In the first part of our series on disruptive digital strategies in Indian banking, we discussed the rational behind the need for such strategies; in the second and concluding part, we take a look at what could possible work for the young and what some innovative players are trying out
(For the first article in the series, Why Indian banks need a disruptive approach in digital, click here)
India is a young country. The digital revolution in India is just beginning. The young are far more comfortable with digital.
But when it comes to banking, there is a big nomenclature gap between what banks today pass off as digital services and what the younger population sees as digital. Unless that gap is closed, banks can only expect incremental gains and the true potential of India’s demographic advantages can hardly be tapped.
Digital for today’s youth is not just accessing information or doing a few tasks through digital. They expect end-to-end digital experience. Today’s digital offering by banks—with a few exceptions—are primarily the results of banks’ initiatives to drive their own efficiency by cutting down physical workforce, transaction time and simplifying transaction processes. Some of these end up providing some convenience to customer too. When it comes to areas where there’s risk/fear of security breach, banks resort to physical, thus negating all the advantages. Consider this. If you have to go to a bank for a transaction, spending one hour of commuting time, does it really matter if the process that was taking ten minutes is now getting completed in five? For banks, it is 50% efficiency gain; for the customers, it is negligible gain.
The new generation wants end-to-end digital experience. Many of them do not know any other way. They have bought books; done homework; corresponded with teachers; appeared in exams—all using Internet. They expect the same in their financial services too.
Ensuring that they get whatever is available in a fully digital experience is the comparatively easier part for banks serious of tapping this segment. In fact, a recent McKinsey article, Building a Digital Banking Business, by Sonia Barquin and Vinayak HV argued that banks need to explore “going all digital.”
A bigger challenge—to effectively target the youth market—is understanding and catering to their expectation. It is not just about the medium. It is also about the offerings.
What exactly is the financial need of today’s young men and women? A 60-something would consider a bank as a safe place to keep his money and get some interest; a 50-something would look at it as a little more—from loans to investments. A 20-something thinks very differently. For him, a bank account is a need only because the government wants it.
Many would identify with payment. As everything—from cab booking to grocery ordering, consulting a doctor to availing a government service—goes digital, online, especially mobile payment, is becoming equivalent of yesterday’s cash. Plastic cards are also going out of fashion.
So, why not lead with payment? The recently concluded ICICI Bank Appathon—where ICICI Bank along with partners NPCI and Visa—turned to outsiders for innovative solutions in banking, saw maximum ideas around payment, both merchant and P2P payments. These developer base, who are closer in age to the youth, are far more familiar with the thinking of this generation.
While standalone payment services are becoming far more popular, RBI has allowed some payment banks to offer services too. Sensing the opportunity in standalone mobile-based payment service, even banks have started offering payment services to non-banking, non-credit card customers. YES Bank, which launched a virtual prepaid card in January this year, in association with Freecharge, has already seen more than 1.2 million users in the first four months. With that, YES Bank has become the largest issuer of such virtual cards, based on MasterCard platform, according to a company announcement.
Another interesting innovation is the Digibank, a mobile-only bank launched by Singapore’s largest bank, DBS Bank. This is India’s first “mobile-only” bank. Digibank is a smart idea that leverages Aadhaar, using the world’s largest biometric-based identification system for authentication. This removes the need for paperwork. Instead, a network of DBS partners—500 to start with—help open the accounts. DBS describes it as a completely “paperless, signatureless and branchless” bank. Considering that India is still a ‘cash’ country, DBS allows physical debit cards that can be used with ATMs.
The offerings of banks should cater to these emerging demands. Social funding, account sharing, dynamic product bundling can easily be tried in digital medium. While regulation may come in the way for some offerings, smart bankers should be able to find a way to work around that. In any case, RBI has been quite progressive in assessing needs from time to time and addressing them through its payment vision statements published every five years. No other area has seen so much change as payment has seen. Mobile wallet usage has now attained critical mass, reaching INR 182 billion in the first 11 months of year 2015-16, jumping more than 100% from the previous year’s full year transaction value.
Allowing of private players in restricted payment space and now licensing of payment banks would see further innovation in this space.
But by no means is payment the only such opportunity. With digital, flexible features can be provided within savings banks, loans and even credit cards. Banks need to understand the expectation before creating those services.
Best of all, digital allows a bank to launch products quickly, test it out, modify, and even withdraw—without too much cost and loss of time. In short, the products themselves can do the market research.
The opportunity that digital provides is immense and is restricted only by imagination.
But a bank, willing to make a real impact, cannot expect to move slowly by changing one thing at a time. The current wisdom—as advocated by digital gurus—is to try changing the core of the organization by digital transformation. It sounds good in theory but it could also mean failing to leverage the completely new opportunities. That may prove to be too costly in future.
The best thing digital allows you to do is to be flexible. So, why not do both? While digital transformation efforts are on, try some disruptive strategies too. Call it digital disruption—or by any other name; just do not let the opportunity go.