can tap their existing client base and operational capabilities
- Improve customer engagement
- Capture more data to understand their customers better and introduce a higher degree of personalization
- Banks can gradually create an ecosystem of services required by their clients to add new revenue streams and prevent their customer base from shifting to emerging fintech companies and digital firms
A popular example is of Post Bank, which has become a significant phone services provider in Italy. Another example is that of an online lender, Elevate credit, that offers credit to non-prime consumers. The company has grown phenomenally by providing a 100% online consumer lending landscape by using virtual customer support technologies like co-browsing by Acquire.
2. Invest in Automation to Boost Convenience & Reduce Costs
Automation in various processes can decrease costs and streamline operations to deliver more value to customers. It also minimizes overheads by reducing the reliance on human staff, which can be passed on to customers in the form of reduced charges. For example, in the times of COVID-19, a small convenience like on-demand e-statements or online account verification can save time and money for everybody and reduce the risk of infection through contact.
According to a McKinsey report, banks can leverage AI/ML technologies to automate up to one-third of their processes to reduce costs and eliminate human error. One such example is JP Morgan Chase’s data-based automation platform, COIN, which uses a private cloud network and ML-based algorithms to review complicated documents. As per one estimate, the platform can complete regular tasks that previously took up to 360,000 hours in just a few seconds.
Below, we have identified a few key areas in which banks can benefit through emerging technologies:
From using decentralized systems (blockchains) to enable touchless payments that are highly secure to using big data and AI for anomaly detection, leading banks are turning to technology to make their financial landscapes highly safe and secure.
Many banks are using predictive machine learning algorithms to identify the needs of their customers and also assess their risk profile based on their past behavior to grant loan approvals or not.
Predictive analytics may also be used to analyze the sentiments of different financial markets to make sensible predictions that help users make informed decisions.
3. Foster Innovation
Necessity is the mother of invention, and innovating new ways to reach out and take care of your customer base is a necessity to remain competitive and also help your loyal customers during the pandemic.
Today, most financial institutions are using sophisticated technology for maintenance operations like customer support. However, it is necessary to channelize a part of this budget towards innovation to create new products that address the customers’ emerging needs.
For example, due to the ongoing social and economic crisis, many customers have wholly moved to e-payments. Some are struggling to make their mortgage repayments, and others are scrambling for emergency cash and insurance products to cover future costs. With access to rich customer data, banks can assess both transactional and behavioral data to offer personalized services to their customers. Some measures include:
- Increasing the limits for online transactions
- Offering relaxation in EMIs, repayment holidays, less stringent KYC norms, mortgage refinancing, etc.
- Extending emergency credit services like low interest-rate personal loans and access to fixed saving accounts
- Monetizing data by creating insightful reports and benchmark analytics for various industries
Banks can also use data to create personalized and engaging web stories to promote the products mentioned above so that they can be discovered by those who require them.
4. Improved Data Management
In the past five years, there’s been a surge in data collected by various organizations, including those in the financial industry, owing to the industry’s digital transformation. However, only a small fraction of this data is utilized due to the operational silos in most organizations.
As any expert would agree, this untapped data can potentially help businesses scale faster in a customer-centric manner. To improve data management, financial institutions and banks must create a unified data management approach that consists of a centralized data hub linked to a robust management platform.
Besides the unification of data and ensuring accessibility, it is also vital to have proper security measures in place for user data protection.
Data Management Best Practices
Investing in thoughtful digitalization can help banks in boosting their revenues while also helping customers impacted by the current pandemic. From disincentivizing branch visits to offering online loan approvals and account opening to educating people on digital banking so that they can take advantage of the facilities being provided by their banks – financial institutes can use technology in more ways than one to gain a competitive edge and also lead community initiatives.
It may be a good idea to start by listing down the unique growth opportunities that match with a bank’s current resources and can be reasonably pursued. Instead of blindly investing in areas like design, innovation, data analytics, and personalization, it is prudent to identify and start with areas that will give the maximum returns with minimal investment for best results.
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