Digital illiteracy and growth of digital banking

Digital Banking and Digital Literacy

Digital Banking is modernization of bank’s traditional products and making them accessible to the bank’s customers through electronic, online and mobility driven platforms. This includes digitization of internal processes as well as customer facing products.

Embarking on this digital journey banks are upgrading their core banking systems, they are implementing agile middleware, enterprise service bus (ESB), creating low code applications and simple ‘easy to use’ front ends. Banks have started training their staff to be more digitally literate and have come up with digital only products that require minimum/ no human intervention. Banks are creating Application Programming Interface (API) stacks that enable banking products/ services to be consumed by third party applications, thereby making these services more accessible. Banks have created Software Development Kit (SDK) driven applications for native/ mobility driven use cases.

Banks have started using in-app notifications, social media platforms, bot banking and bot- based customer services to combat digital illiteracy and service their customers digitally.

The advent of Digital Banking

Digital Banking started gaining prominence in India over the last 7 years. It became especially popular post demonetization, when almost all banks saw long queues across their branches and decided that digital was the way forward. A few banks by then had already successfully launched digital banking products, these banks went on to become leaders in the space.

Earlier in Nov’2010 National Payments Corporation of India (NPCI) had launched IMPS, a revolutionary product that made money transfers instantaneous. It paved way for Digital Payments in the country and revolutionized the way payments were made. However Digital Payments picked up top speed when NPCI launched Unified Payments Interface (UPI) in Apr’2016. UPI made payments simpler and easily accessible via a smart phone. Since people were used to email addresses, it was easy for them to remember a UPI ID, which was essentially a virtual payment address (VPA) and was almost similar to an email address. UPI brought in a revolution in the country and opened doors for Fintech companies to participate in this growing market by becoming an extension of the bank.

FinTechs would become a payment service provider (PSP) and go on to create mobile apps riding on a banking integration at the backend. These apps went on to become a one shop stop for the retail consumer for all their day-to-day needs. These were sophisticated apps that would offer person to person payments, person to account payments, UPI VPA led payments, person to merchant payments, QR code scan payments, bill payments, recharges, travel booking, ecommerce, food ordering and much more inside a single app. The users could register multiple bank accounts in these apps and make payments/ know balances. Some apps even integrated FASTag (cashless toll payments) to ride on a single wallet balance. These FinTechs offered reward/ cash back via scratch cards to the users, these rewards played an important role in creating customer stickiness. It acted as an incentive for the offline customers to convert to digital.

The future of Digital

With banks becoming agile and nimble footed, the future is exciting. Open Banking and Banking as a Service (BaaS) have brought great distribution opportunities. Banks have tied up with FinTechs to leverage digital payments and lending distribution on the digital as well as phygital model. Neobanks have started partnering with traditional banks to offer superior experience. Companies are offering great digital products for their customers to enjoy a complete end to end digital journey for opening SA or booking FD as well.

Banks are now getting into use case driven products and entering niche areas. B2C, B2B and B2B2C driven solutions are the new norm. Bank’s offerings are not just limited to traditional banking products but come with a ‘Banking ++’ offering where the ‘++’ stands for the value add, which solves an important problem for the costumer. With API banking Banks have integrated within the Corporate/ SME ERP systems to offer a single click driven integrated approach for payments and collections. With mobile ledger & soft Point of Sale (POS) driven solutions Banks have provided a one shop stop solution to retail merchants that takes care of their ordering, invoicing, payments, and lending.

From

Vaibhav JoshiChief Digital Officer, Equitas Small Finance Bank
Digital is the only way forward. Banks will have to hitch to this band wagon by adapting new age technologies like Blockchain, Artificial Intelligence, Machine Learning, and Internet of Things (IOT). Cross sell through Intelligent Analytics driven on the strength of big data and curated product offerings for different customer segment is what will distinguish banking offerings. Digital is here to stay, and it is only a matter of time before it becomes the main stay in banking.