Digital Becoming Mainstream For Financial Service Providers
With Internet users embracing online shopping and banking like never before in India, the adoption of digital technologies can substantially improve customer-level profitability and add to the retail profit pool by $3–3.5 billion by 2020, a new report said on Wednesday.
#DigitalErra Thought Corner
According to the report prepared by Facebook and The Boston Consulting Group (BCG), in spite of a growing digital adoption, financial institutions are yet to fully harness the opportunity.
More than 50 per cent of consumers are dissatisfied with their online banking and mobile app experience largely because of fear of hidden charges, lack of trust and complicated information provided, among others. This is also indicated by the very low downloads of mobile apps of financial institutions when compared with e-commerce apps.
“As more and more Indians access the Internet on their mobile phones, there is a big opportunity for the financial companies to create a powerful digital experience that is intuitive and secure for their customers,” said Umang Bedi, Managing Director, Facebook India and South Asia, in a statement.
The report confirms that consumers are leaning towards digital adoption of financial services faster than previous estimates.
“The time is now for the financial services industry to invest so we can help more people contribute to a digital future,” Bedi added.
Adoption of Online Banking
Already 70% urban internet users are digitally influenced during financial product purchase i.e. they use at least one digital channel during the purchase journey of a financial product.
The adoption of online banking fueled by the ongoing digital drive is expected to double to reach 150 million people from the current 45 million active urban online banking users by 2020 in India, the report observed.
“Wide-scale adoption of digital has the potential of reducing cost of acquisition and cost of servicing to 1/10th,” added Amit Kumar, Partner and Managing Director, The Boston Consulting Group, India.
The report requested financial institutions to transform themselves to increase their appeal to customers in three steps.
- First fix the basics through automation of most of their day-to-day tasks
- Next they should transform customer experience by leveraging data and analytics
- Finally support customers in their entire journey and go above and beyond just traditional products and services
Digital Becoming Mainstream
Around two decades ago, many large companies built ‘e-business’ units to ride a wave of e-commerce interest. Eventually, the initial ‘e’ went away, and this became the new normal. Internet development and large technology investments drove unprecedented advances in efficiency.
In financial services, this approach applied to payments, retail banking, insurance and wealth management, and migrating toward institutional areas such as capital markets and commercial banking. This is a new generation of consumers, and they are growing up associating core transactional services with technology and start-up brands, neither of which have historically been associated with financial services.
In recent times, the banking sector has seen a rapid rise of non-traditional competitors. Now that adoption has grown, banks want greater control over alternative channels. They want to manage the security, user experience, and customer connectivity at the point of purchase. Financial firms have large retail profit opportunities by doing the following: simplify legacy systems, adopt an aggressive SaaS-based model and deploy AI based automation.