Digital Bank: Why Human Capital strategy matters most.
Preparing your bank to go digital is not only about rethinking your technology, it’s about rethinking your bank , your customer engagement and most importantly your People Capital.
The lost opportunity for Indian state owned banks: Flash Back: 1985–2000.
Between 1990- 2000 in the early era of Debit / Credit Cards /ATM’s, Indian Banks built significant investments to be first of the block to deliver automated cash and cashless transactions. They built independent teams for technology, products, marketing and service. Standalone silos which worked on a technology strategy and quick go to market strategy. The customer facing teams in many of the older and established banks in India remained muted spectators to what they would term as “Touch me not “ technology. Today these banks have probably between them 50%+ of installed ATM base and over 60% of issued card base- A dominating market position which they still struggle to monetise and drive profitably. Would this position have been different had they engaged all their teams nationally , explained the tech, built up customer engagement skills, driven confidence measures to say, banking technology will enhance their roles and improve their worklife and business contributions? Had these employees been engaged to say ,would you like to recommend ways you need to be skilled up to generate greater business and improve customer convenience with technology, the market would have been very different. The issue here is not technology. The issue here is Human Capital strategy. If the state owned banks invested 10% of their massive technology investments into re-skilling their teams , they would have had a dominating and profitable return on all their investments in a quicker period of time.
This window was captured best by the Foreign Banks and then over a period of time by Private banks. They brought in skilled technologists to equip them. Smart marketeers to drive consumer adoption and skilled their human capital to change.
The era of Payments growth: 2000–2015
This was an era of great experimentation, global innovation and crashes. It was also an era which saw unprecedented investments into Banking Tech and Payments. Again the biggest investors into technology were the State owned banks , followed by the Private Sector banks. Predictably state owned banks moved last, made the biggest investments and now play catch up to recover their investments. They repeated the process that they know best over 100 years of legacy. They still had the customer base, but lost the revenue opportunity. Again it was a poor human capital strategy which failed to capture and motivate a large work force to engage customers.
The Boards and Management of state owned banks: Failure at Human Capital strategy.
It would be interesting to look into how state owned banks firstly skilled their management, boards and thought through a technology road map and its impact on their people and customer strategy. How many CEO’s in such banks actually understood the platforms, road maps, customer impact and tested the same. How many board members, CEO’s actually used any of these service? How many consultants to boards actually delivered a winning strategy, walked through it for a decade and ensured the transformation?
In contrast the Management and Boards of Privately held and Foreign Banks skilled themselves up with knowledge, strategy and built a corporate culture to deliver the technology advantage through a structured people engagement. This enabled them to establish and take away significant market share.
Enter the Digital Era: 2015…. : Align Human Capital to Digital or Perish
A Billion smart phones and Million Apps. Your App store is your new branch.Apps will drive up mobile account opening, paperless payments, remote payments, video and social engagements . Your social history and social graphs may predict your credit worthiness better . The technology to do this will be available on tap, on cloud and will evolve faster than ever before.
Private and newer banks are already aligned to this tectonic shift. They are re-thinking organisation structures and people strategy.They are hiring people who understand digital. Re-building for a world where the customer is mobile and service is inapp. This is a world where they will let go of traditional processes to think differently. No account opening forms, No cheque books, no Cards! Robo advisors will take over advisory. AI agents will answer your service requests.
Re-thinking Human Capital for the digital era is hence critical .
But how will state owned banks align to this? Will they re-think the Mobile strategy? Will their consultants sell them technology and run away? How will their employees be kept busy if most transactions go through digitally? Do they shut down branches? Most important of all, how will their management teams skill up?
It’s going to be the most defining 5 years of Indian Banking and its going to be won on a Human Capital strategy and not on Technology.